To take a proactive approach to procurement and the public sector, new ideas need to be implemented.
It is obvious that a strategic approach to procurement and logistics is essential, if the intent is to correct present-day issues related to tenders and RFPs. Strategic procurement represents a proactive approach to the crisis management of problems that take up much of the buyer’s time. This new concept is fully consistent with emerging managerial practice in the public sector.
Specifically, in Canada, governments are increasingly adopting a management for results approach in setting their expectations.
Previously, public sector managers were held accountable for the prudent use of the resources entrusted to them, the authorities used and the activities that they carried out. Unfortunately, this approach was found not to encourage a focus on the results produced by the resources. Instead, it led to a compliance-dominated approach to management.
In contrast, under a management for results approach, managers make their decisions by reference to what a given program is actually achieving for the people who it is intended to serve: the value of the program to municipal residents, for instance.
That value is then balanced against the cost incurred in delivering the program.
This approach encourages managers to focus more on cost and benefit than compliance.
A management for results approach requires long-term strategic planning towards stated objectives, recognizing this approach must be carried out within the context of the day-to-day operation of complex systems and delivery of services.
Nevertheless, managers must step back from time to time to review the actions, practices and the outputs they have achieved, to see that they are still appropriate given the long-term objectives of their organization.
Aside from incorporating an approach to procurement more clearly related to overall organizational needs and priorities, another basic goal of materials management is to identify potential problems in the procurement process before they arise.
Such an approach permits the purchasing department to devise methods of avoiding those problems or mitigating their effect.
Such problems may be legal or commercial in nature. Whatever the character of the problems in question, the identified solutions must be cost-effective. The method of avoiding the perceived problem must not be more costly to the municipality than the cost of living with the problem in its uncorrected state.
Materials management has both strategic and operational implications.
In order for a municipality to carry on its day-to-day operations, the procurement process must be managed to at least a minimum standard.
Materials management also has important strategic implications for a municipality. An efficiently run procurement system provides the necessary underpinning for budget containment, not only by way of minimizing expenditure but also by way of anticipating expenditure.
Proper materials management discourages wrongdoing on the part of the municipal employees and elected officials. If a municipality’s operations are run in what appears to be a highly efficient manner, there is less temptation to do wrong; less susceptibility to corrupting influence; and investors are more likely to be attracted to the municipality as a sensible location in which to carry on business.
From an operational perspective, the primary objective of everyone engaged in the materials management process is to obtain the right quantity of the right quality and description of materials at the right place and time — the so-called “Five Rights.”
The purchasing of construction services and materials constitutes the largest single form of expenditure for most types of enterprise, including municipalities.
The obvious goal of materials management is to achieve the lowest total cost of supply.
The tax implications of a poorly co-ordinated slap-dash approach to procurement are obvious. However, since municipalities compete against each other to attract new businesses to their territories, improving a municipality’s procurement process can ensure its competitive position.
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.