SPI Insights

New trends in government procurement worth noting

Procurement, like everything else, is continually evolving. That is especially true today because so many procurements are large, complex, and one-of-a-kind. The increased use of public-private partnership engagements is also spurring changes in the way projects are procured. Additionally, a large percentage of the federal funding currently available for infrastructure projects calls for private sector investments. That also is forcing change.

There are numerous types of project delivery methods and change is not new. Public sector procurements have morphed into various types of delivery methods and procurement processes have changed to accommodate short range and long-range efforts and initiatives.

Industry forums, market soundings and pre-procurement meetings are not new, but they seem to be more common now for numerous types of large projects. In the past, most industry soundings were related to transportation projects. Now, when a governmental entity is considering a P3 of any kind, it is common to schedule meetings with developers, potential funding sources, and contractors. Collaboration is best when ideas and input are exchanged so these sessions have been embraced by all parties.

It is important to remember, however, that these pre-procurement meetings can be held in various ways. Most likely, the safest and most valuable information is received by public officials when sessions are scheduled individually. That’s because conversations are more open and productive when only one company is providing input, making suggestions, and asking questions. The dialogue and ideas exchanged are condensed if potential competitors are all in the same session.

One important thing for public officials to remember is that if sessions are held individually or separately, it is wise to advise private sector firms not to leave any documents behind that contain proprietary information or anything else they don’t want shared. It is all too easy for any individual or competitor to send an Open Records Request (ORR) for the documents. Once any document is provided to a public entity, it is considered ‘public information’ and is subject to an ORR.

Some pre-procurement practices involve the issuance of a Request for Information (RFI) only. This is an invitation for companies to respond to questions related to projects being planned or potential decisions that will be made about the project before a formal procurement begins. It is also a way for public officials to gage interest in a project. Much valuable information can be obtained this way but only if enough background data is shared in the RFI. Most private sector contractors will not respond to a generalized RFI because to provide valuable input, they need to know as much as possible about the history of the project, the objective, and the desired input. The RFIs that have been issued in the past are now common for a new delivery method called a progressive P3 engagement.

This practice has been more common at the higher education jurisdiction, but it has been used quite a bit lately at the municipal and county levels of government. There are many reasons for this. One reason is that private sector investors, who bring funding to projects, accept massive amounts of risk, and agree to long-term fixed-price contracts, were being forced to put funding on hold. They had to assemble teams, agree to multiple strict commitments, and then wait for extremely long periods of time for selection decisions, all while knowing that their efforts might be in vain if the procurement might end up being cancelled. The objective was to shorten the formal procurement process so that the project could move quicker.

Under this type of process, public officials select a partner faster and invest fewer resources. Short-listed potential private sector partners are selected based on qualifications, a concept design, an initial budget projection and risk tolerance. Procurement decision makers factor in a company’s experience as well as qualifications and financing capabilities.

Once a partner is selected, projects move quicker. A financial close is achieved efficiently and public owners often have more input into design, community engagement, and collaboration. While price is never overlooked or undervalued, most large projects are not determined by price. Experience and expertise are highly valued and many public entities have requirements for a percentage of the work to be delivered by local subcontractors.

Currently, there is an abundance of federal funding for all types of large projects throughout the country. That environment, however, was never intended to last and public funding will be consolidated with private sector funding in the future. Most government leaders realize that it is important to make public project contracting as efficient as possible. Because of that, there is ample evidence that procurement methods and practices will continue to evolve… and even more changes can be expected in the future.