Supplementary Questions/Information/Thoughts — Item CC 28.15 — PayIt

The item goes to Toronto City Council on Feb 2, 2021

Edit: Analysis — added Jan 30, 2021

Today I was speaking to a fellow civic tech community member, and we touched on PayIt, and they asked me: what should the City do instead? Which prompted me to say that there should be two separate tenders. The payment processing function and the government wide digital platform should be tendered separately.

It took the right question to simplify this whole thing — the reason this procurement is unfair is because of the bundling. It’s also why the Swiss Challenge model that staff followed to deal with the sole source does not address the core problem with the procurement.

As written and expanded on below, the entirety of public procurement rides on fairness as the key principle. This tender uses the financial service model of a vendor that can process payments and who then uses that functionality to gain access to the opportunity to provide a city-wide digital platform. Those are two separate things.

There are vendors that provide each, but few that provide both. This significance is important because the city-wide platform is too important to bundle into a tender where platform vendors have to compete with the payment transaction model. _______________________________________________________________

Preface: this is a compilation of information/questions related to the PayIt procurement process for anyone that might find it helpful, items are not listed in any particular order of information, nor is this complete — this is a fast effort to put some information relevant to the item in one place, and to share questions/concerns on my mind. It’s important to note there are people within the tech community and elsewhere that do not share these concerns and are supportive of the process followed, supportive of the deal. I gave myself an hour to do this, any updates or errors or anything please comment/help me fix them.

summary — it’s a pandemic, and the short-termism of the proposed approach is narrative catnip on levels. i don’t blame anyone not wanting to expend political capital to fight what staff have done here. and yes, you would likely love using PayIt to pay for City fees/charges etc. vs status quo — however, this is a big deal, and keeping track of how it’s happening also matters… and it’s important to note that nothing here suggests wrongdoing by the vendor, this is a process exploration of the City of Toronto

also, please scan the headers before you read — you may care about one part and not the others, this may not be in a helpful order

Commentary

  • background, July 2020 (commentary) — Why is City of Toronto sole-sourcing key digital infrastructure? — Spacing Toronto
  • concern with what’s happening now — summary: the idea of fairness is of paramount importance to public procurement. the process that was followed to try to find alternative bidders should be considered through this lens of fairness — thread on this issue: https://twitter.com/biancawylie/status/1354903254677803008?s=20
  • concern — does the number of senior staff involved in this process that read and approved the Swiss Challenge procurement process (link to City process document, 2008) as a “fair” way to manage this situation, given the nature of the unsolicited proposal, speak to issues of literal interpretation of process vs. necessary contextual interpretation? — contextual factors are critical given the complexity, size, and long-term infrastructural impact of the deal — does the legal intent of the process map properly to what happened, including how the unsolicited proposal came to be? this is hard to describe, but basically you can follow all the rules literally, but if you’re ignoring context, is that right? this is a site of a lot of trouble in technology and procurement and governance.
  • concern — positioning the Swiss Challenge process as meeting necessary fairness standards — while a third party was retained to ensure the protocol was followed, the protocol makes assumptions as referenced in the bullet above — was the unsolicited proposal received from PayIt through the City’s partnership office, which represents a combination of finance/technology in terms of business model, a fair starting point to use to take the opportunity to market? should it have been split into different parts, is the model of providing “free software” to access fee revenue from residents a fair starting point for others in the digital platform and service fee management markets? is it right to have such a potentially significant element of long-term operations be framed by a vendor/in co-development with the vendor rather than by the City independently?
  • concern — the third party fairness report represents another layer of literal interpretation of process vs. necessary contextual interpretation — this document can be pointed to as evidence of fairness, but fair in what way? this problem may have a better name — it’s common in technology, where the legal requirements of process don’t map properly to the context of what’s happening
  • concern — the narrative that there weren’t alternative bidders because there aren’t other companies that provide both payment services and broader digital government functions. the unsolicited proposal basically forces a company to be both, or to bid as a consortium, and beyond that, to have access to the kind of capital necessary to support PayIt’s business model — “no-cost” platform software in exchange for percentage points on each transaction with residents
  • concern — Toronto is the fourth largest city in North America — any model that makes residents a surface for transaction fees and broader communications warrants high levels of scrutiny, particularly given the intent of the platform do more than process payments — are there limitations or considerations as to how that direct access to residents could be monetized beyond the idea of paying for services?
  • concern — the City is midway through a Digital Infrastructure Plan process — this plan should become a policy document to inform the technical requirements for any key digital infrastructure, which is what this platform represents. Instead of designing the requirements prior to going to tender, including rules around openness of the systems which matter a lot to public systems, PayIt has worked with the City to co-author how the deal could work.
  • concerns — Gartner report: last year the City purchased a Gartner report which was used as rationale for the sole source — this entire process of purchasing reports for decision making rationale, though highly common, deserves pause — should we assess the terms that framed the purchase of the report, and consider them in the timeline of the work done between the vendor and the City? In addition, staff said the report could only be accessed through FOI, which is an area for improvement in terms of open government protocol
  • concern — given the history of platforms getting entrenched in public technology systems, decisions like this rarely get undone or changed — does a tender of this value and impact being done through this process sit right?
  • concern — do the staff involved in this deal feel some sort of obligation to follow through on the project given the kinds of interactions they have had with the vendor, including their statement of intent to open an office here, which came to pass during the period the item was out to tender seeking other bidders?

City of Toronto info

Related content

Other relevant history

PayIt press release (Sept 2020) — GovTech leader PayIt announces new Canadian headquarters and plans to create local tech jobs — the HQ is in Toronto

PayIt press release (Sept 2020) — PayIt announces sponsoring partnership with Women Who Code Toronto

PayIt press release (Jan 28, 2021) — Government Technology Leader PayIt Picks Marketing Automation Canada to Help Enhance Outreach to North American Markets

Series B — PayIt — 2019–03–27 — Crunchbase Funding Round Profile — $100 VC round

Undated interview with PayIt, quote re prior services provided: “we launched a voter registration capability, free of charge, out of our platform that we’ve turned on for, for instance the state of North Carolina, first time ever. And we think those are just part of being a great partner and a good corporate citizen and the right thing to do, even though we didn’t make any money from it and didn’t charge anything from it. It’s a sort of a function of building a good platform. It affords you some opportunities to do some things because they’re the right things to do.”