This chapter outlines the GovTech Building Blocks that represent the set of conditions at the micro-level needed to establish GovTech while minimising the risks and maximising the success and positive impact of these collaborations. These GovTech building blocks include mature digital government infrastructure, capacities for collaboration and experimentation, resources and implementation support, and the availability and maturity of GovTech partners.
Enabling Digital Innovation in Government
The OECD GovTech Policy Framework
OECD Digital Government Studies
Abstract
The GovTech Building Blocks represent the processes, policies and initiatives within a country that can maximise the likelihood of success for a GovTech engagement on a micro level. Four core building blocks have been identified as critical for the quality and long-term viability of the GovTech projects:
Mature digital government infrastructure: to provide the basis on which solutions can be built.
Capacities for collaboration and experimentation: to enable GovTech projects to be initiated and organised effectively.
Resources and implementation support: to assure the quality and sustainability of projects.
Availability and maturity of GovTech partners: to ensure that there is an ecosystem of quality counterparts to co-create GovTech solutions with minimised risk.
Source: Authors’ own design.
The first 3 building blocks determine the public sector’s capacity for leveraging GovTech innovations, while the last reflects the needs of the market and its capability to maintain and supply of GovTech solutions.
GovTech solutions build upon existing public sector data and digital government infrastructure. Effective GovTech engagements are dependent on a public sector entity’s existing technology environment and governance arrangements, which can either limit or foster opportunities to feely explore different solutions and ways to develop them. The quality of GovTech solutions is therefore dependant on the quality and maturity of digital government infrastructure. This is because the way the public sector develops digital services is influenced significantly by its legacy technology and infrastructure, common components and tools, and its service standards (OECD, 2020[1]). Data governance, including both data infrastructure and architecture, is also essential to support the design and delivery of digital services and build a data-driven public sector (OECD, 2019[2]). These factors not only enable GovTech collaborations to take place, but also influence the quality and efficiency of these initiatives. As such, there are three components of mature digital government that hold a significant influence over successful GovTech projects: high quality data, data access and sharing, and flexible infrastructure.
High quality data
Many GovTech solutions are data-intensive and often rely on high-quality data to create value, especially for those collaborations that are being used to explore and pilot AI solutions. Prior to engaging with GovTech actors, public sector entities should determine whether there is sufficient high-quality data on the challenge to be addressed. If such data are missing, the organisation might consider reformulating the problem. For instance, public sector entity can refocus the collaboration with innovators from building the solution to ideating around the ways to improve data quality or find innovative data sources to build solutions and algorithms.
High-quality data are a result of long-term alignment of adequate data governance, digital tools, and digital skills within the public sector. However, in the short term, governments can take steps to improve data management, and in turn, the resulting quality and public value of the GovTech solution. The Government Data Value Cycle (Figure 3.2) can serve as a guidance for comprehensive approach to improving the access, sharing, and use of high-quality data (van Ooijen, Ubaldi and Welby, 2019[3]).
Artificial intelligence (AI) and big data analytics are two of the three technologies most often used by GovTech start-ups (StateUp, 2022[4]). Data are one of the main enablers and fundamental foundation for AI in the public sector (OECD/CAF, 2022[5]). Therefore, the quality and usability of GovTech solutions depends on the existence of high-quality data. Inadequate data can instead result in algorithms that inform poor decisions, reflect societal inequalities, and embed discriminatory practices (Berryhill et al., 2019[6])
Data access and sharing
High-quality data should be both available and accessible while data privacy and security should be protected. GovTech actors should be able to use this data to gain insights, conduct analysis, and develop algorithms and innovative applications. Data-sharing systems reduce the friction and delays in GovTech co-operation. If ad hoc data access and sharing arrangements need to be done on individual project basis, it can risk introducing uncertainty, delays in project timelines, and increased resource costs.
For GovTech collaborations, the challenge with data access and sharing is two-fold: inter-entity data sharing and access to external actors. Firstly, solutions might require data from different registers or databases that are not within control of the organisation leading the project. Common challenges in such cases are around data discoverability (how to find the data), sharing (how to make it available to other organisations), and interoperability (how to process it) (van Ooijen, Ubaldi and Welby, 2019[3]).
Once enough quality data are within the hands of public sector entity, the challenge is then sharing these data with the external GovTech actors. Public sector entities must ensure that there are technological and legal ways to facilitate this exchange. A systemic approach to open data can help develop digital ecosystems (Posada Sanchez, Pogorzelska and Vaccari, 2022[7]) GovTech start-ups can use the data to build solutions, which can be further facilitated by Application Programming Interfaces (APIs). This practice is growing across OECD Members, including Australia, Canada, Colombia, Denmark, France, Mexico, Portugal, Switzerland and the United Kingdom (OECD, 2019[2]).
The Lithuanian Innovation Centre needed a solution that could evaluate science and business cooperation. Building such a solution required access to data about education and enterprises tha.t are owned by other organisations, and trying to access it delayed the development of the solution. To address this, Lithuania’s State Data Agency is building a single data lake: the State Data Management Information System (SDMS IS). The SDMS IS pools data from various registries and information systems – creating a space to manage data from collection to its use and publication, with the entire data management cycle overseen by a single organisation. National and local public sector entities can access data sandboxes, dashboards, and other public sector data to facilitate efficient interorganisational data sharing.
Flexible infrastructure
Flexible digital government infrastructure can enable effective collaboration. For GovTech, cloud computing and open-source policy can influence how solutions are built, maintained, and scaled.
Cloud computing is another of the most used technologies among GovTech start-ups (StateUp, 2022[4]), making it part of the key underlying infrastructure required for the development of solutions. Access to secure and scalable cloud infrastructure is thus essential (OECD, 2020[1]), as it mitigates the risks of disruption (OECD, 2022[10]). This is especially crucial if the solution uses AI or big data because it requires more computing power and may not be compatible with legacy technologies (OECD/CAF, 2022[5]). Additional compute also risks increasing the environmental impact, as data centres can be very energy intensive. Public sector entities should consider how to procure or access cloud infrastructure to support GovTech, including what access might be required for beta and live solution development, as well as to ensure that the providers are sustainable and support the green transition.
Open-source policies can also impact how GovTech solutions are built and what options are available to public sector entities to scale and maintain these solutions. StateUp (2022[4]) notes that there has been an increase in uptake of open-source software in the GovTech market. For instance, one of the most well-known GovTech start-ups, CitizenLab went open source in 2021 (van Ransbeeck, 2021[11]). However, there is debate around the trade-offs between cost-effectiveness and competitive advantage. For instance, open-source software can potentially reduce costs for GovTech start-ups, as they can leverage existing solutions without incurring licensing fees. Furthermore, using open source together with open standards might level the playing field, allowing smaller companies to compete with larger ones by leveraging shared resources and lowering the risk of vendor lock-in (OECD, 2022[12]). On the other hand, some argue that proprietary solutions can offer a competitive advantage in terms of unique features and intellectual property. Balancing the need for transparency with protecting valuable intellectual property can be challenging, so GovTech actors should weigh these factors based on a project’s goals, requirements, and intended solution. If the use of open-source is appropriate, then governments should communicate the requirement in advance and offer guidance on its use, including on how to ensure that participation in open source networks remains active and that solutions remain current.
To ensure the success of GovTech engagements, it is essential for public sector employees to have the necessary skills and capabilities to initiate and deliver GovTech projects. The public sector has traditionally favoured large projects where the public sector acts as the contractor, providing detailed terms of references, while the private sector primarily focuses on meeting those requirements. Most processes for managing projects therefore are predicated on this kind of relationship. GovTech takes a more disruptive approach and instead focuses on experimentation, iteration, and co-creation. Public sector entities need to evolve to find balance between managing risk and leaving room for more innovation. To achieve this, they need to enhance skills, update processes, tools, and methods for GovTech projects, and create an enabling culture to enable their success.
Skills
GovTech complements existing public sector capability to deliver digital projects and initiatives – it does not replace them. Public sector entities need sufficient level of skills to ensure a balanced and equitable partnership with external actors. Without a sufficient level of understanding and expertise, there is a risk of poor outcomes or the poor management of public resources. Given the focus of GovTech collaborations on digital innovation, engaging in GovTech collaborations requires a combination of skills related to public sector innovation and digital government. The OECD has identified six core skill areas required to support increased levels of innovation in the public sector: iteration, data literacy, user centricity, curiosity, storytelling, and insurgency (OECD, 2014[13]). Figure 3.3 outlines these skills below:
Source: (OECD, 2014[13])
This set of skills is key to effective GovTech collaborations. GovTech actors need to be able to seek out new ideas and reframing existing problems (i.e. have curiosity). They should also challenge the status quo and build alliances with alternative partners, such as start-ups and entrepreneurs (i.e. insurgency). It is important also to be able to define GovTech challenges in a way that attracts more co-creators or gather support to scale pilots into fully-developed solutions (i.e. storytelling). Skills related to user-centricity – such as solving user needs and involving users in the design, delivery, and evaluation of projects – allow public servants to better define the problem they are trying to solve and increase the quality of the solution being built. Data literacy is essential to help identify opportunities for and assess the impact of GovTech. Finally, GovTech actors should know how to successfully deliver GovTech projects in an agile way (i.e. iteration) – taking steps to ensure that the solution will meet user needs and integrate into the environment.
As GovTech focuses on encouraging more user-driven digital government, it is important to also consider the 5 digital government user skills defined in the OECD Framework for Digital Talent and Skills (OECD, 2020[14]) and illustrated below in Figure 3.4. This skillset is key to developing capability around data-driven decision-making and how to develop digital solutions in a way that is collaborative, iterative, and genuinely meets the needs and expectations of its users. Furthermore, these skills enable employees to ask relevant, informed, and challenging questions to go beyond superficial reporting when overseeing digital, data and technology activities. This is crucial for GovTech given the close collaboration with GovTech partners that might have higher technical expertise - public officials need to be able to ask the right questions.
Source: (OECD, 2020[14])
To address this, countries should assess its workforce to identify skills gaps and develop competence frameworks to help address them, including through formal and informal learning opportunities. This is described in greater detail in the OECD’s paper on ‘Developing skills for digital government’ (2024[15]).
However, a single person is not expected to have all these skills. Rather, multidisciplinary teams would be constructed in the public sector entities to cover all the skills in the innovation and digital skills framework. As innovation practices and digital technologies are key to GovTech projects, these teams should have at least an ‘emerging capability’ in each of the skills listed. Where teams only have basic awareness of these concepts, then teams can address skills gaps by using structured processes for GovTech that entities can follow or by seeking assistance from centralised GovTech teams (where they are available).
Processes, tools, and methods
Public sector processes often need to be updated to enable GovTech and public employees should be equipped with the tools and methodologies they need to support the successful delivery of these agile projects. This aligns to the Declaration on Public Sector Innovation in acknowledging that support structures and processes as the key enablers for innovation (OECD, 2019[16]).
Traditional project management is often based on a ‘waterfall’ methodology, which relies on knowing outcomes in advance, long planning processes, and minimal opportunity for changes or innovation during implementation (OECD, 2017[17]). GovTech instead centres on a more agile prototype delivery approach. Public sector entities primarily use GovTech because they are in a ‘discovery’ phase and cannot yet define the outcomes. Instead, GovTech starts small, undergoes iteration with feedback loops, and adapts quickly to control and plan around the uncertainty. Traditional processes can also be siloed and leave user engagement to the end of a project. GovTech instead requires more of a user-driven approach that centres early, continuous, and effective collaboration with stakeholders (OECD, 2017[17]).
Source: (OECD, 2017[17])
For GovTech projects to succeed, public employees also need to be supported with the guidance and policies on how best to manage agile projects. Implementing such processes would ensure that the necessary risk controls are maintained, while also building confidence, fostering trust, and facilitating more innovative solution development. This can be achieved through:
Open innovation processes: organisations should maintain structured innovation processes that allow for internal and external collaboration in each of the phases of problem formulation, idea generation, idea selection, and idea conversion (Roy and Roy, 2019[18]). Hackathons, incubators, shared spaces, living labs, ideation platforms are some tools to do this (BearingPoint, 2018[19]).
Agile project management methodologies: agile project management can be a tool to implement open innovation in practice (BearingPoint, 2018[19]).
Tools and methods for problem refinement, iteration and collaboration: public employees should have tools and templates for design thinking, co-creation facilitation, and prototyping.
These processes and tools can either be specific to an organisation, standardised across the public sector, or supported by a central GovTech team. In the absence of agile project methodologies and processes, public sector entities may attempt to fit GovTech projects into traditional frameworks, which can stifle innovation, increase risk, and result in disappointment.
Culture
The success of GovTech projects depends on an organisational culture that encourages and enables innovation. Without organisational support and incentives, “rewards for innovation may be much smaller than the sanctions for trying and failing” (OECD, 2017[20]). This is often seen in tension between:
regulated continuity versus space for risk taking.
narrow specialisation versus cross-silo collaboration.
hierarchical organisations versus diffused accountability.
According to the OECD Declaration on Public Innovation (2019[16]), the public sector should “acknowledge the advantages that a culture of openness, of learning from errors and of collaboration across silos and sectors offers to the practice of innovation; give permission to public sector entities and public servants to take appropriate risks and to explore and engage with new ideas, technology and ways of working as part of their core business” (OECD, 2019[16]). Similarly, the OECD Framework for Digital Talent and Skills in the Public Sector encourages a learning culture including a safe environment for employees to experiment, learn and develop through testing and failing (OECD, 2021[21]).
Without an organisational culture that supports experimentation and collaboration, GovTech engagements can happen only on an ad-hoc basis and rely heavily on active individual changemakers. Additionally, organisational support is critical to help overcome the additional scrutiny and mistrust that often accompanies these innovative practices and can magnify the fear of failure. Support for GovTech should be visible enough to encourage public sector employees that it is still safe to experiment.
The high level of scrutiny for GovTech is due to projects often not having a clearly defined project scope and timeline. While public sector employees can define the pilot stage, it is difficult to determine how complex and expensive the end solution will be. In addition, GovTech partners often leverage innovative and emerging technologies, which can increase the perception of the risk inherent in such an engagement. Furthermore, the outcome of a GovTech engagement is not guaranteed. A project owner might determine that a solution is not viable or that it does not solve the problem at hand. Organisations need to be prepared for and should tolerate such outcomes or public sector employees will be reluctant to experiment.
Another important aspect of culture is the tolerance and encouragement for collaboration across organisations, as well as between the public and private sectors. Public sector employees should be supported to engage horizontally – directly working with their peers to better understand a problem, explore potential data, and understand the scalability of the solution. This should include open engagement and collaboration with GovTech partners to discuss the challenges that the public sector needs help to address.
Creating a culture that enables experimentation and collaboration is a long process that needs to alter prevailing behaviours and approaches in the public sector. Nevertheless, establishing the necessary organisational culture is possible through supportive leadership that aligns with individual and organisational incentives. In the short term, creating spaces for networking can provide an impetus for change by sharing lessons from failures and celebrating successes. Awards can be another way to encourage innovation and provide visibility to such projects (OPSI, 2022[22]). While they alone do not create systemic change, they can motivate individuals, provide inspiring examples, and demonstrate that innovation delivers. Another approach could be to also acknowledge and celebrate the failures in the public sector to create an environment where risk is allowed, and innovation is encouraged. For example, UNICEF initiated ‘Fail Fridays’ for teams to discuss their failures and doubts with to facilitate learning and “institutionalise risk-taking” (OPSI, 2022[22]). In the US, the Centre for Public Impact and the National Association of County Administrators run a year-long program to help local governments ‘fail forwards’ – learning from failure to foster a culture of innovation (Center for Public Impact, 2022[23]).
Public sector entities need to have the adequate resources and implementation support to get the full value of GovTech engagements. This means making GovTech part of the broader strategic approach to digital government investments in two ways: both as a method to support digital investments and as an example of an investment to be delivered (OECD/CAF, 2023[24]). First, GovTech is one of the methods of engagement identified under the OECD’s Digital Government Investment Framework to support procurement, commissioning, and early market engagement (OECD, forthcoming). Secondly, projects that leverage GovTech are also considered digital government investments that should be managed in line with this framework to ensure that they are planned, implemented and monitored effectively to deliver their intended outcomes. To facilitate this, public sector entities need to consider the appropriate funding, procurement methods, and pathways for scaling solutions that are required for the sustainability and integrity of GovTech.
Funding
While it is possible to have GovTech engagements without it, having dedicated financial resources can result in more impactful GovTech solutions. As GovTech projects focus on developing pilots and often have a higher risk of failure, their budgets need to be flexible and conducive to experimentation. There are two primary sources of funding for public sector entities’ GovTech projects: traditional budget negotiations, based on the need to solve a specific problem, or funds for public sector innovation. Public sector entities often struggle to build business cases for GovTech projects to be financed under the first option, given that the potential scope of the solution is hard to define beforehand. This leads many organisations to pursue the latter option: funds for public sector innovation. There are two variations in how these funds are generally administered:
General innovation funds: these often reflect the cross-cutting nature of innovation and serve the need for flexibility in funding, which is often difficult to attain through traditional budget processes. According to previous OECD research, 14 of the 25 surveyed OECD countries had at least one general innovation fund that aimed to support prototyping, innovative solutions implemented elsewhere, or the implementation of new projects (OECD, 2017[25]). General innovation funds often support broader digital transformation initiatives. For example, Ireland has launched the Public Service Innovation Fund in 2019. It is a competitive fund, that supports innovative ideas from across public sector entities with funding between EUR 25,000 - 60,000 (Our Public Service, 2023[26]). Canada has taken a different approach – the Government’s Experimentation Direction recommends that senior managers dedicate a percentage of their budget to experimentation, backing this expectation with reporting requirements on their spend (OPSI, 2022[22]).
GovTech-specific funds: While general innovation funds can be used successfully for GovTech projects, some countries have opted to create funding specifically for collaboration with GovTech actors. Allocating dedicated funding to GovTech projects demonstrates a commitment to explore and implement digital solutions effectively through innovative collaborations. For example, between 2018 and 2019, GovTech Catalyst in the UK provided funding for public sector entities to undertake the pre-commercial procurements for GovTech solutions. Other GovTech-specific funds have been tied to GovTech programmes themselves, ensuring that public sector entities receive money, training and platforms for structured co-creation with GovTech actors. For example, Lithuania launched a procurement sandbox in 2021 to fund and undertake GovTech design contests. Each project was able to receive up to EUR 53,000.
Overall, it is important to design public sector innovation and GovTech-specific funds to be flexible in terms of how resources can be used, to avoid fragmentation, and to maintain predictable budgets over the longer-term for more strategic investment (OECD, 2017[25]).
Public Procurement
Public procurement can often be seen as a barrier for GovTech. However, With the right procedures and process in place, procurement can instead facilitate successful GovTech engagements in pursuing innovation while still maintaining integrity in the use of public resources. Without using more dynamic procurement approaches, public sector entities risk stifling the innovation that GovTech can bring – leading to poorer quality outcomes and less value-for-money.
Existing procurement rules enable collaborative and challenge-driven approaches to GovTech (OECD, 2022[27]). Some key procurement methods that can be used for GovTech include pre-commercial procurement, innovation partnerships, and design contests, as described in Table 3.1 below:
These procurement practices can encourage more agile and iterative project delivery – better reflecting the needs of GovTech collaborations, supporting public sector entities in collecting ideas on different solutions, exploring different concepts, and working with different actors simultaneously and flexibly.
Standard tender processes can still be used for GovTech, especially if it concerns the procurement of a solution that already exists in the market (European Commission, 2021[29]). While this approach may be less flexible or agile, it can be adapted or used more dynamically to support GovTech collaborations.
However, there have been examples where countries have defined specific procurement rules to facilitate GovTech. In Brazil, the Government introduced the National Startup Bill, which facilitates bidding for challenge-based procurements (i.e. without a prescribing a solution) up to a value of BRL 1.6 million (or approximately EUR 260,000), as well as the option to integrate the solution without an additional procurement process (Carvalho, 2021[31]). Some other standard tender processes include:
Early market engagement: by engaging with GovTech partners prior to procurement (see Box 3.2), buyers can better understand the technological landscape, assess what solutions are available, and what might require further R&D (OECD, 2022[27]). It also helps to ensure that all actors understand the nature of the challenge. By notifying the market of future procurements, smaller providers are also given greater opportunity to participate (OECD, 2022[12]).
Minimal participation requirements: to include only the essential prerequisites for participation. Unnecessarily focusing on requirements like number of years’ experience or operation can lock start-ups and smaller providers out of the market (European Commission, 2023[32]).
Technical specifications based on outcomes: technical specifications should focus on the outcome to be achieved, but not the manner or solution the supplier uses to achieve it (Englund and Hareide, 2022[28]). The ’needs description’ should be functional and allow innovative GovTech partners to offer variety of solutions. Being overly prescriptive can mean missed opportunity by making procurement rigid and inflexible, allowing no space for agility, modifications, or iteration.
Better contract design: contracts can be made more ‘start-up friendly’ by having smaller contracts that require less negotiation, include more frequent payments tied to milestones, and maintain only essential reporting and other administrative requirements (European Commission, 2023[32]).
Shared rights to intellectual property (IP): GovTech partners can be less inclined to participate if buyers can retain sole rights to a solution, as it can preclude further product scalability (European Commission, 2023[32]). Similarly, buyers want to avoid vendor lock-in and be able to continue building the solution, regardless of whether the supplier relationship continues. In Lithuania‘s GovTechLab partnerships, there are some collaborations where IP is open and free to reuse, while other projects maintain the IP of the commercial partner so that they can monetise and scale the solutions. Another model is for the commercial partner to retain the IP for the minimal viable product, but the buyer retains the right to make certain elements public for future procurements.
Australia’s Digital Transformation Agency developed practical guidance on doing early market engagement in the right ways. While procurement approaches may vary, it reminds buyers to:
Be thorough –keep accurate and thorough records of your market research activities.
Be consistent – keep your records and documented information in a consistent manner. This enables the information to be accessible to public authority in the future.
Be flexible – be prepared to customise your probity considerations, particularly for unusual or complex sourcing projects. You may wish to engage an external probity officer to assist.
Be inclusive - probity processes should ensure a level playing field so that smaller sellers have the same opportunities to engage as the bigger or more embedded sellers.
Be vigilant - when handling information, it is critical that there is no element of formal bidding, actual or perceived conflict of interest, commitment or undertaking towards any potential seller(s). Carefully consider whether you are using potentially sensitive information or a seller’s intellectual property to inform a formal sourcing process. Any information you receive from sellers must be treated in-confidence and only used for the intended purposes.
Be fair - have a good range of seller-types included in your early market research. This will help to show that you have cast a wide net and considered as many as you were able.
Source: Digital Transformation Agency (2021) Early Market Research, Source: https://www.buyict.gov.au/sp?id=early_market_research
Scaling solutions
One of the key benefits of GovTech engagements is the potential to scale-out pilot solutions. Scaling can occur at three different levels: internal, cross-organisational, and international.
The primary challenge lies in achieving internal scalability to transition a solution from the alpha to the beta stage, and then to full-scale deployment. This challenge is often twofold: securing funding and addressing procurement considerations. While pilots typically require less funding, resources for full-scale solutions may not be readily available. To aid this, public sector entities should establish clear goals for the pilot solution to achieve (e.g., timesaving, service quality) and leverage these measured results to develop a compelling business case to support financially the implementation of a full-scale solution. Mechanisms can also be built into the budget process to mitigate the risk of negotiating additional funding for the delivery of the full solution. CivTech Scotland, for example, allocates additional funding of approximately EUR 240,000 to EUR 700,000 (depending on the initial procurement) to develop the GovTech solution from ’minimum viable’ to a ‘commercially viable’ product (CivTech, 2023[33]). There also needs to consider the capacity within delivery teams required to support the scaling and integration of GovTech solutions, which may also need new processes, ways of working, or resources to support them longer-term.
Another challenge in the scaling process is in procuring the full-scale solution following the initial pilot. It can be difficult to balance the need for open and fair procurement with incentives for the incumbent GovTech partner to continue working on the solution. Norway’s StartOff programme (using a PCP) sought to solve this challenge by assisting organisations through both the pilot procurement and in buying full-scale solutions. During the procurement of full-scale solution, StartOff shared the initial needs description for the pilot with suppliers, along with all new information discovered during the pilot phase. That ensured that the original GovTech partner(s) are not designing the subsequent procurement and instead compete on an even playing field.
Furthermore, countries could do more to support the full-scale deployment of solutions across the public sector. For instance, if one municipality co-creates an innovative participatory budget platform, other municipalities should be able to procure such solutions. The challenge for cross-organisational scalability is lack of awareness of solutions and insufficient resources to buy and use them.
To solve these challenges, many GovTech teams organise demonstration days to showcase potential solutions or build databases with solutions implemented elsewhere. For example, Lithuania’s GovTech Lab has funded a program to showcase and test solutions already on the market. The intent is to overcome the challenge of limited resources by leveraging what is already available and facilitating access to ready-made solutions, including for open source solutions that can be replicated or scaled either by in-house teams or as part of further GovTech collaborations.
Finally, GovTech partners should be able to scale internationally, given that challenges across public sector entities in different countries are often similar. In addition to issues around funding and awareness, GovTech partners can find it difficult to access the foreign markets and key decision makers. To mitigate this challenge, the GovTech Global Alliance has launched the Global Scale-up Programme (GSUP) (GovTech Global Alliance, 2023[34]). The GSUP is aimed at GovTech solutions with mature green-tech related products that have the potential to be scaled up quickly. The programme enables access to decision makers in governments, procurement agencies, and innovation ecosystems in multiple locations – streamlining the introduction of GovTech partners to a new ecosystem to enable solutions to scale further.
GovTech is reliant on a mature and capable ecosystem of GovTech partners. It is not the sole responsibility of the public sector to possess the necessary skills, resources, and scalability options for GovTech projects. GovTech innovators must also be equipped to meet the needs of the public sector, grow their companies, and scale up their solutions. However, governments have a vested interest in implementing policies that help build a more mature ecosystem of GovTech partners. This is particularly key in mitigating the high failure rate amongst start-ups or smaller providers, which often face barriers to success around access to finance, entrepreneurship skills and capabilities, access to international markets, and access to networks (OECD, 2022[35]). There are three major initiatives that the public sector can implement to help ensure the availability and maturity of GovTech partners: acceleration programmes, venture capital and other forms of investment, and access to procurement.
Acceleration programmes
To ensure the success and growth of GovTech start-ups, it is crucial to provide them with adequate support and resources to develop and scale their businesses. High-quality incubation and acceleration programs play a vital role in this process (European Commission, OECD, 2019[36]). This support could involve:
Participation of GovTech start-ups in general accelerators: innovators can benefit from joining accelerator programs that offer support, mentorship, and access to networks and resources.
Creation of GovTech tracks or GovTech-specific training within general accelerators: tailored training programs can be integrated into existing accelerator initiatives, providing targeted guidance and expertise on the unique challenges faced by GovTech start-ups.
Creation of dedicated GovTech accelerators: focused environment for GovTech start-ups to receive sector-specific support, mentorship, and connections. For example, GovStart is a 6-month programme in Europe and the UK with dedicated learning content, events and tools for start-ups that want to transform public sector. Another example is CivStart in the US, which focuses on building startups that solve local government challenges.
Governments can play a proactive role in developing the ecosystem, including by funding potential accelerators, initiating the establishment of GovTech-focused accelerators, or providing insights to start-ups into the inner workings of government. Accelerators can foster a thriving GovTech ecosystem and provide valuable resources and support for start-ups as they grow. One such example is New Zealand’s Creative HQ, which does this at the city-level in Wellington (Creative HQ, 2024[37]). The European Commission’s GovTech4All project also works to develop the pan-European GovTech ecosystem focused on three key pilots: securing cross-border data, assisting citizens with digital benefits, and innovating public procurement (Interoperable Europe, 2024[38]).
Venture capital and other investments
Access to capital is essential for fostering the growth of GovTech partners, especially start-ups and scale-ups. Investment is needed to finance the development of the solutions and to support rapid growth and scalability. Venture capital (VC) funding has generally proven to be a critical turning point for start-ups (Breschi, Lassébie and Menon, 2018[39]). Both start-ups and governments should have a vested interest in the success of start-up fundraising, given that some of benefits of such collaboration can be reaped only if solutions are scaled beyond the initial pilot stage of GovTech engagements.
However, investors often approach the market with caution due to concerns about lengthy sales cycles and perceived ‘red tape’, which in turn can limit company’s growth (Knight Foundation, 2017[40]) (Santiso and Ortiz de Artinano, 2020[41]). While these concerns may sometimes be exaggerated, GovTech start-ups do often require more patient capital to accommodate longer timelines and slower scaling processes (Filer, 2018[42]) (Santiso, 2019[43]). While the total value of investment in GovTech start-ups is growing, from just EUR 2 billion between 2008-2018 (Jandel, 2018[44]) to as much as USD 20 billion between 2010-2022 (UVC Partners, 2022[45]), the investment still lags behind other tech industries. For instance, fintech startups have attracted EUR 79 billion in 2022 alone, which was already a decrease of 38% from 2021 (Dealroom and ABN AMRO Ventures, 2023[46]). However, the positive investment trend in GovTech should be considered a sign that investors see the importance of GovTech in a post-pandemic society, as well as a change in investors’ perspectives towards ‘impact’ investing (StateUp, 2022[4]).
A range of funding and investment options should be made available to GovTech partners, including:
Venture capital (VC): including generalist VC funds that can invest in GovTech start-ups as part of broad portfolio of investments (e.g. UVC partners), specialised funds focused on impact investment, education or climate (e.g. Contrarian Ventures), GovTech-specific VC (e.g. the GovTech Fund in the US or Fundo GovTech Brazil launched by KPTL and Cedro Capital in 2022), or support from other corporate investors, like family offices or other large providers .
Government-led investment funds: such as Córdoba Smart City Fund, which is financed by municipal revenue. Government-led VC can cover areas where the private VC market is not yet mature enough (Breschi, Lassébie and Menon, 2018[39]). In some countries, up to half of the VC-supported start-ups are supported by government (Breschi, Lassébie and Menon, 2018[39]).
Philanthropic funds and venture philanthropy: to bridge a funding gap for start-ups and other GovTech partners with a focus on social impact, public value and democratic goals (Santiso and Ortiz de Artinano, 2020[41]), where profit generation and rapid scalability is less crucial. For example, the Knight Foundation funds CivicTech start-ups, while the Westpac bank’s New Zealand Government Innovation Fund provides funding to companies and government agencies’ projects.
Funding through grants: government grants can also be used to fund research and development activities. Creating grant programmes can be a solution where procurement for early-stage products is difficult and funding is needed to bridge the gap between ideas and pilots. For example, South Australia’s Go2Gov programme provides funding directly to star-ups and early-stage businesses for feasibility and proof-of-concept stages (fixe, 2023[47]).
While there are diverse investment options available and the level of investment is trending upwards, it has not yet achieved the level required. Governments could encourage investment by signalling interest in GovTech and facilitating access to capital. Initiatives like dedicated GovTech investment funds, investor education programs, and collaboration platforms could help stimulate private investment in GovTech and enable start-ups to scale their solutions and deliver on their potential.
Access to procurement opportunities for greater market participation
Equitable access to procurement opportunities is another way to support the GovTech ecosystem by fostering competition and providing opportunities to scale pilot solutions with new clients. Governments can minimise the barriers to participation in the procurement process by establishing more open, accessible, and streamlined procurement processes that improve access for these providers to the government market. Common guidelines on eligibility and qualification requirements for procurement would also enable greater participation of start-ups and newer providers. Another potential solution could be through promoting subcontracting arrangements or opportunities for consortia, which could enable smaller providers to leverage the access and resources of the larger, more established providers.
Pre-vetting GovTech partners, through a dynamic purchasing system for example, is another way to build trust in these suppliers. For example, the Korean Government built Venture Nara to help start-ups and innovative companies access public procurement platforms and display their products (OPSI, 2022[22]). Singapore has the IMDA Accreditation programme to enable expedited procurement of products and services from accredited companies by government and large enterprise buyers (Singapore Government Developer Portal, 2022[48]). BrazilLab instead grants GovTech partners a seal to certify that they are mature and capable of selling technological solutions to the public sector. It does not bypass any procurement processes but rather provides an extra layer of due diligence to help build confidence.
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