Why e-Procurement Fails in Public Sector, NGOs and PIUs
October 30, 2017
There are dozens of e-Procurement products in the market, yet those products fail when it comes to working in public sector or development world. There are reasons behind this failure.
Normally, public procurement learns best practice from the private sector and corporate purchasing. While corporate world indeed can teach a lot in various areas, such as business practices, market trends, supplier relationship, effective supply chain, etc., it fails to address the main idea of public procurement, i.e. creating public good. Instead, in corporate procurement shareholders expect procurement function to create and multiply corporate profit. Fair enough.
Obviously, corporations have CSR policies and various schemes showing how they care about societies and nature, however that is not what corporations are created for.
When it comes to adoption of corporate e-Procurement products by the public sector, these products are applied without any modification. And this is where the problem starts.
E-Procurement products coming from the corporate world are not created to ensure the level of transparency, integrity, public liability and equality, i.e. issues so important in every public procurement framework and thus coded deeply into public legislation.
Instead, the focus is on procure-to-pay solutions, requisitions and approvals, creating POs, i.e. the areas where corporations must have tight control and decent software, the areas that should be well-documented and automated to save time and resources.
Not every corporation organizes tenders. It would be fair to say most of them do not organize tenders. Many corporations work directly with long-term, qualified and reliable partners and they do not need to prove or justify the reason for contracting those partners, especially if the partner company successfully provided products or services to the corporation for the last 30 years.
In public sector tendering is a must. Therefore, speaking about e-Procurement products coming from the corporate world, we must mention the tendering module as the missing part in those products. Numerous e-Procurement products are being reformatted to include the tendering module, but those look more like ugly creatures, heavy and unfriendly. We see many of those creatures in the market, while not a single e-Procurement product has been created specifically for public sector from ground zero.
The best way to create a product for someone is to engage that someone into the development of the product. This is what is missing in modern e-Procurement applications offered to the public sector.
The e-Procurement products are created mainly by IT groups, involving angel investors, sometimes equity partners and the best insight those products get is part-time involvement of some finance staff in the process. No procurement professionals involved. One of the biggest mistakes is to think that someone else can do procurement work instead of procurement expert. This mistake mirrors in almost all modern e-Procurement products offered to the public sector.
Later, when it comes to choosing a product for any public institution, international organization or NGO, the officials, who normally are not involved in daily procurement activities, make decisions on selecting the final product. They make that choice relying on a track record of the product. The following logic is applied then: “well-known multinational corporations successfully use the product, our organization needs that decent product too”.
Officials making these decisions do not fully understand the difference between public and corporate procurement and do not imagine the damage this can cause to public funds' management. Most often these are political decisions and therefore no procurement expert is involved in the selection of the final product.
Products (the consequence)
It is heartbreaking to see the number of e-Procurement products having little or no relation to public sector and offering no solution for the challenges the public sector faces today. It is even more painful to imagine the amount of investors’ money spent for creating those products.
Instead of simplifying procurement and making it smoother, more disciplined and automated, modern e-Procurement products offered to public sector are super heavy, enormously complex and … useless. In other words, time and efforts spent for harnessing those products are much more than the energy spent for managing non-electronic procurement.
Because of reputation risks and to make the reports offered to the electorate good-looking, public institutions rush to buy e-Procurement systems and employ them. We witnessed cases where e-Procurement was forced from the very top to public institutions who did not even have internet connection (Kenya) and cases where applying for citizenship in the country is easier and quicker than registering as a vendor in the e-Procurement system (Mauritius).
Recognizing the above, Procurement Network has put the right people and ideology together to eventually develop the e-Procurement software specifically for public institutions, NGOs and PIUs.
Knowing how limited budgets are in some public institutions and NGOs, that unique solution will not require additional expenses, sophisticated equipment or special training.