The State of Public Procurement: Part 2 - Future Predictions

What’s Next for Public Sector Procurement?

Procurement has moved into the spotlight, in no small part due to the COVID-19 pandemic. Below are our predictions on how the space will continue to change over the next decade.

Local Jobs and Supplier Diversity

The top priority for public sector procurement moving forward from COVID-19 is likely to be local jobs. This means procurement teams will be looking for better ways to identify, engage and support local suppliers. There are also likely to be targets for diversity in the supply base, including minority-owned businesses.

As a consequence, procurement teams will not be able to simply issue an RFP to three suppliers. There may need to be one local supplier, one non-metro supplier and one minority-owned supplier.

Market stewards

The targeting of specific groups in society will require procurement teams to know more about their first-tier suppliers, as well as the upstream supply chain participants. This may drive closer links with organisations like the Industry Capability Network.

There may also be a growth in third-party information brokers not only reporting on the solvency of companies but also their ownership details as well as any ethical, social, environmental and business risks.

Climate change and sustainability

The Paris Climate Accord was signed in 2016 and the impact on procurement practices is slowly growing. It is reasonable to expect that suppliers will be asked to report upon the carbon impact of their supply chains, and their progress in reducing the impact on the environment.

As a result, the future will likely hold mandatory sustainability weighting in tender evaluations.

Not enough procurement capacity

Public sector procurement has always been complex. Balancing competing priorities is not easy. There is a role in government at all levels to facilitate the procurement process so that it delivers value for money outcomes at the lowest overall cost while complying with governance requirements.

The reality is that many governmental organisations do not have enough capable practitioners to do this now, let alone if the definition of value for money is broadened still further. The response is likely to be that full-time procurement practitioners will need to focus on higher value/risk projects.

Other projects will be subject to 'self-serve' solutions, so that business stakeholders can manage their own projects enabled by guided technology solutions.

Rise of niche procurement solutions

Procurement has been subject to as many oversold, over-engineered solutions as any other function. But the era of 18-month implementation programs has gone. A new generation of ‘no-code and ‘low-code’ solutions are displacing highly customised ones.

This trend is likely to accelerate, particularly in respect of phases of the procurement process that have not yet been impacted by robotic process automation or artificial intelligence tools. ‘Software-as-a-service (SaaS) solutions will further automate workflows and empower self-service solutions.

Emerging procurement leadership

The issues of capacity and capability will continue to be a constraint on the contribution of the procurement function, especially in smaller departments, agencies and local authorities.

In 2021, the Australian Procurement and Construction Council launched a Procurement Capability and Workforce Development Strategy to create “a professional procurement capability that delivers effective solutions to achieve public outcomes.”

Full-time procurement practitioners will focus on complex projects

We can expect the emergence of shared services procurement between smaller local authorities. In smaller state government departments, there may be a demarcation between tactical procurement and strategic procurement.

Tactical procurement will be managed locally by budget holders using guided solutions. Strategic procurement will be managed by full-time procurement specialists, or perhaps even outsourced to business process outsourcing companies.

Value for money

It is one of the unspoken truths of public sector procurement that value for money is almost impossible to define or measure. Evaluation criteria are the most important expression of priorities, as they decide which tender or RFx is accepted.

It is likely that model evaluation criteria will be developed by full-time procurement specialists and cascaded to business stakeholders. If the project is low value and low risk, the evaluation criteria may focus more on local impact, social benefits, social enterprises and the use of SMEs and/or minority-owned businesses.

Will these Predictions Happen?

Some are already happening, and there are strong indications this is the path the future will take. If the past is any indication, procurement will largely be shifted in reaction to any significant current and future events rather than through intentional design.

However, there are ways in which procurement teams can actively take the wheel and prepare for the changing trends in procurement.

How to Get Ahead of the Curve

Modern source-to-pay solutions like VendorPanel have the ability to support the New Procurement. These include being able to identify and support local suppliers via LGA boundaries and geolocation, support social and sustainable procurement initiatives, and more.

VendorPanel allows you to manage strategic and operational spend in one place, and automatically guide your buyers into making the right procurement decisions, ensuring compliance by default.

To learn more about why VendorPanel is the solution of choice for hundreds of private-sector organisations, contact us today. Alternatively, read our government customer stories to hear what our many clients have to say.