Procurement continuity critical to managing pandemic
From the April 2020 print edition
When dealing with the challenges of the current pandemic, public sector decision makers should prioritize their procurement planning since their procurement operations are critical to ensuring ongoing services to the public and minimizing adverse impacts to the broader economy. This discussion provides some guidelines on how to manage ongoing procurement operations and how to deal with the stimulus spending that was recently announced in response to the global pandemic.
In addition to serving as a key method of delivering essential goods and services to the public
by securing critical supply chains, government procurement also serves as a major driver of economic activity. In fact, each year public institutions flow billions into local economies through the award of government contracts. Given this dual role as a critical channel for public service delivery, as well as a major driver of economic activity, it is a matter of paramount public interest that government procurement be managed with a high degree of speed and precise speed sion, especially in crisis situations.
While some public institutions may be tempted to shut down all non-critical aspects of their ongoing operations in response to a major emergency such as a global pandemic, that approach to business continuity will actually make the situation worse by triggering avoidable economic downturns. To put this challenge in context, government procurement accounts for 12 per cent of gross domestic product (GDP) across Organisation for Economic Co-operation and Development (OECD) countries and there is a strong correlation between higher levels of government procurement expenditures and higher living standards.
For example, the OECD reports that government procurement ranges from as low as 5.1 per cent of GDP in Mexico to as high as 20.2 per cent of GDP in the Netherlands. When the engines of government procurement fail, this has a stalling effect on the economy and an adverse impact on our living standards.
While public institutions should ensure that their staff are safe through social distancing and that their emergency operations are prioritized, they should avoid overreacting by unnecessarily shutting down other business operations that can be performed remotely. Leaving staff idle and ignoring general procurement operations will only prolong the impact of the global pandemic by causing serious economic disruption. Many suppliers, especially in industries that can continue to provide services remotely, are facing significant reductions in their business and would welcome ongoing business opportunities to maintain their own operations and avoid staff layoffs.
Public institutions should therefore revert to a virtual version of “business as usual” as soon as possible and, to the greatest extent possible, should prioritize all procurements that can be delivered remotely to minimize impacts to their business operations and to the overall economy. Unless the specific procurement falls within a legitimate emergency exception or another direct award exception, general procurement operations, as well as procurements funded by stimulus spending, should be conducted in accordance with open tendering protocols. For those areas that do not fall within the emergency exception or other direct award exceptions, purchasing institutions should accelerate their tendering cycles by leveraging early strategic planning for their more complex projects.
The internal decision-making process for the selection and approval of priority projects, including stimulus funded projects, remains subject to due diligence standards. While procurement operations should continue during the pandemic crisis, they need to be executed with both speed and precision.
For example, in a March 2019 report entitled Inquiry into procurement of work by Westland District Council at Franz Josef, New Zealand’s Auditor-General found significant flaws in the direct intervention by two locally elected officials in a rushed municipal construction project that was initiated to protect
a local wastewater facility from potential flooding. Those flaws included poor decision making and procurement planning, questionable authorizations and the absence of proper technical advice.
Similarly, in its 2010 report, the Ontario Auditor General found significant flaws in how the provincial government approved the funding for its $4 billion stimulus spending initiative. The Auditor General determined that the province failed to allocate adequate time and staff resources to the approval of thousands of municipal funding requests, that it failed to properly prioritize those requests, and that it failed to document the rationale behind its funding approval decisions to properly protect against the politicization of its spending decisions.