How smart procurement improves outcomes and reduces costs
In my previous blog, I looked at how cities can take a broader, cross-departmental approach to achieve specific outcomes in a collaborative way. This starts with changing procurement processes to focus more on what needs to be achieved rather than on individual departments’ requests for proposals.
New business models
With a cross-departmental vision, the necessary approvals and possibly policy changes, city services can be procured at lower cost. What’s more, cost savings can be shared between departments and services, even to attract external revenues both for the city and for its service providers. This drives ongoing optimization, efficiency and responsiveness of services and partners. It will also attract interest from service providers based on a business model that doesn’t require any major investment by the city.
Let’s imagine a city that is preparing to procure a few service renewals. This city is facing a backlog of requirements for infrastructure maintenance due to budget constraints and the impact of severe weather conditions. These weather patterns are repeating on an annual basis, so a more resilient infrastructure solution is needed.
This city is also dealing with an increase in commute times. Roadworks to increase capacity for traffic are ongoing, disrupting traffic-flow. Of course, the city is working hard to present itself as attractive to investors. Those investors, however, are selecting cities that offer healthy living conditions with lower commute times and so on.
Joint procurement processes
In response to these challenges, the city’s departments decide to start collaborating on joint procurement. Instead of a narrow focus on repairs and renewal of the infrastructure (with individual projects to maintain or replace bus shelters, street lights, traffic lights and so on), they take a more holistic view. They develop requests for proposals from service providers to collaborate to lower emissions, reduce commute times, save on operational costs, and create a city that’s more attractive to investors. Adding an option that allows for partners and suppliers to generate external revenues makes requests for proposals even more appealing to potential providers.
The city receives tenders from collaborative service providers who propose innovative, forward-looking responses and solutions. There is cost optimization through combining services and creating configurations of services that can be replicated. For example, bus shelters can be used to offer services and experiences that attract and increase the numbers of passengers. These shelters are the connection point to multiple modes of transport and are attractive to providers of services such as shared bikes and other shared transport. In addition, locations like this are ideal for installing digital displays to present information on transport services, general city messaging and so on. They are also perfect for advertisements to generate revenue for the city.
In my next blog, I’ll look in more detail at how these elements of infrastructure can be configured to work in smart ways.