The Changing Landscape of Public Sector Procurement – What We Can Learn from the Private Sector

Published on 15/06/2015

By Andy Paterson, Senior Consultant, Cegos Group

The Changing Landscape of Public Sector Procurement

We all know that public sector procurement is facing a rapidly changing landscape.From the crucial role procurement is playing in delivering savings and efficiencies across the public sector to the growing influence of European procurement law and the pressures for greater transparency, the winds of change in public sector procurement are certainly here.It’s also no longer good enough today for procurement to act just as an advanced form of purchasing. Cost savings are a one off benefit anyway – normally built into the price of the supplying organisation – and too often, failed tender processes are being used as an excuse for retreating back to old-fashioned purchasing negotiation.Yet, what can the public sector learn from its private sector counterparts? There are a couple of initiatives from the commercial world that are beginning to illuminate the public procurement process. These are Substitutability and Sustainability.Take Substitutability. How can you ensure that your organisation is protected from non-delivery by the supplier, due to insolvency, for example? One means of doing this is building relationships with your key suppliers to a level where they are ready to step into a failed contract with a minimum of distress.The job of procurement here is no longer just the requirement to shave percentages from a price quote or to manage an increasingly complicated and litigious supply chain process. It’s also to make sure that the organisation is able to procure with the minimum of fuss and complexity, and ensure that relationships are strong enough to adapt to rapidly changing organisational models.Ideas, such as best economic value, balanced score carding and through life costings, are just a few of the areas that public sector procurement executives are having to master.In terms of sustainability, procurement is still in the adolescent part of its life within an organisation - no longer protected but still not yet delivering against expectations and past promises.Sustainability is all about focusing on how procurement sustains its position within the organisation and provides best value to all the departments it touches.Just as HR has done with its generalist to business partner evolution, so procurement is starting to get closer to understanding what the core purchasing departments in the organisation need, and getting closer to the initial stages of the process. This means not simply being used as a support service, once a need has been defined, but being embedded throughout and shaping the whole process.From a training perspective, there are many areas where procurement managers are feeling exposed and where they are having to adapt away from the more established supplier relationship management activity that has long been their designated function.This can include everything from the ability to influence debate within a matrix organisation, where employees are often working under several managers and across different task boundaries, through to building and communicating the value of what they doAs the procurement function becomes more integrated into the wider organisation, they will increasingly be looked on as not just procurement experts but organisational and business experts with all the interpersonal and communication capabilities that this infers.The winds of change are blowing. Public sector procurement executives will need to rise to the challenge and replicate some of the activities of their private sector partners, or risk being left behind.