How can a Modern Government use procurement to enable its business outcomes without being dragged down by factors such as existing procurement policies, practices and compliances?
Last week I had the honour of presenting my vision for procurement to enable a Modern Government at the annual national Government Procurement and Contract Law summit. Government procurement reform is a subject I’m passionate about, and it was pleasing to speak to a receptive audience of public sector procurement professionals.
I believe procurement is a strategic function for government. It’s an enabler. That is, procurement enables government to achieve many of its business outcomes and policy priorities.
The problem is that procurement is not always viewed as a strategic enabler. Often it’s viewed simply as a mechanism to deliver cost efficiencies or drive compliance. Furthermore, when it comes to driving policy priorities through procurement, it can be at the expense of business outcomes if the balance is not right.
The Modern Government
Achieving outcomes is very important for a Modern Government – which, thanks to modern technology, is more transparent and accountable to the community than ever before. Government is under pressure to deliver outcomes that increasingly include justice, human rights, health, security, education and protecting democracy – or face not being re-elected.
Governments are being judged on their outputs – not their processes or, increasingly, even their policies. They are judged on what they deliver, what they produce.
At the same time, the community expects governments to be responsible, ethical and drive social outcomes. As budgets get smaller and the community’s expectations increase, then government must do more with less.
To achieve all this, a Modern Government must be agile and mobilise quickly. To adopt a phrase recently coined by Ken Sheargold, CEO of PM Partners, a modern government needs to create a mindset of ‘planned adaptability’; that is, focus on ‘being’ agile, not ‘doing’ agile.
Key challenges of the Modern Government
As a modern and responsive government is driving the need for agility and responsiveness, procurement is bucking the trend.
Procurement: then and now
Government procurement has changed over the last couple of decades. Twenty years ago government procurement focused on industry engagement, collaboration, and communication, all within the framework policies of openness, competition and even-handed treatment of all companies. This recognised the importance of partnerships between government buyer and prospective suppliers to deliver both strong procurement outcomes and best value-for-money outcomes for both government and industry.
Things began to change when the procurement industry and government started talking about ‘category management’ to better understand a procurement category, the sector, opportunities and market forces.
Category management is a common sense way of approaching procurement, as it helps governments buy effectively and efficiently, particularly when looking at commodity items where there is a specific market. However, it has had the adverse effect of causing government to move away from industry engagement and knowledge of how these products and services are consumed (by the end user).
I have two concerns with government’s implementation of category management:
- Category managers have become focused on the contract (as a written document) and the product or service that is the subject of the procurement, and completely lost sight of industry relationships and partnering.
- The process does not necessarily fit evolving services, such as in the technology space, where government is buying solutions from an evolving marketplace. It also does not necessarily support evolving practices such as agile procurement, different models of pricing or even alternate contracting models.
Conflicting procurement policy agendas
My other fundamental concern with government procurement is conflicting procurement policy agendas.
Naturally, government has a responsibility, through its procurement spend, to drive social policies, competition, local content and industry development (and more). But how can a procurement team gain procurement efficiency (another key objective), when they must succeed against every other policy objective?
The number of procurement inputs are also growing – the result of new processes, increasing compliance requirements, and the ongoing need to be transparent and fair. Since these inputs and processes are what procurement teams are judged on, that is what they’re focusing on.
As a result we’re seeing government procurement approvals given according to policy adherence and process – and not the ultimate business outcome. In fact, it’s not uncommon to see outcomes that have changed scope, cost more time and money, and sometimes no longer achieve the original brief. But at least the process followed was correct!
So what needs to change? How can procurement enable an agile and responsive, modern government?
Procurement reform: Five things that need to change
In designing a procurement we need to challenge ourselves on what is really important for that particular procurement to achieve its desired outcomes. I call for high-level changes to government procurement in five key areas.
1. Unpick procurement policies, starting with industry development
Given the number of procurement policies, it’s nonsensical to believe that every government procurement can deliver against every policy outcome, particularly when many of them conflict with each other.
Government needs to unpack each procurement policy and understand the best way for each to be delivered, based on the nature and value of the procurement. These policies should then be applied to the procurement type best suited to deliver those outcomes.
For instance, there is often a fundamental conflict between industry development (i.e. the drive to issue multiple quotes and to use new suppliers, including SMEs) and the need for efficiency, value-for-money and low risk.
Is there an issue with using a supplier government has used previously? It’s lower risk and lower cost to do so, and, for many low-complexity and straightforward procurements, provides exceptional value for money to government, and supports greater government responsiveness.
I also think government should be able to release more direct quotations (regardless of value) to a list of contracted or pre-qualified vendors without being criticised for lack of industry development.
Instead, there are various other types of government procurement that can foster the development of industry – from start-ups to national businesses to global businesses – just as there are various methods for engaging with industry, based on the procurement need.
2. Develop industry engagement plans
To ensure value-for-money outcomes, a modern government needs government-industry engagement plans that sit in harmony with the procurement policies and encourage open and constructive industry dialogue within a probity environment against planned programs of government work.
By better understanding market sectors, government can design more relevant and even innovative procurements. And by government sharing its programs and needs with industry, industry can develop solutions that represent a better fit for government.
Industry engagement plans also inspire initiatives such as innovation sand pits and industry innovation funds, because industry and government have a stronger shared understanding of what each party needs within a broader agenda.
3. Use early contractor engagement
It’s good practice for government to engage with industry early in the procurement process. By this I mean being open about the specifications, who the incumbents are, what is being sought in an industry partner, and how requirements could be delivered. This helps manage industry’s costs and expectations and makes government more attractive to the market – ultimately leading to a better solution.
This can take the form of government working closely with vendors during the planning stages of a procurement to develop a shared understanding of business requirements and vendors’ offerings in response to those requirements; or simply be achieved through online feedback on draft specifications.
4. Adopt guardrails to foster agile and innovative procurement practices
I love this idea.
In a business context, guardrails are decision-making guidelines or boundaries put in place to protect businesses from taking unnecessary risks, while empowering employees to make decisions. The guardrails thus keep a project in ‘safe’ territory, while benefiting from the inherent efficiencies of employees working independently.
These so-called guardrails can be used in a government procurement context too. The potential ‘danger spots’ for each procurement, which often relate to probity and competition, can be identified, and measures put in place to guard against them. Overall it paves the way for innovative procurement practices and agile-centred procurement approaches.
So, guardrails protect from risk, while enabling government to achieve faster and often better value outcomes. However, the right culture needs to be in place on both sides. Over time, the more a method like this is used the greater adoption it can have across a business.
5. Change the perception and culture of procurement as a discipline
This is probably my most important point. To get the most out of procurement as a strategic function, we must elevate the perception and culture of procurement in our agencies.
Procurement capability needs to be treated as a profession to ensure currency, appropriate skills and effective engagement. Investment in procurement practitioners builds the respect of the profession. Furthermore, strong training will help weed out the rogue government buyers, or simply those who aren’t sure what they’re doing. This is driving much of the increased levels of scrutiny on process.
Secondly, the culture of procurement teams and how they are perceived by government stakeholders need to change. Procurement officers are not policemen. They should be the people invested in working with stakeholders to design processes that deliver the required outcomes. Government buyers should value their outputs.
And this brings me to my third point on changing the perception of procurement: The culture towards procurement must be addressed by leaders in an organisation. Until government executives and accountable officers treat procurement with respect and as an enabler – and reinforce this culture from the top down – it can be hard to shift the dial on people’s perspectives of procurement. And when I say ‘with respect’, I mean ‘Walk the talk’.
So, yes, I am passionate about procurement. I love that it can enable outcomes, and that, when done well, it can create such value to both the buyer and the supplier. I’m also passionate about the public sector and what it can achieve both internally and for our community.
We are seeing pushes for procurement reform largely driven by the concept of a Modern Government. I hope this piece will give government some strategies on how to start the process of that reform!
This blog is based on my presentation at the annual national Government Procurement and Contract Law summit, held in Canberra 24-25 October, 2019.