Are cities getting it all wrong in public management risk?


I often ask myself if our definition of risk in city management is causing a systemic failure for the world's urban population?

Risk in public management is today overly defined by process-risk with legal consequences - either by breaking procurement laws, disadvantaged competitors seeking litigation or public scandals of government waste.

We overlook the real risk - of doing the entirely wrong thing.

#citiesshare Peer Learning in London - placing the citizen at the heart of procurement

#citiesshare Peer Learning in London - placing the citizen at the heart of procurement

When is the last time local media has reported on a city government solving a problem in the wrong way, as compared to the usual outrages about cost-overruns or mal-functioning solutions.

Instead of debating the alternatives, we complain about the bureaucratic faults in delivering what usually amounts to the same old solutions. This fault line runs right through our communities - in the way we manage our administrations, the way local media reports on what is wrong rather than what could work better, and our expectations as citizens that someone else is going to fix things.

Risk for government should equal risk for citizens

Local governments spend 10% of world GDP as trustees of citizen taxes with the sole purpose of improving lives. As such, our city administrations have a powerful mandate and unequalled accountability as it is their spending and regulatory decisions affect us most.

As societies democratized, regulated and became more transparent, self-righteous government gave way to more accountable, transparent and professionalized bureaucracies that adhered to rules and introduced measures to protect in particular the process of public procurement against manipulation.

Yet, with professionalization we also saw the rise of the career politician and public servant, often incentivized by job security to inspire loyalty to the citizen and provide counter-incentives to the temptations of corruption.

"No one has ever been punished for putting too many conditions and clauses in a public contract."

But this professionalization may have also detached public servants more and more from citizens and their needs.  This can best be understood by looking at how city governments around the world define risk in procurement. Most government tenders (or RFPs = Requests for Proposals) are constructed around concepts of bureaucratic risks. By this, I mean the transactional risk in contracting that might expose the bureaucracy to liabilities, blame for mistakes or failure.

If you make the short exercise of grouping the risks in government procurement into risks to the citizen and risks to the administration you are likely to get a more balanced view:


Risk to quality of life for citizen

Best solutions are missed

Re-invention

Solution does not deliver impact

User / citizen rejects solution

Best vendors not interested

Effects

Under-performing services, over-spending

Delay in deployment, over-spending

Under-performing services

Failure, costly re-build

Under-performing services, citizen rejection, delays


Risk to administration

Insufficient vendor capacity

Solution failure liability

Cost overruns

Internal resistance

Effects

Deployment delays

Unpredictable cost-overruns

Delays, over-spending

Poorly scoped solutions, delays, citizen rejection, no impact delivered


In a political and bureaucratic culture where failure is not tolerated, it is natural that those risks affecting the administration are those associated with professional blame, litigation and scandals, and therefore tend to take top priority. They have also created their own culture of experts and professionals, often attracting talent that excels at avoiding bureaucratic risk first into procurement positions.

Who then mitigates the risks of not creating citizen value?

Putting the citizen first in procurement requires empathy first and foremost. If we reduce procurement to an exercise in bureaucratic risk management, we undermine the purpose of city government spending - to create value for citizens. It requires a culture change in which the risk of not using our resources to get the best solution to our citizens is valued highest.

City leaders can take a range of measures to mitigate the risks of not getting the most citizen value out of procurement - none of them create additional risks to the administration, but more likely strengthening the bureaucratic risk position also.


Action

Procure by publishing problem statements instead of design specifications

Proactive market research and engagement

Transparency and citizen participation

User-friendly processes

Careful risk planning

Pay for impact / performance

Effect

More solutions presented, more competition, eliminate re-invention, focus on problem throughout the process

Reach all possible solutions, recruit more bids, engage hard-to-get vendors

Share market research, promote debate about solutions to allow citizens to reject solutions before costly deployment

Lower the barriers to bidding to an absolute minimum to broaden the possible vendor pool including small-businesses, citizens or start-ups

Give fair chance to small businesses or disruptive approaches

Shifts risk to vendors and maximizes incentive to invest in problem-solving


And why would this happen?

It is happening already. A growing number of cities are actively changing both the culture and process of procurement to create more value for the citizen.

Cities like Barcelona, Philadelphia and San Francisco have found that using problem statements instead of specifications in their procurement process, lowering the barriers to vendors and investing in market research and communications is paying tangible dividends.

  • Costs are driven down by opening procurement to a wider solution and vendor-base. Barcelona and San Francisco found dozens of vendors compete to solve problems that in the past had just a handful of qualified vendors.
  • Citizens and entrepreneurs get more engaged. A recent $1,5 Million RFP by the city of Barcelona (maximum contract size $250,000) attracted 55,000 visitors of the RFP page in just 3 weeks through a coordinated local and global outreach campaign.
  • Philadelphia is accelerating a new crop of urban solutions through its FastFWD start-up accelerator program, integrated into a broader vision of a more responsive and open procurement system.

In just four years Citymart has helped more than 50 global cities to publish problem statements to find the best solutions to match their community needs learning about entirely new approaches to solving their problems that offer more value at lower cost.

A stupid question can go a long way

Most successful innovators are experts at reframing risk – often breaking down a seemingly unchallengeable risk into manageable pieces that allow new value to be created. Who would have invited strangers to sleep into their home before Airbnb or Couchsurfing turning our perception of trust on its head?

Changing risk frameworks doesn’t just require experts, but common sense and a clear sense of priority for citizen value which helps us ask the challenging question “why”?

  • “Why” can only companies with $10 million annual revenue or more present solutions? Will that really help the citizen or exclude too many new ideas?
  • “Why” are we really certain when we specify a solution that we know it doesn’t already exist, or that a better alternative may be out there somewhere?
  • "Why" do we need to buy a solution? Can we not lease it, give a concession or pay for the results achieved?

Each of these questions alone (and we ask many others every day) can transform the outcomes and results for the citizen. Most often, no one is asking them – so go ahead, and do it.

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