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INDUSTRY INSIGHT

How to improve services during unpredictable times

In today’s rapidly evolving and highly uncertain environment, government procurement leaders find themselves in both an admired and unenviable position. As in the private sector, expectations for federal, state and local procurement continue to rise to improve or maintain levels of education, infrastructure, public safety and much more. In many ways, the quality of life of future generations depends on the ability of public-sector leaders to adapt technology to their approach to procurement.

Ultimately, public- and private-sector procurement leaders have similar objectives. First and foremost, they must deliver maximum value by providing the best goods and services at competitive costs. Second, they must do so while effectively managing risk.

The failure of U.K. government procurement to do so in the case of Carillion is a case in point. Despite repeated profit warnings, the British government continued to award contracts to the company. Carillion’s ultimate liquidation carries implications for U.K. public services, the company’s 43,000 current and former employees and the British taxpayer. The 450 projects the company was working on for the government now face an uncertain future, as do food service in over 900 schools and prison maintenance in various corners of the country. Moreover, the financial viability of hundreds of suppliers to Carillion is now in jeopardy.  It's a chief procurement officer's nightmare.

Public-sector procurement officials also must increase transparency and consumerize the procurement experience for buyers and suppliers (who are also constituents in many cases) because the impact of inefficiencies and vague processes flow through the supply chain and ultimately to the community. And lastly, leaders must demonstrate agility to do all of the above as well or better tomorrow, when new and uncertain conditions and requirements will exist. Failure to do so can mean any progress is short-lived, sending teams scrambling to cope with the new reality.

While these objectives parallel those in the private sector, public-sector leaders face unique challenges. Rising public expectations are matched by steadily declining budgets. At the federal, state and local levels, the funding squeeze is only expected to worsen as pension and other unmanaged costs consume an ever larger share of budgets. The political constraints, such as geographical preferences for suppliers, further bind procurement officers’ hands, even as trade agreements such as NAFTA are suddenly reopened for negotiation. And constantly changing policies, regulations and directives create extra uncertainty.

So, what are savvy CPOs to do?

The key is to adopt best practices already being leveraged in the private sector while still addressing unique public-sector requirements. Innovative private-sector procurement leaders are well on their way to transforming their organizations to tackle their broader and more strategic objectives. The key to their success has been building smart, collaborative and agile organizations.

Working smarter. Being smart is not a reference to IQ levels. Employee profiles are one aspect, and boosting analytical capabilities either by changing profiles for new hires or upskilling existing employees is an important part of building a smarter organization. But equally important is freeing team capacity to focus on more strategic initiatives. Digitization of the source-to-pay process is key here and where the public sector generally lags far behind. The goal should be to eliminate manual and paper-based processes, minimize exceptions and streamline the process for all users, including suppliers. Technology must be evaluated to ensure not just leading capabilities, but true integration of user and supplier workflows, consistent user experience and underlying data.

At the Ardent Partners CPO Rising event last November, New York City's deputy CPO explained how the city has digitized its supplier registration process, eliminating 12 pounds of paper per supplier and reducing the average registration cycle from over a year to a few weeks. This benefited both staff and suppliers, while also addressing one of the city's key environmental objectives.

Being smarter also means bringing actionable insights to one’s fingertips, taking advantage of integrated platforms that also connect to third-party sources and leveraging innovations in areas such artificial intelligence. An effective system can, among other things, provide true 360-degree visibility into suppliers to help CPOs better manage risk. It is hard to imagine Carillion being awarded contracts if decision-makers had access to a scorecard on the company's financials and payment history during evaluations.

When digitizing source-to-pay, look for integrated project management capabilities and supplier-friendly networks that make it easy for suppliers to connect. That means going beyond PO and invoice digitization to supporting collaboration on new products and services and sharing documents. Enabling such digital collaboration provides scale, transparency and improved accountability.

Collaboration. Building a culture of collaboration with team members that know how to engage both internal departments and suppliers and pulling them together for different projects is essential. Key to New York’s success to date has been the central procurement team’s ability to build alignment with the 40 mayoral and 175 non-mayoral agencies involved in procurement.  With relationships in place, technology can then play a supporting role, empowering teams to collaborate at scale with improved transparency.

Agility. Lastly, do not forget the importance of agility, both in terms of meeting tomorrow’s requirements and the unique needs in one’s own agency. Today’s leading software solutions have embedded many best practices, and in general organizations should look to adopt those. Be advised that some agency  requirements are truly different, so be sure any system can accommodate them and still meet future needs. For example, supplier requirements constantly change, so any system should quickly allow users to survey suppliers for new information, build and monitor improvement plans and modify workflows to fit new processes or projects. Such an approach provides auditability as well as structure.

Today’s public sector procurement leaders have the potential to improve the lives of millions of citizens as well as the health of supply chains. It is a daunting responsibility with many obstacles, but success is possible with the right people, processes and systems. Much can be gained by replicating private-sector innovations  while maintaining the agility to address government's unique and evolving requirements.

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