Trends in government procurement – fostering innovation

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Government procurement processes will always need to be navigated – but how can those same processes accommodate and even encourage innovative tendering?

I’m always keeping an eye on trends in government procurement, and often write blogs on the government procurement environment – particularly on the need for industry to really understand government procurement processes and for government to get better at it! More recently I’ve been looking at how to achieve innovation in procurement balanced by probity demands.

In January I was invited to attend an ICT Procurement Taskforce hosted by the Department of Prime Minister and Cabinet. Gathered around the table was a diverse industry group experienced in selling to government and government procurement.

After discussing the usual issues and trends in government procurement – such as tendering thresholds, output-focused tenders and skills development — we began looking into the impact of risk and compliance into achieving innovative outcomes.

trends in government procurement - innovation

It was unanimously agreed that government procurement must better focus on achieving desired outcomes, rather than getting the inputs right, simply for process’s sake. Even the Secretary of Victoria’s Department of Premier and Cabinet said something similar, when discussing the moral purpose sector in the context of delivering purpose-driven outcomes rather than inputs.

Output-focused procurements lead to innovation

When a procurement starts focusing on outputs, it can begin to accept ‘non-compliant’ bids, and this is what drives real innovation and value for money.

Note this doesn’t mean the procurement wouldn’t need to comply with procurement policies. Whatever new trends in government procurement, government must still follow processes that ensure that the right level and type of competition exist to match the complexity and risk profile of the procurement.

A non-compliant bid, rather, refers to a solution that is delivered in a way that’s inconsistent with the tender specifications but still delivers the outcomes. In other words, the mandatory items should be restricted to outcomes and strategy, rather than the ability to deliver a specified solution.

A very simple example can be used to illustrate this. Government may tender for a meeting table. The specification of a ‘table’ is clear: a solid platform supported by four legs. But what is the desired outcome of this procurement? To facilitate discussions? To foster team meetings? To create a formal meeting environment? The outcome could be achieved by a collection of armchairs, stools or fitballs! Based purely on the specification of ‘table’, any of these tendered solutions would be non-compliant – yet they would all be innovative.

During the taskforce roundtable, we also talked a lot about the ability of a procurement vehicle to deliver efficient outcomes for government as well as industry development opportunities – both desired trends in government procurement. My view is that a single procurement vehicle cannot deliver both simultaneously, unless the market it is seeking to develop is very small.

Take, for example, the e-services register. This pre-qualification procurement vehicle was conceptualised to streamline government procurement of ICT services and solutions – in other words, to increase efficiency. But its transactional nature directly counteracts any prospect of industry development. (To be contrary, is a register of more than 2000 businesses truly going to be efficient?)

To drive industry development, on the other hand, procurement platforms need to be more open to innovative tendering and variant bids – such as we often see with major programs of work that include effective levers to tie in local industry development and social procurement. Such procurements are markedly different from the more transactional procurements designed to drive efficiencies.

Procurement success shouldn’t depend on ticking process boxes

Finally we agreed that to support new trends in government procurement, the government must change the measure and definition of ‘procurement success’. Too often government is buying things that shouldn’t be bought, but because all the inputs have been achieved it’s been highlighted as a success! Meanwhile, the wise procurement official that determines a procurement should be cancelled when it becomes clear that desired benefits won’t be achieved, has their procurement labeled as a failure.

I would judge the opposite to be true. Every single procurement should have benefits and outcomes identified, with  every procurement decision made on achieving those – not on achieving process milestones. However, the very people we hire to run procurement groups are selected based on strong risk management practices, adherence to process and meticulous attention to detail.

I think all taskforce participants agreed that government procurement must be overhauled, or we won’t achieve the service outcomes government seeks. Only last week, a government person said to me that they need to buy a case management system but the procurement process will take 12 months so they are looking to procure a subset of that capability.

We are now in the situation where poor procurement capabilities are dictating the level of government service delivery and response, and this is very bad.

I congratulate DPM&C on running the taskforce to examine initiatives and trends in government procurement, but I do wholeheartedly hope we see real change relating to procurement risk, outputs, benefits, definitions of success and capability uplift across the range of personnel engaged in procurement activities.

2 comments in this article

  1. Tracey Gosling

    Great balanced article Deirdre and gets to the heart of why change is needed.

    1. Deirdre Diamante

      Thank you Tracey.

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