U.S. municipal procurement in the era of COVID-19
“In some ways it’s amazing, because you know that the work that you’re doing — which was always related to the public good — is now saving lives on a daily basis. But it’s also stressful, because if you can’t get something it’s really tragic. You feel desperate all the time.”
Michael Owh, General Manager, Purchasing and Contract Services at Los Angeles County Internal Services Department
Never before has it been more important for our local governments to get public procurement right. How our local governments respond to the current crisis will lay the foundation for more equitable communities in the recovery to come.
Procurement is part of three connected, existential challenges for cities. First, trusted suppliers of emergency medical procurement have run out stock, leaving government officials unsure where to turn in urgent situations. Municipal governments are facing vendor price gouging, counterfeit products, and fraud. “There was a week where it was actually easier for me to get four private planes willing to go pick up respirators from China than it was for me to find legitimate respirators,” Owh said in a recent videocall on local government procurement during the pandemic.
The changes that local governments are making to get life-and-death supplies at unprecedented speeds from new vendors could help city officials address the second and third challenges. The second challenge is the collapse of county and municipal budgets because of extraordinary outlays and because of the free fall in tax receipts and other streams of income (parking revenue, for example) as business owners shut their doors and furlough their workers during this period of sheltering in place. Local government budgets won’t rebound for a very long time, so officials will have less money to spend on goods and services for the foreseeable future. They’ll need to get more for their money with every purchase.
The third challenge is that businesses owned by women and people of color are particularly vulnerable to economic shocks. As has been well-documented, small businesses that already struggled to access capital and didn’t have strong relationships with lenders have been largely shut out of federal relief funds. As Sky Kelley, Founder and CEO of Avisare noted, “The people getting hit the hardest in this crisis are minorities both from a health perspective and economic perspective. We have to find a way to work with small minority- and women-owned businesses because they are the crux of the economy.”
Selling to government could be a way for these small business owners to stay afloat when consumers and other businesses are scaling back even more. Yes, local government budgets are tight, but at the same time, local governments won’t actually shut their doors. They will buy less, but they still have to spend money.
The strain on supply chains has been exacerbated by existing flaws in the public procurement system, such as antiquated and bureaucratic policies, low levels of transparency, lack of digitization, and weak coordination. On our call that we co-organized with the Open Contracting Partnership, procurement experts said that they are seeing changes in procurement for life-saving supplies, which shows that it’s possible to be more flexible and creative during the recovery and afterwards.
Collaborate to expand the vendor pool:
Local governments are sharing information on suppliers of emergency medical equipment through open and public lists, such as one facilitated by CoProcure. By collaborating with each other to identify legitimate vendors through performance information, local governments have been able to fast-track their diligence and vetting process for new suppliers and get the items they need faster.
“When we started [the list] we did what we knew, which was cooperative purchasing,” said Mariel Reed, Founder and CEO of CoProcure. “Then we realized that the problem we were solving for was no longer compliance, we were actually solving for this problem of trust.”
To replenish their vendor pool, local governments could look to smaller businesses, many of whom are seeking to redirect their usual operations to meet the demands of the crisis. User-friendly, online procurement processes would lower the barriers to entry for small firms, including small minority- and women-owned businesses, to access opportunities. Moving away from opaque and time-intensive processes make it easier for governments to move fast, too.
“Digital procurement is more critical than ever…Cities need to get moving,” remarked Jennifer Geiling, Deputy Director for Policy and Partnerships, New York City Mayor’s Office of Contract Services. “If you have a digital end-to-end system that is managing the whole process and provides transparency for all, you’ll be able to touch all of the goals that are critical in an emergency situation and also in an everyday situation.”
Rethink the rules
Governments will always have to spend public money with great care, but the processes and rules that were once used to guard against waste and fraud are being updated. As Michael Owh said, “We should ask ourselves what process we don’t need because there is increased visibility and transparency.” For example, New Orleans has been able to move evaluation scoring, which was previously held offline as a public meeting, online for the first time.
Previously, the way that governments “solved for trust” as Reed put it, was through an extensive system of rules that monitored compliance, or through close relationships with a select group of vendors. Both of these solutions made it harder for women and people of color to sell to government. What’s the mix of technological and process changes to open the system?
“Technology can help, but what we need is a shift in mentality in government procurement,” noted Kelley. “We need to think about how to make changes for the long term.”
Revisit the full conversation here.