“In the Netherlands we have stopped selecting based on price,” says a smart solution procurement expert.
“If you procure innovation and smart solutions, there are considerably more important criteria than price,” observes Obbe Wassenaar. This expert from Hilversum, Netherlands, shared his smart city experience at the Slovak Smart Cities Klub workshop.
Is Hilversum already a smart city?
It’s a process upon which we’re working, so it’s still developing. We concluded contracts two months ago, and the first ideas are being implemented. For example, we already have a solution that improves the town’s traffic flow and an app that assists slower pedestrians crossing the street. We’ve also introduced Gigabit Wireless – for which we organized an e-sports exhibition in the town square. We’re now in the phase of improving community awareness of smart city opportunities by organizing meetings with citizens and arranging further activities.
Let’s return to how it all began. How has the smart city idea developed?
Initially it was a political as well as practical and logical decision. Many media companies are based in Hilversum – it’s a centre of entertainment and TV channels. So it was natural to build innovative solutions there. We initially worked on the idea of a sensor network across the town. We planned to use the data to define better policies, and therefore better services for the community and municipality, and for commercial goals.
Did you have a fixed budget for the solution?
Our own budget was to provide the measurements of air quality, parking and other municipality tasks. However, in the process of consulting commercial partners we soon understood that project scalability was necessary. So we discussed it. Our aim was also that the planned commercial activities would eventually offset the sensor network development cost. We planned to cover the entire project by combining them both.
So you changed your opinion?
Yes, after lengthy discussions with market representatives and consultations about potential solutions we realised that many of the commercial uses were still only at the development phase. Commercial partners were willing to invest into smart city solutions, as it was an innovation that could be rolled out in other towns. Yet this municipality as the first is the most important. That’s why we opted not to approach the entire project as a sensor network construction, but instead considered individual opportunities for practical use. We considered each app type and assessed its added value.
How did you set the budget?
In the Dutch system, it is important for each contract to be precisely defined. There are differing opinions, but I think that it’s enough to have a specific project target and transparent price setting rules for each contract part. We also had a very clear, transparent and objective way for each individual case to ensure it results in fair market price.
Who defined that approach?
It resulted from a joint effort: the municipality, contractors, and external parties also control it of course. As we knew how the goal should look and roughly how to achieve it, we could set an efficient price setting.
Should the lowest price win?
It’s an approach that works, for example, when you know the procurement subject in fine detail to precisely define requirements. But in such a case quality must also be considered. In projects such as smart city, where you know the favoured direction but can’t estimate the cost, it is not possible. In our Hilversum case, price was not among the evaluation criteria as such. We have replaced with the criterion of a potentially succesful business case and transparant pricing mechanisms in the contract. The resulting price was developed during discussions with commercial parties. Absolute transparency is necessary about the manner in which a final price is arrived at. And this is not known in advance, as all similar projects are specific. Each case of use must have its own business case processed. If such case doesn’t have a commercial use, we don’t even implement it.
How does cooperation with regulatory bodies work in the Netherlands?
This question also relates to the political aspect of projects. All projects are under the control of a municipal lawyer, with strict work of a regulatory department and the supervision of external parties. The Dutch control system is risk-based, and so far it can be said to work. This practically means that if a commercial partner and project team work in strict compliance with a contract, then the controls needn’t be strict at all. But if there are hiccups and risks emerge, then both regulators and contract managers are stricter and more careful checking accounts, statements and everything both parties do. So it depends on the specific case at hand.
Was the project tender prepared for one company or divided into parts?
Our strategic partner assists with the data platform and its various parts. For example, when working on a parking app they can help with its development. However, we want to work on the basis of an open platform. So if a third party with interesting ideas comes along, it needs access to our platform. This is a must. Such a contract is also in the interests of our strategic partner, as the bigger the platform becomes the better it is for them. It’s therefore our joint effort to improve and open the platform to other developers.
If you could change one thing in this process what would it be?
Before the beginning, we spent lots of time on preparations and market consultations. I’m sure I would do the same again. But maybe we should have paid more attention to raising awareness about what we wanted to achieve – both within our organisation and among the public. Why? Because as the procurement process was ending, some people thought we would automatically become a smart city just like that. So together with market consultation, we should have spent more time communicating the project. The only way to become a smart city is to overcome the system of individual silos. That’s why you foremost need to establish how and why individual silos emerge, and their willingness to transfer funds from their budget to other, more important parts.
How was this project accepted by the public?
Their major concerns were data processing. We started with things less sensitive from the privacy perspective. From the beginning we also involved the public in discussions. We have a very critical community that closes follows our steps and quality of implementation.
In Slovakia, public procurement is often characterized by a lack of time and lowest price. Can we learn from the Dutch model?
It is necessary to change the mindset of price being the main criterion, otherwise innovation and smart solution procurement will be very complicated. As regards time – we successfully performed one of the shortest competitive dialogues in Netherlands in just six months instead of the typical minimum nine months. Communication with commercial parties participating in a tender is the most important aspect from the initial stages. However, such communication must be very transparent to avoid any accusations of favouritism towards certain parties. A short tender process also has advantages and is favoured by partners because it significantly reduces the cost of the entire process.