Procurement Turmoil: Future strategies for better solutions

When you get into the world of public policy in Canada, you never think you’re going to end up writing this sentence: “Wow! What a wild couple of weeks in federal government procurement!” And yet, here we are. It has, in fact, been a wild couple of weeks in federal government procurement.

First, the Auditor General of Canada’s report into the ill-fated ArriveCan app dropped in the middle of last month. As is often the case with the Auditor General’s work, the report found significant failures of process and recommended process-oriented fixes to ensure that there are new processes to avoid future process oversights.

Then, at the beginning of this month, the federal government announced that it would be shuttering the Innovative Solutions Canada program. While somewhat troubled, ISC was at least an acknowledgement that the procurement status quo left no real routes for buyers and sellers to work together to develop and purchase genuinely innovative solutions to public problems. Innovators who have been working through the program for years now face deep uncertainty.

ArriveCan and ISC’s dysfunction are both morbid symptoms of a procurement system that is fundamentally not fit for purpose. Tacking on more rules to a process already completely choked with them and closing down an underperforming innovation program instead of reforming it screams of the classic Simpsons line: “we’ve tried nothing and we’re all out of ideas.”

There has been some heartening commentary on the need to strengthen in-house public sector tech capabilities to avoid future ArriveCan scandals. This is absolutely necessary. Other governments with similar institutional architecture, like the UK, have made amazing progress on this over the last decade.

But even with vastly improved public sector digital capacity, there will always be a need for the private sector to contribute expertise and ideas. In-house capacity could certainly help make governments better, more savvy buyers. But the fact is that government will always be buyers. Government shouldn’t always be in the business of building its own software systems and developing its own technology solutions. While public sector tech capacity is certainly necessary to avoid scandals like ArriveCan, it isn’t sufficient on its own to fix the problems with procurement systems.

To get to a better place, we still need to make changes to how governments buy. Last month, we talked about how challenge-based mechanisms like the American Small Business Innovation Research program have generated impressive innovation and economic outcomes, and the importance of cultivating expertise and networks within government to enable buying innovation. These programs are great. But there are other good examples to draw on.

The UK is a jurisdiction that has been quietly trailblazing for years on tackling climate change. Their 2008 Climate Change Act, enacted by a Labour government, has survived a series of Conservative Prime Ministers and Brexit. Their national carbon budgets and accompanying delivery plans are impressive pieces of long-range policy work. Another policy tool developed in order to complement their efforts to address climate change is Forward Commitment Procurement (FCP), which has since expanded to areas like healthcare.

The basic idea with FCP is that governments often know, years out, that they will need to solve specific problems. That timeline lets them step back, define the outcomes they want, sound the market for potential novel solutions, and be able to credibly tell innovators, “yes, that sounds great, we’ll take several hundred of those, please.” This approach leverages the government’s massive power as a buyer to communicate needs to potential vendor firms and buy the best solutions that emerge to solve their problems. On the other side of the ledger, firms are able to take those in-hand commitments as bankable assets that make solving any outstanding technical challenges that much easier – crossing what’s often called the “valley of death” between prototype and commercialization.

What’s important about FCP is that it signals to innovators who want to work on public-purpose innovations, such as novel products and services in clean or health technologies, that there is a market for what they want to do.

A common critique of venture capital-driven technological industries is that they are overly concerned with producing outsized financial returns and not enough with improving human lives. If we want technologies that help doctors and nurses treat patients and make our health care system more resilient, or technologies that help us address huge challenges like climate change or the housing crisis, we need to use public institutions to signal that there is a market for it. Forward commitment procurement is an important lever to do exactly that.

As I mentioned in our last issue, CCI has a big report on procurement coming out later this month, on April 3. You can register for our online launch here.