Bringing procurement on the digital journey

The journey to government’s digital transformation

With procurement regulations and a lack of flexibility highlighted as major barriers to digital transformation, how can public sector leaders change their procurement processes to keep pace with the organisations’ needs?

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Reforming procurement processes will be crucial to the success of the public sector as it makes the journey towards digital transformation.

Three quarters of the public sector leaders questioned in a recent Deloitte report, The Journey to Government’s Digital Transformation, feel procurement changes are required in order to support their digital progress.

With regulations, a lack of flexibility and concerns over skills highlighted as major procurement challenges, what steps can government organisations take to overcome them?

Relaxing the rules

Public sector leaders identify support for agile development processes as the top procurement change needed to drive their digital transformation, with 45 percent prioritising this. Less restrictive terms and conditions (31 percent) and less control from the centre (21 percent) follow, meaning a relaxation of existing rules and frameworks is now demanded.

Historically, public sector procurement processes assumed established ways of working would remain stable. This favoured long-term contracts with suppliers, and low unit costs. This approach effectively ‘fossilises’ business models when an organisation makes IT investments, selects suppliers and establishes processes.

But the dawning of the digital age poses significant challenges to this approach, as innovations such as big data, smartphones and connected sensors have led to rapid change, potentially making five-year-old business models redundant. Less rigid strategies and more commercial flexibility are now required.

‘Little and many’ approach

As a first step to becoming more agile, public sector bodies could adopt a modular approach to procurement. By focusing on small batches of requirements instead of trying to speed up large-scale digital transformation projects, cycle times may be reduced.

Using a competitive “bake-off” style approach with teams from different contractors while keeping deliverables relatively small might create further flexibility, while procurement interfaces could be opened up to boost collaboration among vendors.

Simplifying procurement processes could also foster a more flexible relationship with providers. Public sector bodies should look to cast their nets wider than those already familiar with bid qualification processes, reduce the time spent on vendor selections and consider shorter contract periods.

Bigger isn’t always better

In tandem with the ‘little and many’ approach, breaking large contracts down into smaller parts could also support the digital transformation of public sector procurement. Although large-scale contracts have been favoured in the past, the rationale behind them has become less clear-cut in the digital age.

Traditionally, large contracts were thought to deliver economies of scale, while committing to trustworthy suppliers and allowing the risks stemming from complex technical tasks to be transferred. However, lower technology costs have called this view into question, as savings from economies of scale are now smaller than those achieved by tracking falling prices. And while it is thought that contracts with large suppliers create deeper relationships, they can fail to provide access to new innovations.

Owning what is yours

Being tied in to legacy contracts (19 percent), vendor behaviour (13 percent) and onerous terms and conditions (13 percent) were also identified by public sector leaders as major barriers to digital transformation. But building more open standards into their procurement processes could ease their concerns about being locked in to agreements with suppliers.

At present, public sector bodies can find it difficult to extract data or share it between different services and IT systems, while some struggle to even access their data without going through suppliers.

Organisations can tackle these issues by making sure open data standards and open interfaces are among their top procurement priorities. This approach may also futureproof services – ensuring the public sector can access the best available innovations.

Education and integration

Although relaxing rules, adopting a ‘little and many’ approach, breaking down large contracts and prioritising open data standards can all move procurement forwards into the digital age, they must go hand in hand with procurement talent development.

New frameworks and processes could be introduced in this regard to help guide procurement officers towards more agile contracts. Groups that specialise in digital vendor selection and procurement lifecycle management might also be created.

Facing the future

Procurement remains a particularly challenging area for public sector leaders on their path towards digital maturity. Restrictive regulations are a source of frustration, while only a very small proportion (27 percent) are satisfied with their vendor community.

But by proactively facing up to these challenges and rethinking their traditional approaches to contracts and suppliers, government organisations have a stronger chance of facilitating change and, ultimately, of making digital procurement fit for the future.

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