Procurement That Turns Pilots Into Programs

Had I started a large procurement on my first day as deputy mayor of New York, it wouldn’t have been completed for as long as twenty-four months, around the time I returned to Harvard. That delay frustrated me then, and it still frustrates mayors everywhere. But time is only part of the problem. Too often, local governments write procurements as if they already know the answer.
 

New York City now includes what are known as challenge-based procurements to address these problems. Instead of drafting an RFP that prescribes a product, the city publishes a challenge statement that defines the problem and the outcomes it needs. A traditional request for proposals, said Julia Fusfeld, who oversees procurement reform as a deputy director in the Mayor’s Office of Contract Services (MOCS), tells the market, “This is everything that we need. How much does it cost? Thank you. Have a great day.”
 

A challenge statement instead lets vendors propose how to get there. The city pilots the most promising ideas in small, time-limited demonstrations. If a solution performs in the real world, it expands it without restarting the procurement cycle from scratch.
 

Yet, even successful pilots often go nowhere because when one ends, an agency still has to reprocure it competitively. It’s frustrating for everyone involved, notes Fusfeld, whose job involves producing innovation inside the department. She summed up the city’s message to vendors: “You can work with us for a couple years, we’ll try your thing out, and if we like it, you still have to spend all this time and money to compete to get a contract with us longer term.” Not surprisingly, when the city’s Economic Development Corporation talked with tech firms, it heard that the city seemed “incredibly difficult to sell to,” as Fusfeld put it.
 

Three lessons stand out for making this whole process work better for both the city and its vendors:
 

First, clearly state the problem to be solved. New York’s first technology-focused challenge, issued by the Department of Citywide Administrative Services (DCAS), described the problem the city faced and left the answer to vendors. At the vendor information session, Fusfeld recalled, companies kept asking about procedural requirements: “Do you need this or do you need that?” The DCAS answer: “You tell us what your product does and how it might work with the city’s operations.” She said the format sits closer to a request for information, though it keeps some of “the bureaucratic hallmarks of an RFP.”

 

Second, build the team before you write the solicitation. In New York’s model, four groups work together: the agency program team, the agency chief contracting officer, and MOCS’ reform and procurement operations teams. The program team defines the problem first, and the contracting officer joins once the challenge takes shape. City officials say the biggest payoff comes from bringing program and procurement staff together at the start, rather than handing a finished scope from one to the other.

 

Third, understand where the speed comes from: A single procurement should cover both the pilot and the scale-up; a successful challenge pilot should avoid the need for another RFP. DCAS awards a three-year master contract with an extension option, then issues one task order for the pilot and, if the pilot is successful, another for the scale-up. Proposers must price the scale-up upfront, and pilots last no more than twelve months.

 

DCAS picked a hard, expensive problem for its first challenge: modernizing the outdated systems that heat and cool city buildings. More than seventy-five percent of city-occupied buildings predate 1975, and their average age is seventy-two years. Many still run on pneumatic controls, decades-old systems that use compressed air rather than electronics to regulate temperature. The DCAS solicitation calls conventional digital upgrades “costly, time-consuming, invasive, and disruptive to building operations.” Local Law 97, the city’s climate law for large buildings, adds urgency by requiring steep cuts in building emissions.

 

Rather than specify a controls system, DCAS asked vendors to propose ways to modernize those buildings and cut greenhouse gas emissions. Evaluators weight emissions-reduction potential at thirty percent, the plan for a representative site and cost-effectiveness at twenty percent each, and organizational capacity and past performance at fifteen percent each. DCAS may negotiate with up to five proposers, and independent measurement and verification will inform the decision to scale. “This initiative represents an ideal use case for challenge-based procurement,” said DCAS Commissioner Louis A. Molina when the city announced the challenge last November.