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Public Procurement: Where are we headed?

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  1. Public Procurement: Where are we headed? Darin Matthews CPPO, C. P. M. Portland Public Schools, Oregon Second Vice President, NIGP

  2. This Presentation examines... • Government Procurement • defined and examined • Past Voices of Procurement • Present Voices of Procurement • Future Role of Procurement • Asks:“Where are we headed • as a profession?”

  3. What is Government Procurement? “The acquisition and utilization of goods and services required by government institutions from conception of the need for the product or service to its utilization and ultimate disposal” (Guy Callender & Darin Matthews 2002)

  4. Principal Goals of PublicProcurement • Implementation of a system that demonstrates transparency • Efficiency in procurement operations and achievement of cost minimization (through competition) • Achievement of the strategic goals of the organization while ensuring a fair, equitable process (Paul Schapper and Guy Callender, 2003)

  5. Procurement Ideology and Public Management • Science or Art? • Profession? • Do theories of procurement exist or is it just a practice based function?

  6. Procurement in Government • Has limited recognition • Limited educational opportunities • Common adoption of least-cost models (i.e. low bid) • Constant struggle to be “collaborators”

  7. Procurement in Government • Significant impact on GDP (20%) • Translates revenues into expenditures for goods and services • Annual spend: $1670 billion (US)

  8. Voices of Procurement Past • Practice of procurement can be traced back 2800 years • Trade between China and parts of Europe • Centralizing supply function, established internal control

  9. Voices of Procurement Past • Livy (215 BC) • Roman armies in Spain • Involved negotiating and bargaining • Contract for furnishing clothes, grain • Three bidders came forward • Exempt from military service and state, government accepted risk of attack

  10. Voices of Procurement Past • Gustavus Vasa, King of Sweden (16th Century) • “By virtue of the grace invested in my royal office I have decreed you to forge one thousand suits of armor and ten thousand arrowheads. • You have failed to obey this command! • At the peril of having your heads fall to the axe, to the amusement of the inhabitants of Stockholm in the city square one holiday eve at my discretion, I once again command you to comply with my wishes.”

  11. Purchaser Characteristics • Twyford (1915) • Reactive • Clerical • Unimaginative • Unglamorous

  12. Voices of Procurement Past • New voices emerged in 20th century • The Engineer as a Purchasing Agent (1908) • Formation of professional organizations – ISM (1915), NIGP (1944), PMAC (1919), AIPSM (1950)

  13. Voices From The Present Procurement has “emerged from being tactical and operational in nature … to being considered …as being of major strategic importance.” (Humphries, 2001, p.604)

  14. Contemporary Voices • “from the back room to the board room” (Jerry Baker, ISM) • “from controller to collaborator” (Rick Grimm, NIGP)

  15. Contemporary Thought • Traditional ideology changing (1980’s) • Concept of supply chain gaining importance • Procurement seen as “initiator” • Purchasing Multiplier (Jensen) • Strategic partnerships with key business units

  16. Strategic Procurement • Top management has viewed purchasing as ancillary support function However • When purchasing is proactive and operating at a strategic level, major opportunities and advantages exist Source: Ellram & Carr, 1994

  17. Strategic Procurement • In a recent survey 84% of senior management stated they were committed to maximizing strategic procurement and minimizing transactional buying Source: Global Supply Chain

  18. Procurement, technology and the future ... “..all of us must pay close attention to the technological advancements…it is either that or be left behind in 5 or 10 years because of something that we can’t readily embrace today as being an important factor in our business tomorrow.” Russell Broeckelmann, 1999

  19. Procurement needs to bridge the gap between demands for efficiency and effectiveness in government and … • Focus on the clients • Enhance service quality • Reduce costs • Increase speed (cycle time)

  20. Future Roles for Procurement • Offer a strategic approach • Observe developments in the political landscape • Respond to demands of economic, social, environmental influences • Factor in Total Cost of Ownership principles

  21. Future Roles for Procurement • Makes intelligent use of electronic systems • Seeke-literacy among players in a market • Establish orderly and efficient procedures/guidelines • Begin to take account of “green” issues

  22. Some continuing trends…. • Outsourcing of many services (procurement becomes • even more valuable) • New management structures (placement of procurement • still being defined) • Wider use of IT based systems (e-literacy, e-auctions, • sometimes e-chaos, e-insecurity) • Constant talk of re-skilling (people with new skills or • new people?) • Demands for decentralization (where’s the balance?)

  23. Continuing Evolution of Purchasing • Tactical (Historic) • PO issuance • Vendor file maintenance • Excess inventory • Order tracking • Unit cost focus • Local sourcing • Strategic (Leading) • Supplier alliances • Cost management • Global sourcing • Life cycle costing • Procurement planning • Spend management

  24. Procurement professionals must assume • A leadership role – seeking new opportunities and driving them • A managerial role – managing systems and relationships • A creator role – identifying new opportunities and making them available to the organization (strategies, supply options, revenue streams) • A needs enabler role – enabling others in the organization to satisfy their own needs • (Joseph Cavinato, 2000)

  25. A Cross-Disciplinary Model of Government Procurement • Information Technology • Accounting and Finance • Contract Law • Public Administration • Psychology • HR Management

  26. Future Skills for Profession Communication Team Building Interpersonal Skills E-Commerce Proficiency Negotiation Relationship Management Source: Center for Advanced Purchasing Studies

  27. Future Characteristicsof Procurement Aligned with higher education institutions (partnerships, degree programs) Elevated stature (and salary) within organization Increased importance placed on service contracting Recognized as a respected profession (maybe for our own children)

  28. Wrap Up Public procurement: an emerging body of knowledge Increasing responsibility for large expenditures Certain aspects (outsourcing) have seen growing academic attention – more to follow Desire to be recognized as a profession Development of the strategic nature of government procurement

  29. Public Procurement We’ve came a long way, but there is still work to be done