Encouraging More Flexible Government Procurement

Last year, Jon Stewart interviewed Nancy Pelosi on The Daily Show discussing how government procurement sort of sucks. A lot of it was the result of issues with the Affordable Care Act’s healthcare.gov site, which struggled at its launch with a series of technical problems that would make any web developer wince.

The full interview is, as always, an excellent watch.

While the scale of the deployment and the bizarre state of the American healthcare system is almost completely alien to most of us in Australia, there was one part of the interview that resonated very strongly with me as a small business owner who has tried to approach government to solve their technical problems.

Stewart brought up the point that the complexity of the procurement process limits the accessibility of it to large companies – small companies are excluded simply because they don’t have the resources to devote to the tendering process.

The relevant text for those nerds (like me) who dislike video:

Stewart: “Obama’s IT guy, small company, clearly a brilliant guy – he arranged all of Obama’s Internet campaign stuff … That guy couldn’t figure out the process. He couldn’t figure out how to bid for that contract.

He said it was a 300 page document and it seems like it’s obscured like that purposefully so that the larger companies have an advantage because they have teams of lawyers and things that can do it.

I’m presenting it as – “Do we have a foundational problem? Is there a corruption in the system that needs to be addressed to give us the confidence that moving forward, we can execute these programmes better?”

Pelosi: “I don’t think there’s a corruption. There may be a risk aversion with going with the known and then just not being entrepreneurial enough to say, question whether that is really going to do the job.”

If you’re a small ICT company in Queensland looking to expand your customer base, you’ve almost certainly looked at the QTenders site every now and then to see what stuff is on the table.

In general I’ve found the tender documents to be very well written. They’re well organised; it’s clear what they’re trying to do and how they want to do it.

Unfortunately many of the documents are very long – just reading them can be a full day exercise.

For a small company, responding to a tender is the work time equivalent of running an entire project. They often require several people to work on. Given the often short timeframes for tender response – maybe a month – it can mean taking up a huge amount of time servicing other customers.

Arguably, this is just part of the sales process. But large companies have entire teams of sales people that do this. A mate I played soccer with actually lead a team (in mining or something, not IT), the sole purpose of which was to just reply to government tenders, having (over the years) developed a keen insight into how many they’d win versus how many they’d lose.

If you’re a large company, you can afford to do this. You can build your sales process over time and simply absorb the losses incurred by blowing a few human-months of time on responding to a tender. But if you’re a startup or an SME, you’re potentially losing 10-20% of your entire sales effort for a YEAR, working on something that you’re almost certainly not going to win – because the big companies have the tender process so streamlined. They basically have human machines for churning out responses to these things; responses that they probably know statistically how likely they are to win.

The tender process is an important part of open government procurement. But watching the giant companies that win the tenders fail again and again costing taxpayers billions of dollars is starting to wear a bit thin. We need to look at better solutions – dividing large projects up unto smaller and more manageable components and figuring out a way to let our SMEs and startups compete effectively for them, instead of them being excluded because they simply can’t afford a seat at the table.

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