Getting the 'Bosses of Procurement' to Understand its Strategic Value
As a rule, focus on government procurement grows particularly acute during crisis situations. There has likely been no more vivid example of this phenomenon than that experienced during the Covid-19 pandemic. With daily headlines blaring words about shortages of medical devices and personal protective equipment, many procurement officials found themselves in a prominent hot seat at the table of government decision-makers.
But now that these shortages have largely dissipated, will the prominence of this vital government function fade away? Rick Grimm, chief executive officer of NIGP, the Institute of Public Procurement, worries that may be a distinct possibility. “A crisis elevates the importance of contracting, but then procurement tends to take a back seat when things are doing well,” he says.
That would be a mistake. As a brief from NIGP states, “When skilled, professional procurement is buried within an organization and disconnected from the decision-making process, key business opportunities, efficiencies and full value for money may be lost.”
With annual public sector spending of $4.45 trillion, at all levels of government, “procurement goes beyond the transactional process of soliciting goods,” says Grimm. In many governments, a compliance-based system that is locked into a traditional low-bid selection of vendors, still exists.
But, as the word “purchasing” has been increasingly supplanted by the broader term “procurement,” the realization has grown that this field should cover a broad scope of activities including developing suppliers, strategizing to enhance supplier relationships, actively managing acquisitions, overseeing contracts and evaluating supplier performance.
Governments with that enlightened view have engaged in reforms that seek to employ more creative and less rule-bound professionals. “In the past, procurement was often seen as the group that said no,” says Cheral Manke, Washington’s procurement innovation manager. “Today, we strive to be strategic, solution-minded partners of the various business lines throughout our agency and our customer entities across the state, as well as suppliers.”
Since 2013, Washington’s procurement staff has been moving away from a traditional rule-bound way of thinking. Instead, it takes an ever-evolving strategic approach, directed at upfront strategic thinking and collaboration, which includes intentional relationship building, supplier engagement and contract and performance management.
These advances have earned the Department of Enterprise Services Contracts & Procurement Division a prominent role in several gubernatorial initiatives – for example the governor’s priority directive to reduce greenhouse gas emissions, for which Manke chairs the statewide work group on reducing toxics, plastics and other solid waste. The division also leads the state’s critical procurement diversity, equity and inclusion efforts and other key statewide initiatives.
During the first six months of the pandemic, Washington’s reforms gave the state powerful tools to combat ever-present PPE shortages, price gouging and other life-threatening supply issues. The state was able to set up a distribution network for PPE though the Department of Health that helped ensure reliable delivery of supplies to state agencies and local governments.
It was also prepared to undertake intense vetting of suppliers to avoid those that made unachievable promises. In addition, it successfully negotiated PPE deals that were often 50% cheaper than other entities were paying, according to Manke.
Other Valuable Lessons
While Washington had a head start on many of the nation’s states and localities, others learned valuable lessons, and made dramatic advances, in this time of alarming shortages.
For example, Shelby County, Tennessee, home of Memphis, had traditionally relied on interoffice envelopes and paper requisition forms for its procurement functions. These hadn’t been an efficient way to do business for some time. But it became impossible to pass envelopes from hand to hand, when the hands began working at home. So, a far-more-efficient digital approach evolved.
Moreover, departments, which normally handled purchases in a decentralized fashion, became increasingly interested in the help they could receive from a central office. “Departments which normally did their own sourcing were more dependent on us to identify key market players,” says Christin Webb, Shelby County administrator of purchasing.
Pandemic shortages also led the county to work harder to get local businesses registered as vendors. “We learned we needed to have stronger relationships with suppliers and we needed to become more familiar with what is in the market so we don’t have to respond in a reactive way. The pandemic required us to think more outside the box and not as business as usual,” she says.
Growing Vendor Relationships
Governments’ relationships with suppliers also advanced during the pandemic. “What we did in our state, and in other states, was to incentivize our private sector,” says Robert Gleason, chief procurement officer in Maryland. “We had people who make weapons systems for the Department of Defense making ventilators. We had hand sanitizers being retooled and refabricated locally. That happened overnight.”
In Illinois, the events of 2020 led to a dramatic acceleration of goals that had been put in place in the previous year when the buying guide for the state was rewritten in clear layman’s terms and placed on a website that would be accessible without a login. The goal before and during the pandemic was to grow the vendor pool aggressively, with special attention to the state’s Business Enterprise Program that seeks to provide more opportunities to minority, small and women-owned businesses.
The vendors certified as being ready to work with Illinois grew by about 26% in 2020. “We became more strategic in how we source, because we have more competition in the pool,” says Janel Forde, director of the Illinois Department of Central Management Services.
Understanding how those vendors could be best used also became part of the challenge. Product and business codes were analyzed to target local businesses whose product lines could be swiftly shifted.
“We weren’t able to engage directly with the manufacturers overseas, so we had to deal with those here. We saw folks who were previously making sporting goods that were suddenly in the PPE business,” says Ron Wilson, who leads the Bureau of Strategic Sourcing, which is part of CMS.
Will new approaches last? We know that some organizations that have years of reform behind them will continue to move forward. But we’re more than a little concerned that the speed of procurement progress seen in recent months may slow or even halt when the shortage-inspired spotlight dims. As time passes, the crises of the past become memories, and their ability to spur action wanes.
We hope we’re wrong. Retaining high-level attention on procurement, has benefits that extend throughout the entire enterprise. “Leveraging the value of procurement in achieving the government’s mission, helps you achieve those goals and becomes procurement’s mission as well,” says Grimm. “The big challenge, still, is getting the bosses of procurement to understand its strategic value.”
This article was first published on the Route Fifty website.