The real drivers of change in public sector procurement

The changes in public sector contracting that are taking place now are not simply a result of the recent onslaught of negative media attention. Although the reaction from taxpayers to the scandals has prompted the public sector in all jurisdictions to take a serious look at their procurement practices, the significant changes that are occurring have been in the works for some time. Technology, policy, social and economic factors have been influencing and shifting the procurement landscape for a number of years. Increasingly these dynamics are transforming how procurement is conducted, while the publicity acts as a catalyst to expedite the inevitable.

The Current Procurement Environment

Canadian governments do an excellent job of ensuring that citizens receive value for the goods and services purchased on their behalf. According to one federal Web site, the federal government alone awarded 434,220 contracts and 63,031 amendments in 2002, worth more than $12.7 billion for goods, services and construction. While these figures emphasize the existence of a very important relationship, they also underscore the value of making procurement as effective and efficient as possible.

However, in contrast to what the headlines suggest, the majority of the problems and challenges are not due to fraudulent actions, but to slow, inefficient and costly bureaucratic processes. Often represented as the result of overly cautious guardians of the public purse, a more accurate portrayal is one of an environment that is badly out of step with the realities of business.

Jumping through layers of red tape is getting less attractive to suppliers as they consider the hidden costs of doing business with governments. Among the most significant are those incurred when responding to lengthy Requests for Proposal (RFPs) or when reformatting the same basic information to fit arbitrary (and sometimes irrelevant) response requirements that can vary both by organization and by branch. In some cases the cost of responding alone can add days to the overall effort. And if the cost of winning a bid is becoming comparatively high, the value of even submitting a losing bid is naturally put into question.

Change That Respects the Guiding Principles

Inconsistencies and inefficiencies also cost the public sector a great deal, but exactly how much is not yet known. As a result, governments in all jurisdictions have been reviewing their procurement practices and consolidating administrative activities. Key drivers include technology, policy, social and economic factors that are focused on making procurement faster, simpler, and less costly. However, regardless of the drivers, change cannot ignore the underlying principles of public sector procurement, namely transparency, value for public dollars and effective stewardship (upholding the public trust).

1 Technology

Governments have already proven that they have the technological expertise and infrastructure to re-engineer the way they buy goods and services. Even in 2002, 63 per cent (over $5.4 billion) of federal government procurement was conducted through electronic tendering. Given the size and importance of the market to the private sector, companies have been willing to develop innovative responses to technological advances, while still meeting the guiding principles of procurement. In fact, transparency, value for public dollars and sound stewardship can all be more effectively championed given the right application of technology.

One important example is the federal government e-buying programs that have been developed as a technological response to what was increasingly an unmanageable process. Beyond helping to organize a very complex and vast procurement effort, technology has helped lower the cost of procurement for the public sector (value) and created a totally open bidding environment for businesses (transparency) by using an online format for contracts whose dollar value does not exceed a certain threshold.

Technological best practices that support the basic principles of procurement have been in development by individual companies and the public sector and through collaborative initiatives. A case in point is the Information Technology Association of Canada (ITAC), which has formed a Public Sector Business Committee (PSBC) that brings the public and private sector together around IT procurement. The PSBC provides the public sector with an opportunity to articulate or explore changes to the procurement process while offering the private sector an opportunity for feedback.

2 Policy

Policy and legislation provides the pubic sector with much of the authority on which its activities are built. In the federal jurisdiction alone, procurement is carried out within a framework of more than 15 Acts of Parliament and more than 35 different policies. Consequently, there are many examples of how policy has affected and directed the procurement process and contributed to the current state of affairs.

The relationship between the policy as a catalyst for change and the principles of transparency, value for public dollars and effective stewardship is not always as clear. As the procurement process continues to evolve, the impacts of policy must be articulated in a way that makes the process clear (transparent), ties the value generated to the best interests of the citizen, and upholds the role of public steward.

3 Social

Government procurement has often been considered an instrument of social change. On the one hand the public sector must be responsive to the citizenry that it represents and the social mores that it professes. On the other, the sheer volume and size of public sector procurement demands the attention of the both the public and private sector. As a consequence of the size and import of public sector procurement, it has a very real impact on societal norms and on the adoption of social policies. Sensing this impact, the general public will influence how the public sector procures and which societal norms come to the forefront of the procurement process.

An excellent example of using the procurement process to enforce societal norms is the issue of smoking. Non-smoking is a condition of providing services to the federal government, enforceable even in jurisdictions that have not yet banned smoking in the workplace.

This is a response to the changes in society’s attitude toward smoking, rather than any technical or business requirement. Currently, there is an emerging movement to include standards for technology within public sector procurement that will address accessibility issues for disabled Canadians, a major driver being the government’s commitment to an agenda of inclusion and the intent to lead Employment Equity by example. This is just one issue that is likely to gain prominence through the work of Parliamentary Secretary Walt Lastewka’s Task Force on Government-Wide Procurement as it works to make legislative and policy recommendations.

As a first and critical step, the social issues must be identified and defined to ensure that they are in keeping with the wants and/or needs of the population. Once confirmed and established, questions of transparency, the inherent value and the role of the public steward will become obvious.

4 Economic

Streamlining business processes to save money and create more efficient service delivery is not new to business. At times, the public sector has proven to be equally aggressively in pursuing the same goals on behalf of the taxpayer. The current fiscal and political environment, combined with the demand for greater public scrutiny, has focused attention on more careful spending. However, an agenda based around a cost-effective business model has actually been in place in the public sector for the past several years. Increasingly, private sector belt-tightening has become the norm as the public sector adopts best practices and lessons learned concerning sound fiscal prudence.

The announcement by Treasury Board President Reg Alcock that he wants 10 per cent cuts in federal spending across the board is simply upping the ante. Given the extent to which the public sector depends on the private sector to provide and deliver critical goods and services, and the corresponding value associated with those expenditures, economic factors will continue to play a critical role in the procurement process. And again, the economic driver must also be examined through the lens of transparency, value and public stewardship. Conclusion Politically motivated “house cleaning” is only one factor in the development of the emerging procurement landscape. The other factors are responses that were formulated over time, well thought out solutions to very ordinary and, in some senses, rather predictable problems.

Clearly, without private sector suppliers, governments would carry an impossible financial burden of labour and inventory. Government and business are now, more than ever, partners in the procurement process, sharing the responsibilities as well as the benefits. These two groups must work together in adapting to the change that is now occurring. Procurement is no longer something that transpires at the end of the sale/bid and before the beginning of the project. Procurement is part of the cycle of obtaining and providing goods and services from and for Canadians. An in-depth understanding of this lifecycle and the changes that surround it are the cornerstone of any opportunity to achieve the solutions to today’s problems that will benefit both sides of a transaction. Savings and efficiencies will occur only when the public and private sectors work together from the outset on behalf of the client, in this case, all Canadians.

Greg Marshall ([email protected]) is a business development/ procurement specialist with the Intoinfo Consulting Group in Ottawa.


Buying IT: Do it now

Despite talk of cutbacks, governments are in the beginnings of an IT procurement cycle. Purchases made in preparation for Y2K are no longer sufficient to support the accelerated demands of users in the public sector. And common solutions, like government-wide content management initiatives, are still a few years away.

The current cycle is an excellent opportunity for the public sector to engage in “roadmapping” projects, in which IT investments – both present and anticipated – are aligned with the business objectives of departments and agencies.

This is an important exercise in avoiding “disposable” IT solutions; IT investments made now can be used to more fully develop business processes in preparation for government-wide and/or multi-jurisdictional solutions. The federal government, for example, is looking at ways to ensure that purchases made in the areas of IM/IT, Corporate Administration and Service Delivery move from approximately five per cent (2002 -2003) spent commonly to as high as 75 per cent to be spent commonly for the last category. This is significant, considering that these areas are worth up to $12 billion in cost and represent a third of overall government spending. Considerable work in the areas of costing and governance will have to occur for these goals to be achieved. Federally, government is using technology, some resident and some new, to address issues of managing government information and to formulate a horizontal response that will be compliant with the recent Treasury Board Management of Government Information Policy (MGI). This demonstrates effective stewardship of public funds and establishes the value for the dollars spent during this cycle.

The gains made here will no doubt build on the Shared Systems Initiative, a horizontal management activity to streamline systems development and management. This initiative also aims toimprove the effective use of information technology in government administration and service delivery.

The SSI and many other similar activities in all jurisdictions were established over the past several years to optimize the benefits of technology and achieve significant cost savings.In the wake of initiatives like Government On Line, at a federal level, and work being done in Ontario, Alberta and the other online provinces and territories. Governments are at a point where the expertise and the infrastructure are sufficient to act. Now, these impacts of technological advances on public sector business processes will be highly visible and grounds for changing some of the fundamental ways business is conducted.

– Marshall


Upholding the principles of procurement A balanced approach that starts at the requirements-definition stage

Public procurement should balance the principles of transparency, value and effective stewardship. Even among experienced procurement professionals, this can be a fine art. This case study makes a point: A branch of government is concerned about transparency. An executive decision is made that all contracts, regardless of value, will be publicly tendered using the government’s electronic public notification system of record. A single tender in the amount of $22,000.00 is issued and receives 52 responses. There are five mandatory criteria, six rated criteria and three references for each that must be checked, scored and/or validated. Three copies of the technical proposal are required by the tender, indicating an evaluation panel comprised of three public servants. The average proposal length is 40 pages. Three resources, evaluating 52 proposals each with an average evaluation time of two hours, could leave the level of effort (time and salary money) in the region of $10,000. While transparency has been achieved, value for tax dollars has been trampled in the process.

Alternative Approach

Under federal contracting policy, this contract could be directed to one firm with justification. A better alternative is to send a tender for $22,000 to five reputable firms, to be evaluated for less than one-tenth the cost to the organization. These firms could have become known to the department through prior work, marketing materials or consultations across departments with peers who have successfully completed a similar project. There is added value in that the collaboration between branches and consultations with other departments about similar successful projects is a great vehicle for knowledge sharing. This is effective stewardship in that it uses judgment, operates within the guidelines of sound public policy for contracting, demonstrates an appropriate level of transparency, demonstrates value (appropriate to the dollar value of the contract) and does not show favoritism.

– Marshall

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