Follow-up to the Fiscal 2023 Digital Agency Information Systems procurement Reform Review Meeting

Overview

Date and time: Tuesday, March 12, 2024, from 4:00 p.m. to 5:00 p.m.
Location: Digital Agency Shared Conference Room
Agenda:
1. Opening
2. Proceedings
  1. Follow-up to the Fiscal 2023 Digital Agency Information Systems procurement Reform
  2. Free discussion
3. Adjournment

Materials

Relevant policies

Ensuring fairness and transparency in procurement / procurement reform to utilize new technologies

Summary of proceedings

Date

Wednesday, March 12, 2024, from 4:00 p.m. to 5:00 p.m.

Location

Digital Agency Shared Conference Room

Members in attendance

Committee Members Kajikawa, Arikawa, Kawazawa, Kimura, and Sakashita

Summary of proceedings

After the opening speech by Researcher Kadoma Digital Agency, based on Material 1, the Secretariat gave an overview of the results of the initiatives implemented this fiscal year for the proposed measures, the main Issue in the difficult initiatives, and the method of promoting the measures in the next fiscal year and beyond, and made a transition for free discussion by each committee member.
After that, Chairman Kajikawa reviewed the discussion and summarized it. Finally, Director-General Digital Agency Tomiyasu commented on Digital Agency's future policies based on the contents of the discussion at this Review Board.

Opening Remarks by Senior Researcher Kadoma Digital Agency

Last fiscal year, the 7th Digital Agency Information Systems procurement Reform Study Group compiled a final report. This fiscal year, we have implemented various initiatives in line with the direction of the five measures shown in the report. Today, as a follow-up, I would like to report on the status of implementation of the initiatives over the past year and the points that we recognize as important Issue, and I would like to receive suggestions from various perspectives on the future direction. In addition, this time, we also conducted a hearing survey with major related industry groups and received various opinions and requests. We would like to publish today's report and discussion contents, which will be useful for further promoting information systems procurement reform in the public sector, and report on Digital Agency's efforts.

After the briefing by the Secretariat, the main opinions from each Committee member are as follows.

Free discussion

It can be evaluated that overall efforts are progressing smoothly in accordance with the direction of the five measures shown in the final report of the last fiscal year.
Steady progress has been made in the preparation of templates for procurement specifications, the establishment of consultation counters, the introduction of checklists to prevent vendor lock-in, and the exchange of opinions and information with industry organizations.
On the other hand, it seems that development, which is relatively difficult, is still in the middle of the road, such as the demonstration of digital marketplace (DMP), the Agile Issue initiative, and the consideration of setting a maximum amount of compensation for damage. There are some parts that cannot be helped because we are required to respond to many Issue with limited time and personnel, but we expect that Issue, which is difficult, will be intensively addressed in the future.
Regarding Agile development, why it is necessary to adopt Agile procurement in public development, differences from general development methods such as the purpose, definition, and system design of Agile development, advantages and disadvantages, analysis of precedent cases including foreign countries, etc. should be advanced, and the way of efficient and effective implementation should be examined.
With regard to technical dialogue, we should promote the analysis of precedent cases, including foreign countries, and consider how to implement it efficiently and effectively.
Regarding the maximum amount of compensation for damage and the quasi-mandate contract in Agile development, it would be good to understand the purpose and purpose of the private sector contract, analyze whether they are applicable to public contracts or what the differences are in, and proceed with legal consideration while clarifying the necessity and reason for the introduction in public contracts.
The direction of the whole effort is not strange.
In terms of environmental development of Agile development, what is elementary but important is efforts such as identifying risks at the beginning of a project and enhancing communication by appearing at online meetings. In public procurement, even large-scale projects may be started only by confirming written proposals without presentations, so it is necessary to sufficiently communicate at the beginning of a project. In order to make the ordering party aware of this point, the existing guidelines should be added based on the performance of Agile development. In addition, in order to make the business operator aware of the necessity of communication costs at the beginning of a project, it should be clearly indicated in the procurement specifications.
It is important to secure a large number of people involved in requirements definition from the beginning, and to make efforts to verbalize requirements definition and target setting. Even if it is not clearly written down like Waterfall development, Agile development may need to spend more time on requirements definition.
It has been pointed out as a development that the responsibility for the completion of the deliverables cannot be taken due to the selection of the quasi-mandate contract in the Agile Issue. I think it is certainly a Issue, but on the other hand, it is also a risk that only the completion of the deliverables is prioritized without pursuing the ideal development results, a low-quality system is delivered, and the development must be advanced based on that assumption. In any case, it is better to consider the ideal way of the quasi-mandate contract in each contract. In addition, it is necessary to consider how to share the risk between the orderer and the contractor.
With regard to the development of consultation services, it is important to improve the abilities of persons in charge at each Ministry and Agency. Instead of having digital Ministries and Agencies accept all consultations from other Ministries and Agencies, it is better to take operational measures such as having each Ministry and Agency handle the first consultation, accepting only the contents that cannot be resolved by Digital Agency, and holding workshops for persons in charge of consultation, including each Ministry and Agency.
The organization of the procurement Specifications Database can be evaluated as a very important initiative. I think that the addition of supplier information will lead to the dissemination of future projects and the promotion of corporate participation.
It is also commendable that multiple measures are progressing simultaneously and that we are able to communicate our efforts to private sector. We are truly challenged by what we have always wanted us to work on, such as the procurement Specifications Database and the Vendor Lock-in Prevention Checklist.
Quasi-mandate contracts in the Agile development are also struggling in private sector. There is a model contract prepared by the Information-Technology Promotion Agency (IPA), but it seems to be suitable for large-scale projects. Therefore, if a model that can handle small-scale projects is prepared in Digital Agency, it may lead to the promotion of the use of quasi-mandate contracts.
Waterfall development is desirable for some projects. Why don't we create criteria to determine the suitability of the development method according to the characteristics of the project in the Digital Agency? It would be good if Agile development could be introduced in the appropriate project without forcibly selecting it, and the criteria would eliminate the variation in judgment from person in charge of ordering to employee.
Although the Issue of risk management remains, in recent years it has been stated in the contracts of private sector companies, and we think it is time to consider setting a maximum amount of compensation for damage.
Regarding the consideration of setting a ceiling on the amount of compensation for damage, it may be good to start from where possible. Since it is difficult to decide if a large project and a small project are considered at the same time, it may be good to try to set a ceiling on projects with low amounts and risks without being too particular about details at first.
I have heard that there are cases where there is a government agency in the interaction between a startup company that is not used to Issue projects and the ordering section. It is necessary to understand the corporate culture of the startup company and select the right startup company in the right procurement. In addition, depending on the procurement, a conventional large company may be more appropriate. It is very good to have a startup company, but it should be noted that the startup company is not superior in everything, and the suitability should be determined.
The introduction of a checklist to prevent vendor lock-in can also be evaluated. On the other hand, I have heard that there are cases in which the checklist has not been properly utilized. In addition, since vendor lock-in is not necessarily bad, it is good to consider measures while taking into account the future of vendor lock-in, such as how to take measures in the case that one party bidding has continued for several years and how to negotiate prices in the case of discretionary contracts.
The graph shows the results of the expansion of participation opportunities for SMEs and start-up companies, etc., and the results of one party bidding, etc., but what is important is to verbalize the factors for changes in numerical values and have other ministries and agencies work on the same as an effective approach.
In the Agile development, there are examples of successful agile adoption in the financial industry. It would be good to hear from companies with a track record of success and consider what is missing by comparing it with current efforts.
With regard to DMPs, it may be necessary to consider the next initiatives after evaluating the achievement status of the current initiatives in Digital Agency by comparing them with overseas examples such as the Senior Responsible Owner of the Government Digital Service (GDS) in the United Kingdom and the Australian Digital Transformation Agency (DTA).

Additional Comments

In the case of Agile development, by making it a blanket contract, the contractor will be burdened with the risk, and it will be difficult for companies with high technical capabilities to enter the market, and the original purpose of the ordering party will not be achieved. Instead of the idea that one party bears the risk, it may be better to discuss from the viewpoint of how to promote the risk sharing between the ordering party and the contractor.
In order to prevent vendor lock-in, there is also a method of making a more effective procurement by selecting a discretionary contract and negotiating for large-scale projects in which it is difficult for non-major companies to enter and in which vendor lock-in is occurring. Even if general competitive bidding is implemented, for example, it may be advisable to consider making arrangements at the time of ordering so that know-how will not be accumulated only in specific companies and engineers by evaluating the placement of young engineers with additional points and promoting the inheritance of know-how and information sharing to new engineers at least in the same company.

Review and summary by the chairman

First, regarding the evaluation of efforts in fiscal 2023 and how to proceed with future measures, it is recognized that we are making steady progress toward realizing the ideal image of Information Systems procurement in accordance with the five directions of measures presented in the Final Report compiled in March last year, and it can be evaluated that the direction to be taken is generally progressing appropriately. One of the points that can be evaluated as efforts is that we actively promoted efforts to contribute to the development of Information Systems procurement, such as the utilization of new procurement methods and the demonstration of DMP, such as the start of a trial of proposal-based planning competition and the promotion of the dissemination of technical dialogue methods. We should continue to expand our efforts while carefully assessing the effects. In addition, tools have been developed to serve as the basis for the realization of proper and fair procurement procedures, such as the development and sharing of templates for procurement specifications, the establishment of a consultation desk, the formulation of rules for change contracts, and the introduction of a vendor lock-in prevention checklist. In the future, it is expected that validation the effectiveness of these tools will be made while utilizing internal control functions, and that attention will also be paid to securing their effectiveness. In order to realize highly effective efforts with limited human resources, it is also important to prioritize and implement a wide range of short-term and medium-term measures. We recognize that the "Direction of Future Efforts" organized in this follow-up has clarified how Digital Agency should promote efforts to reform Information Systems procurement, based on the opinions of industry organizations and the aggregated consensus of the results of discussion and examination by the members of the Review Committee. We expect that Digital Agency will further improve its efforts to reform Information Systems.
Next, regarding responses to highly difficult measures and Issue, it is necessary to proceed with consideration while confirming the progress of efforts regarding improvement measures related to the implementation method and approach of measures that are highly difficult or have a Issue, such as issues related to agile development and the setting of a maximum amount of compensation for damage, which were also discussed by Issue today. However, there are some Issue where it is not always possible to determine the direction to aim due to differences in positions and ways of thinking. Regarding such Issue, we believe that Digital Agency should actively be involved in order to derive best practices by referring to the situations in foreign countries, hearing the opinions of various ministries, relevant industry groups, and experts, and deepening discussions.
Finally, regarding the focus on the penetration and expansion of procurement reform initiatives. Many of the procurement reform initiatives that I reviewed today are being implemented on a trial basis only in Digital Agency at this time. It is important for Digital Agency to continue to assess the effects of new measures based on validation, and to gradually deploy those that are found to be effective to each Ministry. It is required to deploy them to local local government as well, but because the law on which the procurement procedure is based is different, first of all, communication with local local government, etc. should be activated, effective cooperation measures should be examined, and their penetration should be attempted. Such information systems procurement reform initiatives are initiatives that have not been made in the past, even as a window for dialogue with private sector companies through industry organizations, and Digital Agency should also be responsible for strengthening them for the appropriate improvement of government procurement. In particular, we expect that efforts will be made to penetrate new initiatives represented by DMP, such as more active PR and support, etc., to each Ministry, local local government, and businesses through industry organizations.
These efforts by Digital Agency are of high social interest and are important for showing how public services should be provided. I believe that it will be easier for the measures to proceed if they are promoted, including public relations activities, to understand how they will be useful to everyone in society, and if not only each ministry and agency and local government but also the people who receive the services understand the steady status of their efforts.

Address by Director-General Digital Agency Tomiyasu

This time, in accordance with the measures proposed last year, we summarized the activities carried out this fiscal year. We are working hard to provide good services. Since positive changes are also appearing as a result, we will continue to advance our efforts and work to spread them to each ministry and agency and local government.
Regarding DMP, progress has been made to the stage where the government can search by asking business operators to list their SaaS on a demonstrative basis. In the future, there will be work to reach an agreement on systems related to accounting and procurement. On that basis, we would like to make it fully operational after the fall of 2024 and contribute to the procurement of local government.
The Digital Administration and Finance Reform Council is also discussing that the use of digital technology is essential for maintaining local public services because the number of local government employees is expected to decrease in the future due to a decline in production population. Digital Agency also wants to work on the provision of common functions, etc., and it is significant that DMP is used in procurement in local government. On the other hand, since there are procurement mechanisms in each local government, we would like to consider them and make further examinations.
We would appreciate your continued guidance.

End