If there were ever a time for procurement to be more strategic, it’s now
The public sector is no stranger to frugality. It’s hard to remember a time in the last couple of decades in which “better spend management” wasn’t a top fiscal priority. State and local entities, in particular, have been battling to increase the balance of their rainy-day funds for as long as I can remember. Even when the economy is strong, there still seems to be budget deficits in several categories. As such, public procurement professionals have spent their entire careers trying to extract as much value as possible from each dollar spent.
So, when COVID-19 came in with a one-two punch – first hurling emergency spending to historic highs and then slashing budgets to what some say will be historic lows – procurement teams were ready.
Though rattled at first by the simultaneous onslaught of unplanned purchase requests, market constraints and the shift to remote work, government buyers quickly found their footing and proved how incredibly adept they are at handling adverse situations. And there has been a lot of adversity these past several months.
When the COVID-19 crisis began, many state and local agencies didn’t have the ability to post bids electronically, much less manage the procure-to-pay process in a single e-procurement system. With buyers working safely from home, access to secure (and often disparate) procurement and finance systems was tough to come by. Paper-based contract documents and catalogs were completely inaccessible. And the collaborative processes typically used to conduct market research, secure new vendors, negotiate pricing, troubleshoot contract issues and secure approvals became more difficult to sustain. Not necessarily because of the physical separation, though.
Strategic sourcing efforts often proved impossible because buyers and their agency partners (i.e. customers, legal and finance, etc.) lacked a single, shared view of everything happening within the procurement function.
It didn’t help that workloads nearly doubled at a time when workforces were sometimes being cut in half. Most procurement professionals tasked with emergency buys were still having to manage existing contracts, which became more burdensome than usual. With many projects, services and even routine product buys suddenly halted, contract amendments had to be made, notifications issued, funds re-allocated and new reports generated. Vendor management actually became more complicated during the COVID-19 crisis because contracts that may have been previously managed on autopilot suddenly required a lot of manual intervention.
But the impact of the pandemic’s sudden blow could have been softened for many if the right e-procurement solutions would have been in place from the beginning. Procurement officials would have had the operational visibility and the resource capacity needed to be more strategic in their decisions and more deliberate in their actions.
No change can occur in government operations without procurement’s involvement. If a project needs to be started, paused or canceled, it’s up to procurement to make it happen. If 1,000 workers or 10,000 teachers need certain computers or software next week to work from home, procurement has to deliver. If a field hospital is needed, a public building needs to be cleaned STAT or first responders need PPE, procurement’s phone is among the first to ring. Oftentimes, we feel like we’re being asked to work a miracle. But that’s precisely why procurement needs to become more strategic – as does our utilization of people, processes and technology.
Just ask procurement leaders from Massachusetts, Nevada, Oregon or Arkansas.
When the COVID-19 outbreak started to shift governments’ priorities and weaken supply chain, these states found themselves facing the same sourcing challenges as surrounding jurisdictions. It became difficult to “buy by the book.” Procurement teams had to get creative in order to secure in-demand items with very limited budgets and within short fulfillment windows.
Yet, these states had an operational advantage: they had spent most of 2019 and early 2020 thoughtfully re-engineering their procurement processes. They had also implemented a set of highly-integrated, cloud-based procure-to-pay technology solutions that not only automated the procure-to-pay process but introduced significant flexibility in the sourcing process while maintaining the necessary rigidity in the financial and contract/vendor management components. When stay-at-home orders were enacted and teleworking became the norm, procurement teams were able to quickly and strategically.
In other words, their strategic technology implementation enabled them to see exactly how to improve the strategic utilization of people and processes in time-sensitive and financially-strapped situations and then act on those opportunities. As such, procurement officials were able to become more strategic influencers and leaders within their agencies, achieving a long-term goal of public procurement. The operational visibility provided by the statewide e-procurement platform empowered geographically-dispersed stakeholders to collaboratively overcome sourcing obstacles, mitigate the risk of fraud, reduce wasteful spending and ensure compliance with government policies and regulations.
Likewise, group purchasing organization (GPO) MMCAP has been able to successfully fulfill government agencies’ requests for medical supplies and pharmaceuticals despite months of sustained surge demand because it has been able to organize, see and manage its many different vendors in one e-procurement system. More so, it has been able to automate many of its procure-to-pay processes on both the buyer and supplier sides, which relieved the burden of end-to-end manual management of vendors, solicitations, contracts and reporting.
The mounting demands faced by procurement teams right now aren’t going to subside any time soon, and workforces aren’t suddenly going to multiply to sustain the growing workload. It’s also going to take a long time for supply chains and budgets to recover. But governments can’t afford to shut down, so we must do what we can to maximize spend, minimize waste, boost productivity and sustain the elevated operational tempo of 2020 (and possibly beyond) without burning out.
I realize that it might not seem like the right time to transform your procurement function given how burdened your team and budgets are already. However, it is because of those burdens that you need to make changes right now. Seize the opportunity to make procurement more strategic, more agile and more cost-efficient as a function! All the states I mentioned earlier are actually generating revenue from their new procurement systems. (Yes, you read that right.) Even more, they have significantly reduced the time that each buyer spends on market research, solicitations, reporting and more. They have prospered as others have struggled.
Of course, you don’t have to overhaul everything at once. You could start by adopting the NIGP Code to help organize your vendors and catalogs or get a better categorical view of spend. Or you could simply focus on updating your e-procurement system, which believe it or not could be live in less than 60 days from project start.
I recommend enlisting the help of an NIGP Consultant if you aren’t sure where to start. This team of public procurement experts can review your current processes, people and systems and recommend strategic changes that would deliver instant benefits. They will even work with you to implement the changes, if desired, to help your procurement team quickly become the strategic influencers and leaders they were meant to be.
Jean Clark, FNIGP, CPPO, C.P.M, CPM is President of NIGP Code and Consulting Services at Periscope Holdings. She is an NIGP Past President and former State of Arizona Procurement Administrator.