Georgia’s efforts mark the first time a U.S. government entity has chosen to dramatically transform the procurement function to enforce contract compliance and make a more strategic, savings-oriented approach to procurement possible. At its core, the goal of Georgia’s efforts is simple: to increase the value of taxpayers’ dollars through the consolidation of buying power and the negotiation of more favorable terms and conditions with suppliers in return for the opportunity to compete for more of the state’s business.
Not surprising, this new approach calls for far-reaching skills and talents not normally associated with public sector procurement operations, which historically have served as processing centers. But even before the state could consider what skills were required, the law first had to change.
Like many states, it was unlawful for Georgia’s employees to negotiate with suppliers. In keeping with the bid system that is synonymous with government, state contracts were awarded to those suppliers that offered or predicted the lowest price. Additional negotiation was simply not allowed.
In late 2005, legislators in the state’s House of Representatives and Senate enacted HB 312 – a bill that allows Georgia’s procurement professionals to negotiate more favorable terms with suppliers submitting proposals in response to requests for proposals. This legislative action was crucial, for without it Georgia could not fully leverage the skills it planned to develop and attract.
With the authority to negotiate on behalf of the taxpayers, Georgia is now implementing its new procurement system. With it the state plans to transform its procurement operation from a processing and simple transaction function into the leading edge of the state’s efforts to generate savings. The new system will aggregate Georgia’s significant buying power – Georgia is the 17th largest economy in the world – and ensure compliance with the contracts that result.
Just what skills are required to transform government procurement into a strategic function? Public sector professionals will increasingly be called upon to exhibit the same abilities and business acumen celebrated in the private sector, where the focus on efficiency and savings is mature and expected, including:
- Strategic Sourcing Expertise: With the ability to aggregate buying power and see where spending occurs, it will become paramount for government procurement professionals to have the ability to leverage newly available data to identify strategic sourcing opportunities. These individuals will increasingly be reviewed not only on their ability to ensure that state contracts are utilized but also on the savings they generate through the sourcing decisions they make and the corresponding impact on the bottom line.
- Negotiation Expertise: While the act of negotiation is largely foreign in government procurement, more states will follow Georgia’s lead in giving procurement professionals the ability to negotiate beyond the issue of cost. Indeed, this will be crucial to ensuring that agencies continue to provide services as tax revenues fluctuate with economic conditions. In Georgia, Tim Gibney, assistant commissioner at the State Purchasing Division of the Department of Administrative Services – himself a veteran of private and public sector procurement – looked to an experienced private sector professional to serve as his director of strategic sourcing. The importance of attracting such talent will increase as the ability to maximize the value of public funds becomes paramount.
- Project Management Skills: As government emulates the private sector and pushes forward in its efforts to realize the efficiencies that result from new technologies and new ways of conducting public operations, the ability to ensure that projects are completed on time and under budget will increase in importance.
- Change Management Experience: As large-scale private sector initiatives reveal, the transformation of long-followed processes cannot be undertaken in a vacuum. It will be increasingly important for procurement professionals not only to manage change and achieve buy-in from employees but also to develop an environment that encourages people to learn new skills and provides them with the tools and support they need to succeed. In Georgia, the creation of a Strategic Sourcing Knowledge Center managed by a technology and management consulting veteran will ensure that such cultural change is as smooth as possible.