The four key drivers that can enable better IT procurement

Bridging the digital divide: Implementing open procurement for effective digital transformation

Digital transformation is arguably the most important administrative undertaking of governments around the world. From healthcare management and social safety net technology to managing vaccine sign-ups during the pandemic, governments simply need to buy IT better. More often than not, public procurement of technology is viewed as non-transparent, uncompetitive, poorly planned, inefficient, costly, and having high failure rates.

But timelines, bureaucratic hurdles, and intricacies of the procurement process prevent the swift adoption of cutting-edge technology and potential for collaboration with innovative organizations that are essential for reforming existing processes. 

For a new report, we analyzed best practices and talked to civil servants, industry leaders and academic experts to identify the key drivers that enable better IT procurement building on the foundations of open contracting. 

In sum: What successful jurisdictions have in common is that they are shortening cycle-times and developing a common approach through flexible and transparent centralized frameworks that enable the private sector to offer solutions to problems. They are encouraging dialogue about who bought what from whom to improve visibility and accountability over the spending and the improved outcomes seen in the examples provided. 

In this blog, in addition to the ten principles that underlie open contracting highlighted in the report, we want to highlight four key challenges that, if overcome, can empower governments to leap ahead rather than fall back when it comes to managing digitization:

Agility and innovation

• Problem: The procurement process is longer than the cycle of IT innovation.
• Solution: An open procurement approach, such as agile procurement methodologies and flexible framework agreements, facilitates quicker decision-making and increases adaptability to emerging technologies. This involves breaking down larger projects into smaller, more manageable components and using iterative development processes. 
• Case studies: In Colombia, rather than the government trying to document and standardize all possible technologies, the framework agreements created for the IT sector link directly to the providers’ public web pages, which list all of their services and prices. This ensures transparency and encourages innovation, because as providers introduce new services and products, they become automatically purchasable under the framework agreement. These frameworks have led to big efficiency wins: the traditional tender procedures take between four months and one year to complete while the framework procedure takes between four and six weeks on average.
  
  The G-Cloud initiative in the UK provides a framework for public sector organizations to easily and cost-effectively procure cloud computing services. Creating a dynamic marketplace that promotes transparency of pricing, services and supply contracts, allows suppliers to continually update their offerings and prices and enables public sector buyers easier access to the latest technology and services. 

Access to technical expertise

• Problem: Lack of specific technical expertise for informed choices within government.
• Solution: Open procurement encourages collaboration with external experts, leveraging public-private partnerships or industry consultations. Establishing advisory panels or seeking input from the technology community can help ensure that the government makes informed decisions based on the latest technical knowledge.
• Case study: ChileCompra does pre-market engagement practices, implementing RFIs to engage with the market before the publication of the opportunity, to better estimate cost and define technical requirements. For example, they used RFIs to gather comments from the industry and national and international suppliers, public entities and academic institutions such as the University of Chile, to develop the standard bidding documents and redesign its framework agreements. A successful example of the market consultation process was the RFI conducted for the Magento Cloud implementation for the public marketplace of framework agreements in 2021.
  
  Colombia Compra Eficiente also introduced a process for pre-market engagement. Departments can issue a request for information that describes the problem that they are trying to solve with technology. As a response to that RFI, they receive designs of possible solutions from all the providers in the framework (which can each submit more than one alternative). From there, the buyer can define the specific requirements for the solution and move to a request for a quotation to build the solution.

Managing investment and securing value for money

• Problem: Government reform often requires large-scale investment.
• Solution: Open contracting fosters competition among vendors, reducing costs through competitive bidding. Governments can also explore innovative financing models, such as public-private partnerships, to share the financial burden of large-scale projects.
• Case studies: A 2023 report by the UK Crown Commercial Services estimates that over the 10yrs of G-Cloud £1.5bn of in commercial benefits have been achieved for public sector customers. The Digital Marketplace has saved the government billions of pounds since its implementation. These savings are not only financial but, according to interviewed sources, also encompass broader economic and social benefits and skills development. There is research to show that every additional tenderer leads to a price reduction. Before G-Cloud, the average IT tender elicited three to four bids; after G-Cloud, it elicits eight or nine.
  
  In Australia, the core principle of Cost Price Ratio (CPR) – value for money – has been embraced, emphasizing the importance of competition, efficient resource use, accountability, and transparent decision-making. Notably, it is acknowledged that price is not the sole determinant in assessing value for money; both financial and non-financial costs are conscientiously considered.

Overcome legacy and avoid vendor lock-in

• Problem: Concerns about lock-in to certain vendors or technologies, and habitual reuse of established contracts. Purchased systems need to replace or work within existing systems.
• Solution: Open standards and interoperability requirements are integrated into procurement specifications. By emphasizing interoperability, governments ensure that new systems seamlessly integrate with existing infrastructure, reducing the risk of legacy issues and promoting a more cohesive and efficient IT environment. Clearly specifying interoperability requirements and encouraging modular architectures provides flexibility in choosing and switching between vendors or technologies over time. Continually promoting competition helps to ensure access to innovative solutions.  
• Case studies: In Australia, “cloud-first” and “open-standards-first” and policy and a commitment to designing projects and opportunities with small businesses in mind has helped to promote interoperability, save money, improve quality and do more business with small business.
  
  By adopting a user-centered, multidisciplinary and open approach to procurement, the Digital Marketplace has fostered economic growth. It contributed significantly to the growth of the UK’s digital economy, creating jobs and nurturing capabilities within the technology sector. The Digital Marketplace facilitated the increased inclusion of SMEs in government procurement. The Cabinet Office reported that in the period between 2009/2010 and 2012/2013, direct government spend on SMEs increased from 6.5% to 10.5%. Further, the Cabinet Office and National Audit Office also reported that this spend increased to 27% in 2014/2015, surpassing the government target of 25%.

Open Contracting as the foundation for effective digitalization 

Notably, all four countries that successfully applied open procurement in technology projects also invested in foundational open contracting reforms to public procurement. They legislated and developed incentives for improved reporting and transparency, adopted the Open Contracting Data Standard, embraced collaboration, and set clear policy goals. 

Read our new report with the Open Data Institute for the AWS Institute which explores the benefits of these reforms across all sectors as well as specific recommendations for the IT sector.