The past several years have seen a radical surge in the digital transformation of procurement practices in the private sector. This change has become widespread, as corporations seek to innovate in the name of cost reduction and risk aversion.
The public procurement sphere has traditionally been slower to adopt new technology and practices than the private sector. However public procurement is starting to show signs of the same sweeping digital transformation.
The benefits of a digitally transformed public procurement process are significant. Government bodies that transition to digital procurement systems and strategically adopt technology to help alleviate traditionally niggling pain points will find themselves more capable of meeting future challenges.
Public sector procurement organisations are aware of this and the desire to digitise their operations is widely present.
Andrew Cooke, Microsoft’s global policy lead for the public sector, noted last year that “We have heard from several governments that they both want, and need, to modernise their approach to technology procurement and to mitigate the risk of the public sector falling behind in the benefits made possible through digital transformation.”
However, meaningful friction points still prevent public procurement organisations from digitally transforming. Stricter compliance regulations, tighter budgets, and more complex approval processes for newer technologies like AI to be adopted are slowing innovation. Overcoming these pain points, however, can yield tremendous benefits.
The benefits of digitally transforming public procurement
From digitising records and user data to creating transparency in service of stricter ethical and ESG standards throughout the procure to pay process, digital transformation can have significant benefits for the public sector.
Public sector procurement is driven by different motivators than the (more or less) pure profit incentive of the private sector. In the private sector, even initiatives like risk management and sustainable behaviour are framed within the scope of their potential to protect revenue and increase brand value. This means that, in the public sector, digital transformation can have more profound benefits.
Sally Guyer, Global CEO of World Commerce and Contracting, pointed in a recent interview to the South Korean public procurement system, which has successfully deployed AI analytics to diversity, strengthen, and nearshore its procurement process.
She noted that 75.6% of the government’s total procurement spend is now awarded to SMEs through the evolution of its AI platform. The move has reportedly increased transparency in the procurement process and generated cost savings of $1.4 billion for the government and $6.6 billion for businesses.
Procurement transformation can also ease friction points between the public and private sectors. “Procurements are at that nexus between the public sector and how it spends public money and interacts with the private sector,” Warren Smith, Chairman of the U4SSC Thematic Group on Smart City Procurement, said in a recent report by the ITU.
He added however that, while technology has an important role to play, “what’s really key in all of this is how you build trust and confidence between governments, companies, and civil society – such as charities or social enterprises – who all have a role to play in that transformation journey.”
