CONTRACT KILLER: Can New York's procurement policies keep up with the changing times?

CONTRACT KILLER: Can New York's procurement policies keep up with the changing times?

May 13, 2014

New York is in many ways a leader when it comes to the use of technology for innovation in government. The state’s Open Senate website was an early model for transparency in terms of making proposed legislation and committee schedules available to the public. The comptroller’s Open Book initiative takes advantage of the state’s integrated accounting system—a fiscal ledger that records most financial transactions across all state agencies— allowing the public to easily track payments made by the government. And outgoing Health Commissioner Nirav Shah won the first annual Health Data Liberators Award last year for his efforts to make his department’s data easily accessible.

New York City is by many accounts even further ahead in terms of digital transparency than the state. It has its own public tracking system for city spending—Checkbook 2.0. It is known as the first major city to set up a phone bank for nonemergency public inquiries—311—and its Open Data Law—which requires all city departments and agencies make their internal records of operation centrally available in an easy-to-analyze format by the end of 2018—is widely considered a model for the nation.

Still, thought leaders in the technology realm say the cumbersome processes by which both the city and state governments go about procuring, implementing and maintaining technology initiatives fail to take advantage of the most innovative possible solutions and inevitably lead to wasted taxpayer dollars.

“New York is probably the poster child for hiring extremely large companies for just about everything,” said John Kaehny, executive director of the nonprofit think tank Reinvent Albany, who also helped write New York City’s Open Data Law. “Big names like IBM, CISCO, Oracle— they get a tremendous share of all IT contracts. The process for getting state contracts is very onerous, and the opportunity cost to your small business of not getting that contract is gigantic. It’s not worthwhile for a lot of the more nimble digital start-ups in places like New York City.”

As with most government processes, New York’s procurement policies—at both the city and the state level—are from an era when technological innovation did not occur at the breakneck pace it does now. And in the time it takes to write up a request for proposal (RFP), put it out for bid, pick a winner and negotiate a contract, the original spec for the project is no longer up-to-date and may not be the best option.

“The implication is that the state is not getting the cheapest and most innovative technology,” Kaehny said. “The state overpays a lot. And even though New York City has the reputation for being the hottest place right now for tech start-ups behind Silicon Valley, the fact is that city government takes very little advantage of all that tech innovation, and New York State even less so.”

Internal department policies are hindering progress as well, according to Andrew Rasiej, chair of NY Tech Meetup, which fosters New York City’s growing technology community. For instance, the hiring qualifications for civil servants in the tech sector have not been upgraded in quite some time.

“Let’s say you work for the Parks Department and you want to build an iPhone app. You can’t go to the union and say ‘Give me an iOS developer, please,’” Rasiej said. “They will give you an engineer who maybe the last time they were trained on anything, it was MS-DOS.”

“So instead of going internally to get civil service workers to do that job, the agency writes an RFP and tries to hire an outside firm to do the work, which is (A) inefficient, because of the procurement process, and (B) doesn’t create any innovation because the work is being done outside of the agency as opposed to inside,” Rasiej continued.

Most large IT development projects—both commercial and governmental—fail in some way, according to Standish Group data published on Computerworld’s Healthcare IT blog. An analysis of 3,555 projects with estimated costs of over $10 million from 2003 to 2012 showed 52 percent of them to be “challenged”—they ran behind schedule, over budget or did not meet user expectations. Another 41.1 percent were utter failures—discarded for another option or abandoned completely. Only 6 or 7 percent of projects were categorized as a “success.”

The Bloomberg administration’s disastrous CityTime project—which, ironically, was meant to streamline New York City’s payroll process—is an obvious example of the problems that can arise: Before a trio of contractors was convicted of defrauding the city of tens of millions in taxpayer dollars, the project had already undergone a series of false starts with other vendors.

Even an outwardly successful project like New York City’s innovative 311 service has caused the city trouble.

“The technology that was adopted for 311 ended up being very difficult and expensive to maintain, and very difficult to improve upon and innovate around,” said Andrew Hoppin, founder and CEO of New Amsterdam Ideas, one of the few start-up companies that contracts regularly with New York City and state government. “So it isn’t just about initial procurements; it’s also about how to maintain software and how do you keep pace with the times.”

Rasiej believes the procurement process could be reformed to be less static: “The idea of buying a product once and having it continue to serve itspurposeforsomelongerperiodof time is a somewhat obsolete model,” he said. “Could we move ... [it] to something more like commissioning, where the service a provider is bidding on [is] an ongoing dynamic relationship with the government agency; where they are obligated to have their technology maintain parity with both the state-of-the-art and the changing dynamics of the service in need?”

Hoppin, formerly the chief information officer in the state Senate, was largely responsible for the design of the chamber’s website. In addition to developing software programs for government use, his company compiles a growing library of open source software—programs that are unlicensed and free for any government, organization or person to download—and also offers maintenance services for those agencies and organizations that would rather not deal with the upkeep themselves.

Hoppin is an advocate for governments freely sharing software that is proven to work, as opposed to reinventing the wheel every time a service needs to be developed. Brazil, he points out, has an “open source first” policy, meaning government agencies must consider all existing available options before contracting to build anything new. Great Britain has saved a significant amount of money using open source software to run its government systems, Hoppin says. He speculates that in New York, a centralized database listing all tech projects the government wants to roll out would do wonders to coordinate needs across agencies and serve to head off waste and redundancy.

As for the problem accountability, Hoppin thinks that ideally a distinction could be drawn between large and small projects: the procurement process could be streamlined in order to encourage small businesses to compete to win contracts of a more modest scale.

“The argument would be that we can afford to make it faster because the costsoffailurearelower,aslongasyou are transparent about why it failed and something is learned from it,” Hoppin said. Still, he concedes that there is currently zero political tolerance in government or in most organizations for admitting the possibility of future failure: “Right now there’s no vested interest on the part of somebody inside government—unless they are an incredibly resolute and outside-of-the-box thinker—to take on risks.” 

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Wilder Fleming