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Public sector out in the cold
There’s a big party going on in the house of purchasing, and the public sector just isn’t invited.
Procurement managers from companies such as Ford Motor Co. are whooping it up over plans to cut the number of suppliers they deal with. They’ll keep the good ones, offer them more business, and ditch the bad ones. It should save Ford a ton of money on sourcing. The company will also enjoy closer relationships with a select few vendors. No wonder the approach is quickly gaining popularity.
Purchasers at these companies will be held in greater esteem. They’ll be encouraged to think far beyond cost. They’ll assess suppliers not to see if they offer the lowest price, but to determine if they’re potential partners for the long haul. They will carefully review potential vendors’ histories, five-year plans, annual reports, and use a keen eye and gut intuition to detect genius in a fledgling supplier. Then, they’ll make a solid case to top-rung executives as to why the supplier should be welcomed on board. Sounds like a challenging and infinitely rewarding career.
Meanwhile, public sector purchasers are metaphorically out in the cold, watching the warm festivities within. For them, there are no bold decisions on dropping or adopting a supplier. There is limited divining of ingenuity or forging of close, mutually-beneficial relationships. Public-sector buyers have to be fair and transparent and make sure every supplier gets an equal shot. They also have to waste countless hours and mental energy getting papers ready to defend against legal challenges.
They issue an RFP, they get challenged. They turn down a bid, they get challenged. They get up from their desks, they get challenged again. I exaggerate, of course. But consider the latest spate of legal action brought about by bidders against the government, and outlined recently in the Globe and Mail: Med-Emerg International Inc. complaining to the Canadian International Trade Tribunal over the loss of a $400-million contract to supply emergency and primary care services to the Department of Defence; a federal appeal by a British-Italian consortium led by AugustaWestland Inc. over the loss of a $5-billion deal to replace Canada’s dilapidated Sea King helicopters.
The examples abound. Of course, the private sector isn’t immune to lawsuits, but it does have significantly more freedom to shed troublesome suppliers—all in the name of strategic sourcing.
I’m not saying we should allow public-sector buyers to cozy up with a clique of their favorite vendors. More than ever, recent scandals in government spending emphasize the need for open, fair disposal of taxpayer money.
But on the other hand, constant legal action against the government is costing the taxpayer gobs of money. It’s putting many public-sector buyers into a state of constant anxiety, and it’s making tender documents longer and more complex.
At some point, the legislators will have to step in to create some boundaries for legal action. Not to allow politicians to bestow lavish contracts on their friends without censure, but to prevent everyday public-sector procurement from grinding to a state of litigation-induced paralysis.
Clearly, the only people partying it up in the world of public-sector buying these days are the lawyers.
Lisa Wichmann
Editor
Lisa Wichmann, editor of Purchasing b2b, may be reached at lisa.wichmann@pb2b.rogers.com
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