Bloomberg Harvard City Leadership Initiative

Case and Materials

You Get What You Pay For: Reforming Procurement in Naperville, Illinois

  • Elizabeth Patton headshot Monica Giannone faculty headshot Brian Mandell staff headshot Jorrit de Jong staff headshot
  • Authors Stefan Norgaard, Elizabeth Patton, Monica Giannone, Brian S. Mandell, Jorrit de Jong, Guhan Subramanian

Last Updated

Topic
Strategic Leadership and Management
Locations
Midwest Region, United States, North America

Overview

For their newest IT support contract, Naperville city leaders developed a new approach for procurement that considered more than cost, factoring in quality, flexibility, and long-term partnership. Even contractors who won bids under the old system praised the new RFP process, which allowed for more creativity, risk-taking, and better-quality service.

Now, with a new procurement model at their disposal, Naperville officials are faced with a new question: Which projects benefit most from a straight-ahead cost comparison, and which would be better served with their new “cost as a component” process?

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Supporting Materials

Introduction

Naperville, Illinois is a suburb of approximately 150,000 people in the Chicago metropolitan area. Traditionally, the city focused on price for all procurement negotiations, but it often had few vendors applying for key contracts and struggled to negotiate on both price and quality.

Naperville’s original procurement process was called Quality-Adjusted Cost (QAC). This process sought to simplify a myriad of concerns and variables (including price, quality, timeline, and scope, among others) into a single metric, so that the city could easily and objectively evaluate bids. Although QAC attempted to incorporate quality into the evaluation, there were instances when it seemed the best vendor was not selected.

In an effort to improve the quality of city services, Naperville adopted a new procurement approach called “Cost as a Component.” This revamped process allowed the city to negotiate with vendors on more than just price for technology upgrades and aimed to ensure long-term partnerships with relevant firms, creating value for both vendors and the city. This case illustrates the trade-offs between QAC and “Cost as a Component” for Naperville and prompts participants to apply negotiation concepts to the broader process of city procurement.

Learning Objectives

Analyze the benefits and drawbacks of distributive and interest-based, integrative negotiation in the city government context.

Examine the role of process changes in shaping negotiation outcomes.

This case can be used on its own or as part of a set. For more information on the rest of the materials in the set, click here.

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The Bloomberg Harvard City Leadership Initiative is located at the Bloomberg Center for Cities at Harvard University.