Public Sector Backwardness in Sourcing and Cost Management (Part 1)

- January 28, 2013 9:07 AM
Categories: Commentary | Tags: , ,

Having gotten to know a good number of executives and consultants over the years working in public sector sourcing in the US – not to mention my friend and UK-based colleague Peter Smith’s contacts – it strikes me that sometimes an environment with the least public sector guidance and required rigor is the best when it comes to strategic sourcing and negotiation. The situation in the UK is particular out of control given how many of the advanced techniques and features that public sector employees could be using in tools such as Emptoris, BravoSolution and Intenda sit on the shelf or go unused in other platforms, either owing to ignorance (not the main cause in our book) or required processes that do not enable new approaches.

But the Federal government in the US is not much better. The absurdly long and complicated Federal Acquisition Regulation (or more simply known as the FAR), spells out procurement policy and check-the-box requirements (“thou shalt …”) but scarcely focuses on realized savings and value for tax payers– for example, budgeting impact and strategy for procurement, elements of advanced negotiation approaches, etc. A recent FCW article titled Old procurement tools Gain New Luster highlights the fundamental issue when it notes that “many tools that are likely to help improve the system in 2013 have been sitting in agencies’ arsenals for years, often unused.” This includes the Federal approach to strategic sourcing, which “began to re-emerge in 2012 … [Based on the] principle of volume buying for lower prices, it can lead to significant savings, but agencies have not been using the technique well.”

The popular concept of leverage and demand aggregation programs leveraging strategic sourcing efforts across Agencies and Departments in Federal government dates back to a push in 2005 by the Office of Management and Budget. And more recently, “the Obama administration renewed the call in a memo released Dec. 5, 2012,” FCW notes. But driving adoption is easier said than done. I’m sure Spend Matters readers are as appalled as we are that federal procurement efforts lack the same teeth and mandates of those in the private sector. Quotes such as this in the article, “The government will undoubtedly move toward more strategic sourcing, but it will take a while,” continue to make us angry given the need to cut spending in Washington.

But might there be a less structured hope than informal strategic sourcing efforts? Check back for Part 2 later this week.

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