How can public tenders in the IT sector produce visionary innovations if all the requirements are just listed on a specification sheet? In order to purchase truly innovative software developments, public administrations should rather rely on creative, iteratively working teams and courageously break away from traditional processes. A suggested solution.

As a rule, all public sector organizations are obliged to award new contracts in a public tender on the basis of transparent criteria. According to the aggregation platform "Deutscher Auftragsdienst" (German commissioning service), the number of tenders lies at around 700,000 a year - representing billions of Euros invested in (digital) infrastructure. In this respect, it is a good idea to identify the most economical, best and most sustainable bid in terms of taxpayers’ money and customers. 

However, it is questionable whether the best forward-looking bid can actually be consistently found using this route. Especially when it comes to developing bespoke software - the field in which we operate. It all starts with the fact that exciting projects are just about as easy to find as the proverbial needle in a haystack. A very large information asymmetry exists between clients and potential service providers: Agencies sort through thousands of tenders to find good potential jobs. On the other hand, contracting authorities receive a large number of applications and have difficulty selecting a qualified partner for digital projects.

This so-called information asymmetry leads to the following structural problems:

• The tendering procedure reinforces existing structures

Contracting authorities have an obligation to find efficient and effective service providers in order to use taxpayers' money responsibly. So far so good. However, what is already difficult with firmly defined projects, such as an airport construction project where clear service criteria exist, becomes incomparably more challenging when developing new and creative software projects. It makes only limited sense to use the fee as the dominant comparison criterion for digital projects. This is because although contracting authorities are quite capable of defining their problem in new software projects, the actual way to solve the problem (service specification) comprises part of the work in projects of this nature and is developed during the course of the project. Hence, it is impossible to predict the price right down to the last penny or nickel, and at the same time it is important to give developers the freedom they need, because this is the only way to come up with creative solutions.

References projects only represent a partially suitable selection criterion as well. They always refer to something that has been achieved in the past. They do not guarantee that future digital solutions will be developed in a visionary and creative manner. (And besides that, how do service providers get their first bite of the cherry if they need project references to get their first job?)

• Waterfall projects and contracts to produce work add to the problem 

In the private sector, agile software development is increasingly being accepted in tenders as a suitable instrument for developing creative digital solutions and by doing placing something truly novel on the market and enhancing it iteratively. And in the process, the paradigm in rendering the service shifts: in itself, the work to be performed is interchangeable, but the creative process of realization, the continuous and rapid enhancement, the work performed with data for a quick feedback into the continued development of the products represent real assets. 

A permanent team of developers and efficient processes over an agreed period of time are therefore much more effective in creatively developing new solutions than tendering out project-based work contracts. Although this insight is already old hat in the development scene, the IT Council of the German Federal Government in December 2020 showed impressively that this outdated form of waterfall thinking still often dominates in public authority organizations: Originally, the modernization of the federal government's IT systems was planned by 2022 or 2025, but now there is talk of a delay until 2028. However, the fact that the modernization of IT systems almost never completely takes place fails to fit in with the world view of the decision-makers there. 

In my opinion this means that established tendering processes have an absolute right to exist when it comes to standardized requirements. However, in order to establish creative and fresh solutions in the field of software development, more courage is needed in tenders.

• The courage to focus on goals

When it comes to forward-looking solutions, contracting authorities should not invite bids based on specific service specifications. I think it would be more expedient to define clear problems and formulate goals. This would force potential providers to bid by sketching out the solution and substantiating how they plan to solve a problem for users in future. This puts the focus on creative ideas and a discussion about the methods and resources that can be used to achieve these goals. What counts then are no longer the laurels of tired top dogs from the past, but ideas and innovations - whether from established providers or young challengers.

• Have the courage to trust in a team 

Contracting authorities should not invite bids based on specifications, but rather look out for interdisciplinary digital innovation teams that they trust in to solve their problems using digital means. (In my eyes, interdisciplinarity is particularly important here, because it allows for a diverse view of issues). When developing new topics, it makes a big difference when a team is completely familiar with the problem and identifies with the client and its culture. Working with established and well-networked teams creates trust. Trust creates a strong and efficient service culture. When established teams and a willingness to engage in agile iterative software development come together, it creates an ecosystem that continuously produces results. 

In our experience, this route represents the best way to deliver products to market that are subject to constant enhancement without the need to invite bids for each iteration individually. 

We therefore ask you dear public authorities, please look for reliable and creative teams when you invite bids on new digital solutions and don’t just list solutions. Formulate the goal and bid farewell to dedicated service specifications. 

Because one thing's for sure: if the goal is clear, and the way to it is open, it leads to creative competition to find the best solution. Taking an approach like this will result in relevant digital products that add significantly more value than they cost.