Note to readers: This blog is focused on government procurement. It is relevant to entities at all levels of government, including local, state, and federal. Most of the examples used in this blog will be drawn from the Commonwealth of Australia. However, the principles discussed are relevant to all government entities.
For government entities, procurement is a core function and accounts for a significant percentage of the budget. For example, in the Commonwealth of Australia, procurement by Commonwealth entities in the 2021-22 financial year accounted for more than $80 billion of committed budget. Delivering efficient, effective, economical and ethical procurement outcomes is an important element of the operation of any government entity.
Like many corporate functions, procurement only tends to end up in the spotlight when things go horribly wrong. One only needs to look at performance audits focused on procurement to find a slew of examples of poor procurement practice. The most horrific of these make the news and cause significant damage to the reputation of the organisations involved and public trust in government more broadly.
So, what makes procurement work well in a government entity? Here are three key elements.
1) Keep your eye on the goal: value for money. While policy and process are important in procurement, they are not the “be all and end all”. They are only one element of achieving good outcomes in procurement – and are certainly not the starting point! So, where do we start? It is important to take a step back and think about the end-game? What is our overarching objective in conducting a procurement? In the introduction to the Commonwealth Procurement Rules, the Commonwealth Finance Minister identifies value for money as the core principle of Commonwealth procurement. I would suggest that this is true for procurement at all levels of government (and most private sector organisations). Understanding value for money is fundamental. Value for money is a wholistic concept and includes consideration of:
a. Adequately fulfilling the business requirement in a reasonable timeframe
b. The proper use of public resources – using public resources in an efficient, effective, economical and ethical manner
c. Fostering genuine competition
d. Transparency and accountability in procurement decisions
e. Ensuring the process is compliant with relevant rules and policies and is commensurate with the size, complexity and risk
f. Whole of life costs of the procurement
If we don’t achieve value for money, we have not been successful. At every stage of the procurement process we must keep value for money front and centre. Don’t get lost in the process – the objective is value for money!
2) Keep focused on your users: you are there to support them. Your procurement users are your customers. You are there to support them in achieving their procurement outcomes. This means you must have a clear understanding of their needs in order to be able to support them appropriately. This also means that it is important that the user side of your procurement processes, tools and other resources are as simple and intuitive as possible. Complexity is the enemy. Make it simple and they will stay engaged. Make it too hard or too complex, and they will look for workarounds. Having a customer focus also means that you need to think about how you engage with your users – including how and when you communicate with them and provide them the information and support they need to be successful in their procurement. Proactivity is important. They shouldn’t have to come looking for help. Support mechanisms should be right there when they need them. When the procurement function has a customer focus it is better for the organisation. Ensuring that internal customers’ procurement needs and expectations are met in an efficient and timely manner optimises overall operational efficiency. When procurement aligns its strategies with the requirements of internal customers, it streamlines the procurement process, reduces lead times, and minimises disruptions. This, in turn, enhances collaboration across the organisation and fosters a culture of teamwork and productivity. Effective internal customer-focused procurement promotes cost-effectiveness, resource allocation, and the timely provision of goods and services – all of which contribute to the organisation’s overall effectiveness and success.
3) Technology can be your friend – or your enemy. It is very easy to develop a complicated and lengthy procurement process. Embed that process in technology and you have a potential nightmare for users. It is a lot harder to design and develop a simple and intuitive process – but that is where procurement success lies. Using technology to deliver your procurement processes to users is essential to achieve optimal outcomes. Streamlined and efficient procurement processes delivered with user-friendly technology are essential for engaging users, reducing costs, minimising errors, achieving compliance, and ensuring timely delivery of goods or services. The successful use of technology in procurement is dependent on a good foundation of procurement policies and business processes. Good policies will identify core requirements and compliant processes. Policy should be simple and easy to understand. Processes will be standardised where possible and no more onerous that absolutely necessary. The technology will amplify the benefits of “good” policy and process by automating a range of tasks, enhancing efficiency and accuracy, and providing visibility and real time information for stakeholders across the entire procurement lifecycle. The user will engage with the technology at the point that a business requirement that necessitates a procurement is identified. They will be guided through each step in the process. Relevant rules and policy will be embedded in the system to ensure compliance is achieved organically (compliance by design). The process should be dynamic and change in response to different types and values of procurement. Finally, it is important that the technology you use should not force your organisation to adopt its way of working. Good technology will be able to embed and deliver your policy and processes.
In conclusion, successful procurement for a government organisation hinges on getting the fundamentals right. First and foremost, it revolves around the pursuit of value for money, where every dollar committed translates into tangible benefits for the entity. Second, procurement success necessitates a profound understanding of internal customer needs, making internal customer focus a critical component. The alignment of your procurement strategies with the requirements of your internal customers is not just good practice; it’s essential for operational efficiency. Finally, in our digital age, the role of technology cannot be overstated. Leveraging technology enables organisations to streamline processes, enhance transparency, ensure compliance, and ultimately deliver optimal procurement outcomes. Embracing these three key elements for procurement success positions government entities to not only procure efficiently, but also to thrive, grow, and adapt in an ever-changing procurement environment.
This article was written by Zane Edwards, Global Director of GRC at LighthouseGRC. Zane is a chartered accountant and has 20 years experience in Government and Private sector GRC management. Not only is he passionate about the digital transformation of governance, but he is also a skilled and influential communicator with extensive national and international experience in a variety of channels, including conferences, radio, television, and video.