Gridlock ahead

From the December 2022 print edition

While some may be surprised and frustrated by your organization’s annual cycle of procurement gridlock, systemic procurement delays are inevitable unless you adopt proactive strategies to avoid

Paul Emanuelli is the general council of the Procurement Law office. Paul can be reached at [email protected]

them. This article explains how you can accelerate your tendering cycle by developing an annual procurement plan and by adopting a proper portfolio management strategy.

The foreseeability of annual gridlock
Every year, many institutions sit in procurement limbo, waiting for budget approvals. Every year, those same institutions find themselves in procurement gridlock once their budgets are approved and everyone converges on the procurement department at the same time to develop and release their bid solicitations. This annual logjam has particularly adverse impacts on time-sensitive procurements and on complex new projects that are short-changed on attention in a resource-limited procurement system.

While many in your organization, including repeat users of the procurement process, may still
be surprised by this annual gridlock – which they typically blame on inefficiency in the procurement department and on unnecessary “red tape” in the procurement process – these delays are foreseeable, systemic, and, unless you adopt measures to proactively prevent them, inevitable.

Yet, year after year, many organizations remain mired in this gridlock, putting unreasonable pressure on their procurement operations to approve questionable sole-source awards for recurring annual purchases, while incurring unnecessary risks by rushing complex new projects through the
system with flawed strategies and weak execution.

Failing to plan for peak demand
Organizations typically fail to staff their procurement departments at the levels necessary to quickly meet peak volume demands. This reality hides under the surface if you consider total staffing and total annual procurement volumes in isolation since, superficially, your procurement team may appear to be adequately staffed to process your total number of procurement transactions in any given year.

However, this game of averages fails to account for the post-budget-approval surge in procurements during the annual cycle. Since carrying excess procurement capacity to meet peak demand is not a realistic strategy for most resource-constrained organizations, the solution lies in flattening the demand curve by avoiding the annual post-budget surge that overwhelms the capacity of your procurement operation and leads to gridlock in the first place.

Flattening the curve requires strategic planning and a realistic understanding of procurement timeframes. While the time required to run a proper tendering process should be well known to everyone involved in the procurement cycle, project teams who are behind schedule coming out of budget approvals are notorious for failing to allocate adequate time to the tendering process or any time to the work required by the procurement department to prepare solicitation documents for public posting.

Annual plans and portfolio management
Organizations could quickly reduce their level of procurement gridlock, and the compliance risks that it creates, by adopting annual procurement plans that help flatten the curve of peak demand.

By allowing work to begin on time-sensitive and complex projects prior to annual budget approvals, bid solicitations can be finalized in advance for quick release once budgets are confirmed.

When presented with this option, many operational departments claim that this advance work is not possible since they are still waiting to know which projects will be approved in their annual budget. This weak excuse is, at best, a half truth. While a department’s exact total annual budget may not be known in advance, this does not prevent a department from ranking its time-sensitive and complex projects at the top of its annual budget request list, where those projects are most likely to be approved so that time spent in advance work is not wasted. Even if that advance planning list only covers half of the department’s procurement requirements for the upcoming year, cutting post-budget-approval peak demand in half would go a long way to eliminating procurement gridlock across the organization.

Further, time-sensitive contracts tend to fall in recurring areas. An annual procurement plan should stream recurring purchases to pre-established supplier roster framework agreements that use fast-tracked invitational tendering, as well as direct rotational awards for lower value contracts, so that repeat purchases never have to take up space in the annual gridlock of publicly posted projects in the first place. These multi-year framework agreements can be established in off-peak periods to help facilitate a strategic approach to portfolio management.

Future Considerations
Rather than remaining trapped in an annual cycle of gridlock and then blaming the procurement department and procurement process for the resulting delays, the adoption of advanced planning and portfolio management would go a long way to resolving the existing logjams in your procurement cycle.