Public concerns with accountability and proper governance mechanisms might lead one to believe there is a growing concern as to how government procures goods and services.
As I have stated in previous articles, due to the rules, regulations and procedures that are in place government does not always get the best possible price in relation to the private sector for the same services.
The private sector has more latitude by being able to negotiate the best price unlike the public sector. Fair, open, and transparent does not always translate to the best possible price.
The government is continually looking for ways to monitor and measure how the purchasing department functions as well as the way they can attract qualified bidders in the process.
The long-time debate between using centralized or decentralized procurement has recently come back up for discussion.
For many years, there was a growing trend toward centralization of purchasing departments. Surprisingly, the emerging trend seems to be taking a second look towards decentralization, which is more widely used in the private sector.
This paradox is most likely explained by the tight economic conditions under which municipalities now operate after COVID. More people in the private sector are still working from home which is creating the more popular decentralized approach.
Since private sector procurement has a more global reach, it is more efficient to work under the decentralized approach.
I foresee the future of procurement as having purchasing managers working from home looking after specific areas of procurement for private sector companies. Going into the office to work on a regular basis is a thing of the past.
The pandemic completely changed the course of how we all do business forever.
For a purchasing manager in the private sector, it is far more efficient to work from home in this new world as opposed to working from a centralized office location.
Many companies are selling off office buildings or at least cutting back on office space to move to a decentralized working environment for all employees, not just purchasing people. These types of cost saving initiatives and the move to virtual employment policies are well underway.
Government has always been slower to react to industry trends. The foundation of the private sector is built on making money and needs to stay abreast of economic factors.
The public sector on the other had does not have profit as a primary outcome for success.
It is more broadly concerned with goods and services supplied to the public. Being profitable has never been a high-level consideration for any level of government.
Since municipalities are only concerned with running their respective cities, a centralized approach is most likely the best approach.
In my opinion, since the pandemic, many of the municipal services have been cut back or even cancelled. This would appear to be the new normal.
When it relates to municipal procurement unfortunately, experience with full-scale decentralization rarely generates the benefits that are promised in its favour.
In reaction, public sector procurement in recent years has seen a steady shift to a more centralized approach.
The consensus is that the underlying goal in centralization was to improve the efficiency and effectiveness of the procurement process, to increase value to the municipality.
The benefits to be derived from a centralized approach can, of course, be oversold, but in general a centralized approach, based on a dedicated purchasing department or similar office, has several advantages for municipalities.
It is worth noting that centralized purchasing is not intended to exclude operating departments from procurement decisions.
It has always been the objective for buyers to be responsive to the needs of such departments, review past performance with them and fully co-operate in the procurement of new orders and technology.
It has widely been viewed that for municipal procurement a centralized control should be employed to maximize the benefits it is intended to generate.
Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.
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