Where do the billions go?

Beginning to understand how cities purchase goods and services is the tip of the iceberg but it's the only way to get that money back into communities.

First, a note on solidarity: It’s feeling harder to write about niche local government problems. Where usually they’re like gaps in the sidewalk that I want to look into and explore, sometimes it’s feeling like “Yeah, that’s just weeds.” I’m keeping on because I think these gaps are opportunities for organizers, advocates, public servants, movers, and shakers to take a chance at fixing some things that we’ll do better in our societal do-over. But reforms aren’t enough, and I encourage everyone reading this to get involved in your community’s actions around abortion solidarity, disaster resilience, abolition, or any other political agendas that improve material conditions for you or your neighbors.

Thanks for sticking with me. 💜

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Somewhere in a major US city, a vendor is entering a bid to work with the local government at a public office building, wheeling a pallet stacked 3 feet high with reams and reams of paper. 

Many local governments in the US conduct their procurement programs, or their processes to purchase goods, on paper. Some are taking steps to digitize procurement to make spending more open and transparent, and others are re-evaluating whether their processes are even effective. 

Across the board, communities are often left out of local governments’ decisions about which products or services to buy. Sometimes this makes sense since local governments purchase everything from pens to playground sets, but other times it doesn’t. 

A significant part of governments’ operating budgets are spent through procurement. Globally, public procurement accounted for 12 percent of global GDP in 2018. That’s $11 trillion out of the global GDP of $90 trillion. US local governments could account for up to 16 percent of that, spending a total of $1.8 trillion in direct expenditures in 2019. 

What I’m saying is that local governments are spending life-changing amounts of money through processes that would be totally hidden from the public eye if it weren’t for the transparency gains won by advocates in the last 10 years. For reference, the City of New York spent over $30 billion on goods and services in FY 2021 alone. 

Even if local government spending is seen, it isn’t always felt. With this much money potentially flowing into communities in cities across the US, why don’t you feel the benefits? 

Well, there are reasons. 

The way public procurement is set up allows a handful of corporate players to dominate. 

Public procurement is really complicated. And when I say complicated, I mean cooooomplicaaated. 

Having such a high barrier to understanding how to even navigate the process means that local governments tend to work with the same types of companies. Companies that have infinite money and people to throw at the procurement problem. 

In a standard local government procurement process, these are the general steps you’d have to take if you just wanted to bid on a city contract: 

1. Register for an account on a city’s procurement portal. Already obscure.

2. Register for alerts about upcoming procurement opportunities that match what you can offer. If this is even an option. 

3. Once you find an opportunity, read the RFP and assemble your materials. Contingent on being able to read the RFP. 

4. Make sure you are insured. Not very affordable if you’re running a small business.

5. Figure out how to actually submit the bid. Yes, that’s right, where you read about the opportunity is not necessarily where you submit your bid for the opportunity. 

I don’t think I have to explain how this creates an exclusionary environment where the same handful of big, strong companies with a never-ending supply of people on the bench can bulldoze their way to get these bids submitted and win (looking at you, Deloitte). 

I’ve worked on projects with the Open Contracting Partnership and the Government Performance Lab to try to deconstruct some of these extremely hard-coded processes to allow a more diverse range of smaller, local vendors to benefit from procurement, but it’s really tough work that requires leaders to stick their necks out and invest in serious, big, sweeping reforms. 

The reality is that unless local governments take intentional steps to tailor procurement processes to people who are excluded, small businesses don’t stand a chance. That means fewer procurement dollars flowing into local communities and more flowing into the pockets of executives at companies that are more accustomed to logistical nightmares.  

But while we might not see our friends or neighbors doing work with local governments, we might still have to live with the consequences of local governments’ purchasing decisions. 

We actually do feel the impact of public procurement in our lives all the time… 

But it might not be a positive impact. 

Say your city found someone to build a playground through the procurement process, and then the monkey bars fell down after too many kids piled on at once. Now, you’re worried about the other playgrounds that the vendor has built around the city. What do you do? 

You could call the Department of Parks and Recreation, given that they’re the “buyer” on the city side, and let them know their construction firm didn’t do a good job. They might write your comment down on a complaint form and file it away in a cabinet. They might enter your comment into an Excel document. 

But then, when the Office of Youth Engagement wants to help build a playground nearby at a local school, they might choose to work with the same vendor. They don’t have access to Parks and Rec’s filing cabinet or their Excel sheet. 

You could try to contact the city’s procurement team, but they’re not used to hearing from the public, and they probably don’t have any kind of feedback form. They’d probably refer you back to Parks and Rec. 

But unless someone on the procurement team knows about the Bad Playground Builder, the Office of Youth Engagement is going to look for the biggest, lowest cost vendor for their next playground project. And, look at that, the procurement team says there’s one that has worked with the city before.

This is essentially what happens in government over and over and over again. 

If local governments don’t track outcomes from past procurement projects, they can end up contracting that same vendor to work with new departments despite their subpar performance. 

This has a serious effect on real people and their lives. On the ground level, this looks like kids at summer camp wondering why the city keeps working with food suppliers that deliver rotten meals; or people living in affordable housing wondering why the locks on the doors keep breaking.    

The effect of all this bureaucracy is that everyday people fall through the cracks. 

The good news is that there are lots of public servants and advocates who want these things to change. Many of them are working on building outcome-driven procurement, small business inclusion, channels for public participation, cooperative purchasing practices, and generally taking initiative to make necessary reforms.

But public servants aren’t always able to make procurement do good for the people because there are some people who like procurement the way it is. 

Inefficiency in procurement can open the door for corruption. 

Last September, Houston Mayor Sylvester Turner fired city housing director Tom McCasland after McCasland accused the mayor of funneling $15 million to a favored housing developer.

McCasland said the vendor was pre-selected to win the contract through the city’s procurement process. He said that the project, which would provide 88 affordable units, was selected over a project recommended by the housing department, which would have provided 362 units at the same cost.

The company attached to the project was called Harbor Venture Group, which is run by… drumroll please… the Mayor’s former law partner Barry Barnes who the Mayor worked with until his election in 2015. 

There’s not a clear way to prove that the procurement was illegal. There wasn’t an overt quid pro quo, which usually happens in the form of campaign donations. The city can just say that the criteria used to judge the contract, which some governments publish but Houston doesn’t, simply showed that the 88-unit project was the right one. 

Plus, at the end of the day, many local governments in the US are legally required to award contracts to the lowest bidder, so if the cost was even marginally lower, that’d be enough of a reason to go with the mayor’s preferred vendor. 

In general, there are a million behind-the-scenes “too complicated for you to understand” explanations local governments can use to justify their procurement decisions. That’s why transparency around procurement is such an important foundation of a functioning democracy. 

But transparency is only the beginning!

If these challenges in local government procurement got you riled up, then welcome to the party. There’s plenty more about how local governments buy things that need work. 

Since procurement is such a big topic, I’m taking suggestions on sub-topics to dive into in future issues! Drop a comment or email me your picks. 

Some ideas: 

• How are local governments opening doors for small or minority-owned businesses? 

• When can people show up to participate in procurement? 

• What can local governments do to get their procurement data in order? 

• How does procurement affect governments’ use of technology? 

Linked Thinking

• Pay to play - Interactive feature by Zach Despart matching procurement data to campaign contributions and exposing corruption in Harris County

• How Illinois is building equity into procurement - Reporting by Beeck Center Storyteller-in-Residence Ashleigh Fryer on procurement reform in Illinois, supported by our Data Labs program 

• Can open contracting hold smart cities accountable - Panel discussion between me and some friends at the NYC Mayor’s Office of the CTO & Reboot

• What lies beneath - “Procurement challenges don’t end when a government agency selects a vendor to fulfill a contract.” A helpful blog post from Mark Headd on what comes after the contract for new gov tech