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Danya Henninger

City Hall goes digital: New contract system kills paper, saves cash

“We should have been doing this a long time ago,” the Philadelphia Chief Administrative Officer said.

There are rooms in City Hall stacked top to bottom with vendor bids and contracts, dusty boxes of files rising from the floor to the ceiling. In a few years, many of those rooms will be empty — the data will live in the cloud.

If all goes as planned with the city’s new procurement strategy, doing business with the City of Philadelphia will soon be all digital.

The modernization plan, which began rolling out in several pilot tests this week, has four major components:

  • Proposals for big jobs like construction will be submitted online
  • Suppliers for some items will be able to engage in a “reverse auction” online bidding war
  • Business opportunities will be searchable on a single hub website
  • Contracts will be executed without ever printing a copy — much less the three paper copies (minimum) required today

“The private sector uses this kind of tech already. We need to catch up,” said Rebecca Rhynhart, Philadelphia’s first Chief Administrative Officer.

“This effort gets to the bottom of an issue we heard about anecdotally — that the city is difficult to do business with.”

Rhynhart, budget director under the previous administration, has been thinking about how to modernize municipal business transactions for years. It was during Mayor Jim Kenney’s campaign that she began touting the benefits of modernization — efficiency, cost savings, ease of use. Making it happen is one of the main reasons Kenney created the Office of the CAO.

And so the end result ought to be making transactions easier. It’s also supposed to save taxpayers money, in several ways.

More bids = better prices

Talking about this week’s launch of PHLContracts, the new digital portal for accepting bids, Procurement Commissioner Trevor Day was almost giddy. He hefted a Staples cardboard filing box onto the table, stuffed to the brim with papers.

“This,” he said, “is the bid submitted by one vendor. For one procurement contract.”

Lying on top of the paperwork was a CD that contained everything in the box. The metaphor was clear. The pile of dead tree matter was obviously redundant, a relic of the past. But before now, it’s what was required.

By eliminating the need to print out the giant stack and manually deliver it, the city hopes to encourage more vendors to bid on each project.

During the most recent fiscal year (FY 2016), the average number of bidders on City of Philadelphia supply and equipment contracts worth $1 million or less was 2.5. Which means that for many projects, the city had two or three choices. In Atlanta, for comparison, the average number of bidders for those kinds of contracts was between 8 and 10, Rhynhart said.

Why’s that matter? The more options available to choose from, the greater the chance of getting a good deal — and also the greater the chance of awarding a contract to a women- or minority-owned business.

More than 1,400 vendors who do business with the city have already been entered into the new database (if that’s you, you’ll get an email with a link and initial password to log in and confirm your info). And any new business wanting to get in on the more than $3 billion the city spends annually on business contracts can now easily sign up online.

Starting in November of this year, all new procurement bids will go through PHLContracts.

‘A reverse eBay’

The city could realize even more savings with smaller supply contracts — things like napkins or toilet paper or chicken nuggets — with a new “reverse auction” portal.

Vendors will submit proposals online, and then be able to see in real-time where their bid falls. They won’t see other businesses’ information, but they’ll know their ranking among the contenders. If they see they’re in 6th place, for example, they’ll have the option to lower their price to try and move up.

“It’s like a reverse eBay,” explained deputy CAO Christine Derenick-Lopez, who has been leading the modernization charge. Other governments that already have implemented this kind of system and seen savings included Chicago, Los Angeles and the Commonwealth of Pennsylvania, she said.

Philadelphia is outsourcing the development of both the eProcurement and the reverse auction portals, the former to a Texas-based company called Periscope Holdings and the latter to an Erie, Pa., outfit known as Procurex.

Speed is good

An additional benefit of digitizing these processes is increased speed. It used to take an average of 160 days to go from requesting supply or equipment bids to awarding contract. The goal is to get that down to 90 days.

Which brings us to DocuSign.

Currently, every contract the city executes — and there were 2,108 of them in FY2016 — is printed out at least three times. Then, whichever city official is handling the project has to walk those copies around and manually make sure they get signed by the proper parties. After that, it’s back to the vendor to get their multiple signatures. Especially when dealing with nonprofits, where a whole board might have to sign off on something, this can take weeks, or even months.

When the electronic signature system is in place, everything happens online. (DocuSign is generally considered extremely secure. According to its website, it’s used by more than 200,000 companies around the world, including 10 of the top 15 US financial services companies.)

The e-signature program is being rolled out slowly, department by department — and not just for procurement contracts, but also for professional services, like consulting.

Adopting it this month is the Office of Information Technology, mostly because the OIT already uses DocuSign for internal docs. Next will be the Department of Human Services, because it contracts with a high number of nonprofit orgs. After collecting feedback, Rynhart expects to expand it city-wide in 2017.

Getting contracts executed quicker will also help the city pay its bills faster. That’s good for everyone involved.

“We’re looking to truly change the business environment here,” Rhynhart said. “We should have been doing this a long time ago.”

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