Cracking the Code on Procurement Reform

According to a recent report from the Volcker Alliance, governments throughout the United States spend about $2 trillion each year to purchase goods and services. This includes everything from national defense to health care to education.

It also includes transportation. Unfortunately, there is growing concern that the rules and regulations governing how all these items are procured are outdated and misaligned for the public policy priorities of today. Government and private sector stakeholders, as well as the public who eventually benefits from these projects, bear the costs of these antiquated processes through delayed projects, sub-optimal risk allocation, and wasted time.

Procurement rules at the federal, state, and local levels originate from a right-minded perspective. They largely exist to ward off fraud, waste, and abuse and to ensure business have fair and equal ability to compete for public dollars. Processes are often very precise and because government buyers are expected to spend taxpayer money wisely, their purchases are subject to significant oversight.

But there are three problems:

One is the oft-voiced opinion that the procurement process just too slow. Non-existent standardization, poor coordination, and even the lack of commonly understood terminology continue to hinder progress. This is particularly problematic with respect to the convergence of transportation and technology, where speed is not only desirable but a prerequisite. In Kansas City, an RFP for a regional taxi voucher program for seniors and those with disabilities took eight months to complete. At the same time, the regional transit agency there made headlines for a microtransit pilot program that was worked out in three weeks.

Related, the operation itself can cost a tremendous amount of time and money for private firms. The internal infrastructure required to submit applications and win contracts is costly to set up and maintain. Moreover, it is ill-suited for small businesses and startups that may not have enough resources to wait months (or years) for government to make a decision on a contract. This may not present a problem for large organizations, but many of the start-ups bringing new innovations to transportation do not have the manpower nor the time to dedicate to time-consuming procurement exercises.

Third is that the noble drive for cost savings is often overemphasized and fails to link up with other policy priorities that could be addressed. A recent effort in Los Angeles, for example, sought to leverage a billion-dollar purchase of rail transit vehicles to support local jobs, train workers, and jumpstart a transit manufacturing renaissance. But it was difficult for local officials to monetize those benefits in any standardized way – and they felt unable to fairly account for them. The contract was awarded to a firm that conducted the high value manufacturing overseas, with only final assemblage occurring in the U.S.

As customer-focused, on-demand technology applications driven by the private sector become the norm, local, regional, and state officials have begun to view cost cutting as an overly simple measure of procurement capability and not a true measure of longer-term success. Most types of savings delivered during the procurement process (even at their best) are seen as defining historic weaknesses and make little business sense as a stand-alone objective for excellent, effective, and impactful procurement.

Newer procurement models consider “best value” and “performance-based” evaluations versus the exclusive use of the lowest bidder as the deciding factor. In Europe, it’s referred to as “sustainable procurement” and considers a multitude of factors other than just price. Here at home, there is a growing body of best practices emerging from leaders in local, state, and even the federal government. While many of these initiatives remain isolated in their own silos or regions, policymakers and private sector leaders are highly interested in finding replicable models and new practices.

At Eno we are working with a range of industry stakeholders, government officials, and others to wrestle these challenges to the ground.

Procurement reform may not be the sexiest transportation issue right now – but to restore American competitiveness, support smart job growth, and proliferate technological innovation, it just might be one of the most important.

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