Purchased goods and services account for over 50% of any State’s budget yet the management and provision of procurement services doesn’t get the priority or attention it deserves in public sector agencies. Procurement and supply chain management in private sector are given considerable weight because even a modest reduction in the costs of procurement itself or of procured goods and services can mean millions in savings. The same is true for government agencies. Making procurement more efficient and effective is a necessary tactic in dealing with current fiscal budget shortfalls and part of public sectors responsibility to be good stewards of public monies. As part of a recent engagement to re-engineer the procurement practices of a state procurement office, Public Knowledge examined best practices in procurement from national procurement organizations and States. We thought a summary of these best practices might be beneficial to you. Current best practices in procurement fall into five areas and include:
Professionalism. Cutting-edge public procurement agencies are raising the level of professionalism among their staff and supervisors through training, certification and the adoption of clearly defined standards.
Innovation. Progressive procurement agencies look for ways to improve their processes and to be more effective and efficient. Some best practices include:
- In the area of IT purchasing:
- Writing solicitations that describe a problem and ask for a solution, which allows suppliers to propose innovative ideas that could provide better value to the state.
- Making purchasing decisions based on overall value rather than price alone (best value).
- Forming long-term strategic partnerships with qualified suppliers.
- Sharing risks and benefits with suppliers.
- Creating a pool of qualified suppliers.
- Focusing on sustainable/green procurement.
- Directing state resources to strategic sourcing and cooperative purchasing to gain volume pricing from suppliers.
- Making use of reverse auctions, purchasing cards and multiple award contracts.
E-procurement. Successful procurement entities use electronic systems to run the procurement process from solicitation development to contract administration. The optimal systems include the following features:
- Supplier management, electronic notification of bids, reverse auctions and electronic catalogs.
- A system linked to government accounting systems with automated electronic invoicing, evaluated receipt settlement and accounts payable processes.
- Online supplier registration, electronic posting and distribution of solicitations, e-mail notification of solicitations, electronic bidding, posting of tabulations and awards, online auctions, and electronic purchase orders.
Productivity. Well-regarded procurement agencies have tools and policies designed to increase productivity and decrease strain on existing resources. Some of those tools are listed below.
- Web page with a “how to do business” guide.
- Formally established ethics policy with enforcement and training.
- End-user and supplier outreach and education.
- Master contracts to permit rapid low cost acquisition.
- Performance measures.
- Procurement manual that has been published or revised recently.
- Internal and external customer service and supplier surveys.
Leadership. Best practices indicate a preference for a center-led organizational structure, defined as: The central procurement authority focuses on training and education, performance measurement, dispute resolution, system oversight and supply-chain management. Agencies are empowered to conduct procurements over which they are subject matter experts while the central authority consults, provides support, and reviews compliance with state rules and policies.