Since roaring onto the global stage, the novel coronavirus pandemic has both revealed the significant challenges faced by public procurement professionals and presented a glimpse of how government organizations can meet and overcome those challenges. As the public sector fought to secure the goods and services it needed to address a global health crisis, previously minor inconveniences and inefficiencies were rapidly amplified into major threats. Corruption choked supply lines and sent prices skyrocketing — often in areas already plagued by limited access to resources.
But if the pandemic brought out the worst in some, it inspired others to look for new, more effective ways to maintain transparency and accountability while providing swift, affordable and efficient access to goods and services.
Combatting a Global Crisis—and Broken Systems
Ubiquitous, bureaucratic and entrenched in the labyrinthine machinery of government, public procurement has its own unique challenges. Historically, it’s lagged behind the private sector in efficiency and innovation, and struggled to combat waste, corruption and inefficiency.
The pandemic reframed and emphasized the severity of these challenges with brutal clarity.
Seemingly overnight, public procurement organizations found themselves navigating a completely different marketplace than the one they knew. Lockdowns and quarantine measures threatened to disrupt supply chains. Opportunists, unwittingly abetted by a panic-buying, hoarding-minded public, raised prices on personal protective equipment (PPE) to outrageous levels, leaving front-line workers dangerously underequipped and over-exposed. And in less wealthy nations, the focus quickly shifted from obtaining affordable PPE to finding ways to obtain any PPE at all.
Around the world, government procurement organizations faced three primary challenges in developing their responses to the pandemic: opacity, corruption and incomplete or absent integration of digital technologies and policies.
Public procurement accounts for roughly a third of all government spending. The world’s governments spend about $13 trillion every year on public contracts. Yet only 3% ($363 billion) of that spend is publicly documented. This opacity breeds and perpetuates corruption and inefficiency, and damages the relationships and trust between governments and their citizens.
It also creates unintended bidding wars between entities within the same government. When transparency is low and the paradigm is competitive rather than collaborative, different states, departments and agencies can wind up bidding against one another for the same equipment.
Complicating the issue is the tendency of opaque organizations to meet emergency needs by removing what little accountability and transparency they do have, relaxing their rules to allow for faster purchases from whatever sources —reputable or otherwise — will promise to deliver.
In such an environment, it’s all too easy for opportunistic suppliers to cash in at the expense of public health. From vendors charging 25 times the normal price for respirator masks to no-bid, multi-million-dollar contracts going to untested companies charging eight times the pre-pandemic price, public funds can quickly flow into private coffers for suboptimal returns.
Digital Transformation Challenges
From process automation to deep data analytics, digital transformation technologies have a proven capacity to boost efficiency, reduce risk and build value for procurement organizations of all sizes. These capabilities have been leveraged with great success in the private sector by companies looking to protect their business continuity and strengthen their competitive advantage in “the new normal.”
However, while a 2020 study conducted by Deloitte found more than 76% of public sector leaders see digital technologies as (positively) disrupting to public sector procurement, only 41% said they were satisfied with how their organizations were reacting to and adapting these technologies. And of the 1,200 government officials surveyed, just 13% had digital policies and practices Deloitte classified as “maturing,” while 60% were still “developing” and 26% were still in the early stages.
The professionals surveyed cited competing priorities, lack of a digital transformation strategy, and insufficient organizational agility as some of the reasons their organizations were slow to embrace digital transformation technologies.
The Future of Public Procurement: Adaptive, Transparent and Digital
COVID-19 created a pressing need for precious and limited resources. And while much of the public sector did, and continues to, struggle with the realities of a post-COVID economy, some organizations were either already prepared for a crisis due to investment in digital transformation tech or ready to embrace novel sourcing solutions balancing transparency and accountability with speed, convenience and reliability.
For example, in March 2020, the Estonian government kicked off a “Hack the Crisis” event, leveraging its profoundly digital society (99% of public services are online) with crowd-sourced pandemic solutions, addressing not just the coronavirus pandemic but initiatives that will render Estonia more agile and resilient against future crises.
In Moldova, early efforts to combat COVID-19 led to a hasty plan eliminating accountability and reporting for contractors fulfilling government contracts. So a patients’ rights group called Positive Initiative collaborated closely with the government’s Ministry of Health to build a user-friendly, constantly updated public platform providing transparent information on government contracts related to the battle against COVID-19.
In South Africa, the government fought corruption by setting firm quality and pricing specifications for PPE, tied to “realistic current market prices.” In addition, the Africa Centres for Disease Control and Prevention is working with Novartis to build a digital platform to help companies leverage economies of scale to boost their purchasing power and ensure equality of access to quality equipment, medicine and goods.
To reduce risk and minimize business disruptions created by threats to their supply chains, many nations in Latin America were already investing in digital transformation long before the coronavirus came knocking. Chile, for example, has been investing in eProcurement since the 90s and revised its policies to help protect private enterprise as well as public health by providing accelerated disbursements for public contracts and formalizing and enforcing a multi-stage COVID recovery plan.
Other nations are following suit. Many are drawing inspiration from the Organization for Economic Cooperation and Development’s suggested policy response to the coronavirus crisis. The suggestion includes guidance on addressing the insufficiencies of digital infrastructure that hampered response to the pandemic, and building new, more collaborative, sustainable and adaptive policies that leverage both digital technologies and human ingenuity to guard against disaster.
As countries continue their COVID-19 recovery efforts, governments who embrace digital transformation and prioritize transparency and accountability will be those best equipped to take on the challenges ahead. They will innovate, updating their policies and practices to be more collaborative and communicative. And they will build procurement systems that meet today’s needs while insulating their supply chains — and their citizenry — against needless risk with sustainability, resilience and agility.