After 18 months working closely with US States, Cities and Counties at mdf commerce (and 15 years in Procurement Tech), I think it's a good time to look forward and give my perspective about the undergoing transformation in public sector procurement.
It is similar to what the private sector went through a few years ago (say between 2015 and 2020). Still, the private sector had the additional motivation:
1. Generating savings through procurement (remember, this was the first leitmotiv for procurement transformation, but then people started to ask, "How do we define a saving?!" - that might be the topic for another article…
2. Understanding the value generated by advanced procurement teams in innovation, differentiation, and risk mitigation.
3. Consider procurement as a strategic function in reaching company goals and the missing link between profitability and sustainability.
However, the Public Sector faces different contexts and challenges.
The pivotal role of state procurement in delivering essential services and supporting government functions cannot be overstated, given the substantial annual expenditure of over $2 trillion across a broad spectrum of goods and services, ranging from everyday essentials to complex IT systems. This underscores the growing pressure on state procurement offices to navigate an increasingly intricate landscape, facing challenges unique to their domain. These challenges encompass a complex mandate that includes procurement of administrative goods, support for department-specific purchases, and facilitation of cooperative contracts for local government entities while contending with talent shortages and evolving customer expectations. Oh, and by the way, in the context of multiple financial systems and incomplete visibility on statewide spending and consolidation opportunities at the local level - it is, therefore, unable to initiate informed strategic sourcing initiatives.
Furthermore, state procurement offices encounter significant hurdles such as lengthy procurement timelines, ambiguous requirements definition, and ineffective supplier performance management (hey hey Procurated !), often exacerbated by traditional procurement practices ill-suited to address modern complexities.
Addressing these challenges necessitates a comprehensive transformation (buzzword, way overused, but can't find a better one!) strategy that concurrently encompasses structural, procedural, personnel, and technological aspects. Additionally, a phased approach to transformation is recommended (or maybe mandatory - think about Change Management), involving a systematic diagnosis of existing challenges and design of tailored solutions (and that means, in terms of technology, it has to be public sector native !!), and implementation of targeted initiatives to drive sustainable change.
Successful transformation efforts must include active engagement with stakeholders, meticulous long-term planning, prioritization of quick wins to demonstrate progress, and investment in building procurement capabilities. By embracing a holistic transformation approach and aligning efforts with best practices from both federal and private sectors, states will unlock the full potential of their procurement functions, achieving measurable savings, enhancing workforce productivity, and fostering transparency and efficiency in procurement operations.
Let's start with phase 1 of the revolution, applying the usual "crawl - walk - run" approach, before we even begin talking about Generative AI, please.
The next few years are going to be exciting in State Procurement!
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