Can we start taking an approach to spend management and compliance that nods to the free will of buyers? Kelly Barner discusses Libertarian procurement.
Public sector procurement has always gotten a unique kind of attention. Not only is it the sector of our field most likely to get general media coverage, when it does, it is almost always spectacularly bad news. Trying to regulate procurement may be well-intentioned, but things have a way of going awry when buyer free will is denied.
Here’s a perfect example:
In 2013, the Massachusetts State Lottery Commission awarded a $5 Million contract for advertising services. They required that a portion of the work be sub-contracted out to a minority or woman-owned supplier. All proposals were evaluated on cost and presentation as well as the diversity requirement.
The contract was awarded to a firm that did not earn the highest score for cost or presentation but did commit to sub-contract $12,000 (0.24%) of the work to a woman-owned supplier. As a result, another firm involved in the bid, sued the lottery commission. Not only had they earned the highest score for cost and presentation, they were a certified woman-owned business. Had they been awarded the contract, 100% of the $5 Million would have been awarded to a diversity supplier and the state would have gotten better results for less money. They did not receive the award because they did not submit a plan to subcontract the work, believing their own status covered the intent (if not the letter) of the requirement.
Talk about missing the forest for the trees.
Public sector procurement may take the majority of the heat, but private sector procurement is just as guilty of using rules rather than sound judgement to drive desired results. Onerous governance and harsh mandates can have the opposite effect of what we intend with ‘strategic’ processes such as sourcing and supplier performance management.
Technology and consumer expectations have advanced to the point where we can consider the possibilities of ‘Libertarian’ procurement, an approach to spend management and compliance that nods to the free will of buyers whenever possible, even if it means giving up some of the ‘control’ traditionally associated with spend management. Libertarian procurement might include:
- Allowing distributed buyers with strategic experience and category expertise to run their own sourcing projects.
- Evaluating the suitability of a full sourcing project on a case by case basis (I.e. sometimes when a buyer requests to contract with a specific supplier, they have already done their homework and procurement should just support them).
- Balancing supplier performance metrics with qualitative approaches to recognizing their total value contribution.
Sometimes internal colleagues want to work around procurement’s processes because they find them too slow or frustrating and just plan to push on principle. Other times, they really know what the right path forward is and can’t get started a minute too soon. The challenge is for procurement to tell the difference between the two. Understanding the motivations of stakeholders who want to exercise their free will is what separates spending mischief from spending vision. Procurement should be willing to take a chance when the conditions seem right, allowing vision to thrive even if the occasional mischief slips through.
Combining responsible spending principles with an increased level of trust for internal buyers will create challenges for procurement teams, but it will also create new opportunities and increased ownership on the part of internal stakeholders. Not being open to such change may actually be a risky move for procurement. After all, the more rigid and codified our role is, the more likely we are to be the target of automation initiatives. Any procurement team with their own healthy dose of free will should want to prevent that.