Recent trends and challenges in public procurement
[April 2014 print edition]
Procurement professionals are living in interesting times. There are significant challenges associated with current trends in public procurement. Ignoring the trends and challenges is not an option for those wishing to stay employed in supply management. This article is empirical and based on my observations working in public procurement.
The processes involving major procurements are increasing in complexity. This is due in part to federal and inter-provincial trade agreements and in part to Supreme Court of Canada (SCC) decisions. The implementation of the Canada-European Trade Agreement (CETA) will add to major procurement complexity as CETA will apply to all levels of government procurements. Canadian cities and towns need to prepare now for CETA’s implementation.
The recent SCC decision concerning Tercon Contractors v. British Columbia (MOT) has resulted in a trend to avoid creation of “Contract A” in tendering documents. The challenge to the public buyer is how to do this properly, still be seen to treat respondents equally and know under what circumstances it is best utilized. There is the real possibility that the most qualified companies will decline to respond to requests that avoid contract A. Decisions about what procurement strategies to employ are now more complex.
Subjective criteria such as sustainability and social responsibility are more heavily weighted during evaluations and are differentiating factors in selection of suppliers. The challenge for procurement professionals is to design an evaluation process that is acceptable to all parties by removing the taint of hidden bias whether real or perceived. Subjective criteria will need explanation in the supply request and the information required in responses should be clearly and completely articulated.
Government procurement is trending to greater standardization of process and products purchased. For example, the Province of British Columbia is introducing what is termed a two-page short form RFP (SFRFP) in an effort to increase supplier accessibility to government procurement. The SFRFP is intended for low risk procurements valued under $250,000. Boilerplate terms and contract forms will be standardized and incorporated by reference to the province’s web pages. Respondents, once familiar with the referenced terms, should be able to focus on the procurement without wading through pages of legalese.
Similarly, governments are realizing the benefits of standardization of products purchased. For example, they need to know that the valve (or any similar infrastructure component) installed 15 years ago can be easily replaced or refurbished by one manufactured last month. As a result, commodity contract terms are getting longer. This trend presents a risk of reduction of the supplier base and hence reduced competition for government supply in some markets. Procurement professionals will need to hone their negotiation skills and marketplace knowledge to ensure that their organizations obtain fair value for commodity goods purchased.
Senior governments are pushing for centre-led procurements on behalf of agencies funded by those senior governments. While many of these agencies are already participating in co-operative and/or consortia purchasing arrangements, the principle of one contract for all is predicted to reduce duplication of procurement effort and achieve economies of scale. There are, however issues yet to be addressed in the trend to centralized contracting. For example, would a consolidated procurement lessen future competition, creating an oligarchy of large suppliers in that particular market? What are the social and economic costs to a community losing a viable business because we decided to contract centrally? With less competition, would our economy lose the incentive to innovate? How can we create an acceptable balance between agency priorities and group priorities in a centre- or consortia-led procurement.
As we’ve seen, the procurement process is evolving. What we do in our work will continue to be tested and challenged, if not in a court of law, then by our clients, peers and suppliers. Understanding and preparing for the potential outcomes of procurement trends is the key to success while working during interesting times. Knowledge acquisition in negotiation, request drafting, interpersonal skills and contract management is helpful. Even more important is the knowledge gained from experience and the sharing of that experience with your peers.
Rusty J. Joerin, SCMP, is a consultant specializing in public sector procurements. He authors a free monthly newsletter titled Better Value Procurements sent to selected organizations. To subscribe e-mail firstname.lastname@example.org.