GOVERNING: Chicago Confronts Procurement Reform and Finds the Hardest Part Still to Come

December 12, 2017

The Windy City is ahead of most places when it comes to making improvements to the way it buys goods and services. But the city's biggest challenge still lies ahead.

by | December 11, 2017

This story was produced with support from the City Accelerator program.

Chicago’s efforts to overhaul its contracts and purchasing processes have come a long way in the past few years. But its biggest challenge – making it easier for small, women- and minority-owned businesses to bid on city contracts – is yet to come.

Chicago is unique among major cities in that it created a Procurement Reform Task Force, a group of 60 government and nonprofit leaders tasked with increasing transparency, reducing administrative burdens and lowering the barriers to entry for the city’s small businesses. Since its creation in 2015, the task force has already completed half of the 31 recommendations laid out for it. But many of these – like writing new best practices and establishing a quarterly report system – were short-term goals. 

The most difficult portions of the initiative, which includes launching an online platform to connect businesses to Chicago’s more than 2,500 contract opportunities each year, is yet to come. Many are hoping that a sleek and user-friendly digital procurement system will entice more small and minority businesses that simply can’t afford to navigate the different bureaucracies between the city and related agencies like Chicago Public Schools or the Housing Authority. Chicago’s participation this year in City Accelerator, a cohort of cities aiming for comprehensive procurement reform, could give the task force the boost it needs to meet the rest of its more complex goals by the group’s end date of 2021.

One of the most daunting parts of the process is creating a system that can work with the city’s 29 departments and six agencies. That system, says task force co-chair and Chicago Inspector General Joseph Ferguson, should also still allow the different agencies the independence they need to focus on their core mandates.

“It’s a real concern for each agency that whatever we do does not hinder their missions and objectives” he says. “It is the single most important thing to achieve in the next annual cycle.”

Still, with a unified system, says Chief Procurement Officer and task force co-chair Jamie Rhee, the bidding process will be easier to navigate and attract more minority-owned, women-owned and disadvantaged business enterprises. That should increase competition – which ultimately benefits taxpayers.

“Transparency in procurement is key, as access to information levels the playing field for all interested vendors,” Rhee adds. “The degree to which an agency’s procurement process is transparent is dependent not just on what information is made available, but also how easily accessible and user-friendly it is.”

The city’s CIO and Commissioner of the Department of Innovation and Technology is leading a group that will decide if one overarching software should manage the agencies or if a collection of programs should be used to maintain each organization’s ability to function with less standardization. It is a balancing act as different agencies have different sources of funding. For example, some departments are primarily funded through local dollars while others, like the Chicago Housing Authority, receive most of their funding from the federal government.

Gustavo Giraldo, Chicago’s former deputy procurement officer and now the Illinois Tollway’s chief of diversity and strategic development, says making the city’s procurement solicitations more efficient is a big challenge for all businesses – let alone smaller firms that can’t afford to deal with bureaucracy. “A lot of things can happen along the way to cause major delays,” he says. “Every single city agency has its own organizational culture and its own way of dealing with issues, procurement being one of them. It’s the personalities.”

The slow reputation has dogged the city for decades. In 1985, a Chicago Tribune article noted the city lagged far behind many other state and local governments in how swiftly it pays contractors, sometimes taking as long as four months to do so. Fast-forward two decades and while the city has made progress with attracting minority and small businesses in general, African-American-owned businesses still lag behind, with just an 8 percent share this year. The reason? Payment issues. 

“They get paid slow,” Roderick Sawyer, chairman of the city council’s Black Caucus, told the Chicago Sun-Times. “There are certain restrictions on what they can do. Sometimes, it’s the contractors unwilling to bid on certain projects because of that.”

Still, he and others applauded Rhee’s efforts that have helped result in companies owned by minorities and women representing big shares of the city’s contract payments: 43 percent in 2016 and 31 percent during the first nine months of this year. Those figures, which do not include agency spending, far exceed the city’s goal. 

Sterling Johnson of Griffin & Strong, a consulting firm that is working with the City Accelerator program, said Chicago’s approach with its procurement task force and its progress thus far puts the city far ahead of its cohorts. Its even drawn international attention as the procurement reform’s task force has shared its work with governments in Canada, Kosovo, Ireland and Poland.

 “A lot of what Chicago is doing is seen as best practices in the field,” says Johnson.

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