ntroduction
Information presented in this booklet and course is accurate as of the time of publication and
consistent with generally accepted public procurement principles. However, as research and
practice advances, standards, principles, and concepts may change. For this reason, it is
recommended that readers and participants evaluate the applicability of any recommendation
in light of their particular situations, changing standards, and jurisdictional guidance based on
their geographic location or political leadership.
Copyright © 2021 by NIGP, Inc. All rights reserved. No part of this publication may be
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recording, or other electronic or mechanical methods, without the prior written permission of
NIGP: The Institute for Public Procurement, except in the case of brief quotations embodied in
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permission requests, write to Director, Content Research and Development, at the address
below:
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Printed in the United States of America
ntroduction
Introduction
Table of Contents
Table of Contents .................................................................................................................. 1
Introduction .......................................................................................................................... 5
About NIGP’s NIGP-CPP Program ................................................................................................ 5
Guiding Principles of the NIGP-CPP ......................................................................................... 6
Conformance with International Standards ............................................................................ 6
NIGP’s Pathways Curriculum ....................................................................................................... 7
Test Specifications ....................................................................................................................... 8
Knowledge-Based vs. Situational Competency-Based Exams ................................................. 8
Exam Format ............................................................................................................................ 9
Preparation Resources and Recommendations ...................................................................... 9
Using the NIGP-CPP Guide ........................................................................................................ 12
Focus Area 1 — Strategy ...................................................................................................... 13
NIGP-CPP Action Statement: Choose and implement strategic improvements for the
procurement function. .............................................................................................................. 13
The Goals of Public Procurement .......................................................................................... 13
Procurement as a Strategic Partner ...................................................................................... 13
Strategic Alignment of Procurement’s Goals ........................................................................ 14
NIGP-CPP Action Statement: Identify, evaluate, and implement social and environmentally
sustainable procurement policies and other procurement priorities. ..................................... 15
Social Responsibility in the Public Sector .............................................................................. 15
Challenges of Social Responsibility ........................................................................................ 15
Focus Area 2 — Policy & Legislation ..................................................................................... 21
NIGP-CPP Action Statement: Advise the entity on how to resolve procurement related issues.
................................................................................................................................................... 21
Authority of the Procurement Professional .......................................................................... 21
The Impact of Legal Requirements on Procurement ............................................................ 21
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Introduction
NIGP-CPP Action Statement: Manage stakeholder expectations by communicating
requirements, responsibilities, and outcomes. ........................................................................ 22
Working with End Users and Stakeholders ........................................................................... 22
Expertise of the Procurement Professional........................................................................... 23
NIGP-CPP Action Statement: Create, lead, and provide holistic procurement program
oversight. ................................................................................................................................... 23
Strategic Planning in the Public Sector .................................................................................. 23
Focus Area 3 — Planning & Analysis..................................................................................... 26
NIGP-CPP Action Statement: Identify opportunities for strategic contracting initiatives. ....... 26
Identifying Opportunities for Strategic Procurement ........................................................... 26
Focus Area 4 — Sourcing & Contracting ............................................................................... 33
NIGP-CPP Action Statement: Manage the issues distinct to international business................ 33
Legal Hierarchy of International Law..................................................................................... 33
Trade Agreements and Treaties ............................................................................................ 33
Nuances of International Procurement ................................................................................. 34
Cultural Considerations of International Procurement......................................................... 36
Focus Area 5 — Contract Administration.............................................................................. 37
NIGP-CPP Action Statement: Ensure the efficiency and effectiveness of asset management,
warehousing, and logistics programs........................................................................................ 37
Asset and Inventory Management in the Public Sector ........................................................ 37
NIGP-CPP Action Statement: Recommend options to dispose of assets to maximize residual
value. ......................................................................................................................................... 40
Surplus and Disposal .............................................................................................................. 40
Social Responsibility in Surplus Management ....................................................................... 41
Focus Area 6 - Leadership .................................................................................................... 43
NIGP-CPP Action Statement: Create policies and procedures to support an ethical workplace.
................................................................................................................................................... 43
The Ethical Workplace ........................................................................................................... 43
Policies and Procedures in Public Procurement .................................................................... 44
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Introduction
NIGP-CPP Action Statement: Create a culture and system to foster continuous improvement.
................................................................................................................................................... 46
The Culture of Public Procurement ....................................................................................... 46
NIGP-CPP Action Statement: Provide procurement professionals development opportunities.
................................................................................................................................................... 48
Training within the Procurement Function ........................................................................... 48
NIGP-CPP Action Statement: Provide educational opportunities related to procurement best
practices to all(non-procurement). ........................................................................................... 50
Training for the Public Entity ................................................................................................. 50
Training Internal and External Stakeholders ......................................................................... 52
NIGP-CPP Action Statement: Communicate programs, policies, and procedures in support of
entity’s continuous advancement............................................................................................. 53
Importance of Communication ............................................................................................. 53
Types of Communication ....................................................................................................... 55
Communicating with Suppliers.............................................................................................. 56
NIGP-CPP Action Statement: Develop criteria for evaluation of internal and external
relationships and procurement’s performance. ....................................................................... 57
Performance Measurement .................................................................................................. 57
Performance Monitoring ....................................................................................................... 59
Implementing Change ........................................................................................................... 60
NIGP-CPP Action Statement: Align procurement change with entity goals. ............................ 61
Change Management ............................................................................................................ 61
NIGP-CPP Action Statement: Identify and address challenges and conflicts. .......................... 65
Challenges in the Public Sector ............................................................................................. 65
NIGP-CPP Action Statement: Engage stakeholders in development of entity key performance
indicators to achieve change implementation. ........................................................................ 66
What are Procurement Key Performance Indicators (KPIs)? ................................................ 66
Tracking Procurement Performance ..................................................................................... 67
Common Procurement Key Performance Indicators ............................................................ 67
Planning and Establishing Performance Measures ............................................................... 68
Focus Area 7 — Business Principles ...................................................................................... 70
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NIGP-CPP Action Statement: Establish a continuous improvement plan................................. 70
Establish a Continuous Improvement Plan ........................................................................... 70
NIGP-CPP Action Statement: Identify how changes in global, national, and regional economies
affect operations. ...................................................................................................................... 72
Globalization in Public Procurement ..................................................................................... 72
NIGP-CPP Action Statement: Develop and manage a thriving and resilient workplace........... 73
Probability of Disaster ........................................................................................................... 73
Business Continuity Plans ...................................................................................................... 73
Procurement’s Role Changes................................................................................................. 74
Document Procurement Services .......................................................................................... 74
Prioritizing Risk ...................................................................................................................... 75
NIGP-CPP Action Statement: Obtain and manage budgetary resources to further procurement
goals. ......................................................................................................................................... 76
Availability of Funds............................................................................................................... 76
Purchase Order Use ............................................................................................................... 76
NIGP-CPP Action Statement: Develop and implement a communication plan to enhance the
image of the procurement function.......................................................................................... 77
Communicating the Value of Public Procurement ................................................................ 77
Acknowledgements ............................................................................................................. 79
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Introduction
Introduction
The NIGP Certified Procurement Professional (NIGP-CPP) certification is a proven,
demonstratable, and strategic way for public procurement professionals to invest in their longterm growth. Based upon the theory and conceptual practice from thought leaders throughout
the field, the Institute’s new certification program shifts the focus of the learning from gaining
knowledge to building competencies, complimenting existing certifications and designations by
focusing on the full scope of a procurement professional’s capabilities, technical skills, and
behavioral services.
This NIGP-CPP Module B Guide is designed to help candidates prepare for the NIGP-CPP
Module B examination. Both this guide and the certification are aligned to NIGP’s Public
Procurement Competency Framework and Pathways course methodology. While the actual
examination questions are held in strict confidence by NIGP: The Institute for Public
Procurement and the NIGP Certification Commission, these preparation materials serve as a
focused study guide through similar application of dependence upon the foundational
curriculum.
About NIGP’s NIGP-CPP Program
Since 1964, when NIGP issued its first Certified Public Purchasing Official (CPPO) designation,
the Institute has led the initiative to drive a professional certification program that publicly
recognizes public procurement officials who have mastered the body of knowledge.
Throughout NIGP’s history, the NIGP Board never lost sight of the value of professional
certification, committing its Chief Executive and related resources to administer the UPPCC
certification programs.
Now, public procurement professionals can choose from a variety of credentialing programs
offered through Pathways. There are numerous certificate programs that can either be
standalone offerings, or they can be bundled and stacked to achieve a designation. The content
in these various programs can range from introductory foundational to mid-level to more
advanced and/or specialty areas that recognize life-long learning and skill development. In
addition to these educational innovations, we are excited to share that Pathways will now also
offer a professional certification program.
To institute a new professional certification, the NIGP Governing Board formed a highlydiversified Credentialing Design Team (CDT) in September 2018 to assist the Board in two areas:
defining the inherent challenges of the existing learning and credentialing programs; and (2)
recommending an array of options to consider when building a holistic learning and
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Introduction
credentialing program. As the CDT began its work, the team identified three major challenges in
the profession that the new credentialing system would address:
•
•
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Shortage of qualified public procurement professionals and the need for succession
planning;
Failure to transition from practitioner to leader; and
Failure to permanently establish procurement as a strategic function within entities.
In late November 2018, the NIGP Governing Board finalized the credentialing system
components to address these major challenges and asked NIGP staff to develop a
comprehensive business plan to implement a credentialing system. The business plan was
adopted in April 2019, and the Institute publicly announced its learning and credentialing
options under the Pathways brand in May 2019.
Guiding Principles of the NIGP-CPP
The NIGP-CPP was developed for you by your colleagues in public procurement based on the
following guiding principles:
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•
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The NIGP-CPP is perceived as valuable by public procurement professionals, their
supervisors, and their employing entities (e.g., district superintendents, finance
officers);
Employers should be able to use the NIGP-CPP to find qualified employees;
The NIGP-CPP values competency over years of experience;
The achievement of the NIGP-CPP must be rigorous and meaningful;
The NIGP-CPP must be flexible and adaptable to remain current and relevant; and
The NIGP-CPP must be comprehensive of enabling competencies.
Conformance with International Standards
NIGP’s credentialing system and structure complies with the International Organization for
Standardization (ISO) 17024 standards for professional certification programs. ISO 17024 serves
as the basis of the American National Standards Institute’s (ANSI) personnel certification
program administered by the ANSI National Accreditation Board (ANAB). The principal for
NIGP’s credentialing consulting firm is an assessor for ANAB. NIGP will be seeking third-party
accreditation from ANAB for its credentialing system once eligible.
The action is consistent with NIGP’s commitment to the third-party accreditation of our
educational program from the International Association for Continuing Education and Training
(IACET).
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Introduction
NIGP’s Pathways Curriculum
The Public Procurement Competency Framework (PPCF) is a comprehensive, universal guide for
professional development that focuses on the critical competencies you need to be a successful
and sought-after public procurement professional. The PPCF has seven focus areas comprised
of 33 individual competencies, all of which are critical to public procurement.
Each competency is based on a specific subject matter and taught in a modular fashion using a
variety of learning tactics from self-paced online courses to group assignments, case studies,
videos, and experiential activities. The PPCF gives you ultimate flexibility to design your learning
pathway and the option to pick and choose which competencies to focus on at different stages
of your career.
The PPCF’s focus areas and associated competencies include:
Strategy
•
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Mission and Public Benefit;
Transformation and Vision Creation; and
Social Responsibility Alignment.
Policy and Legislation
•
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•
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Enabling Regulations and Compliance;
Ethics, Integrity, and Transparency;
Legislation and Legal Environment;
Program Implementation and Management; and
Internal Customers: Advice and Expertise.
Planning and Analysis
•
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•
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Requirements Planning and Understanding;
Standardization;
Market Analysis and Forecasting;
Cost, Price, and Value Analysis;
Spend Analysis; and
Risk Analysis.
Sourcing and Contracting
•
Sourcing and Contracting Methods;
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Introduction
•
•
•
•
•
•
Specification Development;
Evaluation Methods;
Negotiations;
Disputes;
Protests and Appeals; and
International Procurements
Contract Administration
• Contract Management and Performance;
• Quality Assurance, Inspection, and Acceptance;
• Logistics and Transportation; and
• Asset and Inventory Management.
Leadership
•
•
•
•
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Driving Change, Innovation, and Agility;
Communication Strategies;
Problem Solving and Critical Thinking;
Talent Recruitment and Development, Succession Planning; and
Relationship Management: Internal Customers and Suppliers.
Business Principles
•
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Business Management and Continuity;
Economics, Budget, Financial Management and Accounting; and
Technology Management.
Test Specifications
Exam Structure and Breakdown
The comprehensive NIGP-CPP exam is built around 43 competency statements based on the
Public Procurement Competency Framework. Module B covers 19 of those competency
statements.
Knowledge-Based vs. Situational Competency-Based Exams
The NIGP-CPP is a situational competency-based exam, which differs from the more familiar
knowledge-based exam. Knowledge-based exams, with which most people have experience,
tests a candidate’s understanding by asking questions to which the answer is typically clear. For
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Introduction
example, candidates may be asked to identify the specific types of communication a
procurement professional may encounter.
A situational competency-based exam, on the other hand, presents scenarios focused on reallife situations that practicing procurement professionals may experience. For example, a
situational question may present a specific scenario involving a problem and then ask the
candidate how they would effectively communicate with leaders about that problem, given the
circumstances presented. Unlike knowledge-based exams, typically all or most of the response
options in a situational competency-based exam could feasibly be correct. However, this exam
requires candidates to critically analyze each response option and then determine the most
effective answer. Rather than approach situational questions in terms of how their entities
would act, candidates should answer based on general procurement best practices.
Exam Format
The NIGP-CPP is a computer-based, modular exam. The advantage of a modular exam is that, in
case you do not pass either of the modules, you would only need to re-take the module in
which you did not achieve a passing score. This may help reduce the total time you spend in retesting, it will reduce your exam fees and, hopefully, some of the stress and anxiety.
Preparation Resources and Recommendations
In preparation for the NIGP-CPP Exam, NIGP recommends that candidates take advantage of a
wide and diverse variety of preparation resources and activities. The below recommendations
are not intended to be a comprehensive overview of all potential materials that learners may
not be comfortable with, but rather a suggestion of content that can introduce content and
concepts.
NIGP-CPP Prep Virtual, Instructor-Led Course
The NIGP-CPP certification is designed to elevate professional standards, enhance individual
performance, and designate public procurement professionals who demonstrate the
competencies essential to succeed in the public sector. Promoting learner engagement in three
new critical areas not traditionally covered by industry designations—focusing on competencies
associated with Strategy, Leadership, and Business Principles—the NIGP-CPP Prep course
empowers students to assess their own strengths and weaknesses as they relate to the NIGP
Public Procurement Competency Framework.
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Introduction
Candidates of this course should enroll a minimum of six months prior to the selected test date
to provide enough time for independent reflection and additional study. Please note that
participation in this course does not guarantee success on the examination. Prospective
candidates can find the next offering availability of this course on the NIGP website.
NIGP Pathways-Aligned Courses
At the time of application, candidates may have taken an NIGP course related to either the
LEAP or Foundations curriculum or the Institute’s new Pathways methodology. Prospective
candidates are advised to seek out additional curriculum instruction based on the Pathways
model and the associated Public Procurement Competency Framework in support of furthering
their knowledge and performance in unfamiliar topics. Pathways offerings can be found on the
NIGP website and through recurring marketing communications.
Personalized Study Groups
Experts say that studying in a group can be more effective than studying alone.
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Each person in a group has professional experiences to contribute to the group.
Groups can provide motivation and support. Obligation to the group can keep an
individual going for the sake of the group.
Large topics can be better addressed when split up and assigned to several group
members.
Study groups can take many forms. At one end of the spectrum, study groups can be formal,
sponsored, and driven by a pre-set agenda. At the other end, they can be informal, selforganized, and flexible.
Entities or chapters may sponsor a study group, perhaps providing a single instructor or
facilitator and a meeting place in exchange for a fee. Self-organizing groups require more
discipline and motivation but may be more satisfying to the individual members. They may
meet in a room provided by a public library, a community center, an entity, or in private homes.
Ideally, the group size should be between five and fifteen members. If the group is too small,
each member is burdened with too much responsibility, and the opportunity for new input is
limited. Discussion and participation are limited in groups that are too large.
Study Group Logistics
This NIGP-CPP Prep Guide and Pathways curriculum should jointly serve as the study guides for
the group. The respective focus areas and competency statements should be divided up over
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Introduction
the period that the study group meets. Create a schedule that allows the last session to be
open for wrap-up and any topics that need to be revisited. It is often recommended that the
group meet once a week for 12 weeks.
Each meeting should be 2½ to 3 hours in duration. The schedule should be set and agreed upon
by all members.
It is important that the meeting place is free from distractions and of appropriate size and with
the necessary accommodations. Learners can also use digital interfacing materials, such as
Zoom, Google Hangouts, or Facebook to communicate with groups as well, promoting crossfunctional and multi-geographical learning perspectives.
Study Group Activities
Each member should prepare for the session. Relevant materials and references should be
brought, and participants should be prepared with questions and issues—as well as workplace
examples. Each session can combine presentations by a speaker (either a guest or a group
member), discussion, and Q&A. Unanswered questions should be noted and researched before
the next meeting. Study groups should spend time at each meeting summarizing key points.
They can create charts, diagrams of processes, vocabulary lists, lists of key points, mind maps,
and other summarizing devices.
Speakers
Outside speakers can be sourced from an entity or a chapter and should be well versed
in the topic of the meeting. It is advised that all speakers be certified. Speakers should
be notified of the agenda and the time that they must speak.
Ideally, they can stay after their talk and participate in the discussion and Q&A session.
Speakers from inside the group should be well prepared with their assigned topic and
adhere closely to the competency statements and associated tasks and responsibilities
in the Pathways curriculum and associated focus areas.
Identifying Questions and Issues
Study groups should actively identify areas of weakness and points of confusion. It is
important to leave the comfort zone and ensure that new areas and topics are explored.
As the NIGP-CPP Exam covers materials related to Strategy, Leadership, and Business
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Introduction
Principles, it is imperative that candidates review materials they may consider to be
outside the role of the traditional procurement professional.
NIGP’s Contact an Expert Function
NIGP members can use the Contact an Expert member service. This feature provides an easy to
use way to contact public procurement professionals that are subject experts to get additional
information in a specific area. Contacts may be made by email or phone. The Contact an Expert
feature can be found in the Membership section of the NIGP website.
Personal Study Time and Professional Reflection
As the Pathways curriculum and associated focus areas introduce new core procurement
competencies, prospective candidates should identify those NIGP-CPP action statements that
require additional research and reading. Frequent review of key information and thought about
how to apply that information to the procurement function are critical to preparation for the
exam.
Topics such as benchmarking, problem solving, communication, talent recruitment, ethical
workplace engagement, employee retention, leadership skills, and dialogue on social
responsibility in the public sector can be researched through Internet searches, business
journals, and general textbooks.
Personal study time should be a key preparation activity that reinforces classes and study
groups.
Using the NIGP-CPP Guide
For studying convenience, the NIGP-CPP Prep Guide reflects the structure of the NIGP-CPP
Competency Statements within the seven focus areas of the Public Procurement Competency
Framework. This guide may be read straight through or used as a reference book in conjunction
with a study group, a candidate’s personal assessment of their strengths or weaknesses, or
alongside the NIGP-CPP Prep Course offered through Aspire. Learners are encouraged to draw
upon additional resources as well, including but not limited to NIGP’s Global Best Practice
series, NIGP’s Research and White Paper information, and the NSite Member Community, all of
which can be found on the NIGP website.
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Strategy
Focus Area 1 — Strategy
For public procurement to function as a valuable, contributing asset to the entity, it must think,
plan, and act strategically, aligning entity mission and public benefit alongside social
responsibility. The public procurement professional must actively contribute their expertise to
benefit the public through helping create the entity’s strategic vison.
NIGP-CPP Action Statement: Choose and implement strategic
improvements for the procurement function.
The Goals of Public Procurement
The basic goal of public procurement is to satisfy the customer by obtaining the optimum
market response to solicitations for goods and/or services at a fair and reasonable price with
exactly what is needed (i.e., quality), when it is needed (i.e., timeliness), while serving the longterm interests of the entity by minimizing business and technical risks, accomplishing social and
economic objectives, maximizing competition, and maintaining integrity.
While the public procurement function has historically been a non-essential function, nothing
could be further from the truth. While the term “acquisitions” typically refers to the fulfillment
of commodity needs at the federal level, the terms procurement and public purchasing directly
relate to the state and local levels of government fulfilling a similar function. Critical among all
three concepts, however, is the shared need of working with internal and external stakeholders
alike to address their needs in a holistic, ethical, and legal manner, advising internal end users
on the best ways to spend the public taxpayer’s dollar.
Procurement as a Strategic Partner
Even though the goods and services that we provide may differ from entity to entity, the
importance of working with internal and external stakeholders and advisers remains constant
among public procurement professionals. Advising stakeholders can change the shape and
scope of a procurement and explore how the procurement function can provide strategic value
to governmental entities. This perception of public procurement as a strategic partner has
evolved over the years and identified a need to define values and guiding principles for public
procurement.
The importance of and the link between strategic planning and procurement planning cannot
be overemphasized. Like strategic planning, good procurement planning requires the gathering
NIGP-CPP Module B Prep Guide
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Strategy
of extensive information from both internal and external sources. The strategic plan needs to
provide the framework to develop procurement strategy and tactics.
Strategic Alignment of Procurement’s Goals
Leadership has come to realize that an effective procurement operation can impact the entity’s
ability to deliver needed services to demanding taxpayers. Proactively, the central procurement
function can plan for and initiate action. Reactively, the central procurement function merely
responds to the demands placed upon it. The following factors influence whether procurement
plays a proactive or reactive role in the planning process:
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•
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•
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The degree of sophistication in the entity planning process.
How much the entity depends on procured goods and services to meet its mission.
How top management views the procurement function.
The maturity and evolution of the procurement function within the entity.
The ability of procurement professionals to shift from tactical to strategic planning when
driving resource allocation.
Strategic procurement planning involves the transformation of the organizational mission,
goals, and objectives into measurable activities to be used to plan, budget, and manage the
procurement function within the entity. Examples of strategic procurement planning include
the:
•
•
Development of supplier relationships to enhance the procurement/production of
goods and services consumed by the entity.
Identification of specific functional demand attributes and/or linking of procurement
spending to specific goals and objectives within the entity.
One of the first steps in the strategic procurement planning process is linking the procurement
strategic plan to the organizational entity’s strategic plan. It is also important to identify
Procurement’s reporting structure so that it can be determined how to align Procurement’s
mission (purpose) to the department to which it reports.
All entities consist of both vertical and horizontal functions that must share a common purpose,
otherwise the system fails to deliver the right goods and services to the public. As an
interdependent government area, the procurement function would ensure that its strategic
procurement/buying plan includes this common purpose. Procurement is much broader than
simply assigning costs to goods and services consumed in an entity and establishing
compliance- based audit trails.
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Strategy
Procurement involves the management of resources to effectuate the determination and
delivery of the right commodity at the right time and place, and at the right price for entity
stakeholders.
NIGP-CPP Action Statement: Identify, evaluate, and implement
social and environmentally sustainable procurement policies
and other procurement priorities.
Social Responsibility in the Public Sector
As stewards of public resources, public entities have a responsibility to society. In many ways,
Procurement can be a strategic partner in planning for those opportunities.
The private sector has been aware of social and environmentally sustainable procurement
responsibilities for some time now. In fact, if you go to the website for any large firm, you will
likely find a page for social responsibility. The private sector is keenly aware that customers
want to spend their money with suppliers they feel good about. The public sector has not been
as quick to embrace their social impact, but that is because they did not have to. It is simply
about doing the right thing because it is the right thing to do.
Challenges of Social Responsibility
Because of the magnitude of governmental spending, policy makers have used public
procurement to address a variety of social and economic problems. Laws have been enacted
requiring that suppliers must: maintain fair employment practices; provide safe and healthy
working conditions; pay fair wages; refrain from polluting the air and water; give preference to
subcontractors from the same nation, state/province, or locality; award to small or minority-/
women-owned business subcontractors; and promote the rehabilitation of prisoners and the
disabled.
Social Responsibility presents itself through various programs commonly seen in a public entity.
The four most common are: Disadvantaged Business Enterprise (DBE) Engagement/Supplier
Diversity Programs; Environmental Sustainability Programs; Labor Laws; and Local Preference
Programs.
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Strategy
Supplier Diversity in the Public Sector
Government entities often pay a premium, directly or indirectly, to accomplish socioeconomic
goals. Occupational, health, safety and wage rate laws have added extra expenses to industry,
thus leading to higher contract prices. Similarly, the small business programs, despite their cost,
have provided considerable work for small businesses and in doing so have been effective in
creating new sources of supply, thus, increasing competition.
The setting aside of certain contracts for competitive participation by only targeted businesses
has been practiced for many years by federal government agencies and various state and local
entities.
Preference has been defined as an advantage given to offerors in a competition for contract
awards that may be granted based on pre-established criteria, such as ethnicity, residence,
business location, origination of the product or service, business classification (e.g., small
business), or other reasons.
While set asides or goals may enhance competition for selected suppliers, they do restrain open
competition. Preferences always restrain trade because the race or gender of the supplier does
not guarantee that the goods will be of the highest quality at the best price that the free market
can generate. Also, there has been much abuse of preference laws where suppliers engage in
creating a false front that the company is minority- or woman- owned to procure government
contracts.
Understanding and Engaging Disadvantaged Business Enterprises
Many procurement professionals do not have instant access to the MWBEs or DBEs they need
for the commodities they are purchasing. “How do I find MWBEs or DBEs?” is a persistent
question in many public procurement communities. Procurement professionals may not know
that small businesses exist for the commodities they seek because the MWBEs/DBEs often have
limited budgets and resources for marketing campaigns, and limited time and staff to attend
networking events.
The procurement professional must remember that MWBEs/DBEs are knowledgeable about the
business they are in; however, that does not necessarily mean that they are knowledgeable
about conducting business with government. This may mean that they do not even know
government contracts exist. Nor may they know how to find solicitations, how to navigate the
intricacies of each entity, how to properly complete an offer, or the implications of contract
non-performance.
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Strategy
MWBEs/DBEs often lack time and financial resources to obtain professional development on
business topics and licensing requirements and tax responsibilities. These suppliers also need to
be educated on how to respond properly to government solicitation documents.
Navigating these challenges take time to learn. Supplier and distribution networks may be
smaller, making them less competitive with larger businesses. Procurement professionals know
from experience that buying power is better leveraged with higher spend levels. The same is
true in the relationship between manufacturers and distributors. Many DBEs do not have the
same purchasing needs as their larger competitors; therefore, they have difficulties contending
with suppliers who have higher spend volumes.
Persistent stereotypes can create distrust among suppliers and end users. The end user’s
perception may be that MWBEs/DBEs are slower, more expensive, and not as attentive to
customer needs. DBEs may perceive that they have no place in the public procurement process
and assume that they will not receive a fair chance at working with public entities.
Environmental Sustainability
Environmental concerns encompass everything from global warming and ozone depletion to
the use and misuse of natural resources. One of the ways that Procurement can promote
environmental responsibility is to encourage “value procurement” of environmentally preferred
goods, in which the total cost to the environment is included in the value formula during the
planning phase of the procurement.
Many federal, state, and local governments are adopting sustainable procurement policies.
Individual entity policies, whether mandated, preferred, or recommended, establish
environmental procurement responsibility in areas of best value, energy efficiency, less toxic
commodities, and environmentally preferred services and construction. While working with
businesses, the community and other external stakeholders, Procurement serves as an entity
leader to implement environmental initiatives and maximize resource efficiency.
Environmental sustainability is a fascinating and complex concept that is vitally important to all.
The United Nations World Commission on Environment and Development defines sustainability
as being capable of meeting present needs without negatively impacting subsequent
generations' ability to fulfill their needs. Environmental sustainability measures present a
variety of opportunities for entities to address the stewardship of natural resources, including
but not limited to:
•
•
•
Management of waste;
Carbon emissions; and
Water conservation.
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Strategy
While individual responsibility is important, procurement professionals should be concerned
about environmental sustainability and identify potential opportunities to incorporate
environmental sustainability into the procurement process. With careful planning, procurement
professionals can increase value to their entities by leading them in cultivating sustainable
practices which may minimize risk and safety hazards, generate revenue, and/or reduce costs.
During the planning and specification development phase of the procurement for any
commodity, the procurement professional should consider the end-of-life phase of the goods
being purchased. The purchase request should also consider the impact of disposal on the
environment and how it can be mitigated.
Determining the best value of sustainable goods, services, and construction is a Procurement
responsibility. Best value includes the total cost of ownership and can be determined through a
life-cycle cost analysis. Total cost of ownership may include environmental performance,
durability, local production, affirmative market participation, social responsibility issues, and
human health matters.
The need for goods and practices that conserve and protect natural resources and the
environment has created a market for recycled materials, energy savings, conservation of
resources, and reduced pollution. Pursuant to an entity’s sustainable procurement policy, its
Procurement department may be responsible for the procurement of environmentally safe
goods and practices including but not limited to:
•
•
•
•
•
•
•
Reuse and recycle of goods and resources;
Disposal of organic and other solid waste;
Conservation efforts regarding transportation, energy, and water;
Disposal of hazardous waste;
Maintenance;
Pollution reduction or avoidance; and
Construction of buildings and infrastructure, using development practices and accepted
performance criteria that focus on the environment.
Disposal of hazardous material requires special consideration. Jurisdictional rules for disposal of
hazardous material can be very strict and fines for violation costly. This cost should be
considered when determining the total cost of ownership of any commodity requiring this type
of disposal.
Labor Laws
The International Labor Rights Forum discusses the impact Procurement can have on labor
issues by highlighting how the race to the lowest price often included trafficked, forced, and
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Strategy
child labor in the government supply chain. Historically, public entities awarded contracts to the
lowest responsive and responsible bidder, emphasizing judicious use of taxpayer dollars to
procure commodities. However, in the global economy, this same emphasis on low bid can give
an unfair advantage to suppliers who engage in unethical work practices to drive down cost,
such as creating goods through illegal sweatshop conditions or doing business in countries that
regularly use child labor. As the role of public procurement becomes increasingly strategic, the
ability to use evaluation criteria that go beyond lowest price has become more common.
Unfortunately, while best value procurement can help procurement professionals more easily
discover such labor violations, the global market supply chain is marked by such hidden
violations.
Governments are mega-consumers of many manufactured goods and services. As such they
should, in principle, be able to influence workers’ rights abroad via the terms of purchase
contracts. Yet, to date, little attention has been paid to the potential of public procurement to
promote respect for labor rights globally besides the international trade law framework.
One of the main objections to the inclusion of standards and reporting clauses dealing with
labor is the burden and cost to the supplier of this compliance. These costs will inevitably be
passed on to the taxpayer through the prices offered by suppliers, and the burden must be
carefully considered. As with all solicitation and contract requirements, they often have costs
that must be balanced against the achieved benefits.
Labor priorities and culture are a combination of current leadership and historical and cultural
traditions. Some states and cities have a historically strong organized labor presence. Similarly,
the labor movement is often tied to:
•
•
•
•
Human Rights Advocacy;
Child Labor Laws;
Wage Parity; and
Worker Safety.
While much of the labor discussion will focus on industry-specific or universal labor issues that
apply to all procurements, some procurements will need specific labor conscious attention. For
example, a specific scope may require background checks, e-verify, sex offender registry
prohibitions, declaration of previous convictions, or employee drug testing. Another scopespecific issue is whether the contract scope appropriately targets underserved classes. Finally,
the solicitation will need to include all the labor terms and the required compliance
documentation. These are often cost centers for the supplier and applying these requirements
after the contract award could disadvantage the winning offeror.
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Local Preference
Local businesses are staples in our communities and support many of our public and social
programs. They pay taxes and sponsor local organizations such as little league teams. They
know the community because they are a part of the community. Local businesses are within the
fabric of the communities they reside, and sometimes may experience the same or similar
challenges as disadvantaged businesses.
The foundation for developing positive supplier relationships begins with creating a climate of
trust and respect between Procurement and the supplier community. It is essential that all
suppliers be treated in a manner that promotes honesty, fairness, and transparency. In
addition, public procurement professionals should strive to build mutually beneficial supplier
relationships. The basis of such a business relationship is that the public entity and the supplier
will receive a positive benefit from the relationship. The goal of developing mutually beneficial
relationships is to achieve win-win agreements and will make conducting negotiations or
resolving potential contract disputes or disagreements with the supplier easier for the
procurement professional.
When considering strategies to promote local business participation and support the local
economy, it is vital that procurement professionals develop and maintain good supplier
relations. Suppliers not only provide needed commodities but are also a valuable source of
market information. In addition, good supplier relations help Procurement establish a positive
reputation in the community that will motivate other suppliers to want to do business with the
entity.
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Policy & Legislation
Focus Area 2 — Policy & Legislation
As stewards of the public trust, procurement professionals are held to a higher standard of
ethics than are most public employees, acting with confidence to wisely expend the taxpayer
dollars. It is vital they not only understand and follow applicable laws, but also that they act in
accordance with the intent of laws created to guard against favoritism, unfairness, and
unnecessary spending, meeting the needs of their entity without bowing to either internal or
external political pressures. Knowledge of the political environment and entity management
are necessary tools in order to do so.
NIGP-CPP Action Statement: Advise the entity on how to resolve
procurement related issues.
Authority of the Procurement Professional
The executive branch of government must delegate to procurement professionals the specific
authorization and authority to contract. Authority may be derived from express, implied, or
apparent authority. The most effective procurement statutes, regulations, and ordinances
establish the general parameters of authority. While not a lawyer or a member of the legal
sector, public procurement professionals are expected to be well versed in the application of
legal limits for each procurement. As such, the responsibility of procurement professionals to
comply with legislation, legal principles, and public procurement best practice guidance is
critical for the success of the function and for the entity. Legal staff are subsequently called
upon for formal guidance when risks have increased and are deemed to negatively impact the
success of the project.
The Impact of Legal Requirements on Procurement
Entities are guided by laws, ordinances, policies, regulations, and procedures that impact
procurement activities. Public procurement is quite different from the private sector. Public
procurement is restricted to activities that are authorized by law. The authority of Procurement
is limited by what has been included in the enabling legislation. The opposite is true in the
private sector, where one may do whatever the law does not prohibit.
There are three primary sources of procurement laws in any governmental jurisdiction:
•
Statutory laws include constitutions, statutes, ordinances, and charters. Statutory laws
are based on statutes or laws passed by governments. State or provincial statutes
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Policy & Legislation
•
•
provide state/provincial-directed legislative law. Ordinances and charters provide for
local and municipal entities.
Administrative laws are written rules and regulations and entity policy (developed and
promulgated by administrative and regulatory governmental agencies). Administrative
Law, provided by the applicable regulatory entity, has equal force and effect as
legislative law if it does not supersede the context of legislative law.
Common law is based on customs and traditions and codified through the legal system.
Common law is based on custom and usage or confirmed by court decision, i.e., a
collection of court decisions. Access to published judicial decisions is available through
volumes called “reporters” in major law libraries.
NIGP-CPP Action Statement: Manage stakeholder expectations
by communicating requirements, responsibilities, and
outcomes.
Working with End Users and Stakeholders
The relationship that procurement professionals develop with their internal clients is critical to
the success of the entity’s procurement process. The procurement professional takes the lead
in bringing stakeholders together and guiding them throughout the process. The lead
establishes expectations and explains what to expect as each phase of the procurement process
unfolds. Strong project management, communication skills, and emotional intelligence are
essential to leading successful meetings and discussions. As the procurement moves through
each step of the process, the procurement professional often serves as a voice of reason during
particularly sensitive discussions. The lead facilitates discussions by addressing differing
opinions and conflicts that may arise. Procurement professionals listen carefully to stakeholder
needs and show respect when providing guidance. They escalate issues when appropriate and
stand firm respectfully when someone tries to pressure them to take certain actions. They must
be willing to speak up and overcome the intimidation of hierarchy or rank.
Procurement professionals can often approach engagements with stakeholders like they
prepare for negotiations with suppliers. Stakeholders usually include individuals with various
roles within the entity, along with higher ranking leadership or politicians. Preparation is a key
principle to help procurement professionals be more comfortable and ready to engage in the
discussion. Prepare in a similar way to how you would prepare for a negotiation with a supplier:
delineate between positions and interests; use discretion; show empathy; step back and look at
the bigger picture; and be willing to offer alternatives. Finally, document the results to establish
clarity, detail issues of agreement, and provide transparency regarding the decisions reached.
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Expertise of the Procurement Professional
The procurement professional can share knowledge, market trends, and strategies during the
planning process that will ultimately result in a streamlined sourcing process and a more
effective contract.
Market research is also a critical part of specification development during requirement
planning. Product specifications continually change and reflect innovative and technological
advancements in production, materials, and manufacturing processes.
As needs are identified and solicitation development begins, it is critical that the procurement
professional establish strong working relationships with end users and stakeholders to ensure
the sourcing process is effective and efficient. This is typically referred to as the “5 Rights of
Procurement.” They are:
•
•
•
•
•
The Right Quantity;
The Right Quality;
The Right Place;
The Right Price; and
The Right Time.
NIGP-CPP Action Statement: Create, lead, and provide holistic
procurement program oversight.
Strategic Planning in the Public Sector
Organizational strategic planning is a process of determining the long-range goals of an entity
and establishing how these goals will be accomplished. It is a road map intended to help the
entity respond to new challenges and develop future opportunities. Strategic planning is “a
disciplined effort to produce fundamental decisions and actions that shape and guide what an
entity is, what it does and why it does it.” It is a complex interwoven activity that involves
multiple participants across various organizational dimensions. It is a set of concepts,
techniques and tools that helps an entity assess where it is, decide where it wants to go, and
determine the best way to get there. It is typically performed on an annual basis; however, it is
also used when an entity needs to expand or alter its capacities to address immediate
challenges and issues.
However, it is also used when an entity needs to expand or alter its capacities to address
immediate challenges and issues.
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Effective strategic planning requires a significant investment of time, energy, commitment of
staff and resources; however, for most entities, public and private, the long-term cost of not
investing in strategic planning is even more expensive. One of the main values of strategic
planning is to force a thinking discipline on everyone involved so that each action is designed to
carry out the focus of the entity’s strategic plan.
While governmental strategic planning is similar in theory and practice to strategic planning
used in the private for-profit sector, governmental strategic planning is more directed toward
addressing current and future societal issues and problems in rapidly changing environments. It
is carried out while staying within strategic and operational constraints and within both legal
and administrative capabilities. Another challenge to developing and implementing a successful
strategic plan in governmental entities is the uncertain tenure of the elected officials and
leaders. Exceptional strategic plans have been shelved part-way through implementation
because of the election or appointment of new leaders to the entity.
Strategic Procurement Planning
The transformation of the entity’s mission, goals, and objectives into measurable activities to
be used to plan, budget, and manage the procurement function within the entity. The ultimate
goal is to effectuate positive change in organizational culture, systems, and operational
processes.
The goal of strategic procurement planning is to establish a set of agreed-upon tactical goals
and objectives within the operational context of the entity, thus linking resource allocation
decisions in a priority-setting model. A thorough and well-crafted strategic procurement plan
will generate an effective and efficient procurement system.
Strategic Sourcing
A subset of the entity’s strategic procurement plan is a strategic sourcing plan. Strategic
sourcing is a methodology and process that enables procurement professionals to analyze what
and how they procure products and services, with the objectives of lowering costs to the entity
and improving supply fulfillment from the producer level to the end user (supply chain). In
addition, strategic sourcing can help Procurement improve supplier performance, eliminate
non-value-add activities and costs, reduce waste, and minimize risk.
This methodology requires strategic planning of procurements and development of policies and
procedures that are not intrusive to programs and operations. Some guiding principles of
strategic sourcing are: make procurements in a manner that reflects the greater good of the
entity, use cost-effective and efficient procurement methods, manage suppliers for
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Policy & Legislation
performance and comply with all statutes, regulatory provisions, and organizational policy and
procedures. A fundamental tenant of strategic sourcing is continuous improvement and
evaluation of methods and process to enhance effectiveness and efficiency.
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Focus Area 3 — Planning & Analysis
The direction of public sector organizations has generated increased demand for strategic
procurement planning and participation by procurement professionals in the implementation
of many projects—particularly standardization, out-sourcing, and public- private partnerships.
Risk is a critical consideration in the contracting and procurement process, and a thoughtful and
proactive approach toward risk, as it relates to specific procurement actions, and contributes to
the success of contract performance.
NIGP-CPP Action Statement: Identify opportunities for strategic
contracting initiatives.
Identifying Opportunities for Strategic Procurement
Strategic sourcing is a methodology and process that enables procurement professionals to
analyze what and how they procure commodities, with the objectives of lowering costs to the
entity and improving supply fulfillment. This is not a reactive approach; rather, it is a proactive
methodology that promotes effectiveness and efficiency. Some guiding principles of strategic
sourcing are:
•
•
•
Structure procurements in a manner that reflects the greater good of the entity;
Utilize cost-effective and efficient procurement methods; and
Manage suppliers for performance and compliance with relevant statutes, regulatory
provisions, and entity policies and procedures.
Strategic sourcing must be viewed in terms of a continuous process that attempts to identify
the best suppliers of goods and services for the entity, as well as to actively engage the supplier
community in delivering value that is based on analytical rigor rather than hunches, intuition, or
good sales pitches.
Traditionally, the most common process by which Procurement learned of a stakeholder need
is when it received a Purchase Requisition (PR). Because of procurement professionals’
knowledge of the market, they may be able to offer suggestions about items that are available
that may meet the need and result in cost savings to the department or offer improved delivery
and serviceability to the end user. Familiarity with the type of commodities requested will allow
adequate and correct information to be assembled for the procurement to proceed.
If other stakeholders within the entity have a need for the same goods or services, the
procurement professional could potentially capitalize on economies of scale by combining
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multiple requests into a single contract increasing quantities and lowering costs. An analysis of
entity budget requests may pinpoint indicators for dollar volume savings and anticipated needs.
Market Research Process
The results of the market research process are used to arrive at the most suitable approach to
sourcing commodities. The market research process consists of market research, market
analysis, and market intelligence.
In conducting market research, primary and secondary types of data will be utilized. Other
methods used to conduct research may include a Request for Information (RFI) or presolicitation conference/site visit.
Primary research is information that comes directly from the source. One can compile this
information or hire someone to gather via surveys, focus groups, and other methods.
Secondary research involves gathering statistics, reports, studies and other data from
government entities, trade associations, local chambers of commerce, or other resources.
RFIs are used in preparation for complex procurements (often procured via a Request for
Proposals process), where additional information is needed from the marketplace to formulate
an effective solicitation document. In using an RFI, the procurement professional can obtain
valuable information from potential suppliers by simply asking for the information from known
and qualified firms. The RFI process can also be helpful in obtaining multiple solutions to meet
entity needs.
A pre-solicitation conference is a meeting held with potential suppliers/contractors prior to a
formal solicitation document being developed. It is a market research tool through which the
entity can acquire an understanding of the current marketplace. This meeting informs the
industry of the entity’s anticipated requirements, assists the entity in understanding the
capabilities of the industry, and generates the interest of prospective contractors. The
conference is not a guarantee of any work, nor is it any kind of agreement, promise or contract
with any party.
In addition to completing market research, the procurement professional should conduct
market analysis, for example, cost and make-or-buy analyses and investigation of
leasing/renting options.
Before beginning the sourcing process, it is important to determine that adequate competition
exists within the supplier community. Oftentimes, the stakeholders can supply a list of potential
suppliers, but it is necessary for the procurement professional to apply knowledge from market
intelligence, ongoing market research of industries and trends, and to identify additional
sources.
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While receipt of a PR is one way to identify stakeholder needs, there is also a more proactive
approach. Rather than reacting to a PR, the procurement professional should partner with
stakeholders during their planning process. Stakeholders are always the first to know, and plan
for, a need they have identified. Often, they report on potential projects and make budget
requests at specific times of the year. By requiring entities to periodically submit reports that
outline anticipated needs for the coming year, the procurement team can identify
opportunities for volume purchases.
If procurement professionals can partner with stakeholders as they make their budget requests
and begin to plan for the project, Procurement can share knowledge, market trends, and
strategies during the planning process that will ultimately result in a streamlined sourcing
process and a more effective contract.
The market research process identifies the suppliers in the market that supply the needed
goods or services and recognizes what is new or noteworthy in that market space. It also
identifies industry trends that may impact supplier prices. The market research process is not
something that is conducted once and never revisited. It should be ongoing and targeted to
areas of interest and priority for the entity and its upcoming procurements.
Standardization
Standardization is an integral element of the procurement process, with some of the benefits
being cost reduction and improved supplier/entity relationships. While the cost benefits of
standardization may not be easy to quantify, entities can easily recognize savings through fewer
and lower transaction costs. This is accomplished by combining all the entity’s needs for the
same or similar goods or services to utilize economies of scale.
Standardization is a tool intended to achieve savings. Standardization is essentially a technical
and engineering concept, meaning agreement on designs, sizes, shapes, colors, quality,
materials composition, chemical properties, performance characteristics, etc. The primary
intent is to achieve economies of scale.
The relatively high cost of standardizing after the fact is one reason for achieving
standardization during product development. What do you do with items that do not meet the
standard? What is the cost of change? The procurement professional wants standardization to
yield savings and efficiency, not create chaos and confusion. There are five principles of the
process of standardization. These principles are:
•
•
•
Consensus;
Due Process;
Openness;
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•
•
Right to Appeal; and
Balance.
The principles which underlie the preparation of a standard or the amendment of the existing
standard include:
•
•
•
•
•
Fulfillment of the generally recognized needs of industry, trade, technology, and other
sectors;
Safeguarding the interests of both the producer and the consumer. (Reliability and
repeatability are extremely important; for example, in labs when testing for diseases or
in the legal system management of court evidence.);
Representation of the largest possible consensus among all the interests concerned;
Aiming at the maximum overall economy through better utilization of resources; and
Being subject to periodic revision and amendment so that the standard can be kept up
to date to reflect the latest advances in technology and the progressively changing
conditions in the environment.
Not all goods or services are viable candidates for standardization. Working through the
process should result in an informed decision on whether to standardize the good or service
being considered. A standard may limit competition and result in a non- competitive purchase.
Care should be taken to ensure that the standards are reasonable and that their use provides
value to the entity.
Standardization efforts should include testing methods for measuring compliance to the
stipulated standard. This varies depending on the good or service. For example, reflective road
paint would need to be sent to a lab to be tested to ensure compliance with a contract’s
standards/specifications.
Overstated standards will inevitably lead to increased and unnecessary costs. Nice or fun to
have “requirements” or options, such as a disc player in a police vehicle, are not needed to
perform the function the vehicle is intended for. Think back to needs vs. wants. Why is it
necessary in the performance or to successfully complete the job? Reverse the question as well,
what would happen if you did not have it?
The competitive environment of global markets is forcing manufacturers to develop standards
for certain products, which, by their nature, establishes standardization of products. Several
international organizations exist that develop and support international standards and can aid
in the procurement process. The following are a few, key examples of those organizations:
•
•
•
Underwriters Laboratories (UL);
Canadian Standards Association (CSA);
Canadian General Standards Board (CGSB);
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Planning & Analysis
•
•
•
•
•
•
American National Standards Institute (ANSI);
International Organization for Standardization (ISO);
International Electro-technical Commission (IEC);
Pan American Standards Commission (COPANT);
American Society of Test Materials (ASTM); and
Organization for the Advancement of Structured Information Standards (OASIS).
If the right people are not included on the standardization team, the resulting standard may not
achieve the right good or service. In addition, lack of stakeholder buy-in may result in client
resistance/dissatisfaction. For any standardization activity to succeed, it is critical that key
stakeholders across the entity become involved in identifying and developing specifications for
the commodity to be standardized.
Some entities might not have the manpower to effectively create various standardization
groups. Consequently, those entities may have to rely on one or two individuals to perform the
standardization process for the entity.
Outsourcing and Privatization
Outsourcing occurs when an entity makes an informed decision to contract out a product,
service, or business process that was previously provided by internal (in-house) resources. The
responsibility for providing the contracted-out product, service, or business process remains
with the entity, and the entity pays the contractor for the work done and administers the
contract.
Entities may consider outsourcing as an alternative delivery system to reduce costs and
increase efficiency in public sector procurement or when they are unable to obtain additional
funding for full-time equivalent positions to perform essential entity tasks. Decisions to
outsource a service must be made at the entity’s highest level. If lower-level manager become
involved in a procurement of services that has not been approved by senior entity officials,
wasted effort, and lost productivity may result.
Decisions regarding the outsourcing process should be made openly and honestly.
Misinformation can create unnecessary stress within the entity, especially when organized
labor is involved. Multitudes of stakeholders are involved in the decision to contract out, and
credibility among all parties is essential. Senior management and elected officials must be kept
fully informed.
It should be noted that outsourcing and privatization are terms that are often used incorrectly
as interchangeable. While they share the same purpose of saving taxpayer dollars, in its true
sense, privatization is transferring property that the public owns to private ownership or
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transferring a service that the government has provided to a supplier in the public sector,
without any funds or oversite from the government.
Collaborative relationships
As policy makers at all levels of government seek ways to serve their constituents more
effectively and at lower cost, they have begun to look more to the private sector to supply
skilled personnel and to perform activities that previously were considered the sole purview of
government. The late 20th and early 21st centuries saw the development of concepts such as
outsourcing, commercialization, joint ventures, franchising, public- private competition, and
vouchering. All of these meant that governments entered agreements with profit or non-profit
entities to provide direct services to citizens or carry out traditional governmental functions.
The collaborative relationship requires a sharing of information that recognizes some degree of
interdependence and cooperation. An essential element for success is that the relationship
must contain an element of mutual trust and respect between the parties. These partnerships
are a major departure from the more traditional and somewhat adversarial relationships of the
past.
Contractors find partnerships desirable because of opportunities to:
•
•
•
•
provide product/service/facilities to all entity departments;
provide input for new products needed by the entity;
increase sales to the entity; and
leverage economies of scale for their pricing structure to the entity.
Procurement finds partnering desirable to:
•
•
•
•
remain current on market trends and new products/services;
enhance communication with suppliers;
improve quality and delivery of commodities; and
increase likelihood of meeting entity needs in a timely, effective, and efficient manner.
Advantages for both partners include:
•
•
a closer working relationship that is focused more on mutual long-term goals and
success, rather than just meeting immediate needs;
desire by both parties for success.
The principal benefits to be gained are maximum reduction and/or elimination of claims,
protests, and litigation through the development of a win-win team. The synergy that can be
developed through mutually-agreed-upon goals and measurable objectives can be
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extraordinary, with the customers of the entity becoming the ultimate benefactors. More value
for every tax dollar ultimately benefits both the entity and the supplier.
There is a potential misconception about partnering which must be understood and effectively
addressed by procurement professionals at the outset. Very simply, the move towards longerterm relationships with suppliers may be perceived as a reduction in competition. To
counteract that possibility, several things need to be done. Establishment of a partnering
arrangement must include a comprehensive communication plan to clearly explain to all
potential suppliers and clients the rationale for the partnering arrangement and the checks and
balances to be put in place to ensure responsive and quality service. There must be an open
solicitation to ensure very visibly that all potential suppliers have access to this opportunity and
fully understand its scope. To ensure stakeholder buy-in, all major clients must be involved in
the establishment of evaluation criteria and actively participate on the evaluation committee.
Supplier- contractor partnerships do not just happen. Considerable planning and effort by both
parties are required.
Procurement professionals and policy makers need to carefully consider the impacts of these
partnering trends on the ethical, personnel, and organizational aspects of an entity. Without
transparent and accountable processes, the rush to use private firms to provide government
services may result in favoritism and corruption. Without procurement professionals who have
the appropriate knowledge, skills, and abilities to conduct business on an equal basis with the
executives and staffs of private firms, contracts may be drafted that do not protect the public
interest.
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Focus Area 4 — Sourcing &
Contracting
In addition to knowing the approved methods of procurement, the procurement professional
must know the appropriate situations to use each in order to achieve the best value for the
entity while meeting the needs of the end user. To do this, procurement professionals must
understand how to deal effectively with individual clients across a variety of situations while
ensuring the contractor’s financial strength, ethics, past performance, etc., are duly considered
prior to award. Furthermore, procurement professionals must establish positive, pro-active
relationships with end users and suppliers (both domestic and international) in both positive
and negative situations.
NIGP-CPP Action Statement: Manage the issues distinct to
international business.
Legal Hierarchy of International Law
The challenges of international business are diverse, from social and business practices, to
general procurement policies and processes, to compliance with legal obligations. Some may be
obvious, such as differences in language and time zones. These challenges, as well as the
complexity of most international procurements, generally encompass significantly higher risks.
When a treaty is ratified, the country is obligated to fulfill the provisions of the treaty. It may
require a country to make changes in domestic laws to fulfill treaty obligations. However,
treaties do not have absolute authority; countries can negotiate or reject provisions.
Trade Agreements and Treaties
In the United States, federal government procurements are conducted in accordance with the
Federal Acquisitions Regulations, Part 25. The clauses primarily adjust domestic content
requirements and include prohibitions for contracting with companies doing business in certain
countries such as Iran and the Sudan. At the state and local levels of government,
procurements are usually conducted in accordance with the Model Procurement Code for State
and Local Governments as adopted by each state. Within Canada, government procurements
must be conducted in compliance with the Canada Free Trade Agreement (CFTA), regardless of
which level of government is involved.
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When dealing with high-value international procurements, international trade agreements are
likely to apply, and where they do, they take precedence over local procurement laws. The
trade agreements most frequently encountered in government procurement are:
•
•
The North American Free Trade Agreement (NAFTA) between the U.S. and Canada and,
as of 1992, Mexico. Part 4 provides the rules under which government procurement was
to be conducted between the three countries. An updated version of NAFTA, the United
States-Mexico-Canada Agreement (USMCA) was signed on Nov. 30, 2018, and a revised
agreement was signed in Dec. 2019, though not fully ratified.
The World Trade Organization Revised Agreement on Government Procurement (WTOGPA or simply GPA). This Agreement is used if no other specific trade agreement exists
between the countries if those countries are signatories to the GPA. The WTO-GPA
requires that open, fair, and transparent conditions of competition be ensured in
government procurement.
Nuances of International Procurement
The sale of goods sold within a nation is governed similarly by the Uniform Commercial Code in
the United States and the Sale of Goods Act in Canada. The United Nations Convention on
Contracts for the International Sale of Goods (CISG) governs international sale of goods
between UN nations. The CISG rules may supersede the home country law unless CISG terms
are specifically excluded in the contract’s choice of law clause. The CISG usually applies only if
both parties have adopted the CISG, i.e., are “contracting states.”
Specification Development
Specifications are particularly important in international procurement. If differences between
the specifications of the parties’ countries are not considered, a procurement may not meet the
specified requirements. Further, shipping of goods can be affected by discrepancies in the
specifications, leading to increased costs and delays.
Examples of specifications with differing industrial standards and units of measure from one
country to the next include shoe sizes (a 10½ U.S. is 44⅔ in the EU and 275 in China) and ton
measurements (in the UK the British Tonne is the long ton or metric ton in the U.S., 1,000
kilograms or 2,204 pounds and, in the U.S., the ton is the short ton which is 2,000 pounds).
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Tariffs
Traditionally, countries have used tariffs (both fixed and variable) to enrich government coffers.
At present, they, along with export and import quotas, are primarily being used as a tool to
promote protectionism by reducing the trade deficit and by reducing pressure on domestic
supplier from foreign competition, since taxing imported items causes them to become more
expensive for the consumer to buy.
Embargoes
Embargoes are commercial and financial penalties applied by one or more countries against a
targeted self-governing state, group, or individual. Embargoes can mean limiting or banning
export or import, creating quotas for quantity, imposing special tolls, taxes, banning freight or
transport vehicles, freezing or seizing freights, assets, bank accounts, or even limiting the
transport of technologies or products. They are used as penalties against a targeted country or
other entity and are considered a legal barrier to trade.
Logistics and Transportation
It is part of the procurement professional’s responsibility in the procurement process to
determine the least expensive, fastest, and/or the most secure and reliable method of
transportation. Relying on another to make this determination may involve a cost for that
convenience. One still needs to use due diligence to know the risks. Determining the shipping
method involves a cost in time spent, as well as possible risks caused by not being intimately
familiar with different aspects of international shipment. Factor all these things into the price
and risk analyses for the procurement.
There are two primary modes of transportation available for international procurements: air
shipping and intermodal container ships. Fifty percent of incoming U.S. trade arrives by
containers onboard ships. In calculating shipping costs, shipping companies use five factors: the
volume or weight of the goods, type of transport, distance traveled, destination port, and the
time of year.
Suppliers that assist with international procurement may focus only on certain aspects, such as
customs brokers that know all the various nations’ procedures and restrictions on transferring
goods or providing services that cross-national boundaries. Other suppliers are transportation
brokers who specialize in finding the fastest or least expensive or safest or most convenient
carriers to transport goods, and usually make all the contracting arrangements for delivery. A
broker does not transport the property and does not usually assume responsibility for the
goods but makes the arrangements for doing so.
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Cultural Considerations of International Procurement
In the interest of maintaining a positive relationship with international suppliers, attempting to
honor the culture and customs of the supplier is a worthwhile endeavor. The differences in
communication from one country to another often transcend beyond the need for language
translation. For a more complex contract, Procurement may need to seek a cultural expert to
help with nuances of those differences.
The first encounter with a counterpart in a foreign country is the best opportunity to make the
proverbial first impression. It sounds obvious, but judgments and decisions can be made based
on that first impression. It is important as this is the first opportunity to set or establish an
anchor.
It is important to learn the greeting protocols for that country, for that area of that country, and
for that individual. It is in one’s best interest to learn the customary greeting, both verbal and
body gesture (e.g., handshake, bow). There is a psychological impact for the extra effort. In the
U.S. and Canada, it is customary to shake hands when greeting a business contact. Imagine if
you had a meeting with a supplier, and when you reach out for a handshake, he pulls you into
an embrace, kisses you on the cheek, and bumps his nose against yours twice. This is a
traditional greeting in Qatar, and if caught unaware, the greeting might catch one off guard.
The person might be slightly disturbed through the whole meeting, and this exchange could
lead to negative impressions. The problem with this scenario is a misunderstanding of cultural
customs.
It is also important to research how important personal relationships are in that business or
during contract development. The procurement professional should identify key differences in
language communications during interpersonal interactions. For example, be prepared for
differences in the use of hand gestures, jokes, small talk, or the expectation for socializing
between parties in some countries, or language variations in terminology, or jargon.
The procurement professional can obtain additional assistance and resources from foreign
consulates, foreign chambers of commerce, or trade associations, to name a few.
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Focus Area 5 — Contract
Administration
Public procurement professionals must be prepared to demonstrate good contract writing and
management skills when pursuing procurement engagement and supporting uninterrupted
public service delivery of commodities for their entity. For the procurement professional, this
includes all aspects from the time the need is recognized until the commodity is used or
disposed of, including, but not limited to receipt, inspection, logistics, inventory management,
and contract/supplier management.
NIGP-CPP Action Statement: Ensure the efficiency and
effectiveness of asset management, warehousing, and logistics
programs.
Asset and Inventory Management in the Public Sector
Procurement professionals are responsible for effectively managing the full procurement
process and ensuring an uninterrupted supply of materials to meet the needs of their
stakeholders. For the procurement professional, this includes all aspects of the sourcing
process, from the time the need is recognized to the time the good is used or disposed of,
including, but not limited to, receipt, inspection, logistics, inventory management, and
contract/supplier management.
Contract administration describes the functions that are performed after the parties have
signed the contract to ensure compliance with all the terms and conditions contained within
the contract document. Included in the contract administration process is asset management,
warehousing, and logistics.
Asset management is the practice of managing the entire life cycle of physical and
infrastructure assets such as buildings, power, water and waste treatment facilities, distribution
networks, transport systems, furniture and equipment, and other physical assets. Assets can be
classified as capital or fixed. A capital asset is an item with a life cycle of more than one year
with a value of more than a certain prescribed limit set by accounting standards or by
governmental policy. Fixed assets are physical assets such as property, plant, and equipment.
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Inventory Control and Efficiencies
As items in an entity’s inventory are not all the same, it would be wasteful to treat the items as
being equal in value. It would be costly and inefficient, for example, to apply the same strict
inventory control procedures to a 3-cent part as to a $3,000 component. A common way to
manage inventory utilizes the “ABC” classification system where Class A are mission critical
items to operations, Class B are general off-the-shelf commodity items with high usage rates,
and Class C are usually low dollar items with high volume activity. Managing Class A items
require more skill than Class C. A disadvantage of the ABC classification system is that the
analysis is based on dollar values rather than on the number of items that cycle through
inventory, creating the risk of running out of low value, but essential items.
When deciding to place an asset into inventory, it is important to establish economic order
quantities (minimum and maximum inventory re-ordering points) that will trigger a re-order
notice, as well as appropriate order quantities (do you order by dozen, by pallet, etc.).
Determining reorder points depends upon knowing and managing demand, carrying costs,
acquisition costs, working inventory, safety requirements, and lead times.
Selecting an appropriate inventory method will be based upon analyzing the above factors
relative to the specific asset inventoried, and the way it is needed by the entity. Items with
same day or short-term delivery that carry low risk may be conducive to a Just-In-Time delivery
method. Items with longer delivery times and higher risk to the entity may be more appropriate
for carrying larger quantities on-hand. Finally, the disbursement method should be analyzed to
determine how best to issue the asset out of inventory. For example, rotating inventory will
generally be issued as LIFO (last in, first out) or FIFO (first in, first out) process.
Logistics and Transportation
The management of logistics and transportation is the process of transporting materials from
the point of origin to the destination, from the supplier to the entity. Materials may be
transported through various modes, including truck, rail, ship, and air. Procurement
professionals should consider the following when choosing a mode of transportation:
1. Product Characteristics – The type of container needed.
2. Facility Characteristics – The design and capabilities of the facilities that the product will
flow through.
3. Time Constraints - Speed; faster modes usually cost more.
An understanding of transportation, logistics, and supply chain technologies is necessary for
evaluating a potential supplier’s capability to fulfill the requirements. Logistics is a
determination of how a shipment will move from the point of origin to the destination including
the selection of carriers and geographic routes. Freight and delivery charges alone may be
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considerable for some procurements, so there may be cost benefits to contracting for transport
services from a third-party logistics provider.
Source Good Suppliers/Analyze Supplier Capabilities
An important part of supply chain management is being able to objectively analyze the
capabilities of a potential supplier. A challenge in this area may be that the policies and values
of a supplier do not necessarily align with those of the public entity. A procurement
professional needs to be able to first understand the values of their own entity, and then be
able to determine as to whether a potential supplier’s values are similar.
Analyzing Past Performance
A supplier’s history of performance can be a good indicator of how well they are likely to
perform. Whether their past performance is good or bad, it will provide valuable information to
a procurement professional. RFPs and IFBs often require references, which a procurement
professional may utilize to score the supplier, taking into consideration the quality of
performance, cost containment (original cost vs. final cost), responsiveness to customer
demands, and ease of working with entity. A satisfactory record of performance by a supplier
on similar types of projects can signal less risk for the entity.
Assess Equipment Fleet and Distribution Facility
In addition to making sure a selected transportation supplier has a strong record of quality
performance, it is also important to ensure they have the proper equipment and facilities to
fulfill the terms of the contract. This will require that the procurement professional evaluate
the supplier. This evaluation may include scheduling a site visit to physically inspect their
equipment and distribution facility and checking to see if the supplier has the appropriate fleet
of trucks and equipment.
Review Sustainability Goals of Supplier
Countless public entities have made a commitment to environmental sustainability, including
the use of green travel practices. This can include buying electric vehicles for local
transportation, operating CNG (compressed natural gas) buses, and using more sustainable fuel
such as biodiesel. These actions are normally aligned to the sustainable goals of the entity or
even their mission. The next logical step for an entity that supports sustainability is to require it
of their suppliers. The RFP and IFB solicitations should include statements in support of
sustainable practices and even include them as part of the selection criteria for contracts (both
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for services and goods). While no two entities are exactly alike, public entities often expect that
the suppliers they work with will be similar in their sustainability practices, and that their
policies are also in alignment.
Transportation Technology
Transportation technology has made remarkable advances. As an example, in the past, a
procurement professional trying to track a delivery would have to contact the supplier to assist
in locating a package in transit. That supplier may then have had to contact the shipping
company to obtain a status of the delivery. Today, procurement professionals are often able to
utilize a tracking number to locate a delivery in a web-based application. Today’s shipments are
even more innovative, as packages contain RFID (radio frequency identification) chips that can
send a message to the customer regarding its expected arrival. Either through email or a
notification to a handheld device or smart phone, the package can generate the message on its
status.
There is much more to transportation technology than package tracking. All over the world,
entities are automating their material retrieval systems with computer-controlled equipment.
This means that instead of a warehouse worker using a forklift to retrieve material on a high
shelf, an automated lift will do the work for them. As technology continues to evolve,
particularly in relation to artificial intelligence, procurement professionals will begin seeing
advances in areas such as driverless delivery vehicles and drone delivery.
Finally, since technology is advancing more rapidly than ever before, it is imperative that the
public procurement professional continue to develop their knowledge in this area.
NIGP-CPP Action Statement: Recommend options to dispose of
assets to maximize residual value.
Surplus and Disposal
Surplus, disposal, and closeout are necessary tasks in supply chain management. Surplus can be
transferred to other areas within an entity, or it may be necessary to find a home outside of the
entity. With each choice, there are associated decisions to be made including the impact the
disposal has on the environment and expenses that must be considered.
During the planning and specification development phase of the procurement of any
commodity, the procurement professional should consider the end-of-life phase of the
materials being purchased. Consideration must be given to the way materials are disposed of,
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the potential value at the point of disposition, and the impact to the environment at the point
of disposition. Procurement professionals should work with the client to address all these
points up front in the solicitation, negotiate them during the evaluation process, and manage
them during the contract administration phase.
Part of the asset management process is the disposition of surplus. Surplus is defined as
materials that are obsolete or no longer needed by the entity and are designated for disposal.
Surplus becomes available for disposal outside of the entity because of some unforeseen
situation that affects the use of the item. Once an asset has reached the end of its useful life for
an entity, decisions must be made on how to properly dispose of the asset. An asset reaching
the end of life for an entity may be the result of a variety of factors, including obsolescence
resulting from changes in design or specification, high cost of maintenance, wear and tear,
damage beyond reasonable repair. Surplus may also be the result of scrap, waste and rubbish,
or damaged stock.
Procurement may work with the customer or other subject matter experts in the surplus
material to determine the most appropriate disposition method. Data necessary to guide the
disposition method decision includes potential market value of the asset, possibly alternative
uses for the asset, available options for trade-in or markets for scrap, and interest by third
parties for possible sale outside the entity.
There are several options available for asset disposition. The procurement professional should
be guiding the entity on selecting the method of disposition that brings the greatest value to
the entity. Available disposition options may include any of the following:
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Reuse – Transfer, redeploy within the entity;
Recondition – Refurbish for use within the entity;
Return - Trade-in to a supplier for credit toward a new purchase;
Resell – Sale through auction (live or online) or competitive process (IFB/RFP);
Reclaim – Sale as scrap;
Recycle — Convert material to reuse; and
Remove – Trash or donation.
Social Responsibility in Surplus Management
Supply chain management is the design and management of seamless, value added processes
across entity boundaries to meet the real needs of the customer. As such, countless public
entities have made a commitment to environmental sustainability and incorporated
sustainability into their procurement practices, even including it as a factor in supplier
selection. Sustainability policies and practices will also incorporate supply chain management.
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Disposal goes beyond the transfer of excess stuff. Depending on the commodity, it may involve
the proper handling of hazardous materials (i.e., safety), scrap metal with associated value or
no value at all, donations, or throw away(s) – an item that brings no residual savings back and
may cost the entity to destroy.
Ultimately, the goal is minimal surplus on-hand by proactively managing inventory (i.e.,
consumable and capital assets) through on-going training of clients and meeting their
expectations, routine review of inventory/capital assets reports for entity compliance, and
continuous development and execution of action plans to manage what worked and what did
not.
Determine the Best Disposal Method
Obsolete inventory may have monetary value that affects the financial statement. To efficiently
dispose of excess inventory, procurement professionals must work with several other parties
such as the internal Information Technology and Finance departments and outside government
agencies like the Environmental Protection Agency (EPA).
The internal transfer or deployment of assets can be a cost-effective method to reduce surplus
inventory. Accurate inventory reports can be used to evaluate items for disposal. Factors to
look for to carry out the analysis include the quantity on hand and usage over time.
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Focus Area 6 - Leadership
Public procurement professionals must be prepared to demonstrate good leadership skills
when faced with everyday challenges, striving to ensure that both employees and leaders have
the necessary agility, innovation, and drive to proactively transform their procurement cultures
in strategic, practical ways. In addition, the procurement professional must master
communication strategies, problem solving and critical thinking skills, and relationship
management skills, learning to operate as forward-thinking stakeholders in their entity to
ensure continuous, proactive solutions that align with their entity’s strategic objectives. As the
practitioners leave the profession or age and retire, public procurement professionals must
ensure that talent recruitment and development, along with long-term succession planning,
play a critical role in their public service, working collaboratively to establish and oversee
expectations for career progression, retention, and life-long learning for the procurement
function.
NIGP-CPP Action Statement: Create policies and procedures to
support an ethical workplace.
The Ethical Workplace
An ethical workplace is vital to a fair, open, and effective procurement environment. It
promotes adherence to the values and guiding principles of the public procurement profession.
An ethical workplace results in an environment that is better for employees and for the public.
The ethical environment fosters motivation and loyalty to the employer. An entity that does not
promote ethical behavior becomes vulnerable to high turnover, loss of key staff, lawsuits, bad
publicity, and the loss of the public’s trust. Most people want to do the right thing. Behaving
ethically makes people feel good about themselves and their work. There may be perceived
personal advantages based on approval from others and being recognized as an honest, fair,
and trustworthy person. Some people behave ethically based upon their religious beliefs, while
for others, acting ethically is simply a habit.
Making ethical decisions can be difficult because situations are not always clear cut, i.e., good
or bad, right or wrong, but rather varying shades of the two extremes. Additionally, people may
be under pressure to perform; they may be operating under fear of retribution; perhaps their
motives are misguided from the outset; or they are influenced by financial and/or time
pressures.
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Well-developed policies and procedures help ensure ethical behavior is practiced throughout
the entity. Entity polices are critical for complying with relevant laws and regulations,
preserving trust and confidentiality, and abstaining from conflicts of interest. Entity procedures
are critical for defining step-by-step instructions on how to perform a task. Policies and
procedures that are well-written promote transparency and accountability.
To successfully serve the entity’s stakeholders and to ensure that goods and services are
delivered in a timely, effective, and economical manner, it is critical that Procurement develop
and maintain clear policies and procedures outlining its method of operation. Policies and
procedures for the central procurement office must be directly related to the enabling laws and
regulations that establish Procurement’s structure and govern the entity.
Policies and Procedures in Public Procurement
Policy and procedure manuals must be well organized and should contain a clear description of
the purpose of each manual and its intended use. To have proper entity-wide impact, the
highest level of authority within the entity should endorse each manual. Manuals should be
produced in a manner that facilitates revision, given inevitable changes in legislation as well as
the need for continuous improvement in the operation. A procedure must be based on a policy,
which in turn, is grounded in a regulation or in legislation.
Policy Manuals
Policy manuals are designed to guide behavior toward accomplishing specific entity objectives.
Regardless of the degree of centralization or decentralization, the procurement policy manual
shall be centrally written and controlled.
Policy manuals usually contain key provisions of enabling legislation or ordinance, establish the
procurement authority and define the roles and responsibilities of the procurement function.
They are used to forge a direct relationship between the legal foundation of an entity’s
procurement department and the procurement rules and policies that guide procurement
throughout the entity. Procurement policies should be sufficiently flexible to stand the test of
time, and the procurement department should conduct periodic reviews of the continued
relevance and applicability of procurement policies. It is important to remember that policies
are intended to provide general guidance. Specific issues should be addressed with written
procedures, delegation of authority, and training.
Development of policies, practices, and procedures to govern the entity's operations helps to
ensure that the entity:
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Complies with its legal responsibilities;
Can demonstrate effective management and accountability;
Provides clear guidelines for those executing duties; and
Clearly establishes its values and principles, helping to ensure that these are supported
through its activities.
Procedure Manuals
Procedure manuals are written with a greater level of detail and are intended not just to
provide guidance but to provide information on required forms, process requirements, and
steps for each procurement action. Procedure manuals are used, not only by procurement staff,
but also by stakeholders throughout the entity.
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Procedure manuals should be developed to meet the entity’s requirements and, at a
minimum, should include the following:
Procurement goals, objectives, and responsibilities;
A step-by-step outline of all procurement processes, including processing of
requisitions, solicitations, offer evaluation and award, issuance of purchase orders and
contracts, and contract administration;
Guidelines and steps for stakeholders for preparing various procurement requisitions,
developing requisitions, receiving and inspection, and documenting supplier
performance;
A step-by-step outline of property and supply management programs including
inventory control and surplus disposition;
Detailed procedures for other procurement operations, including cooperative
purchasing programs, p-Card and payment processes; and
A listing of important forms used in the procurement process, instructions to offerors
and general conditions governing contracting, and a glossary of procurement terms.
A written procedure is necessary when the issue is important, when there will be a significant
benefit from clarifying a process to ensure consistency, and when multiple individuals and steps
are involved in a process. Before drafting a procedure manual, consider the intended audience
and the intended outcome. A procedure is needed when a process:
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Is lengthy (example: year-end inventory);
Is complex (example: benefits administration);
Is routine, but it is essential that everyone strictly follows rules (example: payroll);
Demands consistency (example: handling a refund request);
Involves documentation (example: disciplining a staff member);
Involves significant change (example: installing a new computer system); or
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Has serious consequences if done incorrectly (example: safety guidelines).
NIGP-CPP Action Statement: Create a culture and system to
foster continuous improvement.
The Culture of Public Procurement
Procurement is a service-based profession which should strive to build a culture of service. The
foundation of that culture is built by leaders working with their stakeholders to identify the
goals they want to mutually achieve. A key goal of all procurement functions should be a
culture focused on continuous improvement (CI). In working to establish the CI culture,
Procurement must focus on several activities including developing a team, establishing clear
and open communication, empowering staff, celebrating successes, and implementing process
improvements.
Regardless of professional or personal backgrounds, professionals can shift zones and may not
always remain in one zone dependent upon what they are working on. Someone may sit in the
Creative Zone for work they really enjoy, while sitting in the Coasting Zone for work they find
mundane. It may not always be easy to transition from one zone to another, but it is possible.
This requires a mindset change, and a suspension of the belief that there is only one answer to
a question or situation. When people think creatively, they can come up with alternatives that
can be explored. Albert Einstein said, “Imagination is more important than knowledge.
Knowledge is limited. Imagination encircles the world.” Procurement professionals deal with
many rules; however, when thinking creatively, it is important for them to give their minds the
freedom to think outside the boundaries. There may be different ways of accomplishing the
same outcome, while maintaining compliance. Sometimes people simply do not want to fail,
look foolish, or do not believe that they are creative.
Organizational Leadership
Organizational leaders from nearly every sector have been using continuous improvement
models and improvement science for years to improve products, services, and processes. These
efforts gain power and greater efficiencies and improved performance through the ongoing and
continuous examination of performance, problem identification, design change, and ongoing
review that are all key components of the continuous improvement cycle.
It is important to carefully plan for the implementation of any improvements. Changes may
affect systems, policies, procedures, staffing, or any number of areas. As such, different
changes may require different types of implementation plans. Implementing change or
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innovative solutions may require testing in a smaller “pilot” environment before implementing
to the larger environment. Some solutions may require a phased implementation, as well as
making adjustments after testing in a pilot environment, before deploying to the rest of the
entity. The pilot environment also provides a unique opportunity to develop leaders and
trainers who can assist in full scale implementation.
Planning for change should also include development of a communication plan. Communicating
to all stakeholders affected by any potential change is essential to successful implementation
and adoption of the change. Further, careful consideration should be given to engaging affected
stakeholders in the planning, analysis, and implementation of CI, increasing the likelihood of
success and adoption.
Professional Accountability
The goal of a continuous improvement accountability system is to leverage multiple inputs and
processes to achieve desired outcomes. High-performance entities continually seek to deliver
quality products and services, provide outstanding customer service, and maintain sound
financial performance within the constraints of the entity’s internal and external environment.
The critical characteristics of high-performance entities include the following:
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A flatter, horizontal organizational structure instead of a vertical hierarchy;
Work is done by teams organized around processes; teams are empowered to make
decisions; management is decentralized and participative;
Empowered employees possess high skill levels and are cross-trained; rewards are
granted for team performance;
Collaboration must be continuous among teams, between staff and management, and
with suppliers;
Focus is on customers, quality and continuous improvement; and
Flexible technologies are used.
Entity Buy-In
For the procurement professional, implementing high-performance characteristics without buyin throughout the entity may be fraught with obstacles. However, a focus on the quality of staff
output, customer service, and the financial performance of a unit cannot help but provide
improvements. A personal evaluation of leadership philosophy and an intensive effort to foster
an environment where the staff may function with more autonomy and empowerment is
critical in developing the high-performance model. Achieving positive or high-yield outcomes
for each of the performance indicators normally is based on the mission of most organizations,
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whether it is a private business or a public entity. However, achieving increased entity
performance is the hurdle that must be overcome.
The ultimate determinant of an entity’s success in achieving high performance is often reflected
in its culture and design. Culture is a product of a host of factors, including management and
leadership.
Within the standards for high-performance entities, procurement reform over the last few
decades has focused on four primary areas:
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Structural challenges confronting procurement departments;
Value of improving and benchmarking procedures and performance to world
class/within class standards;
Professionalization, education, and certification of procurement personnel; and
Redefining procurement processes (including information technology) to focus on
procedural and substantive outcomes rather than process outputs (typically described
as transaction costs).
NIGP-CPP Action Statement: Provide procurement professionals
development opportunities.
Training within the Procurement Function
Training is a continuous process that is necessary to develop and retain the best employees.
Employees can be trained with both internal and external resources. Internal training resources
include formal procurement training with procurement staff, training sessions with entity
subject matter experts, job shadowing, cross training, and coaching. External training resources
may include industry procurement training, conferences, online training opportunities, and
webinars.
As the procurement profession continues to evolve, employees are becoming more aware of
the importance of professional development. Further, entities are also becoming more aware
of how vital professional development is to maintain an effective workforce. Not only can
training have a positive impact on employee attitudes but it can also enhance commitment to
the entity and promote a desire to prepare for higher level positions.
Training and development can be initiated for a variety of reasons for an employee or group of
employees, such as:
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To be used when a performance appraisal indicates that performance improvement is
needed;
To "benchmark" the status of improvement so far in a performance improvement effort;
To be included as part of an overall professional development program;
To be used as a part of succession planning to help an employee be eligible for a
planned change in role in the entity; or
To "pilot," or test, the operation of a new performance management system.
There are numerous sources of online information about training and development. Several of
these sites suggest reasons for leaders to provide training for employees. These reasons
include:
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Increased job satisfaction and morale among employees;
Increased employee motivation;
Increased efficiencies in processes;
Increased capacity to adopt new technologies and methods;
Increased innovation in strategies and service;
Reduced employee turnover;
Enhanced entity image; and
Improved risk management function.
To maintain a standard of maturity in the procurement function, management must recognize
the need to continually develop employees through specialized training. Given that entity goals
and objectives change over time, employees change jobs, and the skills, knowledge, and
abilities of current employees become outdated, it is important to ensure training programs are
reviewed and revised to remain relevant.
If there is little turnover in staff and very few absences, the need for staff training may be
forgotten until the department is faced with a problem. To minimize or avoid crisis
management, some procurement leaders have staff members develop procedures manuals
detailing the tasks for their respective positions. This results in a kind of on-the-job training
document, applying not only to new staff, but also to those who may be the back-up person for
a job, someone from a temporary agency, or even the manager from time to time.
It is essential that an entity invest in the personal and professional growth of employees since
they are the true assets of an entity. When employees feel respected and valued, they are more
motivated and develop a sense of loyalty toward the entity. When employees feel recognized,
valued, and appreciated by the entity, they tend to stay with the entity, despite any absence of
monetary incentives.
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Developing a formal training program creates a learning culture in the entity where every
employee is motivated to learn new skills and acquire additional knowledge. Managers should
give their employees every opportunity to grow and develop as procurement professionals.
Managers should also create opportunities for employees to conduct a self-assessment of their
competencies. This assessment should then be compared to the Public Procurement
Competency Framework to identify gaps and opportunities for growth and professional
development. Entities should also invest in providing training opportunities aligned with the
core competency framework.
Methods of Training and Engagement
There are various ways to engage employees in other learning opportunities. Some of these
opportunities include:
•
•
•
•
•
•
Form committees of diverse staff members to exchange ideas and knowledge.
Encourage employees to participate in conferences and seminars. Then, ask them to
give a brief report or presentation of what was learned at the conference to their
colleagues.
Employees learn many new skills while on job itself. Share examples where an employee
showed tremendous intelligence, used his innovative ideas, and utilized his/her skills to
find a solution to any problem.
Job shadowing is another opportunity for an employee to learn additional skills. This
allows an employee to follow colleagues and gain from their experience and expertise.
Ask employees to work in teams. Every individual has his/her own area of expertise. Let
employees gain from each other’s knowledge and experience. Motivate employees to
help each other learn new skills.
Establish a mentorship program, to match mentors and mentees within the entity.
NIGP-CPP Action Statement: Provide educational opportunities
related to procurement best practices to all(non-procurement).
Training for the Public Entity
Developing and conducting training programs for internal and external stakeholders is an
effective way to educate others on the entity’s procurement policies and processes. Training
programs can be used to ensure that stakeholders understand the purposes of the policies and
processes and that they are clearly defined. Training can also be helpful in gauging gaps in
knowledge and understanding, helping to determine how much training might be necessary in
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the future. Procurement professionals should emphasize that the policies and processes have
been established to promote fair, transparent, competitive practices, and efficiencies in the
procurement processes that will serve the best interests of the entity and the public.
The procurement professional often takes the lead in bringing stakeholders together, either
individually or in larger meetings. Engaging stakeholders in events where you can share
information and help them be more successful is a key responsibility of Procurement.
Procurement should focus on gaining an understanding of the stakeholders needs to provide
educational opportunities that provide value to the various stakeholder group. Always ensure
these training opportunities have a clear purpose, a well-formed agenda, and value-added
supporting material.
Identifying Who Should Be Trained
The procurement professional must first determine exactly what the client needs and who the
key stakeholders are in making this decision. Often there are people that want to have a voice
in the process but may not necessarily have authority or know the true needs of the entity. The
goal of the procurement professional is to identify those stakeholders that add value to the
process and have authority to make decisions for the entity regarding the potential solicitation.
Often it is assumed that the person making the request is the one that has all the information
for the project, but that is not always true.
Stakeholders should be categorized into internal and external stakeholder groups. Internal
stakeholders are those individuals who interact with the procurement function from within the
entity (generally employees of the entity), such as client departments who have the sourcing
need. External stakeholders are the potential suppliers, the contractors and providers who have
existing contracts with the entity and various other groups that have interest in how the entity
manages its procurement function. These groups may include Chambers of Commerce or
special interest groups such as trade associations. Each of the stakeholder groups have different
needs and interests; therefore, any training or communication of information should be
developed and delivered in consideration of those needs.
Deciding What to Train
Once you determine who should attend training, you then need to determine what they should
be trained on. Procurement should also take into consideration the various roles that
stakeholders may serve in, such as contract administrator, project manager, invoice processor,
etc. When developing and delivering training, Procurement should match the information
needed to the individual’s role, trying to avoid overwhelming individuals with too much
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information that does not pertain to their area of responsibility. It will be necessary to develop
various training approaches and materials for delivery to the various stakeholder groups.
The content of stakeholder training will generally fall into three categories: Policy,
Process/Procedure, and Best Practices. Policy is important so everyone understands the rules
and where they apply. For someone to care about the rules, they must understand how the
rules apply to them and why they are important. Process helps stakeholders understand how
they are to accomplish things, how to complete a task and what tools they need to execute
them. Finally, to develop and become more successful, all stakeholders should understand
industry best practices. Best practices help all those engaging in the procurement process to
adhere to a higher standard of practice, resulting in increased efficiencies and greater
effectiveness.
Training Internal and External Stakeholders
Developing training for stakeholders requires that the stakeholders be categorized. Training can
then be tailored to stakeholder needs. Internal stakeholders, such as client departments and
management, will have completely different needs than external stakeholders such as suppliers
and taxpayers.
Internal Stakeholders
There are multiple ways in which to train internal stakeholders. A well-rounded procurement
entity will utilize various methods to disseminate information. Some of the common delivery
methods in the procurement industry include the following events:
•
•
•
New Employee Orientations – Sharing information with new employees in the entity,
either through a joint training session with other entity functions (such as Human
Resources and Finance) or through procurement-focused training sessions.
Procurement Liaisons – Targeted training sessions for those individuals whose role is to
serve as the “point person” for their department/entity unit. These sessions focus on
the role of the Purchasing Liaison to receive key information from procurement on
policy, process, and practices, and then to relay that information to key individuals
within their department/unit area. Purchasing Liaisons are the “go to” representatives
in their area for obtaining the most up-to-date procurement information.
Contract Administrators/Project Managers – Individuals who have specific
responsibilities for administering and managing awarded contracts and purchases. Given
their role and their direct engagement with the external stakeholders, it is critical that
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these individuals have a solid understanding of their roles and responsibilities relative to
entity contracts.
External Stakeholders
It is equally important to ensure that our suppliers are well-informed about procurement
policy, process, and practices. Further, helping them to be successful when interacting with the
competitive procurement process will create a more competitive pool of providers. Our
external stakeholders include not only our existing contractors but also our potential contractor
community as well. Remember, many potential providers may shy away from doing business
with government simply because of the complexities of government procurement. There are
number of opportunities Procurement can create to share information and educate the
external procurement community:
•
•
•
How to Do Business Seminars – These may include discussion panels at outreach
supplier events or more formalized training sessions. In addition, many entities produce
“How To” on-line or printed booklets with key information on doing business with the
entity.
Topic Specific Training Sessions – These sessions are focused on a specific topic area of
relevance to the stakeholder groups. For example, a trade association may have interest
in training on a Minority-/Women-Owned Business Preference Program, while
contractors may have interest in training on Contract Administration to better execute
their responsibilities in providing service under an entity contract.
Other Stakeholder Events – There are numerous other ways in which information can
be shared with this community. Events may include a meet and greet with key clients at
the entity, an open house event with contractors recently awarded a contract with the
entity, or an industry-specific opportunity for collaboration (such as emergency
management contractors).
NIGP-CPP Action Statement: Communicate programs, policies,
and procedures in support of entity’s continuous advancement.
Importance of Communication
Good communication and leadership are all about connecting. The ability to connect with
others starts with understanding the value of people. If you can connect with others at every
level— one-on-one, in groups, and with an audience—your relationships become stronger, your
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sense of community improves, your ability to create teamwork increases, your influence
increases, and your productivity skyrockets.
Connecting is important whether you are trying to lead a child or lead a nation. It is vital for any
person who wants to achieve success, and it is something that can be learned. When we
connect with others, we position ourselves to make the best of our skills and talents.
People cannot succeed without effective communication. What we say accounts for only 7% of
what is believed; the way it is said accounts for 38%; and what others see accounts for 55%.
Face- to-face communication can be broken down into three components: words, tone of voice,
and body language. When verbal and non-verbal communication is inconsistent, our body
language and tone outweigh any words we say. About 90% of the impression we often convey
has nothing to do with what we actually say.
All communication has three important components: intellectual (thought), emotional
(emotion), and volitional (action, will). These three components are important to connect.
When there is thought, emotion, and action in your communication, then it has conviction,
passion, and credibility. The result is connection.
Our communication skills are very important to lead training opportunities lead with
stakeholders. A key skill is to be a good listener, which means listening with an open mind and
understanding the individual’s needs to develop effective learning opportunities for the
stakeholders. Through basic communication skills, we build trust and credibility with
stakeholders. This often overcomes the tendency of stakeholders to not want to engage in an
educational event.
Communication is one of the most critical aspects of Procurement’s relationships with its
stakeholders. A well-defined, effective communication plan will address not only Procurement’s
method of dissemination information but will also address the way in which Procurement
promotes the procurement function to the entity and to the community. Communication
should consider the multiple methods and platforms available to disseminate information, as
well as leverage available technology. Procurement should establish a marketing and
communication plan to address all aspects of sharing information.
Collaboration with Stakeholders
Stakeholders may not always know how best to communicate or distinguish between their
desires/wants and their needs/requirements. It is important for a procurement professional to
collaborate with stakeholders to ensure their needs are accurately and clearly stated in the
solicitation, thereby communicating those needs effectively with the supplier community.
When needs are not communicated effectively, entities expose themselves to a potentially long
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and drawn-out procurement process that could result in dissatisfaction by internal
stakeholders and protests by suppliers. It is important for the procurement professional to issue
each solicitation document with, to the extent possible, the most comprehensive, accurate, and
concise specifications and supporting information that captures the true needs of the entity
and not the exaggerated “wants” of the individual. The procurement professional must also be
courageous enough to ask the tough questions and challenge viewpoints when necessary.
There are times when questions may not be well received. It is important to communicate with
an attitude of partnership and service and avoid a tone that is adversarial or uncooperative.
Over time, as value is recognized and trust is built, the process and partnership will flow much
smoother and more naturally.
Types of Communication
Communication traditionally took two forms: oral and written documents. With advances in
technology, there is an increasing need to recognize a new category: digital communications.
Each form of communication serves an important purpose. It is important to identify the best
form(s) to utilize to ensure effectiveness.
Written Communication
Supplier manuals serve several purposes that are important to suppliers: how to obtain
opportunities for doing business (solicitations); how the relationship between the government
entity and the supplier is managed (offer evaluation, contract formation, contract
administration); and the standards of conduct to be expected (ethics, conflict of interest). At a
minimum, effective supplier manuals should:
•
•
•
•
•
•
•
•
Contain general information about the entity;
List key contacts and telephone numbers;
Describe how the solicitation process is conducted (Sole Source, Request for Quotation,
Request for Proposals, Invitation for Bids);
Advise how to receive an opportunity to compete;
Describe the need for the offer to meet the requirements of responsiveness and the
offeror to be determined to be responsible;
Detail how offers are to be submitted, the process for receipt and documentation, the
process for public openings, and the policy regarding late submissions;
Point out the standards of conduct expected of procurement staff and suppliers; and
Describe the limitations surrounding relationships and the extent of contact that
suppliers should have with the end user departments.
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Digital Communication
Websites are commonly used communication channels. Most websites post procurement
policies, supplier manuals, procurement manuals, term contract catalogs, supplier catalogs,
supplier registrations and, particularly, Procurement contacts—including telephone numbers,
postal service addresses, and email addresses. Many entities now post current solicitations on
their websites. Procurement departments are now also using social media and public and
private community boards to communicate with their customers, suppliers, other procurement
professionals, and the public.
Media Communication
The media is an important part of procurement culture and has a major impact on the public
perception of procurement ethics. There are few households in the world today that do not
receive information from television, radio, newspapers, or social media. Editors, publishers, and
station managers have a product to sell; and, of course, their goal is to be first with the news.
How does that impact a public entity and, more specifically, the procurement profession? It is
important to remember that expenditures for goods and services are almost equal to those for
employee salaries and benefits. Understandably, the media is curious about how Procurement
is spending tax dollars and what value citizens are receiving in return.
The most important lesson, though, in dealing with the media about questions of integrity in
public procurement is to be factual, truthful, and never attempt to cover up an actual instance
of malfeasance. When a public official is believed to have misled or “stonewalled” an issue
relating to the public trust, the story suddenly will “develop legs.” Coverage by multiple media
organizations over a short period may create a cloud of suspicion over the individuals and
entities involved that will take years to dispel. Even those who are blameless may find their
reputations tainted by allegations, innuendo, and guilt by association; and the public
procurement professional whose behavior becomes suspect will find it difficult to recover
credibility in the public’s eyes.
Understanding that public procurement exists within the fishbowl of public opinion, and
behaving accordingly, will pay dividends in media relationships.
Communicating with Suppliers
Trade shows/Expos/Product expositions bring stakeholders and suppliers together in a noncompetitive atmosphere that highlights applications, capabilities, and opportunities.
Training may also be provided for suppliers. Some entities have taken a proactive approach to
reduce the likelihood of protests. These entities provide the supplier community with training
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and education about their procurement policies and processes. They offer workshops on the
RFP process, publish their policies, solicit input, and develop handbooks on How to Submit a
Proposal. Others hire an RFP or legal expert to ensure that high-visibility RFPs are properly
executed.
Some entities provide unsuccessful proposers with extensive debriefings. Still others release
their RFPs in draft form to obtain potential proposer acceptance prior to the competition itself.
A policy should be in place to encourage constant review of the entity’s practices and
continuous improvement. The entity should adopt practices designed to convince offerors of
the fairness of the process and, thereby, deter them from protesting the solicitation or award.
Procurement professionals may also provide training to their stakeholders to improve
relationships and increase process efficiency and effectiveness.
It is important to address the issue of communication with suppliers and those who would like
to be become suppliers. Just as it is believed that there are many stakeholders to whom the
entity is accountable, it is important to remember that suppliers also have many activities
outside the buyer-seller relationship. They are taxpaying citizens (if not in our jurisdiction, then
in another); they are voters and constituents of the elected officials to whom the procurement
professional reports directly or indirectly; and their impression of doing business with the entity
will doubtless be repeated to their colleagues, especially if that experience is less than positive
for them. There exists an old business rule that goes something like, “If you provide good
service, the recipient will tell one person; if you provide bad service, the recipient will tell at
least nine other people.”
Most entities these days have a set of written guidelines for suppliers often entitled, “How to
Do Business with the (Entity),” which highlights the general conduct of the business
relationship. These guidelines are often offered online. For suppliers that do not register online,
a How to Do Business” brochure or fact sheet may be sent with a supplier registration form.
NIGP-CPP Action Statement: Develop criteria for evaluation of
internal and external relationships and procurement’s
performance.
Performance Measurement
Performance measurement is crucial to any core public sector activity, program, department, or
entity. If an activity is not measured against some established performance criteria (metric),
then the management of resources cannot be evaluated based upon pre-defined criteria, and
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sustainable strategic improvements cannot be made. This is valid for both the entire entity as
well as Procurement. The best procurement departments can measure and demonstrate their
performance, customer satisfaction, cost savings and avoidance efforts, and processes or
outcomes through benchmarking. Benchmarking should occur against other departments
within the entity externally against industry standards and best practices, and even against
private or non-profit organizations.
To continuously improve our level of service to our stakeholders, Procurement must be able to
critically evaluate our level of performance to our internal and external stakeholders. As roles
and relationships are established with various stakeholder groups, established agreements
should be considered to document the level of service (i.e., Service Level Agreements). Criteria
must be developed based upon the needs of our stakeholders and based upon subjective data
that can be captured, tracked, and acted upon. Evaluation program development should be
based upon direct input by stakeholders, should define the methods of data collection, and
should have well-established action plans to make use of data to improve service delivery.
Developing positive work relationships and rapport with the entity’s stakeholders forms the
foundation for creating a climate that is conducive to creating consistency in procurement
processes. Public procurement is a service function, one that should focus heavily on customer
service, and procurement professionals should strive to develop working relationships with
internal and external stakeholders that promote trust and mutual respect. This will make it
easier for procurement professionals to effectively address the challenges associated with
maintaining a consistent approach to procurement.
Evaluation Metrics
Measuring an entity’s procurement process efficiency is necessary. The processes procurement
uses are important for functions such as supply chain management in the event of an economic
downturn.
Even though cost savings are an important function in the procurement role, there are
questions that should be answered such as:
•
•
•
•
When did we last review this process?
Are improvements needed?
How do we compare with other procurement entities?
Are current processes improving or declining?
Once the needed improvements are identified, appropriate criteria for measuring those
improvements must be selected. It is important to have narrowly defined and very specific
criteria to ensure improvements can be measured.
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Some of the most common methods an entity can use to measure procurement performance
include performance reviews, regular staff meetings, benchmarking, performance indicators,
performance targets, and quality management tools. The concept of outsourcing the
procurement function is also beginning to receive some attention. Perhaps the most common
way in which procurement performance is evaluated is through some general performance
review process, typically during the budget cycle. There needs to be a dedicated, cross-cutting
review of the procurement function to examine how procurement is conducted for all areas of
an entity. Ultimately, the procurement function should be judged as a tool for fulfilling the
needs of stakeholders to achieve the mission of the entity. It is generally believed that those
best able to evaluate whether performance measure outcomes are being achieved, and to what
level of achievement, are individual staff members who help deliver the products or services. In
some cases, it may be possible to gauge the direct contribution towards the achievement of
entity goals and objectives, e.g., growth in the number of local businesses and the development
of existing businesses (increased activity/turnover and staffing levels) that may be attributable
to the procurement function.
Collecting and Analyzing Responses
Ideally, the criteria to be measured can be incorporated into a simple survey that can be
completed by either the targeted stakeholder, or Procurement staff, depending on the goal of
the survey. If the stakeholder is expected to complete the survey, the entity’s technology and
culture will dictate how distribution will occur. However, it is critical that Procurement follow
up to ensure sufficient responses are received to result in the collected data being an accurate
representation of the whole client base.
Performance Monitoring
Performance monitoring and review are needed to ensure that any plan for Procurement
operations are being followed as stated (and to note where differences may occur). Such plans
may include plans for delivering programs and activities, for tracking cost savings/avoidance,
for process improvement, etc. An evaluation should be conducted, and a report completed for
each task. Without linking review to some established metric, there is no way to assure that
progress against the plan is measured and managed. Without such a review, there is also no
way to isolate potential problems. A process to monitor and evaluate operations establishes or
isolates accountability structures and provides a means to judge the progress of the
implementation of the plan. If adjustments are in order, the entity can make necessary changes
as it progresses through implementation.
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For example, a local government’s health clinic has decided to conduct a campaign to immunize
an estimated volume of low-income children. A wise procurement professional would conduct
the engagement such that the solicitation and contract give the entity the ability to order
vaccines (with a short lead time) on a periodic basis, with an indefinite quantity over time. A
weekly census of patients would indicate whether the campaign is working, and how much
vaccine to order, given the remaining number of projected vaccinations anticipated. This would
be more effective in the long run, rather than ordering a large quantity prior to the campaign,
and hoping it gets used; or having to turn away any of the children for lack of vaccine.
Within the entity’s requirements, the quality, service, cost, and time characteristics can be
measured and judged relative to the plan’s goals and objectives, including:
•
•
•
•
•
•
Monitor and evaluate individual performance plans by program or activity;
Evaluate performance measures against departmental goals and objectives (conducted
by the Strategic Planning Committee);
Review of progress against the Strategic Plan (conducted by the Strategic Planning
Committee);
Review and evaluate changes made or additions to the plan that have occurred through
various management systems, including organizational learning;
Evaluation of customer satisfaction survey results; and
Critique of Procurement performance measures and quality assurance standards that
focus on outcomes.
Implementing Change
Collecting and analyzing data pertaining to Procurement’s performance is not the end of the
process. It cannot be overstated how important it is to use the results to identify where change
is needed to improve performance. This then initiates another round of evaluation,
measurement, and analysis, followed by more change. This forms a cycle of continuous
improvement.
The level of effectiveness of the leader will correspond to the success in implementing change
during the continuous improvement cycle. It is important to recognize that there are
differences between managers and leaders, and their impact on the change process. A leader
has developed the ability to influence people, while a manager’s focus is on maintaining
systems and processes. Without the ability to influence people, the change management
process is much more difficult.
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NIGP-CPP Action Statement: Align procurement change with
entity goals.
Change Management
Change is inevitable. Any organization must continue to evolve and change to be successful. It is
critical to ensure that change is in alignment with the entity’s overall goals. Identifying what
needs to be changed in our entity can be difficult because we become so accustomed to the
problems, that we no longer see them as problems. One must look at what we have been doing
with a critical and objective eye, particularly that which we have been doing year after year.
Goals & Objectives
The benefits of goals and objectives include a means of measuring success, ensuring leadership
cohesion, employee empowerment through knowledge, and understanding of entity goals and
reassessing goals through monitoring to verify the entity is headed in the right direction. Goals
are observable and measurable end results that help to further define an organization by giving
it direction, long-term targets, and a vision of the future. Put another way, a goal pinpoints
what an entity wants to achieve and is also sometimes called an “outcome statement.” Goals
may pertain to the entity as a whole or to its departments. Departmental goals must support
the overriding entity goals.
Goals describe what an entity’s strategic plan intends to achieve. Goals should address the
internal and external issues facing the entity, and each goal must be easily understood by the
public. Although there is no agreed-upon number of goals for an organization, two to three
goals per item identified in the mission statement are common and recommended. During goal
development, the entity should begin identifying performance measures that can be used to
evaluate accomplishments. A goal should provide measure that detail how an entity will
achieve the outcome.
Objectives detail how an entity will reach a goal. Objectives are highly defined targets that
require specific action. Objectives typically have shorter time frames than goals, and they may
also identify specific performance indicators, such as quantity or quality criteria, Objectives
should be SMART (Specific, Measurable, Achievable, Realistic, and Timebound). Objectives must
be specific to understand exactly what is intended, must be measurable in terms of identified
indicators, must be achievable and realistic to some degree, and must be completed within an
established timeline Specific goals can be divided into multiple objectives, and multiple
strategies can be identified to achieve a given objective.
Although goals are typically broad statements of long-range intended purposes, objectives are
much more specific in terms of accomplishments, quantifiable in terms of evaluation, and time
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sensitive. Objectives represent the extent to which goals will be achieved at the end of the time
period for strategic planning purposes. Objectives should be derived directly from the identified
goals, which imply a priority for resource allocation. Objectives must emphasize the results an
entity is aiming to achieve and when they plan to achieve them. Objectives should clearly
identify measures for specific results that the entity seeks to achieve during implementation of
the strategic plan. These objectives should be easily understood by the individuals accountable
for their outcome and for the general public. The creation of objectives should, at a minimum,
include an analysis of the following statements:
Is the objective logically related to an identified goal?
•
•
•
Does each objective describe an output or outcome in terms of identified targets, and
are they time based?
Is each objective realistic and attainable?
Is the objective related to a specific foreseeable result or outcome instead of some
internal process or output?
Challenges
There are several reasons why change can be challenging at both the personal and
organizational level.
1. People may feel awkward and self-conscious doing something new or different. They
want the change without the pain of making the change. Therefore some people prefer
to live with old problems rather than with new solutions.
2. There is a trade-off. People initially focus on what they will have to give up. Ralph Waldo
Emerson said, “for everything you gain, you lose something,” but some people hold on
to what they have so tightly that they would rather not gain anything to avoid the loss
of something.
3. People are afraid of being ridiculed because of how they perform in a new environment
or perform new tasks. Also, people bring their own views which play into why they may
have difficulty accepting change, so it is important to note that the level of readiness is
different for different individuals.
4. People personalize change and may feel alone in the process. This can be an
overwhelming emotional experience for some people. It is necessary to show patience
instead of expecting that everyone will be on board after change is announced. Not
allowing people to adjust will cause resistance to change. Even though not everyone will
come onboard immediately, patience will help increase influence with people simply by
being able to accept change when they are ready for it.
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Cross-Functional Acceptance
In entities, there is an ever-present conversation about gaining buy-in. Most of the work in
entities is done through influence rather than hierarchy because of entity team-based
structures, requiring professionals to have considerable skill at getting support for their ideas.
After all, you can have a revolutionary idea for your company but without buy-in for it, nothing
will happen.
As any leader can attest, getting true buy-in is not easy. One significant factor is that the
process we use to secure buy-in is inherently flawed. In fact, we do not approach it as buying at
all – but about selling in. It has been called “describe and defend.” We develop an idea, sell it to
ourselves first, and then go about selling it to others. We consider every objection and develop
an air-tight defense for each one. The problem is that we need others to be open to our
influence. When they feel sold to, they are more likely to resist or ignore our entreaties. We
may get compliance, but we will not get the kind of buy-in that motivates others to deeply
support our ideas.
Real buy-in involves at least some element of co-creation. It invites discussion, debate, and
allows everyone to feel even more vested in the outcome. This does not mean that every
opinion about our idea is accepted. We let others know that their views are helpful for us to
finalize our idea, and we are looking at varying viewpoints. Most people understand that they
are part of a larger process, if explained up front.
Action Plan
An action plan is the roadmap that will guide an entity toward its objectives. An action plan
details the concrete steps needed to attain goals, usually covering the coming year and a
timetable for each task, a description of who will do what and a follow-up process. The action
plan is typically created at the end of the strategic planning process, after the entity has set out
its vision, performed an analysis and established objectives.
There is no limit to the number of objectives used in a plan, but there must be at least one
objective for each articulated goal. Objectives are exhibited in the strategic plan based on the
assumed priority of each objective, beginning with those objectives which are determined to be
of greatest importance relative to the goals that are weighted most important. Like their
counterparts in goals, each objective should be no more than one or two sentences in length.
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Performance Management
Performance management is the development and alignment of performance objectives and
mechanisms to measure specific accomplishments that support the strategic goals and
objectives of the entity. Performance management includes activities to ensure that goals are
consistently being met in an effective and efficient manner.
Effectiveness measures are results oriented and are the most useful to decision makers in
determining priorities for resource allocation decisions. Entities normally utilize a variety of
performance measures to monitor and assess current operations considering historical
performance and to establish future goals. As part of this process, it is useful to compare, or
“benchmark,” the performance of a strategy against acknowledged, high performing leaders
and against the general population of similar entities. This allows comparisons of how the entity
and its sub-systems are performing compared to others. History can play an important role as
well. Once a performance management system is in place, performance measures can be
tracked over time to see how the entity is comparing to its past.
In the delivery of programs and activities, performance monitoring and review are needed to
ensure that the action plan is being followed as stated (and to note where differences may
occur). An evaluation should be conducted, and a report completed for each task. Without
linking review to some established metric, there is no way to assure that progress against the
plan is measured and managed. Without such a review, there is also no way to isolate potential
problems. A process to monitor and evaluate operations establishes or isolates accountability
structures and provides a means to judge the progress of the implementation of the plan. If
adjustments are in order, the entity can make necessary changes as it progresses through
implementation.
What can go wrong when developing entity goals? Although significant time and energy can be
spent developing and implementing business goals, they can fail if not done correctly. Setting
unrealistically high goals can be a pitfall and barrier to accomplishing the goals and objectives
set an entity. When a goal is perceived to be unreachable, little to no effort will be made by the
employees to achieve them. Leaders must be careful not to set unrealistic goals. Unrealistic
goals can contribute to employee discouragement and the inability to achieve the set goals.
Evaluation & Feedback
Successful planning depends on satisfactorily executing the plan and monitoring its results. A
well-planned accountability system increases the likelihood of successful implementation.
Accountability touches all levels of the entity. Contract administrators, program managers, and
employees are responsible for certain aspects of the action plan. An accountability system
reinforces that goals and objectives identified within the entity are evaluated, consistent with
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standard evaluation methods. Constructively using an accountability system generates interest
in and builds commitment to the planning process.
Establishing goals is only half the work for an entity focused on achieving goals and objectives.
Once the goals have been explained to employees and a plan has been developed to achieve
those goals, it is important to review those goals at certain times during the year. Leaders must
periodically review the established goals and objectives and ask if the entity is on target to
achieve its goals and if a change of direction is required to get the entity closer to achieving its
goals?
NIGP-CPP Action Statement: Identify and address challenges
and conflicts.
Challenges in the Public Sector
In the workplace things do not always go smoothly. We are often faced with both conflicts and
challenges that must be overcome. It is important to point out the difference between these
two. A conflict exists when there are two different views of a situation, such as when the entity
and a contractor interpret contractual language differently. A challenge exists when a hurdle
must be overcome, and a challenge is not always a negative. Therefore, a conflict is typically a
challenge, but a challenge is not necessarily a conflict. A conflict should be addressed as a
challenge but will include problem solving techniques that are unique to resolving conflicts.
Embracing Challenges
Leadership constantly presents challenges to a leader and their abilities. These challenges are
an invitation to rise to another level, to test one’s self and improve in the process, and to show
that one can accomplish something that may seem difficult or even impossible.
We all encounter multiple challenges at work every day. While some of us look for an excuse to
avoid such challenges, some people take the opportunity to get one step closer to their career
success. We all want success in our lives, but sadly only a few of us get to taste it, simply
because most of us do not know how to transform everyday challenges into opportunities. Our
career depends a lot on the choices we make, and avoiding challenges is not a very effective
choice. Rather, we should identify challenges that can serve as opportunities for leadership
growth.
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Addressing Conflict
As previously mentioned, there will be times when we must address conflict in the workplace.
Whether the conflict is between employees, or between a contractor and an employee, the
approach to the resolution is the same.
Procurement professionals are likely to come across challenging situations involving varying
degrees of conflict. The more complex and high profile the procurement, the greater the
likelihood for encountering conflict. Stakeholders often have competing interests in
procurements. For example, an end user wants a procurement to move quickly, while a supplier
wants more time to respond to a solicitation. These situations present opportunities for
procurement professionals to serve as mediators and facilitators of the competing interests.
Whether conflict arises because of politics, competing interests, or general frustration with
government, procurement professionals must master the skills of mediation, facilitation, and
negotiation.
Disagreements may also arise because of unexpected changes on a project, or during the
initiation phase, when the contractual requirements must be agreed upon. Remember,
however, that conflict is not necessarily bad. Sometimes a situation can only really be
uncovered by getting all opposing emotions, opinions, and views out into the open. Be
resourceful and calm, and diplomatically deal with the situation before it escalates out of
control.
NIGP-CPP Action Statement: Engage stakeholders in
development of entity key performance indicators to achieve
change implementation.
What are Procurement Key Performance Indicators (KPIs)?
Public procurement managers are expected to drive value that goes beyond just cost savings
benefits. Procurement must have the right information readily available to make key decisions
that contribute to organizational improvement. A procurement key performance indicator is a
tool used to measure performance as well as monitor and evaluate the efficiency and
effectiveness of the procurement organization. Key performance indicators provide a clear
picture of the Procurement Department’s current performance level and helps determine the
results and quality of the procurement function.
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Tracking Procurement Performance
The Chief Procurement Officer should have a performance measurement system that assesses
and evaluates progress toward achievement of the strategic procurement plan. Performance
measurement is critical to the success of any public sector activity, program, or entity, and
should be meaningful for everyone involved in the procurement process. Key performance
indicators should be fair, objective, and consistent, and provide information that leads to
demonstrable action.
To track progress toward meeting the Procurement Department’s goals and objectives, the
management of resources must be evaluated based upon a predefined metric. Common
metrics are as follows:
•
•
•
•
•
Inputs – measure resources used to include labor, materials, equipment, and supplies.
Demand for services may also be considered an input metric.
Outputs – records of activity or effort that can be expressed in a quantitative or
qualitative manner, e.g., total number of new contracts, total number of staff
members who obtained professional certification, total spend).
Outcomes – assessments of the results of an activity and whether expected results
were achieved (customer service, reduction in delivery times, employee retention).
Efficiency – measures the ratio of inputs to outputs or outcomes. When outputs are
increased and inputs decreased, more efficiency is generated.
Effectiveness – a measure of the quality of an output such as how long it takes to
process a request for procurement or the turnaround time to receive goods or
services.
Common Procurement Key Performance Indicators
The Chief Procurement Officer evaluates the performance of the Procurement Department to
ensure that entity service expectations are being met. Some common procurement key
performance indicators are as follows:
1. Cost reduction and containment
•
•
•
•
•
•
Savings achieved through use of a new contract or procurement initiatives
Cost reduction due to using alternative products
Value of improved warranties
Reduced costs of stocking inventory
Cost savings achieved through increased competition
Reduction in demand for a good or service
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2. Supplier and industry development
•
•
Targets to identify potential local suppliers or disadvantaged businesses
Number of new sources for certain goods and services
3. Delivery Indicators
•
•
•
Reduction in supplier lead times
Number of emergency purchases
Purchase order cycle time
4. The efficiency of internal procurement systems and processes, volume of procurement
spend transacted electronically, or through other transaction methods such as pCards
•
•
•
Volume of transactions through standing or term contracts
Response time and perceived value for money
Internal client satisfaction with purchasing processes and service levels
5. Client satisfaction
•
•
Survey responses
Regular client communications and meetings
Another effective means of measuring procurement performance is benchmarking.
Benchmarking is the act of measuring a process, product, or service against the characteristics
and performance of the recognized leaders in the given areas of review. Procurement managers
must establish benchmarks as a set of standards against which the process must be measured.
Benchmarks must be quantifiable, attainable, and realistic. Procurement professionals typically
use benchmarking in many situations to determine a need and provide a more cost effective
means to accomplish a given task.
Planning and Establishing Performance Measures
Procurement metrics and KPIs are important in performance management. They can connect
procurement professionals with key strategic points and increase focus on the impact of
procurement processes and functions. Methods used to measure procurement performance
should be designed to motivate staff at all levels to contribute to organizational improvement.
In order for procurement managers to determine what should be measured, accurate planning
must be completed before the process of developing performance measures. Ways to
accomplish this include:
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•
•
•
•
•
•
•
Recognize the value of actively engaging with key stakeholders and building positive
relationships.
Obtain input from key stakeholders.
Ensure that the performance indicators are simple and relevant to the intended audience.
(internal stakeholders, public, elected officials, etc.).
Ensure that measures are specific, consistently applied, and within the control of the
procurement function.
Identify any dependencies among other functions or departments that will be related to
the performance indicators.
Define a specific time period for reporting measures that is directly related to the
attainment of goals and objectives in the strategic plan.
Utilize key performance indicators in the decision-making process, that support informed
decision making and lead to appropriate action.
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Focus Area 7 — Business Principles
In our ever-changing and increasingly complex world, the ability for procurement professionals
to perform their professional responsibilities alongside common business principles and
operations is critical to the success of an entity’s procurement function. It is no longer feasible
for the procurement professional to merely be concerned with the purchasing process. Instead,
they must understand, apply, and master the use of business, financial, technology, and project
management soft skills to serve as an effective and contributing member of an entity’s
management team, thereby ensuring project and program success while efficiently and
ethically serving as stewards of the public trust.
NIGP-CPP Action Statement: Establish a continuous
improvement plan.
Establish a Continuous Improvement Plan
Continuous improvement is a philosophy and way of life that, to be successful, must permeate
every area of an entity. It is not a one-and-done, quick-fix technique, but rather a perpetual
cycle of purposeful activities created to bring about gradual, evolving improvements to services,
processes, or products through perpetual review, measurement, and action. By allowing
individuals to streamline processes and minimize waste, time, and effort by identifying
bottlenecks and inefficiencies, entities that dedicate themselves to continuous improvement
understand the importance of better serving their clients while improving effectiveness and
efficiency in their processes.
Continuous improvement is an essential element of well-known quality methodologies and
frameworks, such as ISO and Six Sigma. However, continuous improvement plans do not need a
dedicated framework to exist. By implementing a continuous improvement plan, entities
provide a tacit acknowledgement that though they will never be perfect; they can always be
better than they have been in the past.
Continuous Improvement Cycle
The continuous improvement process is an overarching cycle. If a test fails, procurement
professionals and entity leaders must reengage the process with slight adjustments to the
overarching framework to generate more successful results. As it will be impossible to identify a
perfect framework or cycle at the onset of the initiative, professionals are encouraged to
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accurately monitor and document results in real time, thereby ensuring comprehensive capture
of materials. As part of procurement staff training, supervisors should schedule a lessons
learned review session after each training simulation event has occurred.
Lesson’s Learned Documents
A lessons learned document is used to capture the decision-making process followed
throughout a procurement’s lifecycle or through the testing of a new policy or procedure.
Lessons learned documents capture both the positive and negative issues related to an
initiative’s people, processes, technology, financials, and other related attributes that might
impact or influence the undertaking. Lessons learned documents are especially critical in
sectors that are never-ending or continuous, such as professional development creation,
warehousing, recurring contracts, etc.
Procurement professionals can begin the process of creating lessons learned documents by
reviewing the routine sources of data, such as status reports, inventory metrics, fulfilled
contracts, or spend and risk analysis results. In addition, all stakeholders should be consulted
with detailed notations made to capture the decision rationale in real time within the
document.
Improvement Plans
Improvement plans are the output of a successful lessons learned document, accurately
synthesizing the information as captured in real-time during the initiative to provide a higher
overview of potential improvements. It is a best practice to hold a meeting with the entire
organization to discuss what happened, what issues were encountered, what you would do
differently next time, what can be improved, and what did or did not work. The discussions
should not focus on assigning blame. It should address any successes and issues that were
encountered.
Many entities call this meeting a “hot wash” or “after-action” meeting, as the goal is to wash
out all the issues! Whatever the entity chooses to call this meeting, it is important that a
meeting is conducted, and any action items are assigned to a responsible individual or group
along with a deadline for completion.
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NIGP-CPP Action Statement: Identify how changes in global,
national, and regional economies affect operations.
Globalization in Public Procurement
There are significant differences between procuring goods manufactured in another country
but purchased through a domestic supplier versus procuring goods or services directly from an
international supplier.
Procurement professionals engaged in international sourcing are often faced with unique
circumstances and requirements regarding social and business practices, procurement policies
and processes, and compliance with legal obligations. While the more obvious differences in
language and time zones may be easily identified, other more complex challenges may be less
obvious and will, therefore, require research, analysis, and planning for effective management
of the sourcing process. In addition to the complexity of most international procurements, the
additional challenges may add greater risk into the procurement. As such, there must be a
greater focus by the procurement professional to engage appropriate stakeholders and subject
matter experts as well as a greater investment of time to conduct research and proper planning
for approach. Unrecognized differences can lead to contracting problems or procurement
failures. Unidentified legal issues may result in lengthy resolution processes and unforeseen
liabilities. Usually, when dealing with high-value procurements, international trade agreements
are likely to apply, and where they do, they take precedence over local procurement laws.
Role of the Procurement Professional
As the relationship manager of the interactions with internal client departments as well as the
external supplier community, the procurement professional has the ability, in fact, the duty, to
set operational compliance expectations with these groups.
Procurement professionals should, at minimum:
•
•
•
•
Know when a procurement from an international supplier might trigger international
trade agreements, know how to determine which trade agreement applies, and know
how to find trade agreement information;
Use checklists to identify important requirements such as threshold levels, posting
period requirements, copyrights, intellectual property rights, etc.;
Be able to explain to stakeholders the effect of the application of certain trade
agreements, international legislation, and geographical logistical challenges;
Identify issues involving breach of contract requirements, as well as ethical standards,
and elevate unresolved issues to legal counsel for advice, as needed.
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Procurement professionals need to follow the law and negotiate the best possible value for
their entity while procuring domestically. In international procurement, overarching trade
agreements and cultural differences may add other factors to the procurement and decisionmaking process. Procurement professionals must educate themselves on business practices in
the country with which they are engaging.
NIGP-CPP Action Statement: Develop and manage a thriving
and resilient workplace.
Probability of Disaster
According to the ICMA 2015 survey on Local Government Sustainability Practices, seventy-six
percent of local governments have responded to a major disaster in the past fifteen years with
the top three disasters being floods, blizzards/ice storms, and hurricanes. As the numbers come
in from the COVID19 pandemic, these numbers may change dramatically.
Because there is a high probability of being faced with a disaster, procurement professionals
should develop a business continuity plan that provides the framework in which the
procurement organization can plan for and perform their respective essential functions during
any type of disruption, disaster, or emergency event. According to the Federal Emergency
Management Administration (FEMA) twenty percent of large organizations spend over 10 days
per month on their continuity plans to ensure that they are robust and current.
Business Continuity Plans
Regardless of where your entity is located; big city or rural community, none are immune to
disasters and being prepared is the key. That is why it is important that the responsibilities of
the procurement organization are established in advance of any event that may impact its
operations. Creating a business continuity plan enables your procurement organization to
become operational again quickly.
The steps to create a business continuity plan include:
1.
2.
3.
4.
5.
Document procurement services.
Assess risks that could interrupt operations.
Develop approach to deal with potential impacts.
Train the team and practice.
Conduct a “lessons learned” after an interruption.
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Procurement’s Role Changes
Procurement generally deals with issues related to organizational decentralization, finding
balance of controls vs. efficiency, and application of regulatory rules. However, emergency
response generally requires operations that are atypical from day-to-day routine procurement
activities, invoking ideas of command and control. Emergency operations look much more like
military operations. During emergency events, many of the procurement process issues fade in
importance in the early response phase. Often, sourcing rules change to permit procurements
based on urgency. Add the fact that the procurement function in emergencies takes on other
roles such as logistics, resource management, or finance functions, and the environment can
quickly become unfamiliar to procurement staff. Exercising these concepts, and broad
involvement of the procurement staff in the planning phases, is critical in order to get everyone
comfortable with the way in which the role changes. The role of procurement is not less
important, just different.
Document Procurement Services
As part of the business continuity plan, procurement organizations first need to understand
their fundamental business services.
Core Services
Identifying core services is the first step to gaining a better perspective of the daily operational
aspects of not only what we do, but also how these services relate to and support the entire
organization. To do this, procurement professionals would need to consider the effect an event
would have on your business operations. Because the job of procurement professionals
changes multiple times each day, the task of documenting services may seem daunting.
Further, procurement professionals do so many things repetitively that we don’t even realize
that we do them. However, it is a critical first step to document resources for business
continuity planning. It is certainly possible that in creating the continuity plan first draft that
some important elements are missed or include some as critical, when in fact they are not a top
priority.
Living Document
The business continuity plan is a living, evolving document that should be revisited after any
disaster event, or at least once a year, so that updates can be made based upon real life
experiences and a growing understanding of related subject matter. It should contain
procedures for requesting and approval of requests, tracking requests, receiving, and logging
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incoming and outgoing inventories that are established in advance of creating the procurement
continuity plan.
Prioritizing Risk
To better prepare and plan, procurement professionals need to determine the likelihood of a
risk occurring so the business continuity plan can be tailored, and practice exercises to test
those plans, to those emergencies that will most likely faced.
Probability
Another word for likelihood is probability. When procurement professionals are determining
the likelihood of the risk occurring, they are determining the probability of the risk occurring.
Procurement professionals have limited time and energy and don’t want to spend time
planning for a risk that has a low likelihood of occurring.
Prioritizing Risk
There are a variety of ways to prioritize and categorize risk.
•
•
•
•
Category Ranking: Uses subjective words such as: Extremely high, high, medium or
moderate, low and extremely low, or always, often, sometimes, rarely, and never.
Ordinal Ranking: Order the risks so the first is the most likely to occur, the second is the
next most likely, and so on.
Scale of 1 to 10: The lower the number, the less likely that the risk will occur; for
example, (1) extremely unlikely and (10) extremely likely to occur.
Probability Rating: The probability would be listed as a percentage.
Category ranking, ordinal ranking, and scale of 1 to 10 can be used when procurement
professionals are using personal opinion to describe the likelihood that particular risks will
occur. Probability rating can be used if procurement professionals have numerical data to assist
with determination.
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NIGP-CPP Action Statement: Obtain and manage budgetary
resources to further procurement goals.
Availability of Funds
Procurement professionals must be able to properly classify an expenditure within their entity’s
chart of accounts to ensure that the correct account is being utilized for that expenditure. They
must determine whether funds are available for a proposed procurement. The procurement
process requires significant time, and it is wasteful to start if funding is not available. Similarly,
suppliers may be hesitant to respond to solicitations from an entity if the procurement
frequently fails to move forward. Preparing accurate, thoughtful proposals requires significant
effort from suppliers. As such, the entity should only publish sourcing opportunities that it fully
intends to award. If funds are not immediately available for a procurement, the procurement
professional must be able to project when funds for the procurement will be available and use
that information to schedule the procurement appropriately. In addition, the procurement
professional must ensure that the contract’s payment terms are structured so that payments
coincide with funding availability. This can be difficult because of changing timelines. This
information can help the procurement professional schedule procurements and manage the
workload more effectively.
Restriction on Fund Use
A procurement professional may be required to determine whether the funds to be used for a
procurement have restrictions associated with them. For example, a grant agreement may
require that funds can only be used for equipment, or another agreement may state that the
funds cannot be used for equipment. Similarly, the grant may have specific requirements
regarding timing of committing and spending the funds. Grant funds are not the only types of
funds that may have restrictions placed on them. Bond proceeds and enterprise funds are other
common sources of funds that may have restrictions on what they can be used for.
Purchase Order Use
Procurement professionals must understand the purpose of purchase orders (POs) in relation
to the budget process. This includes understanding the difference between POs for operational
expenses and capital projects and the importance of the closeout process and its impact on the
budget.
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Close Out of a PO
At the end of a contract or project, once the final invoice is submitted and paid, there may or
may not be funds left in the PO. If there are no funds remaining, the PO will generally close out
financially. If there are funds remaining in the PO, then the procurement professional must
determine what to do with those funds. Any remaining funds need to be released or
disencumbered from the PO, so they go back to the source. To do this, Procurement may need
to prepare a change order. This is important because funds that are encumbered for a
particular contract cannot be used for another purpose, and if funds are no longer needed for a
given contract, then they could be re-allocated to another purpose. Furthermore, when the
entity does not address old purchase orders, the funds remain encumbered and, therefore,
present unresolved liabilities.
NIGP-CPP Action Statement: Develop and implement a
communication plan to enhance the image of the procurement
function.
Communicating the Value of Public Procurement
Promoting the public procurement function is vital to the success of Procurement. The most
successful public procurement departments are well respected by stakeholders and are
perceived as value-added service providers assisting the entity in meeting its commitments to
the public. Procurement professionals must understand that they are a service-based
profession and serve as a strategic partner to the entity and all stakeholders.
Communicating with Stakeholders, End Users, and Suppliers
Procurement must find ways to communicate its value to its stakeholders. Of primary
importance in gaining respect as a valued partner for the entity is by communicating with
stakeholders the various ways in which Procurement can help stakeholders. Whether through
policies, procedures, or programs, Procurement’s primary objective is to meet the needs of
their stakeholders in securing the needed goods and services. Procurement needs to clearly
understand their stakeholders’ needs and then be able to articulate how Procurement can
meet those needs.
At a minimum, the procurement staff should be consistent as possible with how procurements
services are provided, and:
•
Provide stakeholders with high-level education on procurement policies and processes;
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•
•
•
•
•
Establish minimum service expectations stakeholders can expect from Procurement to
fulfill their needs in an efficient and effective manner;
Articulate timeline expectations for each procurement to be mindful of internal
customers’ deadlines and adequately communicate them to the supplier community;
Treat all internal and external stakeholders in a consistent, respectful, and professional
manner;
Promote and adhere to the Values and Guiding Principles of Public Procurement; and
Employ procurement best practices whenever and wherever possible.
As the entity and its members enjoy shared and individual successes, it is important that they
be communicated in the department, throughout the entity, and to the general public. This can
be done by:
•
•
•
•
•
Using National Procurement Month to provide entity leadership with a summary of all
successes experienced in the Procurement department over the course of the year;
Utilizing entity news outlets;
Following up with internal stakeholders to specifically point out the value of the
department in their procurements;
Notifying appropriate news outlets when employees or the entity achieves recognition;
and
Using the entity’s social media to share good news stories.
Communicating with Management & Leadership
To create consistency in the procurement process and develop processes that will result in an
overall benefit to the organization, it is important for procurement professionals to gain the
approval and support of executive management. Procurement should work closely with
executive management to ensure that the entity managers understand the processes and why
they are critical to efficient and effective procurement operations. As discussed earlier,
stakeholders may resist complying with the entity’s procurement processes and requirements,
and procurement professionals may need to rely on the support of upper management.
Ultimately, it is Procurement’s responsibility to make sure executive management understands
fully the value of the procurement function, and the procurement professional must constantly
be looking for new avenues to advance the procurement function in leadership’s eyes.
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Appendix
Acknowledgements
Subject Matter Experts
John Flynn, CPPO, CPPB
Renee A. Rogers, CPPO, CPPB, C.P.M.
Joy M. Kerkhoff, CPPO, CPPB
Christina D. Lochbaum, CPPO, CPPB
Marcheta E. Gillespie, CPPO, CPPB, FNIGP, C.P.M., CPM
Deborah Kay Bryan, CPPO, CPPB
Christine O. Weber, CPPB, C.P.M.
Ronald King, CPPO, CPPB, VCM, VCO