Better Procurement – Learning from the Private Sector

Who does procurement better – the public or private sector? Is there any reason we all can’t do better together through sharing knowledge and experience? Much depends on the professionals involved.

You could argue that an uneasy relationship exists between procurement in the public and private sectors. On one side, there is full accountability and audit trails, scrutiny over every penny/cent spent and the need for what is, from the outside at least, an almost impenetrable set of regulations and documents that have to be completed.

On the other side, it’s just as accountable and auditable, but there’s more freedom in the process, things happen quicker and there’s more time for the good stuff like contract management. I think it’s fairly obvious which is which…

Accept What We Cannot Change

To stop this becoming a lengthy piece on which is ‘better’, public or private sector procurement, it’s important to separate what could be done better from what we cannot change.

• Regulation and Legislation

Yes, the public sector is highly constrained by regulations, leaving it more inflexible and giving less freedom in the process to procurement professionals. But beyond getting better at working within the regulations, there’s not much to be done about it. Even post-Brexit, there will still be substantial regulation governing procurement and procurement process, even if it looks slightly different to what it is now.

• Budgets

Yes, budgets in the public sector are being squeezed. Hard. But no, this is not going to change any time soon. What both the public and private sectors need to do is be savvier with how the available money is spent and how they can maximise what they get from a contract with less money to spend.

• Transparency

Let’s knock this one on the head straight away. Public sector procurement receives the level of scrutiny it does as it is spending the general public’s money. To ensure everything is above board and audited this needs to continue. And the private sector will only face increased scrutiny in the coming years, so there’s no escaping on either side of the fence.

Lend a Helping Hand

However, there’s nothing to say that the public-private relationship can’t be better. Both sides could teach each other a thing or two about the procurement process and how to make it better or more efficient. After all, at a time of squeezed budgets and regulatory pressure (not to mention Brexit and trade wars), why wouldn’t we all want to work together to make our lives and jobs easier?!

In this article, we’ll be looking at three key areas in which the private sector can help the public sector and at some point in the near future, we’ll look at this from the other side.

Some of this is based on what has been written about both sectors in the press and in thought leadership papers. The rest of my advice, to paraphrase Mary Schmich and Baz Luhrmann, has no basis more reliable than my own meandering experience. I will dispense this advice now…

• Negotiation

In the private sector, procurement professionals have the opportunity to negotiate at any stage in the process. Indeed, they may even choose to negotiate at multiple stages in order to get the best deal. Opportunities are more limited in the public sector, meaning more contracts are awarded without negotiation, or negotiation at a stage where the deal is almost done.

However, even these could be maximised to produce a better deal and this is where private sector professionals could help. Who better to assist with a negotiation than someone who is practised, skilled and used to carrying out the process? Swapping notes on good negotiation techniques and where savings have been found in contracts for similar goods or services could provide some much needed wins.

• Longer Contracts and Relationship Management

You know the score – you spend months painstakingly putting a contract together and awarding it, only to come back to the same contract 18 months later to tender again. The limiting factor here is the length of public sector contracts in many cases, but could this be a valuable knowledge sharing opportunity?

Crafting long-term contracts, aimed at longer than 5 years (for the right goods, services or works), is a skill. Maintaining the right balance between getting a good deal on both sides, opening up avenues for innovation, while at the same time knowing that come year 5 any prices are still competitive, is something that the private sector has greater experience with. By putting heads together, this could also be passed into the public sector.

• A Strategic, Value-Adding Profession

Are you in a senior management or executive level role in procurement? What do you think your organisation views procurement as – a tender machine for purchasing or a strategic partner for adding value? Some argue that in the public sector, the former is much more common. When there are savings to be made, procurement is the one tasked with delivering, but is left out of the loop when it comes to bringing the value to the top line.

Leaders can help drive a change in this view. If private sector procurement leaders have been able to make this leap already, then using a tried and tested approach may help gain the necessary traction in the public sector.

Share Your Thoughts

These are my thoughts on what the private sector has to offer the public sector in the overall procurement process. None of them represents a quick fix in terms of greater efficiency or costs savings, but done properly, could provide these benefits in the long run.

It would be interesting to hear from professionals on both sides of the fence on this too. Would you be willing to work closely with the public/private sector? How would you facilitate this? Are there other areas you think you could help with, or have greater priority? Let’s get the conversation started – you never know where it’s going to take you and the profession.