As appeared in Digital Bytes 27th January 2021
The World Economic Forum claims: “Worldwide, governments devote an estimated $9.5 trillion each year to public procurement — an average of approximately 15% of national GDP. This money goes to public goods and services such as the construction of roads and the delivery of healthcare services, but also tends to line the pockets of corrupt government officials, corporate executives, and others who are involved in the procurement process. The problem is almost universal.”
Public Sector procurement has become a humanitarian issue. The world faces increasingly brutal challenges, and its public institutions are on the front line as we meet them and try to minimise the death and suffering that they bring. We need to arm these institutions with every possible advantage as they step up to fight the literally life-or-death battles against issues such as climate change, poverty, pandemics, and more. Technology can give us many of these advantages, but the current barriers to Public Sector adoption are formidable.
The Government has produced a Green Paper which sets out its vision for post-Brexit UK procurement, but does it miss the opportunity to embrace the Tech Sector and break down the barriers that prevent adoption in the places where we need it the most?
The love-hate relationship between the Technology Sector and The Public Sector has to be revolutionised if we are to give ourselves the best chance of tackling the unprecedented challenges of the modern era. Tech solutions using Blockchain, AI, Robotics, IoT, biotech, and others are often transformative — meaning that instead of providing incremental improvements in cost or function, they can cut out entire cost centres often whilst simultaneously improving functionality.
Public sector authorities need to adopt these solutions more desperately than ever before as they struggle to meet increasing demands with reducing resources. Perhaps the most significant problem though is that, even at its best, the whole system is intrinsically sub-optimal. Ironically, that’s because the pace of technological advance is faster than ever before. It’s simply impossible for buyers to be aware of all the developments that they could benefit from — let alone to understand the competitive landscape for each, or the socio-economic, or even environmental impacts that they generate. Another barrier to adoption is that there’s some real risk involved in managing a procurement process, particularly regarding specification, writing, and compliance. Imagine, for example, a case where a council puts together a specification for a payment processing platform but includes security specifications that are slightly out of date — potentially leading to the payment details of all residents and businesses being compromised. This type of potential liability often prevents public sector organisations from engaging with technology providers.
To make matters worse, the current procurement regulations also deter engagement from the Tech Sector since they require suppliers to enter lengthy and costly tender exercises. According to the Centre for Economics and Business Research (CEBR), even simple procurements carried out at a local council level cost about £45k, with about £8k of that being the cost to the council and the remainder being the cost to bidders responding to the tender invitation. Of course, larger procurement exercises, like central government tenders, can carry costs that are literally hundreds of times this level. Even at its best, though, the system is grossly inefficient because the next public body that wants the same solution has to go through the whole process all over again.
The Green Paper talks extensively about the need to adapt public sector procurement to enable the adoption of innovation. Whilst it’s impossible to not welcome and agree with the ambition, we need to question whether the strategy to deliver this is viable. A key premise of the Paper is that innovation is best procured more flexibly and, in particular, with more opportunity for a collaborative process that includes more negotiation with potential suppliers. This is a logical and well-intentioned, but ultimately flawed, premise. Whilst the strategy may achieve better outcomes in some cases (perhaps even in all cases), the problem is that it adds significant additional work and skills requirements to each procurement exercise… skills and resources that are simply not available.
So, to be successfully implemented, the strategies outlined in the government paper need to be expanded to provide contracting authorities with the resources that enable procurement departments to focus on the local aspects of the procurement exercise. For example, under the proposed regulations, a public body looking to electrify its fleet would need to invest significant time researching the options available, finding and engaging with vehicle providers, retro-fitters, charging infrastructure providers, finance providers, etc, negotiating local service requirements, price and payment terms… and so on. And every other public sector organisation would need to carry out exactly the same work if they were to choose to electrify their fleet as well. At a time when the financial and human relations burdens on the public sector are far more difficult to manage than ever before, we need to be providing support rather than adding to the responsibilities and workload of Contracting Authorities.
If the strategy outlined in the Paper is to be delivered without adding additional cost and resource drain, then the ‘legwork’ must be done for Contracting Authorities, freeing them to focus their own resources on ensuring that the products or solutions procured are most advantageously selected and tailored to their specific requirements. And most importantly, we need to streamline the process from the supplier perspective — eliminating the need for suppliers to go to the expense and effort of responding to formal tenders from every public sector body… for the same solution. For these reasons, the Green Paper poses a real and significant threat that the incompatibility of the Public Sector with early Tech adoption will be intensified… at a time when we desperately need to be bridging the gap, not widening it.
The other side of the coin though is incredibly exciting. If we can lobby for the inclusion of a centralised support body that seeks out emerging technology solutions from all around the world, evaluates them and creates fast-tracked procurement rails then we can break down the existing barriers to Public Sector adoption and arm ourselves properly in the battles against pandemics, climate change, poverty, inequality and every other challenge that we face in this unprecedented century.
If this all shows that the Public Sector should respond strongly to this Green Paper, then the same is true for missed opportunities that the Technology Sector, indeed the whole Supply Sector, needs to highlight. For example, 2020 has undoubtedly highlighted the need for transparency in Public procurement. Both the UN and the Organization for Economic Co-operation and Development (OECD) estimate that 10–30% of a public contract’s overall value is commonly lost to corruption. Sadly, despite its heavy focus on technology and innovation, the Green Paper makes no reference to how technological developments can, themselves, solve many of the problems that currently beset Public Sector procurement. Regardless of the truth behind allegations of cronyism and corruption, we need to move to a system where the allegations themselves could never be made — simply because the system would be proof itself against these problems.
And yet, the potential to use or even develop Blockchain solutions was not mentioned once in the Green Paper, despite the fact that this technology could apply an incorruptible audit layer within all Public Sector procurement. The use of Blockchain technology at the same time could bring far greater transparency to the procurement process and so engender more trust in the process of who and why a particular organisation has been awarded the tender.
In fact, the World Economic Forum has partnered with the Inter-American Development Bank and the Colombian Inspector General’s office on the most comprehensive study of Blockchain technology for public procurement and for public-sector corruption. So why, when we are ‘transforming’ Public Sector procurement, is this PoC not even referred to in the Green Paper? The question is serious in its own right… is there a reason for this? After all, it would seem unreasonable that the authors could have been unaware of these technology opportunities, especially after consulting with “over 500” institutions.
So, it is not just the Public Sector that needs to respond strongly to this Green Paper. Every business that supplies the sector, or has aspirations to do so, should lend its voice to a response that demands a review of the multiple technologies that can make this system fairer and more effective.
The CIPFA Technology Procurement Association is collecting Green Paper responses from both the Public and the Private Sectors. To add your voice, please contact the author at firstname.lastname@example.org. Richard Hallewell, who is the award-winning CEO of the CIPFA Technology Procurement Association (CTPA) and procurement specialists CPRAS. He is also VP of the UK Government Blockchain Association and has global leadership roles in numerous technology associations.