Spend it wisely, part 1: streamlining the tender process

By on 07/05/2018
Information overload: procurement reforms can reduce the clutter when going to market (Image courtesy: Ester Inbar).

With so much public money now spent with private sector suppliers, interest is growing in ways to reform and improve public procurement. In the first of two linked articles on the topic, James Johns looks at the scope for innovation in this complex and highly-regulated field – beginning with the opportunities to reduce duplication and transaction costs in traditional tender processes

The use of private sector suppliers in the delivery of public services has become a matter of political orthodoxy in many countries – with the global market now estimated to be worth US$1.7 trillion. And procurement processes play a key role in deciding the effectiveness and value of all this spending. Yet whilst ‘innovation’ has become one of the most fashionable words in government, civil service leaders often have more to say about the importance of procuring innovation than the need to procure innovatively.

There are a range of substantive criticisms of public procurement practice. The most frequent is that it is too bureaucratic, taking too long and costing too much – both for bidders, and for buyers hungry to realise the benefits of their purchases. This complaint is usually followed with the gripe that the same handful of large companies win all the contracts, in part because only companies with a strategic commitment to government and deep pockets can stomach the cost and bureaucracy involved in bidding.

We might also hear critics suggest that the risk-averse world of public procurement makes it difficult to source innovative solutions, or to pilot these prior to a full roll-out. Suppliers often complain that buyers over-specify requirements, limiting bidders’ ability to rethink how public goals are achieved – so there’s little scope to reform systems, and competitions are decided on price alone.

Then there’s the protest that traditional models of public procurement make it difficult to source from smaller (for which read ‘local’) companies; organisations with novel ownership models (such as co-operatives); or companies with expertise in contemporary ways of working, such as agile development. Finally – and of most concern to the taxpayer – there’s the concern that, despite all these onerous layers of process, it’s often the case that the selected supplier fails to achieve the intended outcomes within the desired time and budget.

Obstacles to change

There are good reasons why public procurement might appear stuck in the mud. The field is heavily regulated, and in some cases (notably within the EU or among signatories to the WTO’s Government Procurement Agreement) these regulations have a trans-national element, creating a high barrier to change.

As a result, the burdens on public sector buyers are greater than those in the private sector. Public procurement has thus become something of a ‘black art’ – the preserve of the specialist. Furthermore, political scrutiny of procurement makes easy pickings for an opposition looking to find fault with the party in power. It’s understandable, then, that procurement teams sometimes seem more focused on ‘buying the thing right’ than on ‘buying the right thing’.

But it would be a mistake to dismiss the opportunities for change or the progress that has already been made. Even within established regulations, there is scope for doing things faster, cheaper and better. Many examples can be found of countries that have introduced innovations in procurement which have tackled one or more of the problems outlined above.

Diminish duplication: digital systems can save suppliers the trouble of answering the same set of questions every time they pitch for a contract.

Addressing duplication: supplier data

As a bidder, one gets used to being repeatedly asked for the same information when pitching for contracts. Clearly buyers need to ensure that the information they hold about bidders is up to date, and to avoid placing contracts with a company whose status has deteriorated since qualifying for a competition. But it’s a frequent frustration that governments rarely find ways to centralise qualification information about suppliers. Thankfully, buyers are starting to recognise this, and take steps to reduce the burden.

In 2014 the EU introduced new procurement directives, with measures to facilitate the adoption of e-Procurement including the European Single Procurement Document (ESPD). Prior to the introduction of the ESPD, bidders had to submit multiple documents to demonstrate that they met the exclusion and selection criteria used in evaluating a tender. The ESPD replaces this with a single, electronically-submitted self-declaration, with only the winning bidder having to submit the more detailed documents.

The EPSD service is backed by a mapping tool (e-Certis) which is used to identify and compare certificates requested in procurement procedures across the EU. When it is fully implemented, ESPD will be allow tenderers to provide links to repositories holding their compliance data, allowing the service to act as a ‘business passport’ for companies bidding for tenders anywhere in the EU.

Addressing duplication: pre-qualification questionnaires

Pending the implementation of the ESPD, some governments have taken similar steps locally to reduce bureaucracy. The Welsh Government has introduced measures to standardise the pre-qualification stages of procurements undertaken in the province. These include ‘SQuID’, the Supplier Qualification Information Database.

This provides a catalogue of questions used in supplier selection, from which buyers can select using an online tool (the ‘Squizard’) to assemble those appropriate to their procurement. SQuID stores suppliers’ answers to these questions, which can then be reused in subsequent competitions. The system was designed to increase efficiency for both buyers and sellers, and to increase the transparency regarding selection decisions so that suppliers can make better judgements about the procurements in which to participate.

The measures were seen by the Welsh Government as being of particular benefit in removing unnecessary barriers to the participation of small companies in public procurements. But it makes procurement processes more efficient for both buyer and seller; and like the ESPD, its benefits are rooted in policy changes as much as in technological platforms.

Digitising transactions

Once a tender has been awarded, digital systems and process changes can also be used to streamline interactions between public teams and contractors.

Many public bodies have already adopted e-Procurement platforms to varying degrees for the management of their supply chains, and protocols have been created to support their use – such as the EU’s PEPPOL (Pan-European Public Procurement On-Line) standard. This is a set of EDI (Electronic Document Interchange) templates for exchanging orders, invoices, credit notes and shipping notifications between buyers and suppliers.

Inevitably, adoption rates for the standard vary across the continent; but the experiences of early adopters illustrate its potential. Norway, for example, has been an enthusiastic supporter of PEPPOL, and in 2012 made it mandatory for all central government bodies to demand e-invoices from suppliers. Under the leadership of its Agency for Public Management and eGovernment (Difi) the use of PEPPOL-based invoicing had reached 5.2m transactions a month by the end of 2017, with each invoice saving around 10 minutes of effort.

At this scale, savings accrue quickly, and are estimated to equate to 4.2b NOK (US$540,000) annually. The government’s leadership has encouraged the adoption of e-invoicing by Norway’s businesses, and prompted the growth of new bureau firms to process e-invoices on behalf of companies which cannot do so in-house.

Building on such successes, more fundamental digital transformation of procurement holds out the promise of even greater benefits – mediating sales themselves, rather than simply smoothing their progress. And in the concluding part of this feature, I’ll cover the digital marketplaces through which a growing proportion of government contracts are being placed.

Read Part 2 here

About James Johns

James Johns is a consultant, strategist and digital policy advisor with more than 28 years' experience helping government organisations to make more effective use of technology. He began his career in the National Health Service and the IT services company Xansa, before spending fifteen years in a range of roles at Hewlett Packard. From 2007 to 2014 he was Director of Strategy for the firm's UK public sector business and more recently was HP's Director of Corporate Affairs for the UK & Ireland. James is a Visiting Senior Research Fellow in the Policy Institute at King's College London and an advisor to the World Economic Forum's National Digital Policy Network.

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