Future Cities - Catapult
barcelona, chicago, helsinki, new york, Customer
Opening procurement to start-ups and innovation Opening procurement to start-ups and innovation

In the first of our series on City Leaders turning insight to action, we present three key takeaways on “City as Customer” from the Barcelona Smart Cities Expo CITIE working session.

CITY LEADERS TURNING INSIGHT TO ACTION
– OPENING PROCUREMENT TO START-UPS AND INNOVATION

Building upon the success of the CITIE framework, the CITIE-consortium (Nesta, The Future Cities Catapult and Accenture)  hosted a working session with a select group of global city leaders and policy experts at the Barcelona Smart Cities Expo.  Over 15 cities sent representatives to the session, where we explored two of the key policy roles in detail, City as Customer, and City as Datavore.

City governments are big spenders, accounting for $4.5 trillion in goods and services globally. For example, New York City spent $17.8 billion in 2014 and the Greater London Authority’s budget for 2015/16 is £16.7 billion. But relatively little of that spending finds its way to start-ups. Cities’ lack of transparency in procurement processes, a preference for large, integrated contracts and an aversion to working with unproven ideas or suppliers, all create barriers for new players. Procurement processes also often serve to inhibit innovation. They offer few incentives that SMEs and entrepreneurs need in order to develop new ideas, prototypes and pilots.

If you want to learn more about how 40 cities are catalyzing innovation, please find the diagnostic and report here.

To understand these barriers and the extent to which city leaders are seeking to remove them, we asked them about their procurement. Was it accessible to new businesses? And did it actively seek out innovation? What we learned is set out below, along with some examples of the positive actions cities are taking to encourage more innovation and incentivise start-ups:

 

  1. Define targeted problem statements

Increasing numbers of cities are turning to challenge-based and open procurement methods. They’re becoming more like an accelerator, collaborating in the innovation ecosystem. They are emphasizing the need for shared visions, backed with collaboration and early commitment from the city and its departments.

For example, Chicago’s UI LABS brings industry and universities together to define problems and develop partnerships for new solutions. Its uses interview, research and discovery processes and user engagement workshops to identify challenges and investigate innovative solutions.

 

  1. Open and transparent procurement

Leading cities are pursuing greater transparency about what and how they procure. That’s both in response to citizens’ concerns about how budgets are spent, and to support companies tendering for contracts.

Since 2012, Helsinki has published open data about everything it procures. The  database now covers €2.2bn in purchases. Globally, initiatives such as the Open Contracting Data Standard are driving global standards for publishing contracting data and documents in an accessible, structured and repeatable way to help drive transparency and anti-corruption. Startups are getting in on the act too. Government procurement data experts, Spend Network, incubated by the Open Data Institute, provides a commercial service analysing public procurement data.

Barcelona’s Open Challenge, an early pioneer, sought to lower barriers to entry, and increase visibility by advertising procurement opportunities on the metro. More than 50,000 citizens and entrepreneurs responded and the city received 119 bids. As a result, 12 new businesses were created. The process itself was faster, lower cost and delivered higher quality results than standard approaches.

                                                          

  1. Engage and stimulate the market

Cities’ tendency to procure from a list of approved and known suppliers limits the potential for new companies and innovations to reach the market. As they may not always have the capacity to know the full range of solutions available, cities should therefore seek to engage intermediaries that will test the market, gather knowledge and encourage diversity in the marketplace.

Peterborough DNA, winners of the Barcelona Smart Cities Award, demonstrates this approach. The city needs solutions tailored to its needs, but these are not always new. Often the city wants to identify existing solutions that it can support to scale up and co-develop. To do that, Peterborough DNA gathers market intelligence about what’s already in the market, engaging with its local ecosystem to explore existing solutions that can be adapted and scaled, putting big businesses and small companies together.

 

The innovation and energy that start-ups can bring to solving cities’ challenges is something that cities should work hard to cultivate. Making changes to procurement approaches is a good place to start. By using their position as powerful buyers cities can both find new ways to solve old problems and stimulate economic growth.

And in the next blog, we’ll look at how cities can spur innovation through opening up their data.

 

Tell us how you your city is opening procurement to start-ups and innovation?

Contact the CITIE team at info@citie.org