7 Enhanced cooperation with the private sector
We must improve the efficiency of the public sector to leverage its resources. The public sector should not do itself what the market can do better. Digital collaboration with the business sector and voluntary organisations can provide the basis for new, innovative services.
A lot of good work is done to improve efficiency in the individual agencies. Improving the efficiency of public services is, among other things, about assessing whether the public sector should produce its own services and solutions or purchase them in the market instead.
Where are we?
The choice between producing custom services and solutions and buying them in the market is primarily a question of what is most lucrative. However, it is also a question of what provides the best services for citizens and businesses, and of what generates the best opportunities for innovation. Therefore, the public sector shall in principle not do itself what the market can do better, but instead determine what needs must be satisfied in order to build sustainable digital services, and enter into dialogue with the market on possible solutions.
The Digitalisation Circular requires central government agencies to have a sourcing strategy for how they will digitalise their services. The sourcing of service production, i.e. deciding whether to produce their own services or buy them in the market, or even leave it to non-profit actors, should be a natural part of the agencies’ considerations in connection with development activities.
The public sector spends over NOK 500 billion annually on procurements, but a small portion of this money appears to be actively used to stimulate innovation. Therefore, a goal will be to increase the innovation impact of public procurements. Innovation procurements are about using public procurements to streamline and renew the public sector, while the business sector innovates and creates new jobs at the same time. The National Programme for Supplier Development was established in 2010, and serves as an operational driver and facilitator to increase the strategic use and innovation impact of public procurements in Norway. Since its inception in 2010, the programme has assisted municipal and central government agencies with over 200 procurements, and has developed a methodology for public procurement of innovation
Innovation partnership with the City of Stavanger
In an innovation partnership, public and private enterprises work together to develop completely new solutions to present and future societal challenges. The scheme is both a legal procurement procedure based on the Public Procurement Act and a working model for dialogue and innovation cooperation with the business sector. The goal is to develop brand new products and solutions that are currently not available in the market. An innovation partnership is based on public needs, requires anchoring with top management, and includes the business and public sectors in both understanding needs and formulating solutions.
The City of Stavanger is the first in Norway to test the new innovation partnership form of competition. It all started when the City of Stavanger wanted new innovative solutions for increased activation and coping skills for users on short-term stays in nursing homes. Only one week in bed results in a 10 per cent reduction in endurance and a 20 per cent reduction in muscle strength. At present, short-term stays cost the city NOK 200 million annually. The savings potential from shorter stays and fewer readmissions is huge. Through the innovation partnership, the business sector has, in close cooperation with the city, developed a smart wheeled walker and/or activation robot. When development is completed, the contracting authority can choose to purchase the solution without first having to go through a competitive tendering process, and the project is now in the negotiation phase for procurement. The project has also created three spin-off enterprises – the municipalities of Kristiansand and Bærum and NAV Assistive Technology – who may also buy the solutions if they so wish.
Public–Private Digital Cooperation was established in 2016 by the Brønnøysund Register Centre, the Norwegian Tax administration and Finance Norway. In 2018, NAV and the police joined the initiative. The parties found that cooperation on some specific projects could produce significant socio-economic benefits. Public–Private Digital Cooperation is about streamlining the exchange of information a party needs. Cooperation is based on a portfolio mindset, whereby the parties’ efforts and benefits shall balance out over time. A key component in this cooperation is that, over time, the benefits from various cooperation measures in the Public–Private Digital Cooperation shall pass to the financial services industry, citizens and central government sector. The best-known solution is consent-based loan applications. In 2018, this initiative was expanded to cooperation with the agricultural sector based on a corresponding model, and the aquaculture sector followed suit in 2019.
Consent-based loan applications
Consent-based loan applications have been developed by the Norwegian Tax Administration, Brønnøysund Register Centre and the financial services industry, represented by Finance Norway and Bits AS. Consent-based loan applications simplify loan applications for consumers through cooperation between government agencies and the financial services industry. Loan applicants no longer need to submit tax returns and pay slips to the bank, but can instead give digital consent through Altinn to allow the Norwegian Tax Administration to share information on income, debts and net assets with the bank. The Norwegian Tax Administration, Brønnøysund Register Centre and Finance Norway were awarded the 2018 Digitalisation Award for this service.
Where are we going?
The public sector shall avoid developing digital solutions in competition with the private sector. The public sector shall also exploit the innovative power of the private sector in developing public digital solutions and services, but at the same time exercise active ownership to define what needs are to be satisfied through such cooperation. In addition, the public sector shall publish open public data to stimulate innovation in both the public and private sectors. There is a need to develop common principles for cooperating on digitalisation between the private, voluntary and public sectors. Several issues need to be considered in more detail, such as how costs should be distributed, the relationship to state aid and the procurement regulations, and which business models should be used for individual projects.
Cooperation with the private sector may also challenge the public sector’s social mission and present the authorities with new questions, such as how the technical and security adaptations should be carried out and financed. Allowing a government agency to become a supplier of data to another actor may create a need to set new requirements for the agency’s IT systems and thereby challenge the agency’s core tasks. This must also be taken into account in connection with drawing up principles for cooperating with the private sector.
The public sector must continually assess whether problems can be solved in new and more efficient ways. Public–Private Digital Cooperation makes better services for citizens, voluntary organisations and business sectors possible by sharing data across sectors. Experience from Public–Private Digital Cooperation will be relevant when cooperation with the private sector is further developed in the digitalisation area.
The public sector must be receptive to new ways of cooperating with the market and exploit the opportunities that lie in innovative public procurements. Experience shows that public contracting authorities generally specify solutions in detail when they put contracts out to tender rather than describe their needs. Moreover, procurement processes are often long and suppliers specifications unnecessarily stringent. This means that start-up companies and other small and medium-sized IT service providers with good and innovative solutions to public sector needs are rarely considered. In the United States, the public sector has had various schemes in place that stimulate cooperation between the public sector and start-up companies for many years. Now such schemes are beginning to spread throughout Europe. The Netherlands, Spain and Scotland have established programmes that link public sector needs with start-up companies and facilitate collaboration.
Start-up in Residence: City of San Francisco
The City of San Francisco has worked on simplifying procurement processes to make it easier for government agencies to find and buy innovative digital solutions. This has further stimulated cooperation with the private sector, through, for example, Start-up in Residence (STiR). The idea behind STiR is to connect government agencies with start-up companies wishing to develop solutions that answer challenges in the city.
The CivTech Programme in Scotland
This programme is a framework of assistance and expertise that combines expertise from the public sector with creativity from the private sector to solve real problems, develop new solutions, and offer better, faster and easier services for everyone. Key to this approach is co-production with citizens and support from academia and private investors.
The vision of CivTech is to foster a mindset among public employees that is about daring to bring about innovation in the public sector through solving challenges in cooperation with ambitious companies, and developing solutions that improve people’s lives. Such a mindset is about recognising opportunities and daring to take them further.
The Government will:
- Prepare common principles for cooperating with the private sector on digitalisation with a view to further developing such cooperation
- Initiate activities to establish a programme for increased collaboration between the public sector and start-up companies based on the model used for corresponding programmes in the United States and Europe