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Summary

Government technology procurement practices have traditionally been long-winded and resource-intensive. The processes involved have been developed over many decades to ensure appropriate governance of government expenditure, but they add a considerable transaction overhead for everyone involved. The move to "agile procurement" provides a win-win opportunity for public sector engagements.

Legacy procurement is an overhead for both parties

As traditional government IT projects are extremely expensive and delivered over extended time frames, there is a reasonable expectation that public money will be spent in the best possible way, without favor or misappropriation. To address understandable community concerns, extensive governance processes have been developed over time, which tightly prescribe the entire procurement procedure from end to end.

Such processes commonly take a long time to complete and involve large numbers of resources. It is not unusual for procurements for multiyear service contracts, with cumulative values in the hundreds of millions of dollars, to take large teams of public servants months, if not years, to work through. At the same time, the complexity of the requirements, coupled with the compliance-based procurement evaluation, has created a correspondingly large and expensive government-procurement capability on the supply side.

In most competitive tenders there will be one winner, or at least one winner per service category, which means that most respondents to a tender will be disappointed. The many months of effort put into an unsuccessful response to a major tender is a significant cost embedded in a higher overall price for the few contracts that are won.

Over the last few years, Ovum has identified that many public sector CIOs expect functional proof-of-concept projects to deliver benefits within six months or less, either for free or for a few thousand dollars, before they will commit to further purchases. As most government agencies move away from expensive mega-projects to an approach that favors a short-term, iterative development paradigm, questions have been raised as to whether the relatively small amounts of funds available upfront will cause major structural problems for the larger government service providers with their substantial overheads of presales and bid teams.

However, this fails to recognize that agile procurement approaches can provide benefits to the contractual parties on both sides of the table. Just as an agency no longer needs to produce extensive, detailed requirements documents upfront and tie up precious public sector resources in complex evaluations of responses, a vendor can respond quicker with a smaller, cheaper, and more focused deliverable that targets a specific user problem, rather than attempt to solve every possible future problem in one hit.

Large, traditional vendors that recognize this shift and are able to redirect their presales resources to smaller, quicker, and cheaper initial engagements will be the ones to thrive in the new "agile everything" world.

Appendix

Further reading

The Maturity of Digital Government in Australia, IT0007-000916 (April 2017)

"Government procurement needs to focus more clearly on driving innovation," IT0007-000883 (March 2016)

"Enabling innovation in digital government will require change in the regulatory environment," IT0007-000940 (March 2017)

Author

Al Blake, Principal Analyst, Public Sector

al.blake@ovum.com

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