Both a city’s procurement budgets and challenge initiatives can be powerful levers in providing opportunities to small businesses and entrepreneurs. However, many city governments are yet to open up their procurement processes to competition. Instead some revert to traditional tendering mechanisms for solutions from large incumbent providers.
“City challenges are magnets for innovation”
High-performing cities see the value of outcome-based procurement strategies which invert the traditional procurement process. They work to define the challenge and then open up it to the wider community to submit solutions to the problem, drawing from a wider pool of ideas and solutions. This approach often provides answers that are cheaper and more effective than the city could have developed on their own.
Barcelona City Council has successfully re-defined the way they conduct procurement. Two initiatives highlight their leading practice.
The first is the Barcelona Open Challenge, which set out six challenges for businesses and entrepreneurs to provide solutions to transform public space and services:
- Reducing bicycle thefts in the city
- Empowering support systems to reduce social isolation
- Monitoring pedestrian flows in the city
- Tools for digitisation of museum and archive collections
- Automatic detection and alerts of damaged road surfaces
- Empowering local retails through technology
The Challenge sought to procure innovative solutions, support winning companies and validate projects. Winning proposals were provided with guaranteed public service contracts and office space from which to run their operations.
The Barcelona Urban Lab which predates the Open Challenge, turned Barcelona into an urban laboratory where public spaces were used as a testing ground for new products and services.
The CITIE team met with Josep M. Pique, CEO of the Office of Economic Growth, and Anna Majó, Director of Strategic Sectors and Innovation at the Barcelona City Council to discuss the city’s approach to procurement and how others can learn from the progress that they have made.
There are five key lessons to Barcelona’s success:
- Build user-centricity into the design of procurement tenders
“The shift involved moving from a view of protecting government to one of making it easy to participate.”
When designing the Open Challenge the original Request for Proposal (RFP) was 60 pages. Barcelona realised that to attract new entrants they would have to think about the accessibility of procurement tenders. This meant minimising pre-qualifying requirements and working to clearly articulate the challenge.Long, complicated tendering procedures create a significant barrier to entry for small businesses and entrepreneurs who often lack the capacity and experience to successfully fulfil the criteria.
Making this change required a shift of perspective from viewing complex RFPs as important for “protecting government” to one where the goal is making it “easy to participate” in procurement. This meant a careful balancing act between the rigour required for risk management, and ease of use for enhanced access.
Barcelona worked with Citymart to make the process as frictionless as possible, simplifying their tendering documentation and clarifying messages into key components. The final package for all six city challenges was significantly reduced to make the tender easy for entrepreneurs and SMEs who were not used to presenting their solutions through public tender documents.
“We used the resources at the cities disposal to promote the challenge.”
- Make procurement opportunities visible to new entrants
“The role of a city manager is changing to defining the challenge and bringing in innovators from outside to solve the problem.”
Small businesses and entrepreneurs lack the time and resources to keep up to date with procurement opportunities as they arise. This often results in the same applicants submitting proposals, limiting the pool of new ideas.
Barcelona identified this early on when designing the Open Challenge and with Citymart reached out directly to 200 pre-identified companies for each of the six challenges. They estimated on average that each firm required five unique outreach efforts to recognise the opportunities available, a large but important task.
Barcelona used the resources at its disposal to greatly enhance the visibility of the Open Challenge. The city placed advertisements on subway cars, billboards, buses and social media. The marketing campaign was highly successful with the website receiving an unprecedented number of hits and many start-up entrepreneurs tweeting when they were in the process of submitting a new proposal.
- Signal commitment and offer the right incentives
For a challenge prize to be successful the city needs to clearly signal commitment to the businesses taking the time to submit proposals and help them de-risk the investment of their time and money.
“Cities need to signal a commitment to procuring innovative solutions.”
Practitioners looking to employ a similar model in their own municipalities will need to be ready to demonstrate a serious commitment to creative business ideas and a willingness to invest, both financially and with business mentoring support.In Barcelona, the winner of each of the six Open Challenges was rewarded with a full procurement contract, allowing them to use Barcelona City Council as a first customer for their ideas. The City set aside €1 million euros for the initiative with anything between €60,000 and €250,000 on offer for each individual challenge. Winning firms were also provided with office space to run their projects from.
- Adapt the role of the city procurement manager
Using collaborative procurement methods that engages with entrepreneurs and innovators requires a fundamental shift in the role of the city procurement manager.
Procurement managers, rather than defining prescriptive solutions behind closed doors, need to move towards acting as facilitators, collaborators and challenge setters. In Barcelona, the city manager’s role is to define the challenge and bring innovators in from the outside to solve the problem.
Building these new skills sets takes time and requires training, restructuring and a fundamental re-conceptualisation of the role of a city procurement manager.
- Set up an urban laboratory to test and validate new ideas
City challenges are potential business opportunities for innovators and entrepreneurs. However, to be successful new innovation requires application and testing in a real-life environment.
“Successful innovation requires application and testing.”
The programme launched in 2008 and is based within the 22@ innovation district. The Challenge supported companies to trial innovative products and services in public spaces. The city has found a low cost way of creating value by using existing city resources and open innovation methods. The annual cost of the programme is approximately €250,000.The Barcelona Open Challenge is an evolution of the Barcelona Urban Lab, linking the innovation process with real procurement. By turning the city into an urban laboratory it supports solutions that help solve urban challenges where innovation can be tested and validated.
The Urban Lab has the twin goals of achieving better outcomes for citizens and supporting commercially successful local businesses. Additionally, by enabling businesses show the value of their ideas at a local level, it helps support them grow internationally.
Of the 16 pilot projects the Urban Lab has supported so far, the city’s Office for Economic growth has estimated that 90% have gone on to develop a business based on their pilot.