What Should You Consider When Investing In “Smart City” Technology?
Source: Liz Sisson and Rebecca Williams, Technology and Public Purpose (TAPP) Fellows
In this blogpost, Technology and Public Purpose Fellows Liz Sisson and Rebecca Williams team up to propose how governments and investors alike can consider public purpose in their “smart city” technology investments.
In this blogpost, Technology and Public Purpose Fellows Liz Sisson and Rebecca Williams team up to propose how governments and investors alike can consider public purpose in their “smart city” technology investments. In counting “smart cities” final days, City Monitor summarizes the term quite well:
“Smart cities surfaced as a concept more than 20 years ago and served as an umbrella term to describe a large and varied set of emerging technologies that seemed destined to help metros operate more efficiently. The internet of things for municipalities has to date included everything from simple sensors that allow transportation engineers to track cycle lane usage to full-blown smart-city operations centres that brought to mind scenes from Minority Report.”
Rather than addressing “smart city” product risks to serving the overall public good, this post will cover “smart city” business risks to serving the overall public good. Specifically, this post outlines how governments and investors can approach “smart city” procurement, business models, and long-term value creation with public purpose in mind. For as long as the term still exists, anyway.
Procurement Considerations
For Government
There are many considerations governments must face when procuring goods or services to fulfill government missions and varied policies and procedures to maintain ethical standards and achieve performance goals. Below are a few key “smart city” related considerations that are not meant to be exhaustive nor replace outcome-based contracting, human-centered design, or other participatory purchasing best practices.
Listen to the Public For Procurement Priorities Not Salespeople. The public should never be surprised by their government's use of novel technologies. In addition to consistent proactive public consultation to set government priorities, including related procurement decisions, governments can stave off surprises by rejecting unsolicited “smarty city” sales pitches, the so-called “solutions in search for a problem.” The Boston Smart City Playbook affirms this sentiment in Play 1: Stop sending sales people. Governments must ensure they are in the driver's seat leading with desired outcomes demanded by the public going into any procurement, technology or otherwise. Government-led efforts do not preclude innovation as demonstrated by NASA’s intentional efforts in 2005 to strategically incentivise a commercial space market.
Key Questions
What outcome has the public demanded? Has the public weighed in how technology should be a part of achieving that outcome or not?
Does the solicitation reflect those desired outcomes and dictate discrete ways commercial technology may support those outcomes?
Foster Procurement Transparency and Engagement. Public consultation should not end after outcome determination but continue throughout procurement and implementation. This is democractic, achievable, and many governments are already doing it. Procurement transparency facilitates accountability and enables engagement. Governments should employ best practices, such as Sunlight Foundation's Policy Guidelines for Municipal Contracting and standards provided by the Open Contracting Partnership. Transparent processes can also help city council members, executive leadership, and counterpart agencies be better aware of collective benefits and risks arising from disperse procurements. To the extent possible, governments should work to extend these transparency efforts to the subcontractor level which are of particular interest relating to data privacy policies and technology performance. Governments should go beyond posting procurement information and data online, but ensure the public can observe what range of responses governments are considering. Examples of this include Boston’s New Urban Mechanics’ Beta Blocks program which posted a broad “Smart City” Request for Information (RFI) in 2017 and publicly posted the 100+ responses online and the U.S. Department of Transportation’s 2015 call for “Smart City '' grantee proposals and publicly posted the 78 responses online. Beyond broadcasting proposal responses and procurement activity, governments should provide context and facilitate feedback loops related to novel technologies as Amsterdam and Helsinki have done for AI, and Seattle has done for “surveillance technologies.”
Key Questions
Is our procurement process legible to the public?
Do we know what other agencies are procuring? Do we understand the subcontractor services being utilized here?
Can the public provide feedback on novel technology use before, during, and after procurement?
Can the public engage with implementation through user testing and other feedback mechanisms?
For Investors
Depending on the patience of the VC, the word procurement can be seen as an opportunity or a risk. There is standard advice for startups selling to the government: if possible, avoid RFP processes; if applicable, price slightly under procurement thresholds so decision-making can be sped up consider being a subcontractor; or offer free pilots to illustrate value-add while waiting on a full contract. These pieces of advice can lead to sales, but “cutting corners” might be harmful to the public.
Assess Team Experience. When a startup (or venture-backed vendor) plans to sell to the government, the VC should assess the team to make sure there are people at the company who understand the intricacies of selling to the government. To be successful in selling to the government, the process takes experience, time, and money. Because government sales mean tax dollars will be directly or indirectly used to procure, the sales or business development team needs to have a deep understanding of the relationship building that goes into B2G and respect the processes in place. In addition to business development and sales, VCs should also assess the team to ensure there are product, policy or engineering people at the startup that have experience making government-related or public-facing technology.;
Key Questions
Have members of the startups’ team sold to the government before?
Have members of the startups’ team developed B2G products before?
**Carry Out Fair and Equitable Processes.**For VCs who want to center public purpose in their startup investments, instead of encouraging startups to avoid procurement altogether or overemphasize free pilots, startups should prioritize contracts with governments who have fair, transparent, and equitable processes. In theory, free pilots allow the government to test the effectiveness of a planned solution on a smaller scale but are not always sustainable for startups and do not always require the needed process to reduce harms. Sometimes it is worth startups pursuing sales in smaller-sized cities, instead of devoting countless hours to agencies with big names but tortuous processes. Responding to arduous RFPs or navigating procurement rules takes time, but those processes are in place to ensure public purpose. Those processes also prevent time-wasting activity, where one startup can spend years piloting technology and adjusting the product to fit the pilots’ criteria but never actually securing a contract.
Key Questions
How can the startup ensure procurement corners don’t have to be cut to sell successfully?
How can the startup make sure they are bringing experienced and patient B2G investors on to their cap table?
Conduct Stakeholder Analysis. Often the decision-maker in the government is not the same person as the user or the public who is ultimately impacted by the technology. Startups should ensure they have engaged with all stakeholders, not just government customers, in their product development and sales. It will help prevent public pushback and will build a better business. VCs should encourage their startups to engage with people and communities outside of their customers and users. There are groups like NYC’s The Grid who will facilitate conversations between startups and members of the community.
Key Questions
How is the startup getting feedback from all stakeholders, not just those with buying power?
Which members of the public actually benefit or have access to the product/service?
Business Model Considerations
For Government
Governments struggle to get things done on limited budgets, budget cycle constraints, and time consuming procurement processes, but this is no excuse for accepting business relationships that do not have public purpose in mind. To serve public purpose, governments must remain resolute and ensure they purchase from or partner with entities that do not have a hidden business agenda that may not serve the public’s best interest.
Examine Public-Private Partnerships and “Free” Products for Hidden Agendas. Public-private partnerships can be executed with public purpose in mind, but too often governments engage in public-private partnerships without public input or public risks in mind. Much like the adage about social media platforms, "if you're not paying for the product, you are the product” governments must consider if they are not paying for the service, is the public the product? When governments are offered unsolicited “free” services from vendors or groups, they should be examined and tailored to meet outcomes demanded by the public. Governments should avoid taking any PPP or “free” service without substantively negotiating terms (just because it is free doesn’t mean you have to take it) and analyzing how this affects immediate outcomes and long-term financing. Moreover, since partnership relationships often bypass traditional procurement accountability processes, extra care should be taken by governments to ensure ethical standards are maintained and conflicts of interest are proactively disclosed.
Key Questions
Has the public demanded a specific outcome related with this public-private partnership or “free” service?
Is the public meaningfully insulated from risk resulting from this partnership? Can the government and public hold this partner accountable?
Does accepting this “free” product have long-term costs? If a service is provided as a “freemium”, can the government afford the full price of the offer after the free period has expired?)
Are there conflicts with accepting this partnership? Does this company or organization have legislative interests in play?