Innovative public procurement: is it just a dream?

Public policymakers muddle through setting policy by making successive limited comparisons with imperfect information and complex and competing values.

It is everyone’s desire to drive public procurement towards achieving clearly defined objectives, measurable indicators of performance and a well-articulated system of accountability. The concern is not with the new systems of measurement, but wider issues of what public procurement systems are tasked with achieving.

The trend towards strategic procurement and professional development in the public procurement include the ability to innovate. We shall examine innovation in public procurement approaches towards market competitiveness.

One of the barriers to competitive public markets is lack of accurate and timely data. Most government spent on the public sector is not properly reflected in the country’s national accounts. Public sector spending is often wrongly classified in the presentations.

Significant markets are well-defined in government departments such as energy, health and defence, but common markets cut across the public sector in the area of information technology, construction, consultancy, transport, etc. The lack of common information systems hampers the ability of the public sector to share useful information in areas of common interests. A research on the impact of procurement strategy on corporate performance in Europe identified lack of cross-departmental dialogue on strategic procurement issues. In promoting such dialogue, one critical challenge was the blending of various cultures, stakeholder requirements of internal customer buy groups.
The ability to share information constructively also affects performance measures of suppliers.
Contractors’ performance would need to have one common measure among all sectors. Such performance would be measured and results communicated to all stakeholders.

One area where procurement practice can be innovative is in using co-ordinated purchasing or consortia and framework agreements. Framework agreements allow for central negotiation of a contract while permitting devolved users to manage their spending. The only problem that arises is that the laws are generally weak on punishing local users who do not abide by the framework agreement internationally. This results in the government paying the same cost of the same goods or service across all sectors, putting a relief of the national budget if implemented. Framework agreements can be utilised to revive and stimulate our manufacturing sector if properly structured.

In the public sector, co-ordinated purchasing raises the need for communication and feedback mechanisms in promoting competing markets.
There appears real concern of concentrating consortia demands with few suppliers, with little attention being paid to possible exclusion effects. Consortia have the danger to encourage elitism, oligopoly and the artificial creation of barriers to new entrants. If the system is to be adopted, there is need for ensuring that the competitive supply markets are maintained.

Innovation can also be in the form of new partnerships that share risks between the public and private sector organisations such as private finance initiatives (PFI) another form of PPP. PFI is more in the context of outsourcing and involves a step change in the involvement of the private sector in areas such as healthcare. A PFI contracts runs for 10 – 30 years potentially leading to more established supplier dominance in terms of value for money and risk.

In order to effectively drive innovation in public procurement, it is imperative for the function to attract the best people. In terms of motivating the professional to work effectively, emphasis has been on teamwork and interpersonal skills of late, at the expense of technical skills.

Innovation also focuses on information system and e-procurement. E-procurement is the use of web enabled software systems to enable the purchasing of goods and services on line. It covers sourcing of suppliers, online tendering, e-collaboration, reverse auctions and electronic ordering. E-enabled business will eventually provide across-the-board data on buying organisation’s existing portfolio of bought in goods and services. This will also provide other benefits such as market intelligence on potential new suppliers and sourcing options in the new markets.

As a country, is innovative procurement within our reach?

Nyasha Chizu is a Fellow of CIPS and the branch chairman of CIPS Zimbabwe writing in his personal capacity. Feedback:

Related Posts