Recognizing this as the new reality, Carlsbad, Calif., on Nov. 1 chose not to release a request for information (RFI) or a request for proposal (RFP). Instead, the city of about 115,000 people put out a request for qualifications (RFQ) in its quest to dramatically change its technological structure.
“It is a request for innovative digital transformation ideas and partners,” Carlsbad Chief Innovation Officer David Graham said. “We are aiming to qualify one or more digital transformation partners through this process. We have put the ambitious goal of citywide digital transformation out there. We have provided what our current state is and … the future state that we would like to get to.”
The RFQ is a form of challenge-based procurement, which is an idea that Graham has discussed for years with both Jay Nath and Kamran Saddique, the chief executive officers of City Innovate. The philosophy behind challenge-based procurement is to avoid the prescriptive method of telling companies what they need to deliver. Carlsbad’s RFQ simply states its problem up front, warts and all, and asks companies to respond with their own solutions.
Although challenge-based procurement breaks away from traditional procurement concepts, Saddique said it’s not as much about going in a different direction as it is using a different tool.
“You can use your traditional RFP methods, you can use [Request for Offers], [Request for X], whatever you’d like to call it,” Saddique said. “But what challenge-based procurement does is just add a new tool that allows cities to really demonstrate that we are looking to evaluate something in reality as opposed to evaluating something on paper. We want to see it. We don’t want to read it. So that’s the main difference.”
Essentially, Carlsbad’s RFQ invites companies to submit a road map for how they would solve the city’s problem along with a statement of qualification that includes case studies. The city can then leverage this knowledge to determine which direction it wants to take. Graham points out, however, that responses can emphasize different things. The city is open to starting a business relationship with multiple partners or innovators.
“Now, we expect that some partners will do overall citywide road maps, but we also left the opportunity open for specific areas that they could propose a scope for,” Graham explained.
Once a city evaluates responses, challenge-based procurement typically leads to what Saddique calls a demonstration period in which the company gets to show the city how their solution might work.
“It gets an opportunity to work with a team. It gets an opportunity to see how, whether it’s the code, the user interface, whatever it is, they can now touch it,” Saddique said.
In explaining why Carlsbad didn't release an RFI or RFP, Graham said RFIs often fail to show the intent behind a particular solution being purchased. RFPs, on the other hand, do not allow for more creative solutions or flexibility due to their stated requirements.
“RFPs are fine for a number of things, but you’re not really understanding, in an RFP, strategy and solution creation from industry,” Graham said. “You’re usually just getting, ‘Here is our solution to your problem,’ but there’s no sort of back and forth and co-creation around that, and that’s why challenge-based procurement makes a ton of sense.”
Saddique added that RFPs are better for commodities that can be easily quantified and understood, such as office supplies. Technology, especially emerging technology, is difficult to quantify just by looking at it on paper.
But how difficult is it for a city to engage in challenge-based procurement? Graham said it is essential that leadership buys in and that people are educated on why the approach is useful.
Saddique said he has observed people from the technology space working within cities. At times, these individuals will try to avoid procurement officials by doing pilots. He strongly advises against this kind of circumvention.
“Look, you need to work with your procurement officials,” Saddique said. “You need to get a champion behind you on this, whether it’s a city administrator, whether it’s a mayor themselves, somebody high up or a CIO. And then we do need to have folks who are internally going to be the lead in championing this and working with those innovators on a day-to-day basis.”
Graham agrees that communication must occur with procurement officials, who, he said, can be “just as frustrated with the current state of procurement.” In Carlsbad, procurement officials have warmed to challenge-based procurement because it’s ultimately about delivering goods and services to the public.
Within days of releasing its RFQ, Carlsbad received its first notices of intent from businesses. Graham said companies seem to find the RFQ a refreshing change in direction and have shown eagerness to make it successful, with the hope that other cities will adopt challenge-based procurement.
Saddique said although challenge-based procurement has been a focus of San Francisco and City Innovate for years through the Startup In Residence program, the concept came out of the federal government during the Obama administration. The goal in using it was to answer the question, “How do we keep the United States relevant today?”
Saddique added that because challenge-based procurement lets businesses “learn what happens behind City Hall doors,” it creates an empathy between parties. Graham wants to build on that foundation, saying that Carlsbad intends to continue to refine the RFQ model to create the best value for the city and its residents.
