Procurement reform: transparency leads to accountability and efficiency

Procurement is one of the largest budget items for most jurisdictions and New York City is no exception, with nearly $20 billion spent on contracted services. Yet in many cities and states, procurement has evolved over decades into a sprawling, decentralized, technologically inadequate function that lacks coordination, strategic functionality and systems that ensure both efficiency and integrity.

In New York City, the Mayor’s Office of Contract Services (MOCS), has embarked on a mission that will sound familiar to many procurement professionals around the country: to make the process more efficient and transparent; to broaden the pool of vendors and encourage greater participation from new vendors, including small, community-based businesses and minority- and women-owned enterprises; to get contractors approved more quickly; to have contracts and supporting material completed and submitted for registration to our Comptroller on time; to have invoices approved and payments made on a more timely basis.

Along the way, we have faced the type of challenges that are commonplace around the country and as we are now beginning to see results that validate our work, our approach may be useful to consider by others who are working toward their own strategic procurement improvements.

Where to Start

Begin with a focus on your largest sector – one that impacts a significant number of people and where improvements will be felt the most. The sector may vary in different jurisdictions – in New York City, the largest category of procurement is in health and human services, where billions of dollars in contracts are awarded to nonprofit organizations that provide support for some of the city’s most vulnerable populations. We decided to start there.

Collaboration and Expectations

Charting a successful path forward requires collaboration with both partners in government – the agencies awarding the contracts – as well as the contractors themselves. It is crucially important at the outset to gain input from key stakeholders – to make sure you’re working to solve the problems that are most pressing for the people on the front lines. In New York, the administration created a Nonprofit Resiliency Committee – a group of nearly 100 nonprofit leaders who could work with us to develop new tools and recommend further improvements.

Once a resource like that is created, there needs to be regular contact and open lines of communication – so that goals and priorities can be set early on. In our case, it was clear that we needed to build a contracting platform that would make the procurement process more transparent and make it easier to propose and bid on contracts, especially for new vendors, small businesses and minority and women-owned businesses. We also wanted to enable information sharing among agencies to avoid duplicative and repetitive requests for documents. Most important – there was a compelling need to develop systems to facilitate more timely approval of contracts and payment of invoices.

Setting expectations also means being realistic about time frames. Accomplishing something of this magnitude is not something a SWAT team of technology geniuses can pull off with a few all-nighters. Naturally, contractors are impatient and not without cause. In New York City – like many other cities – the norm for years had been slow approval of contracts, delays in getting them registered with the city comptroller – which is a requirement in New York – and delays in getting invoices approved and paid. Even once goals are agreed upon, don’t take for granted that stakeholders will appreciate the amount of time and resources that were going to be necessary to get to the finish line. That is one of the reasons why having a good communications mechanism is crucial.

Showing Progress

If you’re going to ask people to be patient while you develop new processes, you need to show them progress along the way. Meeting milestones and communicating proactively and collaboratively demonstrates movement in the right direction. For example, in New York, where contractors are sometimes required to maintain services even while contracts are working through the procurement process, the city began facilitating access to interest-free bridge loans and advance payments on contracts. Other improvements contractors find beneficial are things like allowing for streamlined budget modification practices so they have more flexibility in managing day-to-day services, as well as adopting a standardized approach to indirect costs – something that was very high on the list of priorities for our contractors.

Also, when you have significant signs of progress to report, make sure stakeholders know about it. In our case, we recently were able to issue several communications noting that the majority of our health and human services agencies had more than 90% of contracts submitted on time for registration. We are now able to vet contractors faster and to share due diligence across multiple contracts. We have significantly reduced the time required to review and approve invoices and, for MWBEs, as a result of recently enacted legislation, we now have a higher threshold for discretionary contracts. These are major milestones for us, but more important – and the lesson for others in this situation – is that reporting on these milestones publicly is an opportunity to alert contractors that if they still have issues, they should get in touch – because most of their peers are seeing improved results.

Pointing to the Future

Frequent and continual communication is a key – and it never stops being crucially important. No matter how much progress is made, there will always be more to do. Stakeholders need to be reminded on a regular basis of where things stand, what’s coming next, and when they can expect it. This could include (and in our case, will include) improvements like moving toward a system that will capture all procurement activities from end to end, from RFP to approval to invoicing, and such other things as developing templates for RFPs and for commonly used contract language, so that agencies and their legal teams will not need to spend time drafting boilerplate language that has already been approved for use.

Transparency = Accountability

As any procurement professional knows, there is no single answer to how long it should take to award a contract, how long it should take to approve a contract, or how long it should take to pay a contractor. It should be done expeditiously, but it should take as long as it needs to take to do it properly. We believe that once the process is uniform for all city agencies and totally transparent, higher levels of accountability will result in greater efficiencies. For example, once you know what the “norm” is for certain types of contracts, any outliers will be accountable for explaining their delays. If it is easier to approve and pay invoices quickly, anyone that lags will owe their contractor a good justification.

Every jurisdiction has its own unique culture and procurement needs. But the path we are taking includes some steps that we believe are universal and will be fruitful for others to follow. It stresses transparency, standardization, information sharing, ease of use, timeliness, collaboration and communication. We have already seen how transparency leads to accountability. And we feel confident that accountability will lead to greater efficiency. We expect that those principles will bring the results every procurement officer wishes for: efficiency, integrity, cost savings, accountability and greater satisfaction among a wider and more diverse group of contractors.