Airport Software Solutions and Services Sourcing (2022)

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21   C H A P T E R   5 World Leaders Google Google does not have formal procurement or purchasing functions. Google’s Procure to Pay team owns procurement processes and systems that empower all 65,000 Google employees to make purchasing decisions based on needs. Back-office software provides Googlers with filtered search results and a rating tool to share the valuable data that employees need in order to make decisions (Samaniego et al. 2019). This lack of formality is a byproduct of Google’s focus on innovation. Employees are encour- aged to dedicate 20% of the workweek to passion projects. Ideas are a catalyst to create initiatives such as the company’s 2014 supplier diversity strategy. Applicants self-assess specific criteria that mirror the European Union (EU) definition of a small business: $15 million or less in revenue and 50 or fewer full-time employees. This focus has substantially increased supplier diversity within Google and continues to advance innovation. Strategic Sourcing Strategic sourcing harnesses the power of data for greater productivity. Software is used to conduct a market analysis and to create procurement categories. Spend analytics, project man- agement, negotiations, contract management, and supply management all help to create cate- gories of needed procurement and strategies for its execution. In this way, procurement helps to shape business strategy and to ensure that it is fully aligned with other business processes (Businesswire 2020). Figure 5-1 illustrates the value a procurement organization contributes as a business moves from a transactional to a class-leading status. GlaxoSmithKline GlaxoSmithKline (GSK) creates strategic partnerships with businesses, organizations, and academic institutions, delivering innovative solutions to the healthcare industry. Partnerships and collaborations often reside under the research and development function of the partnering organizations. GSK awards funding in order to advance ideas in a non-threatening development arena. Findings are shared among the partnering organizations, which can mitigate unexpected outcomes before a concept or technology is introduced for advance use (GlaxoSmithKline, n.d.). Federal Aviation Administration In 1995, Congress directed the FAA to develop an acquisition management system (AMS) for its acquisitions. The AMS establishes policies and guidance by which the FAA identifies, Innovative Practices

22 Airport Software Solutions and Services Sourcing defines, acquires, deploys, and manages (over the lifecycle of systems) the facilities, services, and infrastructure needed to fulfill its mission (Ingram 2015). The AMS is intended to increase quality, reduce time, manage risk, and lower the cost of delivering safe and secure services to the aviation industry and flying public. The AMS has a lifecycle management process that includes the following steps, as illustrated in Figure 5-2: 1. Service analysis research 2. Service analysis and strategic planning 3. Concept and requirements definition readiness decision 4. Investment analysis readiness decision 5. Solution implementation 6. In-service management Once a need is determined and research is conducted to identify solutions, the Service Analysis and Strategic Planning phase determines the required capabilities that align with the agency’s mission and meet customers’ needs. The Concept and Requirements Definition phase occurs when an FAA enterprise architecture roadmap indicates that there are actions that should be taken to address a critical service shortfall or opportunity. Next, the Investment Analysis phase evaluates the proposed solution’s affordability and key outputs. Once a final analysis is complete and a solution is chosen, the process reaches the Solution Implementation phase and is main- tained through In-Service Management. The FAA’s preferred contracting vehicle for small business contracts is Electronic FAA Accelerated and Simplified Tasks (eFAST). This system streamlines the procurement process Source: Clearview Business Service. Figure 5-1. A procurement organization’s contributions to growth in business value (Source: Fortin et al. 2017).

Innovative Practices 23 by using a web-based acquisition and automated workflow process. It supports firm-fixed price, cost reimbursable, time and materials, labor hours, and other contract types (FAA 2020a). Asset Management Under a Total Cost of Ownership Asset management under a Total Cost of Ownership (TCO) model is intended to span and fully integrate all aspects of identifying and procuring technology solutions. This is a dynamic approach that continuously evolves and advances to ensure that funds to procure and deploy assets across business units are used wisely. Under this model, technology is labeled as an asset or as enabler to achieve operational objectives. An overarching TCO strategy includes a plan developed with input from all stakeholders. The plan incorporates methods that focus on defining what needs to be improved and how to make the change stick during its execution (Fortin et al. 2017). By lead- ing with a line of questioning, this approach naturally incorporates a communication plan. When empowered by a governance structure demonstrating full accountability for the success and failure of the organization, the communications plan allows for transparency in resource requests, com- position of messages with a level of specificity required for action, and integration of teamwork. Teamwork Utility companies and universities use a procurement model centered on teamwork. Policies guide and authorize the team’s actions, which include representation from cross-departmental steering committees and are led by an overall project manager or superintendent (Fortin et al. 2017). Figure 5-3 illustrates a team-based organizational structure. By aligning business units and functional strategies specific to each operation set, the organization is able to enter into a deeper analysis of market dynamics. The identified solutions have enterprise-level impacts rather than small-scope impacts. For example, a technology solution could be included in Build- ing Information Modeling software for construction projects. The business case is better com- municated and costs are saved by progressively building on acquired information from various disciplines. Figure 5-2. The FAA technology procurement process.

24 Airport Software Solutions and Services Sourcing Narita International Airport in Japan includes its IT development and planning department within its corporate planning division, alongside its planning department and corporate affili- ates administration department. Having the IT department play an integral role in planning and considering external technical requirements allows the airport to forecast technology opportu- nities and impacts holistically (Narita International Airport Corporation 2022). Outreach The sustainability of existing infrastructure is an issue that has led airports to increase their outreach activities in order to gather efficient and forward-thinking initiatives to address it. The Paris Air Show attracts a range of broad and specialty services relevant to airports, includ- ing consulting, financing, engineering, construction, operations, and maintenance. Consulting firms that create total solution packages for airports are often also available such events. Partici- pants who attend value the exchange of ideas, exploration of technology, and opportunities for networking (SPECTRA 2019). The city of Houston hosts an annual Meet the Buyer Procurement Forum. The Houston Airport System’s Runway to Business Opportunities is also a networking event that includes information from key decision-makers as well as a “Taste of the Airport” lunch at which concessionaires show- case their offerings (City of Houston, n.d.). Emerging Trends E-Procurement The internet increases efficiency in the supplier–purchaser relationship, allowing procure- ment officers to find new sources, services, and technology available to meet identified needs. The open nature and accessibility of the internet offer an essential advantage over other sourcing networks since it requires very low setup and operational costs and can be inexpensively adapted to changing situations. E-procurement technology allows for automatic and continuous pro- curement processing. It strengthens and leverages an organization’s purchasing resources and enables it to identify new sources and opportunities as they arise. Governance Planning Administration Operations Figure 5-3. Example of a team-based organizational structure.

Innovative Practices 25 Crowdsourcing A prevalent and promising approach to using the internet as an accessible source of infor- mation is crowdsourcing. Crowdsourcing is the process of obtaining needed services, ideas, or content using the support of large groups of people, primarily an online community. Although a variety of crowdsourcing platforms supported the safe return of air travel during the pandemic, specific examples of crowdsourcing platforms for airport technology procurement were not identified. A close replica to a crowdsourcing platform is the Airport Innovation Lab at the San Diego County Regional Airport Authority. The lab offers airport stakeholders the opportunity to test a solution in a live airport environment, granting them the opportunity to evaluate needed ser- vices, ideas, or content (San Diego County Regional Airport Authority 2020). Blockchain Although dating back to 2008, blockchain is an emerging trend in airports, given the grow- ing demand for touchless airports and streamlined passenger experiences. The report from ACRP 01-41, “Airport Blockchain Implementation Guidebook” (https://apps.trb.org/cmsfeed/ TRBNetProjectDisplay.asp?ProjectID=4619) will provide detailed guidance for implementing blockchain and associated technologies for airport decision-makers and stakeholders. Included in the research and exploration of blockchain is the concept of smart contracts. Smart contracts are self-executing, with the terms of agreement written in lines of code. The resulting agreement is distributed and decentralized on a blockchain network. Outcomes include procurement pro- cess efficiencies, traceability, and increased security (Frankenfield 2019). Software Software that allows for digital workflow integration automates business processes and increases transparency. The lifecycle of technology—hardware, software, and services—is captured in the workflow. For example, a computer has a lifespan of approximately four years (Eduardo Valencia, personal communication, December 11, 2020). When a new computer is issued to an existing employee or purchased when a new employee starts work, it is entered into the work- flow and is tracked for replacement by the software. Airports can forecast bulk purchases of new equipment and position purchasing negotiations for a time near the end of a supplier’s fiscal year in order to obtain the best value. ACRP has explored software that is customized for airport functions. Tools such as the evalu- ation tool for defining a computer maintenance management system (CMMS) are available and offered as a result of this research (Bell et al. 2015). Education Pathways Procurement is both a profession and a mechanism for supply chain management. Individuals interested in the field can pursue certification or a degree in a related area such as business, economics, supply chain management, or purchasing. Advanced education is aimed at teaching students how to manage and control procurement frameworks, contract lifecycles, and supplier– purchaser relationships (Reece and Robinson 2020). Information technology is often seen as synonymous with technology generally, despite the range of embedded specialties in the latter. Like procurement, certifications are not required to work in information technology.

26 Airport Software Solutions and Services Sourcing Supplier and vendor educational pathways are available and encouraged. Various entities, including airports, offer webinars, workshops, and keynote presentations geared toward suppliers and vendors interested in doing business with an airport. Awareness of these opportunities can be embedded in an airport’s procurement strategy or outsourced to entities that are focused on vendor management relationships. Opportunities, Challenges, and Unresolved Issues The need for advance health screening of staff members and passengers has increasingly focused on technology. This need provides airports with an open door to make holistic changes in their procurement processes. Realignment to include IT departments in planning, budgetary considerations for technology, and identification of innovative procurement vehicles are things that airports should consider in order to help meet their sustainability goals. The leadership and participation of governance structures in discussions to develop technology implementation strategies, address barriers, and empower a culture for sophisticated protection have a direct impact on airport procurement processes. The increased use of technology will continue to significantly affect workflow and produc- tion processes in airports. Business units, core functions, time allotted for task completion, and staff or department responsibility are all areas that should include automation for improved efficiency. Consequences of the transition to new technology were summarized in four high- level themes and 13 sub-topics in ACRP Web-Only Document 49: Research Roadmap on Airport Administration & Human Resources Issues (Solook et al. 2020). Technology procurement processes include multiple stakeholders in municipalities, and coop- eration and communication between the stakeholders must be effective. In general, municipali- ties and service providers do not collect and analyze information on the services or systems they are using. Stakeholders do not gather and use enough cost- and decision-support information. For example, engineers’ involvement is comparable to that of the procurement officers, since the engineers deal with the assessment of equipment, supplies, and suppliers and must ensure that these meet the airport’s needs satisfactorily. Best practices for gathering stakeholders and using synthesized information can establish a consistent and effective technology procurement process. In public procurement, contracts are awarded on the basis of predetermined criteria and either (a) the most economically advantageous tender, or (b) the lowest price. Emphasis has con- ventionally been placed on the acquisition price. Another important element of public procure- ment is the high level of rules and regulations involved. Public procurement depends heavily on the regulatory environment and considers broader objectives than monetary cost alone (Nevo and Kotlarsky 2020). A consistent procurement process across airports could establish a mechanism for sharing lessons learned. Effective Strategies for Overcoming Challenges Supplier Diversity Supplier diversity has different purposes, definitions, and applications. These generally break into three categories as outlined in Table 5-1: humanitarian, inclusivity, and operationalization. The purpose and desired outcomes of a supplier diversity effort determine which category it falls under. Innovation tends to be a shared outcome of supplier diversity, and it requires a workforce and work environment that reflects that diversity. When diversity is present, a rich

Innovative Practices 27 view of distinct markets and stakeholders can be identified. The insights of a diverse workforce can change or inform procurement bases and specifications. Education encourages diversity of thought. Diversity education usually covers preconcep- tions, cultural and other biases and their confirmation, herding, myopia, inertia, and the basics of neuroscience. An organization focused on diversity works to ensure that its training in these areas is complete, consistent, and measurable, both internally and externally. In procurement, measures adopted for diversity help to identify suppliers’ capacities and experiences and their relevance to the areas of procurement and the items to be procured, as well as to the suppliers’ robustness in delivering. Diversity in procurement is less about the specific diversity metrics and more about how diversity measures align with an organization’s industry and a project’s requirements. The education component extends to the vendor community as well. Recognized vendors and suppliers currently immersed in airport communities are knowledgeable about an air- port’s procurement processes monetary thresholds. Supplier diversity strategies that are attractive to new audiences create competitive pricing while introducing new providers in the airport vertical. Other areas that have fallen under the diversity umbrella are geography and climate. These deal with an organization’s understanding of the hazards and risks inherent in its supply chain and whether it can rebound from them, particularly those caused by climate change. At some levels, inclusion has also been added to this discussion. To what extent does an organization include and measure—and even sometimes mentor—its suppliers? This applies to hiring goals and poli- cies, commitments to reduce greenhouse gases, and efforts to reform their business models to provide for social equity. Airports working with their suppliers may include them in sessions focused on long-term planning and innovation related to climate change impact. The purpose of including suppliers in these conversations is to dovetail projects in order to reduce the cost, speed, and life of both parties’ infrastructure changes in order to better serve their mutual customers and stakeholders. Including and encouraging diverse ideas, issues, and goals in this way (termed co-creation) can strengthen each entity’s purposes and desired outcomes. IBM is one example of a company that deliberately seeks supplier diversity. In a 2015 report, IBM noted that “Building and maintaining a community of diverse suppliers increases IBM’s opportunity to hear new ideas, apply different approaches, and gain access to additional solu- tions that respond to customer needs. Such collaboration helps IBM deliver innovation, quality products, and world-class service to a growing global marketplace” (IBM 2015). Educating Small Suppliers Working with the local business community, including city, county, or sponsor entities, gen- erates awareness of connecting and doing business with airports (Germolus 2020). Leaders of local businesses will frequent the airport as customers, but they may not be aware of opportuni- ties to work with the airport or its stakeholders. An airport can integrate with its community Humanitarian Achieve an environment where all differences are valued and equally represented Inclusivity Differences enrich the organization and counter groupthink and business-as-usual behaviors. Operationalization Maximize benefits and outcomes internally to decisions and every aspect of the job externally Table 5-1. Categories of supplier diversity.

28 Airport Software Solutions and Services Sourcing by working to generate awareness through traditional media resources, scheduled events, and initiatives such as webinars. There are very few technologies made strictly for airports. However, researching a capability can often lead to the identification of a new solution. Further communication with potential providers—both internally and externally—increases airports’ understanding of a technology’s target audience, purpose, and customization opportunities that would allow it to meet the air- port’s needs. For example, radio traffic monitoring and recording devices can provide unbiased data to streamline reporting directly to funding streams. Technology leaders offer hardware, software, and services to universities in a discounted or free capacity. By embedding tools into existing pipelines, new opportunities develop across the value chain. One example is the inclusion of airport software in design and engineering cur- riculums offered at national universities. A second example is technology leaders’ participation in supply chain bootcamps, which are offered at a variety of institutions. Shark Tanks A business strategy popularized by ABC’s reality TV show Shark Tank incorporates a process for gathering out-of-the-box ideas through friendly competition. Every quarter, SEA works with employees to develop an idea into a business model that can be pitched in a 10-minute presenta- tion to the airport’s directors. Research, rehearsals, business case analysis, and prototyping are all embedded in the process in order to vet ideas. Airport directors select which idea is to be included in the innovation hub. To date, there have been 59 presentations and several have been implemented. The SEA Visitor Pass Program was a shark tank idea that now allows individuals to enter the airport’s post-security side even if they are not traveling that day (Port of Seattle, n.d.). The shark tank strategy encourages innovation at all levels. Employees are provided with an opportunity to improve daily functions, and directors have a platform to socialize solutions to problems that require them. Air travel benefits from both of these internal successes. Consortia Though relatively new in aviation as compared with other industries, airline–airport con- sortia bring together key stakeholders (airlines, facilities, and passengers) to provide cost- effective and innovative solutions to air travel operations, management, and services. Unlike strategic alliances and joint ventures, in which there can be an imbalance in risk consider- ations and overarching goals, the consortium model allows members to pool resources via membership to achieve technological and developmental activities together. “In this form, airline and airline–airport consortia cooperate on the ‘invisible’ logistics side of the opera- tion while still competing in the ‘visible’ marketing and revenue-gaining arenas” (Tinoco and Sherman 2014). At present, there are 75 consortia in the United States and Canada at 63 airport locations. Consortia are flexible solutions to various airport challenges, ranging from supply chain effi- ciencies to improved technological equipment and facilities management. Combining resources helps provide better designation between cooperative entities, freeing up time for more spe- cific objectives within the respective organizations. More efficient operations correlate with increased capital as well as scalability in an often-volatile industry. Current consortia see direct benefits of their membership, and many are ongoing instead of a one-time endeavor. “As ACRP Synthesis 31 displayed, most of the contracts between airline consortiums and their respective airports are made in perpetuity and other locales have opted to renew their contracts” (Tinoco and Sherman 2014).

Innovative Practices 29 Subscriptions Subscriptions can offer benefits to the airport when they bundle technology solutions and services. Traditional levers are balanced with how new technology fits holistically within an organization’s strategic blueprint (International Airport Review 2019). Some subscription ser- vices and platforms are curated with vetted suppliers to include a myriad of technology solutions and services. These services are designed to assist airports through the transition from capital expenditure to operational expenditure for technology procurement. Cross-Training The demand for highly skilled operators for new technology (such as fluency in specific cod- ing languages, high technical ability, or data analysis) outpaces the available talent pool, leading to an extreme shortage in technological competency. Organizations often choose to hire exter- nally to fill positions rather than cross-train and upskill employees from within. This is described as the build versus buy model (Koh 2017). In a competitive economic climate, this practice risks trading away the value of an organization’s human capital and could potentially decrease it by devaluing employees while also reducing experience and versatility. Turnover can become quite costly as new employees are onboarded and former employees are replaced. Organizations that invest in current talent can leverage their internal capital and increase employee competency. They may conduct a skills gap analysis to identify areas in which tech- nological skills are deficient and would benefit from improvement and cross-training. A work- force forecast can be used to estimate future labor requirements and help leaders to evaluate the available workforce compared to predicted demand for specific skills. This would allow them to put training into place ahead of emerging needs and anticipated deficits in workforce capabili- ties. When on-the-job training is perceived as valuable and encouraged, it can have a significant impact on employee retention and job satisfaction—an imperative for an organization seeking to expand its capabilities in the age of digital transformation (Lovett 2020). Governance Audits A governance audit is one that analyzes an existing organizational culture for its ability to change, thereby opening the door to policy and procedural adjustments. Such adjustments typically include a combination of processes and structures to inform, manage, and examine the organization’s activities. Governance audits involve an organization’s management, board, shareholders, and stakeholders and occur through coordinated communication. A critical ele- ment of a governance audit is its determination of whether an organization’s information tech- nology supports its objectives and strategy. Effective audits are built with sustainability and scaling in mind and with clearly defined objectives. Some considerations in the scope of a gov- ernance audit include the following: • Leadership and culture • Industry best practices • Risk strategy and appetite • Key performance indicators • Organizational structure • Data integrity Governance audits provide a comprehensive picture of the organization and offer a structure that can support an enterprise-wide implementation of new and updated policies and proce- dures (Deloitte, n.d.).