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The future for Procurement

February 20, 2014

The delivery of outcomes has been a recurrent topic at IACCM for a number of years, since it poses major questions and challenges for the Procurement community. ¬†Yesterday I participated at an excellent conference organized by the World Bank at its Washington D.C. headquarters where the theme was ‘Delivering Outcomes’.

“Should the measures on Procurement relate to transactional compliance or contract results?” was one of the questions posed by Jeffrey Gutman, a former World Bank executive and now with the Brookings Institute. He illustrated his point by highlighting the types of measures Procurement uses today related to ‘process compliance’ – number of bidders, objective selection criteria, adherence to policy – and contrasted this with measures that might relate to the effectiveness of the procurement in delivering the right results.

Mr Gutman rightly pointed to the fundamental difference in business role and value between these two positions. He went on to point out that this is not an abstract or theoretical choice, but a reflection of fundamental change in business need. Organizations today are procuring far more, from more diverse sources, under substantially different levels of regulation, expectation and overall transparency. As examples, he highlighted the growing array of instruments (contract and relationship types), the explosion of stakeholders and their influence, the broadening of ‘success’ objectives (harmonization, green, governance, accountability), global reform programs and the persistent concern over fraud and corruption.

“In this environment, there is need to exercise greater discretion in the use of professional judgment. But in reality, we have become more fearful, more compliance oriented, which has the opposite effect. An excessive focus on compliance results in a risk averse culture.”

These observations led Mr Gutman to conclude that if Procurement is to flourish, it must make fundamental changes:

  1. If the focus is to be on achieving final outcomes, then Procurement measures must be related to the whole procurement lifecycle;
  2. If a key factor is to exercise the credible use of discretion, then Procurement must focus on the development of a new breed of specialists who will be far better integrated with technical staff and far more aligned with the different types of procurement needed by the business;
  3. If deliveries are to be successful, Procurement must become better at defining and communicating objectives and their relative priority;
  4. If organizations are going to function effectively, Procurement must make far more effort to educate others in procurement;
  5. If Procurement wishes to be seen as valuable, it must continually re-evaluate and challenge policies in the context of a rapidly changing environment.

As later presentations (including my own) emphasized, there is no certainty that Procurement can or will successfully occupy this much bigger space in the business. Indeed, if it waits to be asked, that certainly indicates it does not have the capability. But it seems to me that the alternative is terminal decline, because oversight of transactional compliance is the sort of task that will steadily be automated.

Over the next few days, I will summarize some of the other presentations from this event.

 

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