profit from procurement

The Procurement Act – it’s time for change

05/02/2024

The Procurement Act will liberate Public Sector authorities from the restrictive procurement processes of its predecessor regulations.

In so doing, procurement will become a far more strategic and commercial activity, thus making implementation of the Procurement Act as much about Change Management as it is about Strategic Procurement in the short to medium term.

Depending on where the organisation is on the journey towards strategic procurement, it could take up to three years to become fully aligned with the objectives of the Act.

Strategic Procurement comprises five key elements which must be driven by the Organisation’s/Company’s Strategy.
Risk sits across them all.

These are:
·       People & Organisation
·       Process Management
·       Contract & Supplier Relationship Management
·       Performance Management
·       IS Systems & Procedures

Each of the above will require varying degrees of change, but perhaps the most significant will be driven by the Procurement Act’s Pre-Market Engagement and Contract and Supplier Relationship Management (CSRM) requirements.

The more strategic the product or service being procured, the more the people leading the procurement will need to behave with a more commercial and strategic mindset rather than a process mindset. This can be achieved through training or recruitment but given that the procuring team will be negotiating with highly trained and experienced sales teams, ensuring that the appropriate skill set exists within the procurement team is critical.

Strategic procurement does not stop when the contract is signed, yet often organisations behave as though it does.

CSRM is a critical part of the procurement process, but it has often been overlooked. The Procurement Act will drive improvement in this area as emphasis is put on the buyer to consider and measure life cycle costs of the procurement. This, in turn, will drive innovation as procuring organisations and suppliers work together to deliver goods and services more efficiently.

To maximise the potential benefits of CSRM, it is essential that the procuring organisation has the appropriate personnel and processes in place. Indeed, CSRM is not just about realising the benefits, it is also about mitigating significant risk to the organisation’s reputation and financial viability. Seventy five percent of the value of the procurement savings can be lost over the life of the contract if it is not managed properly, but with key strategic contracts involving the purchase of services such as gas installation & maintenance, failure to manage the contract could be catastrophic.

With the Act coming into force in October this year, now is the ideal time for organisations to start managing the change necessary to travel on the journey towards strategic procurement.

The Procurement Act requires it.

Authors: Douglas MacKellar & David Turner

Douglas MacKellar and David Turner are experienced procurement professionals in both the public and private sectors. They bring a ‘hands on’ approach to learning, guiding their clients through procurement activity by demonstrating what they have learned by ‘doing’.

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