Agile Procurement & Good Governance – a NSW Planning and Environment Perspective
What is agile procurement?
A change in the traditional focus of procurement from a singular linear purchasing process towards an end-to-end iterative, situation specific service provision process.
Public sector procurement practices are based on the fundamental principles that procurement must be fair, open, and transparent. This is founded on the premise that public procurement must be designed in a way to prevent corruption, ensure equality, and avoid bias.
Unfortunately, from these principles of fairness, openness and transparency rose a myriad of rules, processes, policies, and templates that became more and more complicated over time. Mistakes would lead to trade complaints and lawsuits, and so more rules would be added, more contingencies, more processes layering on top of one another to reach where we are today – a robust process that can be rigorously defended but takes an enormous amount of time and resources to achieve results (that can sometimes be less than optimal).
Balance this against the world we live in, one of exponential change where new technologies are reaching critical adoption in record times, where governments are challenged to solve wickedly complex problems, and where disruption is a constant reality. We have shifted from discrete problems with fixed answers to holistic messes that require innovative approaches and collaborative solutions.
At our recent Seminar Series event on Agile Procurement and Governance, we invited Deon Stofberg from NSW Planning & Environment to speak to an audience of procurement practitioners about how his organisation is building it’s governance systems to enable agile procurement and to avoid the issue of being constrained by controls.
If you put 22 procurement professionals in a room and ask them what governance is, you will get 25 different responses. At DPE we do not have the answers, but I have some concepts I believe are worthwhile thinking about.
How to maximize the concept of agile procurement whilst ensuring good governance?
- Agile = Able to move quickly and easily
- Governance and controls:
- Governance = The rules of the game
- Controls = To monitor compliance to governance requirements
- Value for money = Par for the course in modern procurement
What is the difference between governance and controls? If you confuse the two, you start thinking that controls are governance and start building your systems around controls rather than thinking about governance. A simple analogy is to look at it like a sport. If you want to play the sport, you must know what the rules are.
In the public sector the rules behind procurement can be incredibly complicated. You don’t need to know all the rules, but you do need to know they exist. Then you ask, how does procurement enable the organisation to understand what the rules are and where to find the support they need? From a governance point of view, that is the role of procurement.
Controls are those things you put in place to give you a reasonable sense of comfort that people are playing according to the rules. You can’t review every person’s work, so you have to design your controls around your processes.
How does this fit together?
‘Systems make it possible, people make it happen’. There are a lot of modern IT solutions available these days, most have these inbuilt, it’s just a matter of configuring the systems to ensure they deliver on your objectives. Design your process and systems so that people in your organisation become willingly compliant.
How will this be achieved within the Department of Planning and Environment?
The way we want to design our systems is to follow a risk-based approach to procurement, governance and controls. What we’re aiming to do below the $150K threshold is design the system for the business unit to use themselves. E.g. if you need to go to market and it meets a certain threshold the system will tell you to get three quotes. We then aim to build the evaluation process within the system so it can be self-managed with very little procurement involvement. If people get used to working with this mechanism, they can start planning accordingly because they know it is all within their control and is lower risk. What we can then do from a procurement standpoint is have some random checks behind the scenes, leaving resources to focus on higher value, higher risk procurements.
As we discussed earlier, procurement can be a very complex process due to the need for compliance with NSW rules and regulations, governance etc. which makes it susceptible to more processes and policies.
While this is a fact of procurement in the NSW Government, we can still work to streamline this into one system so that we can reallocate resources to the high-value, high-risk procurements.
This concept sounds logical, the trouble is the devil in the detail that sits underneath that. How do you get systems to talk to each other, how do you ensure that your organisational structure fits correctly into the system and that the vendors are classified correctly? E.g. Aboriginal suppliers need to be correctly classified. How do you ensure delegations are pulled correctly into the system when you run your processes? That is the complicated part, but if we can balance governance and agile procurement, we can keep the engine running smoothly and the organisation can enjoy the journey.