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Procurement Perspectives: Procurement and the bottom line

0 125 Government

by Stephen Bauld

2015 has been another interesting year with construction projects and the way governments issue documents. Municipal procurement is a challenging environment. Municipalities lack the comparatively bottomless resources of more senior levels of government. They also have less capacity to spread risk and cost.
Procurement Perspectives: Procurement and the bottom line

 

Despite declining real revenues, the demands upon them have been increasing steadily in recent years due to the practice of downloading and the increasing demands of the public. Many municipalities must somehow deal with the problem of an aging infrastructure, while at the same time maintaining a level and range of services consistent with public expectations. In such an environment, it is becoming progressively more necessary to drive hard bargains, than certainly economical ones.

To do so, municipalities must learn to borrow from the lessons learned by the private sector whose tighter financial constraints are a closer approximation to their own, compared to the constraints applicable to provincial and federal governments. Over the years I have written many articles related to the process of supply chain management, material management and the adoption of a strategically focused approach to procurement. However, one may prefer to describe it in a way that offers municipalities their last best chance (at least on the expenditure side of the income statement) to meet these conflicting demands. There is no single magic formula that can be applied in adopting such a system. Rather, it requires a minute examination of individual practices to see which best tend towards maximizing value for money. To that end, established practice needs to be put under the microscope, and subjected to an exacting and painstaking cost-benefit analysis. Not only the procedure and approach, but individual purchase decisions (and the proposals that underlie them) also need to be subjected to a systematic process of critical review. Adequate resources need to be invested in procurement and control, to make sure the value is maximized. It would be going too far to suggest that a more scientific approach to procurement is the only thing that needs to be done. It is nevertheless a critical step that has to be taken. The importance of doing so is clear. Waste and other misuse of public money should not be allowed to become one of the grand traditions of democratic government.

I continue to put forward the idea that municipal procurement needs to be viewed as far more than the setting of rules and procedures to govern the manner in which goods and services are procured for the delivery of municipal public services and programs. It needs to be seen as an integral part of the process of service and program delivery. Both the purchasing decisions made and the rules and regulations governing the manner in which those decisions are carried into effect have a substantial impact on the cost of delivering services and programs. As a result, purchasing has a substantial impact upon the level of service that a municipality can afford to provide and the tax burden that it imposes upon its ratepayers. For this reason, treating the responsibility for purchasing as a low-level administrative function compromises the ability of any municipality to serve the public effectively and efficiently.

The value of the purchasing department as a strategic tool must be fully appreciated. It is not merely a support department, assisting in administrative and operational activity. Rather, it occupies a pivotal position between the planning and execution of strategy, because of its intimate relations with the operational departments that it serves, and its close relationship with the financial control aspects of municipal operations on the other. The bottom line for procurement and construction moving forward is a need to work together to achieve a common goal. Until this objective is reached nothing will change in the coming year.

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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