San Francisco’s procurement system is a critical facet of the city’s operations. Its massive spending — totaling more than a third of San Francisco’s annual $16 billion budget — impacts not only residents but also the broader local economy. Although the procurement system aims to enhance service delivery and foster sustainable practices, its web of regulations — reflected in 100-plus sections of various city codes — often doesn’t result in the intended outcomes. Both city staff and vendors are challenged to navigate the convoluted compliance landscape. The result is a procurement process that takes months or even years, limits competition, and increases costs for public goods and services.
In fiscal year 2022–23 alone, nearly half of the city’s solicitations received few or no responses. According to SPUR’s latest report, Purchasing Power: Nine recommendations to improve San Francisco's procurement process and make it a core part of the city’s strategy to deliver more equitable services, this lack of engagement hints at a deeper issue: a culture of mistrust fostered by a reliance on compliance-driven oversight. Solutions are at hand. We asked the report’s author, SPUR Governance and Economy Policy Director Nicole Neditch, to explain how San Francisco can make its procurement system more effective, equitable, and responsive to community needs.
Just how complex is San Francisco’s procurement process and what are the consequences?
More than 100 sections of San Francisco’s legal framework outline rules and regulations related to procurement. The rules cover contracting components, including how a bid process must be run, types of work and products that can be procured, and wages and benefits to contractors and subcontractors. Additionally, the city’s charter has provisions regarding contracting. In the contracting process, city staff must also adhere to regulations set forth by the city’s purchaser, Ethics Commission, and Controller’s Office.
The complexity of the procurement process hurts everyone involved in and served by the process. City staff focus on meeting compliance requirements rather than project management, which tends to undermine effective procurement processes. Vendors who aren’t familiar with the processes are discouraged from seeking contracting opportunities. And San Franciscans end up with more expensive and lower-quality goods and services because of lack of competition.
Your research suggested that the city’s procurement rules and regulations are undermining their intention. How so?
We came to understand that the city has many laudable goals but that piecemeal pursuit of them has actually created an ineffective system and undermined the city’s strategy to deliver more equitable services. After analyzing the city’s procurement landscape, we came to seven conclusions:
- Many well-intentioned policies have been passed to change the procurement process, resulting in a confusing maze of requirements that is difficult for staff and contractors to navigate.
- Staff time and city resources are spent navigating the complexity of the process as opposed to finding the best vendor or actively managing selected contracts.
- Structural barriers lead to a lack of competition, benefiting organizations with preexisting relationships with the city and experience navigating the system.
- People, rather than systems, are blamed when things go wrong, which has led to a culture of fear and oversight.
- The city has made many improvements to procurement processes, but the complex, decentralized nature of the system and limited resources make change slow and incremental.
- Current contracting thresholds and requirements are not commensurate with the level of risk or the amount of a contract.
- A collective understanding of what’s possible could help unlock potential strategies that could save time and lower costs.
In your talks with people involved in San Francisco’s procurement system, did any themes emerge?
Definitely. One is that the city has actually done a lot of work over the past few years to make the system more effective. Another is that there’s a strong desire to further improve the system but also the realization that doing so will require a long-term vision, the resources to fulfill it, someone or some department to lead that effort, and the political will to make tough decisions.
SPUR maintains that the City Administrator’s Office should lead cross-departmental city operations with a major focus on procurement. What’s the rationale for this strategy?
As it stands, all 52 city departments administer different aspects of the contracting process. COVID-19 exposed a lack of coordinated leadership in this area, prompting the city to establish the Government Operations Recovery Initiative in the City Administrator’s Office to focus on improving core city functions, particularly procurement.
But to elevate procurement from an administrative function to a strategic priority, the city must empower the city administrator with the clear authority to manage procurement work across departments. The city administrator should convene departments, set policy, and enhance the procurement experience for businesses and city staff. To facilitate the interdepartmental coordination that these activities require, the City Administrator’s Office will need to be sufficiently resourced.
SPUR recommends merging contract-related offices for clarity and efficiency and determining whether a centralized or decentralized purchasing structure best suits the city’s needs. Ultimately, with a strong operational culture and streamlined processes, San Francisco can improve its procurement system, realizing cost savings and shortening the time that it takes to get organizations under contract.
You point out that a $100,000 contract requires roughly the same level of work as a $5 million contract. What can the city do about this mismatch between effort and impact?
Contracts under $200,000 account for 59% of the total number of contracts that the city enters into. A recent report found that city staff and suppliers are spending a disproportionate amount of energy and resources on these contracts, which represent just 1.8% of the city’s contracting spend. Streamlining the low-value procurement process would allow staff to focus their time on entering into and administering contracts that represent the majority of the city’s buying power. We also recommend expanding the Delegated Departmental Purchasing Authority, known as Prop. Q, to cover professional and technical services to speed responses to smaller contract needs.
How is procurement a tool for policy and how can the city wield that tool more effectively?
How the city spends money has a significant impact on the local economy. San Francisco has enacted many contract policy requirements to reduce inequalities and protect the health, well-being, and financial security of its constituents.
The intent of these requirements is laudable, but achieving compliance with all of them creates a high barrier to entry for smaller businesses, undermining the city’s goals to increase local investment and ensure equitable contracting. Recent legislative efforts to streamline procurement by reducing restrictions and processing times are positive steps, but because these efforts don’t address issues holistically, they often add complexity in the form of new rules and additional staff training needs.
To more effectively leverage procurement policies to achieve social goals, the city must take a systematic approach of clarifying goals, aligning policies, and analyzing implementation impacts. By incorporating these assessments into the legislative process, the city can ensure that proposed requirements are not only beneficial but also feasible and supportive of broader procurement objectives.
Your report points to a need to move from fear-based to trust-based accountability. What’s leading to trust issues? How have these issues affected service delivery and what can the city do to improve outcomes?
Lawsuits and scandals related to contracting have deteriorated the public’s trust in government. The city has responded with more requirements for contractors and consequences for staff who don’t follow the rules. Here’s the irony: complicated procedures actually hinder the detection of corruption, and increased oversight and barriers make procurement more time-consuming and costly.
Critically, these processes are not leading to better outcomes. Driven by fear that a vendor may not deliver what the city wants, staff tend to rely on overly prescriptive scopes of work that are recycled year after year, even if they no longer meet the city’s needs or result in selection of the best vendors. This compliance-driven mentality can limit alternative methods and innovative thinking that may be better suited to achieving desired outcomes.
That’s why SPUR recommends shifting the city’s focus from compliance and risk mitigation to management for successful outcomes. The city should adopt a more agile, test-and-learn approach to contracting. In practice, that means changing how RFPs and scopes of work are written as well as how staff manage projects.
The report explains that the procurement process is filled with hurdles for contractors. How can the city improve their experience?
Making the system accessible for new contractors and small and local businesses will increase competition, which is good for the city as well as contractors. The city should take three actions to streamline the process of discovering service provision opportunities and applying for them. First, the city administrator should prioritize procurement enhancements within the Digital Services team, which includes experts in user design and research. This team can streamline the creation of contracts and improve the vendor application experience. Second, the city should develop a centralized platform for contracting opportunities. Ideally, the SF City Partner Portal would serve as the primary source for all contracting information. Third, the city should further automate the procurement process to minimize administrative burdens and enhance compliance.
SPUR recommends taking a test-and-learn approach that incorporates user feedback to ensure continuous improvement. We also recommend establishing key performance indicators to track equity, efficiency, quality, and user experience. Finally, we recommend that these metrics be publicly reported to foster transparency and accountability.
Perhaps not surprisingly, given the way the procurement system has evolved, no city entity owns the end-to-end user experience for procurement. How could the city better help both staff and potential vendors navigate the system?
In researching the report, we heard the persistent need for technical support and training for staff to operate San Francisco’s procurement system and for vendors to use it. SPUR recommends that the City Administrator’s Office develop comprehensive resources and training materials for city staff and vendors. These resources would include clear process maps and guidance documents. Additionally, the CAO should clarify the use of preapproved-vendor lists and collaborative agreements, while supporting succession planning and professionalism for procurement staff to attract and retain talent. Smaller departments, which often lack dedicated contract staff, should receive centralized support. Establishing a citywide community of practice will further promote sharing of information and best practices.
In addition to supporting more internal collaboration, the report finds that the city should be looking outside of its walls to find partners and inspiration. What strategies does SPUR propose?
There’s no need to reinvent the wheel when the city can tap as-needed contractor pools and use cooperative contracts. Both strategies can reduce the number of needed solicitations and save time and money. The city should update the administrative code to waive local requirements when leveraging cooperative contracts that other governments have bid, and it should create a centralized repository of all executed contracts to promote sharing and reuse across departments and externally. It should also add default language to contract templates and make them available for use by other departments or outside agencies without additional steps. Finally, it should use regional and state contracting mechanisms like the California Multiple Award Schedule, which can provide faster and more cost-effective procurement of common goods and services. Bottom line: increased resource sharing across local governments can help drive down overall procurement costs.