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Procurement Perspectives: Know the basics of public procurement

Warren Frey
Procurement Perspectives: Know the basics of public procurement

In the United States, the National Association of State Purchasing Officials has identified five fundamental principles of public procurement: competition, impartiality, openness, conservation of funds and appropriate value for money.

It then offers the following observations:

"Those fundamentals call for a public procurement program where public business is open to competition; where venders are treated fairly; where contracts are administered impartially; where value, quality and economy are basic and equally important aims; and where the process is open for public scrutiny."

The principal role of those involved in municipal purchasing may be said to be to direct and drive a process of cost management. In the 1990s, one of the most influential documents published dealing with the overall approach towards public procurement — and the best method for bringing procurement-related costs under control — was the Report of the National Performance Review (NPR), chaired by then vice-president Al Gore. The following extracts from that report provide a good summary of the overall direction recommended:

"Is government inherently incompetent? Absolutely not. Are federal agencies filled with incompetent people? No. The problem is much deeper: Washington is filled with organizations designed for an environment that no longer exists.

"From the 1930s through the 1960s, we built large, top-down centralized bureaucracies…patterned after the corporate structures of the age: hierarchical bureaucracies in which tasks were broken into simple parts…each defined by specific rules and regulations.

"With their rigid preoccupation with standard operating procedure, their vertical chains of command, and their standardized services, those bureaucracies were steady — but slow and cumbersome. And in today’s world of rapid change, lightning-quick information technologies, tough global competition, and demanding customers, large, top-down bureaucracies — public or private — don’t work very well.

"Effective, entrepreneurial governments cast aside red tape, shifting from systems in which people are accountable for following rules to a system in which they are accountable for achieving results. They strip away unnecessary layers of regulation that stifle innovation."

The NPR was controversial for its basis in the citizen-as-customer model of government, rather than the citizen as owner.

Even recognizing the importance of this criticism, the foregoing passage from the NPR affords an interesting counter-perspective to consider when one wades through the day-to-day mechanics of the municipal procurement process.

Whether or not one subscribes to the NPR approach, virtually all authorities see the management of cost to the public as one of the most important aspects of public procurement.

To manage costs, they must be properly identified and each source of cost must be analyzed to determine the extent to which the costs that arise from it can be reduced or eliminated. To do so, it is necessary to identify the key cost drivers and to work out a program for controlling them. While many costs cannot not be reduced, others (such as process-related costs) can be controlled by selection among a range of procurement options.

However, this result will not occur unless there is some systematic thought applied to the process with a view towards reducing or eliminating particular costs and changing activities and procedural requirements that lead to them.

The development of such a plan involves not only the purchasing manager, but the entire staff, since individual buyers are often better placed than the manager to identify specific types of inefficiencies that are built into a particular process. Municipalities and other governments tend to tie purchasing decisions far more to price considerations then many private sector firms. In the private sector, price will often be balanced against numerous other factors, such as strategic relationships and security of supply.

Stephen Bauld is a government procurement expert and can be reached at

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