It is important to note that even if commitments to openness, transparency and fairness were scrupulously observed, there is a good reason to believe that the public procurement system would still perform below the level of public expectations.
The problem is that a fair system, conducted openly, leading to contracting decisions that are transparent does not in itself result in a procurement process that furthers the goals that governments are seeking to pursue. In contrast, a strategic approach to procurement requires the municipality to give its staff precise directions as to the overall goals that are to be pursued through the procurement process.
A clear strategic direction often makes it possible to determine which of two possible approaches should be used in particular circumstances, and when councillors (either individually or collectively) are stepping over the line of giving acceptable direction. To give a few examples, strategic considerations include the following:
- Setting priorities for competing objectives: municipal finances are under increasing strain. Very often, the various overall objectives of a municipality will be found to compete for the same funding. How should the balance be struck in such cases?
- Aligning present day procurement with long-term policy: building and equipment maintenance can be used to illustrate this particular concern. For decades, municipalities (and other levels of government) across the country have underspent on such aspects of municipal administration as the maintenance of public buildings and road and transportation infrastructure. The result is that many buildings and roads are now wearing out. They have reached the point where it would be cheaper to tear them down and build again, than to rehabilitate them. Municipalities need to move away from excessive pre-occupation on the short-term. Too often in the past, municipalities have deferred current maintenance (a specific type of procurement), with a probable resulting substantial increase in likely expenditure on future capital procurement.
- Deciding whether the emphasis of the municipality with respect to the provision of particular services or the delivery of programs should be focused on controlling standards and price, or on providing a basis for actual delivery of those services and programs by the municipality. For instance, should capital recreational facilities be publicly or privately owned and managed? If private, what public uses should be paramount? Some types of programs, facilities or services can generate substantial revenue, as through advertising. Should those revenues be directed specifically at providing those programs, facilities or services or incorporated into general municipal revenue.
As the above list makes clear, the imposition of budgetary control does not give strategic directions. Budgets, of course, may reflect strategic imperatives and the limitations of available resources. Unfortunately, budgets alone do not set targets for growth and development, nor determine priority between such matters as infrastructure capital expenditure as opposed to maintenance and repair, or even as between capital investment and service/program delivery.
When strategic elements are properly factored into the decision-making process, it becomes possible to marshal and integrate resources, so as to maximize the prospect of attaining strategic goals. The misalignment of procurement activity with the attainment of overall strategic objectives can be illustrated by reference to the secondary importance that is often attached by municipalities to working out the cost of meeting a given need, drawing upon the municipalities existing resources.
One of the methods of doing so is known as an in-house bid, in which an internal department bids to secure a given “contract” in competition to external suppliers who may bid for the same work. An in-house bid is essentially a costing exercise, in which a municipality works out what it would cost to provide a service or carry out some work, drawing upon its own assets, staff and other resources, rather than by retaining a private sector service.
Stephen Bauld is a government procurement expert and can be reached at email@example.com.
Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.