I have always held the opinion that in the public sector, buyers need to understand both business and government.
To understand government, a purchasing manager must appreciate both the intricacies of the law of tender and what causes a particular transaction to turn into a political football.
Buyers, and even more so purchasing managers, must be able to provide innovative strategic leadership to the municipal administration in relation to procurement and all other aspects of supply chain management.
Since municipal procurement operates so closely to the coalface of municipal program and service delivery, municipal purchasing staff need to improve their theoretical understanding of the business process as well as develop stronger, practical, problem-solving abilities, in relation to decision-making within a dynamic environment.
At one time, purchasing professionals received largely on-the-job training, but serious doubts could be raised concerning the effectiveness of this approach.
However, as I have noted in many articles, for the past two decades the private sector has moved towards a much more aggressive approach towards formal programs of training.
The Purchasing Management Association of Canada (PMAC) is a leader in delivering these types of programs. I have made a strong argument from the time I was on the Ontario board of the PMAC that a similar approach to training should be adopted across the municipal sector, perhaps with training specifically geared to the needs of the municipal procurement staff.
My company offers over 70 of these training programs that would improve the understanding of the way the industry, both in goods and services as well as construction, relates to the rules and regulations of government process and procedures. Such training would underpin the integration of municipal procurement into the overall strategic management process of the municipality, rather than leaving it as primarily a corporate control function — a shift which occurred in the private sector over 20 years ago.
As much as municipalities have failed to keep abreast of changes in private sector procurement, the same is true of many municipal purchasing policies and procedures and also municipal contract documentation.
Purchasing policies and procedures should be revised in light of changes in the law, changes in market conditions and changes in customer performance. For instance, over the last 20 years more attention has been paid to the environmental implications of procurement options. It is extremely important that staff get clear guidance from the policies and procedures as to how environmental considerations are to be factored into procurement decisions.
These need to be made public so that the suppliers who manufacture green products can identify municipalities as a likely market for their products, even if they are sold at a premium above less environmentally friendly ones.
Another possible area in which municipalities might be well advised to consider revising their existing purchasing bylaws is with respect to the enduring problem of low-ball bidding. Municipal procurement suffers from disreputable businesspeople no more than any other line of commercial activity. However, any system of procurement that operates according to relatively rigid criteria is likely to invite abuse. Considering the number of problems that such bids have caused over the years, it is surprising that more municipalities have not given staff the clear direction to reject low-ball bids.
In the vast majority of cases, excessively low bids reflect either a mistake on the part of the bidder or a bad faith attempt to secure the contract and then use change orders or some other process to get the price raised to a higher amount.
As a working formula, a low-ball bid may be described as one that is below 50 per cent of the next lowest bid. Bids coming in lower than 75 per cent of the next lowest bid should cause some concern.
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.