The fastest way for any public or private sector organization to make money is to invest in the latest state-of-the-art procurement methods.
Over the years, I have noticed the clear majority of government and private sector corporations are decades behind in the way they conduct the purchasing functions.
As far as municipalities are concerned, some of them have not updated their purchasing policies and procedures for over 10 years. So much has changed in that time frame that it would put them in a significant disadvantage in the market place related to getting the best price and service on projects.
In government procurement, it is critical to carry out the purchasing function properly, keeping all policies and procedures up to date and current with the laws applicable to each province.
Most municipalities have bylaws, policies and procedures that dwarf anything in the private sector.
It is equally necessary to give effect to those bylaws, policies and procedures to have an appropriate resourced procurement system that has the capacity to carry out the core responsibilities assigned to it, and to develop, improve, deliver and manage the performance at all levels.
As a general observation, not only do municipalities fail to appreciate how a more effective approach to purchasing could improve their bottom line, they consistently undermine the importance of purchasing as a critical part of overall municipal operations.
Since there are major players in most local markets, delivering a wide range of programs and services, municipalities need top notch procurement departments.
The private sector also has challenges in this area. The art of negotiation has seen great advancements as well over the decades that need to be incorporated into the new purchasing philosophies for greater cost savings.
Negotiating multimillion-dollar construction projects is truly an art, requiring the comprehensive knowledge of both procurement and construction methods. Every company in the private sector can save massive amounts of money when all these unique abilities are available in an experienced procurement person.
The purchasing person who is acting as the negotiator must have the knowledge and proper understanding of the interests and strategic objectives of the organization that he or she represents to be able to place any offer made into its proper context.
They must understand the relative priority of the organization’s objectives to be able to assess the importance of any concession brought forward.
They must also have a realistic understanding of the strengths and weaknesses of both parties and of the merits and realism of their respective positions.
Also, they must have the sufficient authority to make meaningful concessions and timely decisions.
A negotiator must have complete command of the facts and understand the latitude for concession.
In preparing, it is essential to test hidden assumptions about each party’s position.
If a negotiator can cause his or her counterpart to change his assumptions, he might also cause that person to alter his decisions. A mistaken assumption can lead to a misinterpretation of the facts and so to a wrong conclusion.
It is safe to say the purchasing function in both the private, as well as the public sectors, will be essential to the success and profitability aspects of large and small organizations.
Hiring an experienced purchasing person, or purchasing consultant to write as well as respond to major construction or service contracts, may be the difference between you making, or losing, large sums of money.
The purchasing profession has come a long way from when I first started. The training and courses now available make it a profession that many young people are gravitating to in large numbers.
The most successful organizations consider the purchasing function as one of the critically important aspects of the overall operation.
I have always said a good purchasing person is worth their weight in gold, that statement has never been more relevant because of the environment we operate in as well as the current unstable market conditions.
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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