On Public Tech Procurement: Digital Payments edition
Background context
Here’s the relevant links as I write this piece prior to Toronto Council’s final vote on this matter:
David Rider (Toronto Star) tweet thread of TO Executive Committee
… and subsequent Star piece
Bianca Wylie’s from-a-holster Spacing article on how to do digital infrastructure
My own comments as this emerged (first hot take + quick further thoughts)
What’s happening
Toronto has proposed a dramatic modernization of a core digital infrastructure system. Exciting! Also: choppy waters ahead. This is a public infrastructure decision on par with the ongoing Gardiner debate, just digital.
Some considerations for the City’s technology procurement goals. (All this written relatively quickly so pardon any haste.) They’ll want to:
1. Maximize public good generally speaking... a new system that actually works and eases public and bureaucratic burden. Digital payments are a key plank of any fulsome digital infrastructure plan
2. Reduce the chance of a Phoenix-pay type snafu where a zombie system roams the land causing both headache for individual people (public and staff alike) and raising massive cost/service delivery/risk implications for the city institution itself
3. Level the access playing field for Canadian startups and scale ups, giving them a more equal shot against more moneyed companies from outside Canada, or big entrenched Canadian players. We can level the scales a bit in their direction but not guarantee an outcome goes to a Canadian company (NAFTA constraints). This is also directly related to the "how can government be first buyer of Canadian innovation" question in the municipal context.
Wylie’s piece covers the “how to do digital infrastructure” implications so I’m not really talking about those here. My complementary point is instead about perceived cost, intangible value and how to meaningfully use our existing procurement legislation to maximize City benefit and give local companies a fair shake.
Reframing the goals, then:
How can the city create a great outcome on a tough project (digital payments) which is mission-critical to both digital infrastructure modernization, and to having a good shot at creating a breezy, seamless citizen digital service experience.
Can we do 1. in a way that could deliver meaningful stimulus and support to the local tech sector, which is awesome but hurting, and for which every win counts at the moment. The grand slam version of that is: a local company wins a competition to embed within the City of TO and develops a digital payments solution (or hones an existing one) that can then be deployed locally and sold to cities across the world.
The Civic Accelerator, developed* by me and Sam Laban in 2016 is a challenge-based procurement model that gives a city the best (de-risked) shot to do both.
(*Taking direct inspiration and advice from early global comparators in San Francisco and Amsterdam, and more generally, from a ton of smart, helpful people.)
It’s already been tested in Ontario municipalities and was scaled to various cities as the MiX program. It’s a balanced way to (at least try) to do what’s best for the City and the domestic technology sector.
There is already an approved Council motion from this term at the committee level to green light these procurement challenges conceptually.
Cash cost today vs. long term intangible value
What the Civic Accelerator protects with zeal is the real pot of gold for a company trying to bring a product to market or secure its first major institutional buyer: the opportunity to embed inside of a major public institution to harvest staff expertise and time, that can then be put back into the product for which the company owns the intellectual property. This has incalculable value, and dwarfs any notion of what this may cost in cash in the near term.
This embed opportunity with a scalable, legal pathway to a full purchase/deployment... that's the crown jewels, which must be guarded jealously. Consider getting a dragon and moat if required. It’s a massive leverage point for cities to wield. But under this proposed digital payments arrangement, that tool is left untouched, and the field ceded. The cash flow implications are low in the near term, but the backdoor is left wide open.
If we’re sole sourcing…
At least throw in some thoughtful economic nationalism and sole source locally. Since we launched the OCN in early 2019 I've come to know a slice of our domestic technology and innovation sector. The notion that this young US company with a couple state level clients is the only special genius in the universe with this knowledge is... rude. And incompatible with any meaningful local technology strategy.
If you don’t want to sole source to a local firm…
Run a challenge! When you reframe the approach from this digital payments system to a digital payments system that fulfils certain requirements, it draws out the best of the ecosystem to pitch you on why they are the special genius. Applicant data from the 2016 Civic Accelerator round demonstrated that most challenge respondents (companies) were from closer to home. It can be done by the books, creating the buzzy tech outcome and with a greater shot of doing it with a company from the Toronto region.
About challenge-based procurement
Running a challenge based RFP (here’s the original Civic Accelerator documents) is fun! You can do the exciting innovation thing, with the cool private sector partner, in an appropriately regulated environment that leverages the most common city purchasing vehicle: the RFP. But it also now
- builds in a number of off ramps for the actual bearer of risk, the City
- creates a viable legal pathway to a full purchase if development milestones are hit and pilots or test deployments successful
- accounts for grey areas like development of new IP, and cash costs vs. murky future value / embed benefits
- increases the relative chance of a Canadian startup or scale up winning the formal procurement competition
- promotes autonomy and culture of innovation among city staff who are passionate about their jobs and want to use their expertise to help the system improve.
A good challenge model, well executed, will increase the chance of a successful digital outcome, while de-risking the process to the City’s explicit and sole benefit. Everything occurs within our existing procurement laws, available vehicles (RFP), and current bylaws in most municipalities.
Final thoughts
My point is about understanding cash cost and intangible value in complex digital infrastructure situations, and how to meaningfully use our existing procurement legislation to maximize City benefit and give local companies a fair shake. There are aligned interests and incentives here, but we must start from the point of understanding that what is (proposed to be) gifted to PayIt without process is equivalent to a stimulus transfer from the City to this company. If we’re doing a stimulus transfer, ok, but let’s then consider how to maximize that impact by keeping that activity local. If that fails (it won’t), dust off the Gartner report and see who they recommend.
I can’t imagine that a wealth transfer from the Canadian public sector to a private US firm is anyone’s stated goal here. We’re in a hard moment for everyone, especially the City, and our local tech ecosystem could use some thoughtful support. We’ve already proven out the path to do that, while creating the best digital infrastructure modernization outcome for residents.
To come (sometime), part 2: How to Civic Accelerator
Other Links
A good in progress snapshot of the Civic Accelerator from the time, by Caitlin Cassie for Brookfield.