The evolution of the procurement function in the public sector
The procurement profession advises other business areas on how to spend their money more wisely. Proxima details a scale for organisations to judge their procurement journey by
Procurement is changing
Change is a constant, and procurement is no exception. Traditionally a services function, the procurement profession advises other business areas on how to spend their money more wisely. Procurement’s own budget is usually relatively small, and focused on resources and other indirect categories it depends on to operate day-to- day.
Procurement and commercial must respond to the changing needs and shape of the organisation which it serves. By and large, this happens in stages, aligned with the development of the organisation itself and the skills and capabilities of its people. It is perhaps a bigger challenge in public sector, where conflicting priorities abound, and the macro landscape can change with little warning (think of the commercial impact of a machinery of government change).
It is possible to track the evolution of procurement’s stages in most organisations and therefore to predict how it will evolve. Where is your department on this evolutionary scale?
Stage 1: Everyone’s a buyer
Before Procurement… there was nothing.
The stakeholders bought for themselves. This is still the case in many young, rapidly growing businesses where the employees are expected to wear many hats. It is also more commonplace than recognised in public sector, where delegated procurement and financial authority may be assigned on grade or seniority alone, and not based on skill, capability or even job title.
But business and sectors change. Government is focused on aggregation to deliver value from economies of scale, and procuring goods and services in the ‘right’ way. Not all budget holders have the experience and leverage needed to get the best value out of the supply market.
Stage 2: Procurement as a service
The response? A team of procurement and commercial generalists. Procuring well is a skill, and where this organisational maturity is lacking, the public sector focuses on process. A repeatable process that drives some value, is better than having none at all.
But procurement needs more than this. Driving value for money starts at the beginning of the process – in strategy and requirements definition – and ends at the end, in contract management. The ‘process’ in the middle is only half the story.
Stage 3: Categories become King
The response, then, is to introduce category specialisms and category planning – challenging the value delivered at all stages of the procurement process. Teams start to think more deeply about more than the procurement process. Individuals gain reusable, transferable expertise and gravitate towards specialisation.
Often though, categories do not line-up with stakeholders. Aggregation is tricky where data is patchy, and for some, the breadth of interested parties in a category can be overwhelming. Engaging with stakeholders can be more difficult than dealing with suppliers, yet gathering their perspective is critical to delivery.
Stage 4: Partnering to influence value
The next step? To introduce business partners, mirroring change with which other functions have had to grapple (IT, Finance, HR to name just three). This enables procurement to understand what key stakeholders need, as well as want, and to have a direct influence on how objectives are achieved.
The role of advisor is more than saying, ‘I’m from Procurement and I’m here to help’ – traditional stakeholders may not want that help! Successful advisors provide challenge and insights from beyond their organisation or business area, and are able to entice stakeholders to adapt their thinking and understanding of what is possible. To stay relevant, the function must keep producing new perspectives and knowledge to share with stakeholders.
Stage 5: Insightful business partners
For a mature organisation, insightful procurement business partners bring real insight into what is happening outside the business, to challenge and shape what it is that the stakeholder wants from suppliers based on the best the market can provide. This is a challenge – and the ways to deliver this are more innovative than public sector is used to! Procurement’s radar is set permanently in curious mode, pursuing the best ideas from whatever source and insight at any time, because it is needed all the time.
The problem however, is that corporate boundaries are being reset and markets are changing at an extraordinary rate. The most exciting things happening involve bringing combinations of stakeholders together with combinations of suppliers to help reshape the way they work together to deliver the best value for the taxpayer.
This does not correspond to traditional processes, relationships or working cultures. Might this be a step too far for Government in 2019?
Stage 6: Networked for success
The aspiration? A function that has all the consultative, influencing and interpersonal skills to act as an intelligent interface between networks of stakeholders and networks of suppliers. One day.
Of course this article simplifies the evolution of a function. Many will recognise pieces of some or all of the above and will know what is desirable – and achievable – in terms of a step change. Private sector will differ significantly from public sector – values and trajectories are aligned but do not happen at the same pace.
However you look at it, this is an exciting future putting the Procurement function at the forefront of what will help create agile, active businesses; but it is a future that demands extraordinarily different skills, attitudes, and traits from the Procurement professional of the future…a conundrum that the GCF is grappling with every day.
Download Proxima's report 'Is Workforce Transformation the key to Improving Commercial Capability?' here.