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How Did Procurement Get This Way?

Posted By Robert Shumate, Thursday, May 07, 2015

This is the second 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.

In our last Procurement Innovation Series post, we looked at whether or not the procurement process was broken. To understand current procurement practices it is necessary to examine the history of how current procurement practices between the public and private sector developed in the US. In the early part of the 20th century, collusion and corruption were widespread in the procurement process. Few formal rules governing the process existed and those that did exist were frequently ignored. Fortunes were made by unscrupulous suppliers working with corrupt government employees, which inevitably resulted in inferior results. Eventually public outrage at the process resulted in significant reforms to the process that became the basis for modern day procurement practices.

During that period, efforts to reform the process were directed toward preventing collusion between the sellers and the public officials handling the purchase of the services. Much of the procurement reform during that period centered on the twin concepts of transparency and maintaining an arm’s length relationship between the buyer and the seller. Further, the notion of fairness in seeking the best results from the procurement by providing a level playing field for all providers was also embedded in the reform movement. The reform movement occurred over a fifty-year period and became embedded in the procurement culture by the end of World War II. These changes underlie much of our current procurement process. During the period from 1950 until the end of the century, the process continued to be defined and codified in both legal requirements and administrative practices.

In the early 80s, procurement practices began an almost imperceptible but significant change as the concept of Supply Chain Management began to enter the lexicon of the procurement process. This concept gained significant traction in the 1990s as technology advanced to permit sophisticated schemes for supply chain management to be developed. While these concepts originated within the business-to-business community, the public sector has used many of these concepts to manage their procurement cycles particularly as it relates to commodity procurements involving supplies, equipment, non-technology services, etc.

During the latter part of the 20th century, procurement reformers began to become concerned that current procurement practices were ill suited to the process of procuring technology projects. Technology projects, such as information systems, involve complex procedures that are rapidly changing and often represent products not yet designed and for which there is little precedent, including the pricing of the proposed systems. The rigidity of current practices often did not permit buyers and sellers to communicate in such a way that mutual understanding of the problem was reached – often resulting in unsatisfactory results. This problem is only going to be exacerbated as we deal with the procurement of Cloud Computing, Software as a Service, Infrastructure as a Service, and similar technologies.

The objectives underlying the evolution of the procurement process are commendable and in the public interest. Past history is rife with examples of what happens when transparency and public scrutiny is subverted. Inflated cost and shoddy performance have often been the twin consequences of such lapses. The reforms of the first half of the 20th century served the public sector well until the beginning of the technology era (circa 1990) when the complexity of the technology began to come up against the rigidities embodied in prevailing procurement practices.

One of the most important questions that must be addressed is how to maintain the concepts of transparency and fairness in the procurement process and still allow for flexibility from the more rigid requirements for technology procurements. Solutions that may be available to improve the process will require a great deal of research, study experimentation and enlightened discussion between members of both the private and public sector.

The next article in the Procurement Innovation Series begin our coverage of 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.

Don’t forget to provide your comments!

Next: Preplanning for the Procurement

Future Posts:

  • 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:  Procurement History  Technology 

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