Open government procurement drives innovation using the cloud

It should be simple to build digital platforms that offer people reliable, clear ways to access government services such as healthcare, business registration, and welfare payments.

Cloud technology makes it possible for every service to be simple, reliable, scalable, adaptable, and secure. Public sector agencies need to be able to access the cloud, and they do so through public procurement processes. Procurement’s role in supporting modern, digital services for governments is the subject of a report from the Open Data Institute (ODI) and Open Contracting Partnership (OCP).

The Efficiency of Open Procurement report, commissioned by Amazon Web Services (AWS), concludes: “Closed and opaque approaches to procurement are flawed. Unexamined custom and practice, for example, outdated processes or habitually reusing established contracts, limits visibility, reduces competition, and stifles innovation.”

To explore this further, the OCP convened a panel at the World Bank Civil Society Policy Forum in April. As somebody who led a digital transformation program in the UK government and who now listens to government transformation leaders around the world, I joined the panel with leaders from the International Monetary Fund Capacity Development, the World Bank, and Brazil’s federal government. In this post, I share some of the examples of good practice that informed that discussion.

Traditional technology procurement challenges service transformation

When the UK government wanted to transform services to make them modern and digital in 2011, the approach to technology investment then was the same as it was for capital infrastructure projects such as road building. There was an initial specification to build a service to and limited public testing or feedback.

After launch, we saw that people found these new services hard to use. They did not fully achieve the intended benefits. At first, we tried to solve the symptoms and looked at the way the service worked. We didn’t immediately identify the root cause. This emerged when we tried to change the way we built services. We wanted to try an iterative method—Agile methodology—to transform services such as welfare payments for carers.

Open procurement processes drive innovation

Agile methodology makes it possible to collect data and perspectives about how the service should perform throughout the whole build, from discovery of the user need through the alpha prototype and beta limited use stages, and through to the launch of the live service. This methodology uses agile skills, open standards and software, and it takes advantage of the cloud. We needed specialist suppliers to help us develop new services and train people to deliver them. We found that the existing procurement process made it difficult to meet this need.

The solution was a combination of the UK G-Cloud framework and the Digital Outcomes and Specialists (DOS) framework. The UK G-Cloud framework supported standardized items such as cloud hosting, storage, and networking. DOS supported bespoke teams such as developers, researchers, designers, and delivery leaders to complement the in-house government team. The frameworks they developed became the GOV.UK Digital Marketplace. This made it simpler for specialists to bid for government work and increased government access to technology innovators. The simplified procurement process worked for tech and focused on outcomes, so the government became a knowledgeable buyer of technology.

Previously, these typically small-to-medium-sized startup suppliers faced barriers such as annual turnover totals. In 2010, 80 percent of government IT work was undertaken by 18 suppliers. By 2015, there was a £4 billion ($5.09 billion) market with 48 percent of spend going to small and medium-sized enterprises (SMEs), which generally offered the most innovative solutions that used the cloud. By 2019, the cloud supported SMEs that used £1.3 billion ($1.65 billion) of AWS services alone through the UK government digital marketplace.

The OCP panel discussion and the ODI-OCP report looked at ways that open procurement supports service transformation in three ways.

1. Simplification – Chile has administered public procurement through ChileCompra since 2003. It operates with a regulatory framework based on transparency, efficiency, accessibility, and nondiscrimination. In 2019, ChileCompra redesigned how to buy computers, data services, and software development. They reduced contracts from six years to nine months. They used three standard computer ranges instead of 1,200 types. ChileCompra expected savings of 10 percent: As of 2021, the new framework led to average savings of 28 percent compared to market prices.
2. Lowering barriers to transformation – The Australian government’s pledge to encourage competition includes a goal that SMEs will represent 35 percent of government technology contracts. Further, noncorporate Commonwealth entities aim to source at least 20 percent of procurement by value from SMEs. These commitments support inclusive, diverse economic growth.
3. Transparency – A 2017 study of more than four million government contracts in the European Union (EU) found that every additional item of information published about a tender decreased the risk of a single-bid contract. It also found that single-bid contracts are both a governance risk and are, on average, more than seven percent more costly than multi-bid contracts. The number of bids received per call for tender increased by around 12 percent for contracts subject to mandatory EU transparency requirements.

Essential success factors for digital service transformation

Procurement is one of the essential success factors for digital service transformation. Modern digital services often need a new approach to procurement. Traditional technology procurement works for multiyear, capital-based projects, and these don’t fit with the technology underpinning modern, responsive, agile, digital public services. Procurement that needs upfront specifications, binding decisions, and capital investment constrains the ability to deliver better services for less money. This approach also locks in the outcome at the point of least knowledge—that is, before any research or testing has taken place.

For more, read the ODI-OCP report, The Efficiency of Open Procurement, and listen to the World Bank Civil Society Policy Forum discussion.