Increasingly, governments in developed countries are looking to sustainable procurement to rescue their foundering economies under the guise of “green” or “sustainable” procurement.

The United Nations has recently published a statement to this effect: “As the most influential purchasers in a national economy, who spend typically 15% to 30% of GDP on a diverse and wide range of goods and services, governments can drive the market for sustainable products through their procurement policies”.

Although the logical leaps from procurement policy to job creation are not large, there is yet little evidence to suggest the best ways to undertake these programs.

For instance, should governments be focused in creating certain types of jobs (e.g., goods vs. services, different types of technologies, etc.)? And if so, how does that manifest in procurement policy? Will prioritizing a “greening of the economy” also result in successful sustainability outcomes for governments?

Nevertheless, below is an abbreviated list of some procurement strategies that are being used across the world to assist in a “greening of the economy”.

·         Engage the private sector and other stakeholders early on to better understand needs, capabilities, capacities, etc.

·         Build people capacity with training, information sharing and tools / methodologies.

·         Collect quick wins through pilot projects and build from your successes.

·         As always, consider alternatives to actually procuring the good or service: rethink need, use less, re-use, recycle, recover energy, negotiate end-of-life management options, etc.

·         Embed changes to procurement processes including naming of projects, specification definitions, evaluation methodologies and performance criteria.

·         Seeking joint buying to provide additional economic scale to smaller suppliers of sustainable technologies.

A Procurement Exchange partner, PPI Consulting, recently hosted Shaun McCarthy from ActionSustainability. ActionSustainability is at the forefront of sustainable procurement activities in the UK, and Shaun is a founder of that firm.

If nothing else, the event highlighted the philosophical and technical decisions that need to be made to implement a fully functioning sustainable procurement program.

Some of the key questions that I took away from the session included:

·         How far down our supply chain should we be concerned about? Do we care about the activities of our suppliers’ suppliers?

·         How does one create a traditional business case for improved social, economic and environmental benefits? Should a traditional business case be required?

·         How can we avoid the adverse consequences of silo’ed budgeting practices on making sustainability decisions?

·         Should our suppliers be able to charge a premium for sustainability? In many cases, shouldn’t sustainability result in less expensive products?

·         How can we effectively lead our supply chain? What policies do we need in place in order to have the credibility to impose new sustainability requirements on our supply chain?

There is no simple answer to any of these questions. But I don’t think there is any debate whether sustainable procurement is part of our future. So, I’ll endeavour to keep on top of new developments in this area that I can share through the blog.

Some recent procurement news items, courtesy of Google Alerts, caught my attention with respect to the implementation of shared service models for procurement. For starters, I was surprised that it was even news. After all, isn’t this the accepted best practice now? It seems that might not be the case in Australia and Japan.

So, I thought this might be a good time to review what makes a successful shared service model. For reference, see a whitepaper produced by A.T. Kearney on the subject. I have picked which ones I believe are most relevant for the readers.

1.       Define the scope, set realistic targets. Typically, shared service models are best applied to more transactional activities. For procurement, this might include: RFP development, marketing, and process management.

2.       Create an effective governance structure. How will the executive reporting structure work? How can service levels be improved for internal customers? These are effected through the governance structure.

3.       Take your time. A.T. Kearney suggests that full implementation, depending on scale and scope, takes approximately 2 years. Even small organizations must recognize that it will take time to define and implement an effective shared services program.

4.       Choose your management tools. Should it be Service Level Agreements (SLAs) or Chargebacks? The management and administration of SLAs can be quite cumbersome. Yet it many organizations it is unclear whether chargebacks are resulting in the desired service levels. A trade-off between effectiveness and administrative headache is inevitable.

5.       Measure your performance. As the old adage goes, “you tell me what you’ll measure, and I’ll tell you what I’ll manage”.  Thus, to get the desired service levels, you need to create effective performance metrics.

6.       Focus on internal customers. Treat your internal customers like you would if you were running a program focusing on external customers. That means adopting a “customer is always right” philosophy and an “outside-in” approach to organizational improvement.

Maybe it’s election fever on both sides of the border that has me thinking about promises of “cutting government inefficiency”. Invariably, when the leaders have been chosen, the procurement or purchasing functions are squeezed for their contributions.

But what does an effective and efficient procurement function look like? Well, for the last 13 years, the National Purchasing Institute has tried to codify it.

They run an annual awards program for “Achievement of Excellence in ProcurementÒ”. The following is from their website:

“In 1995, the National Purchasing Institute established a program designed to recognize organizational excellence in public procurement.  The Achievement of Excellence in Procurement® (AEP) is awarded annually.  This prestigious award is earned by those organizations that demonstrate excellence by obtaining a high score based on standardized criteria.  The criteria are designed to measure innovation, professionalism, productivity, e-procurement, and leadership attributes of the procurement organization”

They provide 19 categories of assessment that span policies, technology, strategy, organizational considerations, vendor relationship management, training / certifications, etc. Each criterion is allotted a certain score and the total available score is 200. It is not a relative assessment; if you score 100 pts, you receive an award.

These criteria would be a great assessment for anyone wishing to figure out whether they’re meeting best-in-class procurement practices.

I’ve recently had some recent discussions regarding the Construction Sector Transparency Initiative. The purpose of which is to promote increased transparency and accountability in publicly financed construction projects around the world. It does this through the public disclosure of information – such as publishing government contracts online.

I profess no experience in the degree of corruption in construction (or any really) contracts in developing nations. But if someone is advocating for the process stewards, is anyone worrying about the business outcome?

This trade-off is inherent in every public procurement process everywhere. Officials become obsessed with a sound process. Is running a fair, open and transparent process to pick a vendor that under-delivers, resulting in wasted time and money fair? Wouldn’t this scenario qualify as a misuse of public funds as well?

In Canada I believe we have a 3^rd way. It’s called Fairness Advisory. This is a specialized service with growing application in the Provinces of Ontario, Manitoba, and Alberta.

Fairness Advisors are engaged at the beginning of a project. In this way they ensure that the fair, open and transparent process actually achieves the desired business outcome.

This is in stark contrast to process auditors or the publishing of contracts, which are backwards-looking solutions.

Here’s how I think it should work: the sponsors require that procurements are certified by a Fairness Advisor. The sponsors then develop a short-list of qualified Fairness Advisors from which buyers may choose from.  If the government does not abide by the recommendations of the Fairness Advisor during the procurement, they risk it being documented in the Fairness Report. The Fairness Report documents the entire process from start to finish.

Under this scenario, everyone wins. The public gets appropriate stewardship of their monies, while gaining some assurance of sound business decision-making. Politicians, although still accountable, get a form of insurance on the process and the business outcome by way of the Fairness Advisor’s report. Lastly, bidders can be assured that the procurement process is free from bias, and that the best bidder under the given rules will win.

First, let’s start from the beginning. Why is it that sustainable procurement in a public sector context is a big deal? The short answer is that the sum total of all government expenditures in Canada is often quoted to be $100 billion. With that kind of clout, suppliers may have the impetus they need to make sustainable goods and services their default offering, rather than a custom offering.

But what does sustainable procurement mean? ICLEI is the authority on this subject. They suggest that sustainable procurement is an approach to public purchasing that takes into consideration the environmental, economic and societal impacts of goods and services being purchased. 

This is contrasted against green procurement, of which we hear most about, that focuses on the environmental impact of goods and services over the full lifecycle.

Time will tell how sustainable principles manifest themselves in procurement transactions. As business leaders are concerned with getting the required business outcome and procurement professionals are concerned with conducting fair, open and transparent processes – who will be the steward for the sustainability goals?

Organizations that are leading the charge for the implementation of sustainable procurement practices set their own sustainability goals before imposing them on their suppliers. This is not only good leadership, but establishes the metrics to which suppliers will be evaluated.

Some great resources that are available:

http://www.gov.ns.ca/tenders/sustproc/default.asp

http://www.ottawa.ca/residents/environment/workplace/procurement_en.html

http://www.greeninggovernment.gc.ca/default.asp?lang=En&n=256986C5-1

Much investment has been made to centralize procurement and purchasing within organizational boundaries. Yet, much work remains to wring out savings across organizational boundaries.

The challenges with collaborative procurement are not insignificant. One must worry about the selection of appropriate goods / services, demand planning, allocation of risk and liability, establishing acceptable standards / specifications, effect on local economies, etc.

The best way to tackle these challenges is to collaboratively develop and implement a prescribed approach to sourcing, selecting and managing suppliers. This will not only make it easier to evaluate prospective goods and services for collaborative procurement but will also make it easier for new jurisdictions / organizations to join the program.

Now, not everyone is going it alone. In the US, collaborative purchasing is well established. The US Communities Government Purchasing Alliance (www.uscommunities.org) describes itself as such:

“U.S. Communities Government Purchasing Alliance is a nonprofit instrumentality of government that assists local and state government agencies, school districts (K-12), higher education, and nonprofits in reducing the cost of purchased goods through pooling the purchasing power of public agencies nationwide. This is accomplished through competitively solicited contracts for quality products through lead public agencies.

Today more than 32,000 public agencies utilize U.S. Communities contracts and suppliers to procure 1 billion dollars in products and services annually. Each month more than 400 new public agencies register to participate. The continuing rapid growth of public agency participation is fueled by the program’s proven track record of providing public agencies unparallel value.”

Many buying groups, of course, exist in the Canadian public sector as well. Recent research conducted by The Procurement Exchange (www.procurementexchange.com) suggests that the use of buying groups is more common as the size of an organization grows. What is not clear however, is what proportion of spend is accounted for by these buying groups. Given my experience in public procurement, I would venture: very little.

Procurement professionals don’t have it easy. Not only are they responsible for managing transaction risk, but they must also advise on structuring the transaction to get the desired business outcome.

A good guide to assessing whether your Request for Proposal (RFP) will achieve the desired business outcome is to apply a risk-based test.  Generally, risks may be considered to be an adverse event that negatively affects the business outcome for the project.

In a risk based test, all the major risks that have the potential to adversely affect the project are documented and categorized. These categories become the Key Components, which define the structure of the evaluation.

When you see RFPs structured such that proponents are required to respond according to the structure of, for example: Design & Construction, Operations, Financing, Management, etc . – this is risk-based structuring at work.

A schematic for this process is provided below:

By using this as a guide, and supplementing with additional evaluation criteria as required, you’re on your way to having more successful procurements.

To find out more about Ben Sorensen and his Blog, visit his page

The District of Columbia is proving that the use of Web 2.0 tools can bring greater transparency, efficiency and competition to a procurement – at virtually no cost. And the tools are simple enough that anyone with moderate internet skills would be able to implement them.

This week I had the pleasure to speak with Vivek Kundra, CTO of the District of Columbia. One of Mr. Kundra’s objectives is to review and apply popularized Web 2.0 tools such as wikis, YouTube videos, and Google Apps to a variety of government functions, including procurement.

The first test of these tools was the use of a free, open source MediaWiki (popularized by Wikipedia) for the District’s Evidence Warehouse project. The wiki contains the call documentation, video recordings of key events, the Q&A, and other key pieces of information. The content for this project can still be found at:

http://www.evidencewarehouse.ocp.dc.gov/index.php/Evidence_Warehouse

Given the positive wiki experience, the District evolved their projects into a Google Sites page. Google Sites allows you to create a group workspace without having to know any HTML code. You simply pick the functions that you would like to add to your website.

This allowed the District to add more sophisticated calendar functionality, document downloading, and a much improved user interface. Below is a site for the new Information Technology Staff Augmentation project.

http://sites.google.com/a/dc.gov/itsa-contract/Home

According to Mr. Kundra, undertaking projects in this manner has been positively received by all stakeholder groups as project transparency and efficiency has been improved. These tools not only reduce the number of paper-based information hand-offs required during a procurement, but also provide a single source for up-to-date content.