Overcoming policy roadblocks to E-procurement
In the world of public sector purchasing, rules and regulations are essential to ensuring that proper procedures are followed when purchases are made. However, despite their critical role in an effective procurement process, some regulations unintentionally become formidable barriers to substantive change, even when that change is for the better.
In many areas, rules surrounding public sector purchasing are so rigid that they can prevent the use of electronic tools to facilitate sourcing, vendor management, bid evaluation and more. In this article we will review some of the common barriers preventing buying organizations from adopting e-procurement solutions.
In many areas, any changes to the official Purchasing Policy of the county or municipality must be accomplished through the creation of new bylaws and/or voted on by the local board. This is a time-consuming, laborious and potentially expensive process, particularly if an attorney needs to be engaged to draft legal language and assess any potential legal issues with the changes. The prospect of handling such a complicated issue is enough to put off even the most proactive and conscientious procurement staff from broaching the issue, unfortunately ensuring that sourcing processes will remain behind the times until the buying organization is ready to upgrade their operations.
Bidding thresholds and established processes
Every public buying agency has internal rules for what sourcing initiatives must be put out for public bid. Usually, an agency will require that any purchases valued above a certain threshold – say, $50,000 – must be put out for public bidding. The purpose of these rules is to help ensure transparency in procurement and to promote fairness by allowing interested vendors to submit proposals for projects and for buying organizations to choose which bid represents the best value for taxpayers.
However, not every buying organization is the same. Some set a very low threshold for public bidding, such as any purchase over $1000, while others have six-figure thresholds that allow many smaller purchases to happen “under the radar” thus preventing them from being subject to public scrutiny.
This creates a situation where the majority of purchases made by a smaller public buying organization with a high threshold for public bidding can effectively be exempt from external oversight. While there may be nothing untoward going on behind the scenes, this can lead to stagnant processes within the organization, such as relying on the same two or three vendors for their sourcing needs rather than opening up the bidding to competition.
Centralized vs. decentralized purchasing
Every buying organization has its own internal policy of centralization or decentralization when it comes to sourcing goods and services from third-party vendors. In a centralized environment, all purchasing across an organization is done through a central office, meaning fewer people are involved in the procurement process. Conversely, in a decentralized environment, every department of a buying organization is responsible for its own sourcing. Decentralization in particular can create a very challenging environment for those pushing for the adoption of more-modern procurement practices, since many more stakeholders are involved in purchasing. Getting buy-in from every department, not to mention obtaining the funding approvals required, can be daunting and lead to change-averse culture which can be very difficult to overcome.
There is hope!
Despite these roadblocks, more and more buying organizations are coming to understand that e-procurement is the future of sourcing and that the adoption of efficient and powerful procurement tools generates many benefits for organizations.
What about your organization? Are there institutional or other barriers that are preventing your purchasing department from achieving its full potential? If so, it might be time to raise the prospect of adopting an e-procurement solution – even if that means taking things one step at a time.