An outcome-led approach to financing city services
Cities today are searching for smart ways to harness technology to solve their most important challenges. Lowering costs and improving public services while at the same time attracting more inward investment cannot be achieved by departments working in isolation. Increasingly, there are opportunities for cities to re-think how they procure and manage different parts of their infrastructure using a more integrated approach.
Addressing long-term issues in a sustainable way requires collaboration between engaged departments and partners. Many city departments, however, still have a strong focus on procuring technology based around requested technological functions and price. Instead, departments could collaborate to procure and deliver integrated infrastructure and services around key outcomes.
For example, one city department can only look at replacing existing infrastructure, such as bus shelters. A more comprehensive strategy could involve public safety, street lighting, public transport services and resilient designs to lower the costs of repair and maintenance. The city is better served because existing infrastructures are used or upgraded to achieve a broader goal. The result is the improvement of services beyond an individual department’s focus area.
Leading more open partner ecosystems
Orchestrating and reconfiguring procurement of infrastructure and services in this way means that budgets from multiple departments can be pooled and savings on operations budgets can be shared with contracted business partners. This, in turn, attracts more investment from providers and partners – which means the upfront investments (CapEx) for the city will be lower and, in some cases, will provide the option to pay an annual service fee only (OpEx).
Critically, the city needs to remain in a leadership role, with a clear vision for how to procure and finance different inter-related city services and infrastructure. For example, sharing data with service providers can help them to improve their services and/or reduce cost of delivery. In doing this, cities can create more open partner ecosystems and attract more service providers by operating a multi-sided market. This is explored in Atos’ paper Smart city economics: a multi-sided approach to financing the smart city. It is important that the city still takes the lead in financing the renewal of services; transparency in the financing of services is what taxpayers demand.
Given the complexity of city infrastructures and the array of technological solutions now available, a more outcome-driven vision and approach to procuring city services will be essential to generate savings, release pressure on budgets and make real changes happen to improve city services. In my next blog, I’ll look in more detail at how procurement for this new kind of smart city model can work.