Sascha Haselmayer is a nonresident fellow in global cities at the Chicago Council on Global Affairs and a partner at social entrepreneurship organization Ashoka Germany.
Local governments have discovered the necessity of engaging with residents on nearly every city service and project, from city planning to social services. One of their biggest functions, however, remains largely immune to this trend: public procurement, the process by which cities buy goods and services.
Cities and other subnational governments worldwide are estimated to have procured more than $6 trillion of goods and services in 2021, which is 8% of world GDP. Nearly all of that purchasing happens out of public view, aside from the occasional corruption scandal. That is a big mistake.
Procurement is not a neutral and esoteric administrative function, although it is typically treated as such. As I describe in my recent study for the Chicago Council on Global Affairs, it is a key force in cities that can and should be directed toward the larger public good. Public procurement usually occurs outside public view. It’s governed by complex regulations and administered by staff stretched beyond capacity after decades of budget cuts. Intentionally or not, it has become a mostly clerical affair which, in the absence of a vision, has grown to meet the needs of bureaucracies, not residents.
Practitioners work in a compliance culture marked by fear of litigation should they make a mistake. They may face legal action for choosing a greener product over a cheaper one, for example. They have little leeway to choose an innovative, unproven approach to a problem over an older, “safe” approach known to yield inadequate results. They also face pressure not to stray from big, corporate suppliers simply because those suppliers are big enough to sue. This defensive anti-creativity reflects an absence of vision and mission, and it paralyzes vast sums of money that could be used more effectively.
Getting the public involved
For procurement to have a mission, the public needs to get involved. Rather than being an inscrutable bureaucratic box, procurement should engage with citizens for instruction on its basic purposes. Is “value” about cost savings, or can it also encompass protecting the environment? What’s gained and lost from buying local? How should we approach innovation and new ideas? How can buying practices incorporate societal goals?
Some cities have already taken up this challenge. Eindhoven, in the Netherlands, involved citizens in its plan to upgrade its streetlights to LEDs. The result was a creative plan that used the new streetlights to bask bike paths in artful colors, drawing on the city’s history as the “City of Light” and center of the match industry. The initiative embraced the city’s identity, improved the quality of life and also drastically reduced carbon emissions.
Berlin set a citywide goal to run a carbon-neutral administration by 2045. As a result it reworked its laws and detailed guidelines to replace the products and services its 2,000 decentralized procurement teams purchase with sustainable alternatives. It anticipates cutting carbon emissions by about 50% while also lowering costs by nearly 4%.
In Barcelona, during the peak of the financial crisis, the city radically opened up its bidding process for a million-euro contract to reduce bicycle theft and social isolation, allowing thousands of people and groups to bid rather than a handful of suppliers.
Sascha Haselmayer is a nonresident fellow in global cities at the Chicago Council on Global Affairs and a partner at social entrepreneurship organization Ashoka Germany.
These projects embraced procurement as a creative force for good, one that can make our cities more resilient and inclusive. Not by spending more, but by spending better.
Engaging the public in defining the mission is just the start. Procurement professionals also need to reimagine their own role, shifting the focus beyond bureaucratic necessities to instead focusing relentlessly on delivering meaningful outcomes to the public. Procurement teams need to be encouraged to think critically, work collaboratively and use a degree of creativity to achieve the best results. They need to be allowed to think more broadly about the questions they are being asked and the answers they are allowed to give.
The promise of this approach can be seen in Sydney, for example. The city put its procurement team at the heart of both its Aboriginal reconciliation efforts and its sustainability efforts. As a result, the city changed how it spends money to meet the needs of Indigenous suppliers. It also developed pioneering methods to calculate the true cost of carbon emissions, which it incorporates into the price of any bids it receives.
Barriers to change
For most cities, these approaches are far from reality. In the U.S., experts from 15 leading institutions I spoke with for my research reported that procurement teams lack both the vision and capacity to innovate. They estimated that procurement teams are underfunded by roughly one-third to deliver even on their existing mission of narrow bureaucratic compliance. They also reported more than 30 major challenges these teams face, such as the exclusion of small or women-owned businesses from the informal networks that influence procurement, that undermine the promise of a fair and open market.
The good news is that investing in procurement is an inexpensive way to achieve transformative results. After reviewing cases and reports on reform efforts around the world, the Chicago Council on Global Affairs estimated, conservatively, that a dollar spent on better procurement easily yields 20 dollars in cost savings. In some cases, the figure is far higher. Before the ghastly Russian invasion, Ukraine had been a leader in this field: The European Commission estimated its procurement reform yielded more than $1,500 in savings for every dollar invested.
But the promise of better procurement is not just about saving money. Rather, it is a powerful tool for achieving higher quality outcomes and significant reductions in emissions. Most important, it creates a sizable dividend on democracy through increased trust, transparency and participation.
Too often, how much we spend matters less than the way we spend. We risk undermining the just, inclusive, sustainable society we aspire to be. In the short term, we may end up spending trillions earmarked for the revival of our cities in the same old ways, without getting any closer to achieving publicly defined goals. History has shown where that will lead: to a needlessly slow recovery with many people left behind, unsustainable budgets, unnecessarily high carbon emissions, more suffering by disadvantaged groups and further erosion of trust in institutions for lack of public involvement.
Contributed pieces do not reflect an editorial position by Smart Cities Dive.
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