Harnessing Procurement Transformation
By David P. Gragan
Procurement transformation involves taking a current, cumbersome process and implementing changes to complement a government entity’s vision and sense of public duty. Most public purchasing professionals see their function as a service that supports other agencies within government. However, the process by which governments conduct acquisition functions is sometimes viewed by constituents as a
barrier to success, rather than supporting established goals. As a result, more buying activity may occur outside of the procurement process than within it.
At all levels of government, procurement directors should create an environment whereby user agencies have easy access to the goods and services needed to perform their jobs. More importantly, public entities must control funds entrusted to them by taxpayers. These duties are two distinctly different and often conflicting components of the purchasing process. Purchasing directors in every government enterprise must be willing to engage in continuous reforms to ensure that procurement goals work in unison.
The concept of procurement reform, which includes shifting the emphasis from process to outcome, and from lowest price to best value, is spreading throughout the public sector. Purchasing is a core management function that has an impact on every department and agency within an organization. Public-sector organizations should direct the same level of attention and resources to the procurement function as they do to other critical functions.
The public-sector environment continues to be shaped by the same pressures that influence the nature of procurement reform, particularly the mandate to do more with less money and fewer people, within a shorter timeframe. Transforming the procurement process is a way to address and relieve these pressures.
Evaluate Procurement Processes
Public procurement agencies operate in a particularly rule-bound setting. A purchasing director should routinely monitor the regulatory environment for requirements that may no longer make sense from the perspective of the agency’s overall mission. In turn, changes should be initiated, when and where needed.
Procurement directors should ask themselves the following questions:
• Are current procurement guidelines and statutes structured to allow the use of the latest procurement tools and technologies that are available to procurement professionals?
• Are current regulations aligned with realities of the day-to-day procurement processes that take place within the purchasing organization?
By evaluating answers to these questions on a regular basis, procurement directors can initiate procedures to improve processes within the organization.
Introduce Process Automation
Many routine tasks within the procurement process lend themselves to automation. Robust tools are available to accomplish specific objectives, including eProcurement applications and reverse-auction technologies. Benefits of automation include:
• User communities can search term contracts for the right purchasing vehicle more quickly.
• Agencies can ensure compliance with established business rules, routings, and approvals.
• Purchasers can better facilitate and control the buying of goods and services.
• Public entities can improve the speed with which payment is made to vendors, assisting the public in meeting prompt-pay responsibilities and possibly allowing the benefit of prompt-pay discounts.
Requisitioners, the principal users of the procurement function, often complain that public purchasers have failed to explain their value in the overall process of government.
Procurement personnel in the trenches are frequently overworked, misunderstood, and underappreciated by the very people they are trying to help. To open lines of communication, procurement leaders should establish direct contact with their user base, explaining the value of optimum purchasing procedures. These leaders should also depict the procurement office as a repository of assistance to support the mission needs of departments and agencies.
The need for outreach and communications extends to the vendor community, as well. For example, quasi-governmental organizations, such as small and minority business-development centers, chambers of commerce, and procurement technical assistance centers, frequently seek ways to encourage business participation in the public procurement process.
By establishing a user advisory council, and perhaps a vendor advisory council, procurement officials can stay abreast of vendor and citizen concerns, as well as ensure that constituents are aware of issues faced by public purchasers.
A primary requirement of the procurement leader is the ability to see what is being purchased across the organization. Procurement directors must receive all pertinent data in usable form. As more automated procurement tools are introduced into public purchasing environments, procurement data becomes easier to access, organize, and use. Analysis and reporting with this data will form a linchpin for continuous procurement reform and savings.
An ideal procurement system should enforce specific sourcing protocols. Automated procurement systems can embed business rules into the procurement process, enhancing the ability to gain compliance with sourcing routines.
Beyond enforcement of the sourcing protocol, increased knowledge of the seller environment is a very effective way to ensure best available pricing. Typically, procurement officials face challenges in maintaining industry expertise, primarily because a single buyer can purchase from multiple industries.
However, knowledge of build-out dates, market cycles, quarterly or year-end sales incentives, and regulatory pressure can all affect prices. The more that is known about these complex industry dynamics, the more likely purchasers will find the best buys for products or services.
By implementing automated procedures, procurement staffs will gain increased time to study and better understand selling dynamics in specific areas served.
Recent trends show that state governments and some higher-education institutions are jumpstarting procurement reforms. A prime way is by spearheading a spending analy-
sis or strategic sourcing initiative, with a limit of 18 to 24 months on the engagement and a stipulation that knowledge transfer will occur.
Launch Training Programs
The development and management of a good training program can support the needs of the procurement staff, users, and vendors. Training should be mandatory for anyone charged with spending public funds, whether agencies use procurement cards, delegated buying, or direct procurement authority.
For training assistance, agencies can rely on existing, nationally recognized curriculums, such as those offered by the National Institute of Governmental Purchasing or the National Contract Management Association, coupled with local capstone instruction on specific regulatory environments affecting buyers.
Manage Vendor Relationships
Fostering sound relationships with vendors ensures the creation of a healthy and competitive procurement environment. Because government agencies tend to be valuable clients, these agencies have a right to demand quality service, products, and pricing from vendors.
When appropriate, public purchasers should solicit vendor input to gain an understanding about the state of the industry prior to issuing a bid, especially in industries where change is frequent, such as the technology and automotive industries.
Additional tips for public procurement entities include:
• When a contract is awarded, administer it conscientiously. If the public agency expects vendors to perform, they will do so.
• Counsel and train your vendors, but be prepared to deny government business to any vendor that fails to meet expectations of the public.
Public procurement professionals face a complex, difficult, and often misunderstood task: to help user agencies obtain the goods and services needed to do their jobs, while controlling the process that spends large amounts of public funds.
To bring these two disparate duties closer together, continuous improvements and procurement transformation efforts are needed. Goals are to promote an understanding
of procurement duties among user agencies. Enacted reforms will also allow purchasers to better serve constituents, while assuring appropriate oversight and control of the mission-critical procurement process.
Editors Note: David P. Gragan is Managing Director of Government Procurement for Silver Oak Solutions. Har-nessing Procurement Transformation in the Public Sector was reprinted with permission from Silver Oak Solutions. For additional information, visit http://www.govinfo.bz/4589-102.