Towards more open, more diverse and more competitive digital public procurement

How can we open the Public Administration supplier market to digital startups and SMEs?

This is THE QUESTION, and the big obsession at GOBE. More and more public institutions are interested in having in their digital transformation processes with startups that are impacting all types of industries. Companies with traction in the market and with solutions to service provision, administrative efficiency or institutional quality, and that could combine their B2B business model with the B2G model. However, the presence of startups, scale-ups and digital SMEs in public transformation processes is still minimal.

There are several reasons for this, but the main barrier continues to be commercial public procurement. Although great efforts have been made to open the market to other types of companies, the truth is that the expected objectives have not been achieved. On the one hand, one of the objectives of the Public Sector Contracts Law (LCSP), following European recommendations and directives, was to diversify public procurement and increase the number of SMEs working with the Administration. On the other hand, an attempt has been made to implement Innovative Public Procurement (CPI), and with it, to activate the role of the Administrations in the generation of R&D. None of these efforts have had the desired result: the specifications continue to close competition to SMEs (especially in the ICT sector), and the PPI processes are too slow and complex to attract new digital companies with rapid growth objectives. In addition, the PPI leaves out all those companies that, although young, already have a product and traction in the market.

We have been promoting and implementing govtech labs for five years, before from the Publictech Lab, now from GOBE, and together with the development of this type of labs, we have proposed a series of measures to take advantage of the opportunities of the current legal system in order to encourage a more open, diverse and competitive digital public procurement. With this, we are developing a new concept, "Entrepreneurial Public Procurement" (EPP) that aims to scale innovation with public value already existing in the market (vs. PPI whose purpose is to boost R&D).

Below, we put forward some very concrete first lines of reflection that respond to the limitations we have encountered when implementing govtech projects. This reflection is part of this new concept of FPC, which we would love to further deepen with all those interested in the subject.

The big question: How to do pilot projects for more than 15,000 euros? We think we have (finally) the answer

Especially in digital projects, it is necessary to test new solutions and measure their impact and efficiency. If there are no pilots, the Administrations cannot know the value of these new solutions, therefore, they cannot demand them via tenders. Unfortunately, the Contract Law does not present any clear figure that allows to pay for a test or pilot of a solution already in the market. Therefore, it is usual to resort to the minor contract, by which the contract can be awarded in a simple, discretionary and direct way to a supplier (sometimes by means of shortlists). But the minor contract is not the correct figure for an experimentation or pilot, nor does it allow the development of pilots of a certain amount necessary for a real evaluation of the solution and the technology.

Some institutions are resorting to other types of figures for this type of testing processes: awards, the most characteristic example being that of Aena Ventures; subsidies, as in the case of Puertos del Estado, or collaboration agreements with the companies participating in the pilot, with the example of the work carried out by the Mobile World Capital Foundation. All these modalities exceed €15,000 but do not usually exceed €50,000.

Perhaps the most interesting experience is the one carried out by Renfe in 2021, and which is under development, which used the figure is that of project competitions, of Article 183 of the Contract Law, which allows to link the winner of the award with a negotiated without advertising. This figure has been widely used in urban planning and design and architecture competitions, and last year a first example of the application of the figure was developed for a startup challenge program in Renfe. Attached are the terms and conditions.

Renfe launched on its contracting portal a project competition for each identified challenge. In total there were five.  The prize consisted of:

• a prize of €50,000 in two phases: €25,000 at the beginning, and if the milestones established in the pilot were met the other €25,000
• an acceleration and mentoring valued at €60,000
• and access to a negotiated without advertising of up to €1 million. As the negotiated was up to one million, the teams had the ability to not buy the solution or buy it based on their needs and proven potential.

In a few weeks we will publish a guide for the use of Article 183 in this type of projects.

How to encourage the hiring of startups, scaleups and digital SMEs in open procurements?

Quick answer: following exactly what the LCSP says and pursuing its philosophy.

If anything could have a decisive impact on the opening of the digital market, it is the design of specifications. No change in the law or regulations. Here we explain some of the options, starting with the basics: not establishing solvencies that represent an insurmountable barrier to small and medium-sized companies.

Thus, the Contracts Law allows facilitating mechanisms for the presentation of solvencies to newly created companies as long as they are non-SARA procedures (subject to harmonized regulation), which in the case of entities other than the General State Administration (AGE) have their maximum threshold at 214,000 euros. These provisions allow companies less than five years old to present civil liability insurance instead of economic solvency, or to present the technical solvency of the team members instead of the technical solvency of a newly created company.

After clearing the solvency hurdle, the hyper-specialized companies are faced with the weight of price in the bidding documents. Since almost any abnormally low bid can be justified, the only option left is for the price to weigh no more than 35%. We dare say that most tenders where the weight of the price is greater than 35% cannot comply with the obligation established by the Public Sector Contracts Law to "ensure that the design of the award criteria allows obtaining works, supplies and services of high quality, specifically through the inclusion of qualitative, environmental, social and innovative aspects linked to the object of the contract".  Otherwise, we would be dealing with mere auctions at the lowest price. Institutions such as the Mint launch tenders with a price weighting of around 30% to avoid these project auctions.

In addition to the weight of price in the award criteria, the other important factor is the formula. Unfortunately, the most commonly used formula is the basic linear formula, which assigns the maximum score to the bid with the lowest bid price and values the rest of the bids proportionally to their low bid. You don't have to know much math to figure out that this formula is not very compatible with quality.

Finally, and in our opinion, the most powerful measure is to ask for a proof of concept as part of the tender, and to demand that at least 80% of the functionalities required by the specifications are already developed. It makes no sense that in the 21st century Public Administrations are buying software based on what is established in a written memory, giving space to companies not specialized in products but in winning public tenders to win millionaire tenders for adhoc developments. Here you can find a good example of Bid looking for specialized companies.

How to implement the procedures that fall under the so-called "rationalization of public procurement" to promote the recruitment of emerging digital companies?

Using the instruments that have served to close the market for years to standardize specialized companies and streamline procurement.

Among these mechanisms are the "Framework Agreements" (MA) and the "Dynamic Procurement Systems" (DPS). In both cases, in the search for efficiency, a set of companies are accredited to respond to the different requests made within the framework of the FPA or DPS, with the possibility of arbitrating solvency to facilitate access by newly created companies.

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En el último año vemos ejemplos interesantes, aunque ninguno ha sido de fácil implementación. Destaca el Acuerdo Marco de la Comunidad de Madrid en cuyo diseño se identifica el objetivo de promover la diversidad de licitadores. De hecho, fueron homologadas decenas de empresas por categoría. Las solvencias de entrada eran bajas y se priorizaba la especialización, algo positivo para las startups y scaleups que desarrollan y escalan un producto específico.

AMTEGA también licitó un Acuerdo Marco en el 2022 que preveía el desarrollo de pilotos y la posterior implantación de soluciones tecnológicas disruptivas. El presupuesto total ascendía a 30.000.000 € y, cada contrato basado se estimaba en 1.000.000 €. Desafortunadamente, y dadas las solvencias requeridas, fueron pocas las pymes que entraron en el AM.

Por último, destaca especialmente el grupo Correos que ha sido pionero en la aplicación de SDA para la contratación de diferentes tipos de servicios y suministros, no limitándose a aquellos de uso corriente. El SDA de Correos contempla servicios tan sofisticados como la reingeniería de procesos, la oficina del dato, consultoría TI, etc.

A nivel internacional destaca el Digital Marketplace de Gran Bretaña, un sistema de homologación de servicios y productos digitales que ha sido ejemplo para la mayoría de los países que buscan facilitar la entrada de nuevos proveedores digitales.

¿Cómo promover la colaboración de grandes empresas o proveedores tradicionales con empresas emergentes?

A día de hoy, hay más espacio para la colaboración que para la competencia, pero no habrá incentivos para la colaboración, si no hay competencia. 

El considerando 47 de la Directiva 2014/24/UE expone que los poderes públicos deben hacer la mejor utilización estratégica posible de la contratación pública para fomentar la innovación, por ser considerada uno de los principales motores del crecimiento futuro. Y la comunicación de la Comisión sobre contratación de 2017 es también clara: “La contratación pública es un instrumento estratégico (…). Con un gasto anual de aproximadamente el 14 % del PIB de la UE, la contratación pública puede contribuir a afrontar muchos de los principales retos de Europa, especialmente la consecución de un crecimiento sostenible y la creación de empleo. Puede permitir inversiones en la economía real y estimular la demanda para aumentar la competitividad basada en la innovación y en la digitalización” (European Commission, 2017).

Planteamos aquí la posibilidad de generar pliegos dirigidos a promover la relación entre grandes empresas y startups/scaleups y pymes digitales, con varios objetivos: (i) canalizar la innovación de estas empresas a la administración a través de licitaciones de mayor envergadura, (ii) promover la compra pública como instrumentos para la dinamización de los ecosistemas innovadores del territorio, y (iii) fomentar la digitalización y modernización de la oferta pública tradicional.

Estas son unas primeras pinceladas de lo que puede ser el impulso de un nuevo mercado. Si te divierte la contratación pública y quieres seguir pensando en esto con nosotras, ¡escríbenos!