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Is the Procurement Process Broken?

Posted By Robert Shumate, Wednesday, May 6, 2015

This is the first of an eight-part series on procurement practices in information technology. This series is authored by Bob Shumate, a Member Emeritus of the IJIS Institute and the chair of the IJIS Institute’s Procurement Innovation Task Force. The material in these articles covers the findings of the Procurement Innovation Task Force and offers some insight into the problems and solutions in procurement evident in today’s information technology markets.

Over the past three decades, technology procurement within the public sector has continued to produce substandard results in terms of subsequent performance. In 1995, the Standish Group conducted a study of IT contract performance results. They found that 31% of such contracts were abandoned before completion, while 53% were challenged, defined as either over budget, late, or did not deliver the required features (challenged). There is little evidence that contract results have improved that much during the ensuing period. In 2009, a similar study by Standish showed 24% of the contracts were canceled and 44% were challenged.

The collective attention on the procurement problem often points to events with significant media attention and key power players. However, thousands of technology contracts, ranging in size from two million to fifty million, end up as failed or compromised efforts and attract little attention beyond the parties affected, even though they collectively result in hundreds of millions of dollars of wasted effort.

So why are so many projects going badly?

Is the procurement process, as it currently exists, broken? If so, what does it take to make it more responsive to today’s technology needs?

Recently (2013) the Code for America Foundation, the Omidyar Network, and the Sunlight Foundation conducted a procurement survey of local government entities to try to determine what problems local government entities faced. (http://www.codeforamerica.org/blog/2013/09/27/the-state-of-local-government-procurement/) Here are some highlights from the survey effort:

  • 96% of the survey respondents indicated that they face "significant” challenges procuring technology.
  • 64% identified writing well-defined statements of work as a major challenge.
  • 25% identified finding enough qualified bidders as a major challenge.
  • 25% identified screening applicants as a major challenge.
  • 21% identified lacking institutional knowledge of effective technology as a major challenge.

The relationship between the procurement process and the success or failure of the resulting project is not fully understood. It would be unreasonable to assign all of the blame for contract performance failures on the procurement process alone since management of the contract activities after the procurement is complete can be a contributor to failure. However many people who have examined contract failures believe that the procurement process itself is a significant contributor to the high failure rates.

Procurement practices are often directed toward creating an adversarial relationship between the purchaser and the supplier. This is exacerbated by adversarial contract negotiations after the procurement is awarded that further cements the two parties as adversaries rather than two parties that have a common interest in producing an acceptable product at an agreed upon price. The nature of software and related services are sufficiently complex that a partnership between buyer and seller is more likely to create a productive relationship than when the Buyer and the Seller view each other as adversaries.

The procurement process, particularly as it relates to the acquisition of technology products or services, is a complex activity that involves a variety of activities and skills. Because of this, the concept of producing a comprehensive roadmap for changing the process is extremely complex and involves a very broad community of both public and private entities. When we speak of the procurement process, we are referring to procurement for technology projects primarily at the state and local government level. Procurement for commodities such as desks, vehicles, supplies and similar items, while important are not included in these discussions.

This Procurement Innovations Series will include eight articles, with this being the first. The next article will discuss how the procurement process got to the state it is in, and the remaining articles will cover the procurement process for technology products and services, which is divided into six segments. In each segment, we will discuss ways in which the procurement process can accommodate the needs of technology procurement without compromising the basic tenants of good procurement practices, transparency, and fairness.

Stay tuned for more on this incredibly important topic, and feel free to get involved in the discussion here and provide your thoughts.

Next: How Did Procurement Get This Way?

Future Posts:

  • Preplanning for the Procurement
  • Defining and Articulating the Problem
  • Preparing and Disseminating the Formal RFP
  • Evaluating Responses to the RFP and Selecting a Supplier
  • Negotiating a Contractual Agreement with the Selected Supplier
  • Contract Oversight and Management

For further reading: https://ijis.site-ym.com/?page=Procurement_Resource

Tags:  contract performance  procurement 

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