How to Be Strategic in Public Procurement and Government Contracting

It seems like every purchasing/acquisition leader I talk with (in both the private and public sectors,) as well as many or most of the practitioner-directed literature I read their organization’s transformational journey. In my experience, most purchasing/acquisition organizations claim they are two to four years into a journey of radical transformation. They argue that the strategies followed by the recently departed CPO were woefully inadequate to meet the demands of the future. These radical transformations are invariably accompanied by sweeping organizational changes intended to move the organization from tactical to strategic procurement (whatever that means). Change is not only required but is almost always brutal: less than half of the current staff can make the transition. But, hey, it’s tough love and only the strong survive.

Though common, this approach to reorganization and right-sizing is a delusional journey. Rather than weeding out underperformers, it only serves to diminish critical supply knowledge, create bogus savings accounting, and reduce morale. Moreover, as a static, zero-sum game, the transformation is unvaryingly focused on a single company: Suppliers are not included in the vision except as sources of price reduction despite the lip service to cost of ownership, collaboration, and improved asset productivity.

Here’s a prescriptive list that contrasts the differences between tactical and strategic. It also defines the distinction between collaborative and combative supply management transformation. Although hard to sell to senior leadership and even harder to do, right-hand column activity and behavior is the only way to promote genuine supply network transformation that can create and deliver absolute, sustainable competitive advantage.

Zero-Sum – Tactical/Operational (Moves network costs with little, no or negative revenue impact or network profitability. Negotiation inherently combative)	Non-Zero-Sum – Strategic (Eliminates or reduces network costs improving network profitability enhancing revenue. inherently collaborative)
Combative to, at best, cooperative (Porter)	From cooperative to collaborative (Deming)
Negotiate from a power dominated position	Create opportunities through mutual dependence
Efficient “rights” Quantity, Place, Time & Price	Effective “rights” Thing & Cost
Extend Payables	Reduce waste & network TCO
Combative negotiations	Collaborative problem solving
Hold harmless clauses	Reduce lead-time & enhance flexibility
Transferred warranty obligations	Improve manufacturability & design
Imposed performance fines	Accelerate continuous improvements
Extracted concessions	Increase speed to market
Redundant audits	Advance innovation
Vendor Managed Inventory	Reduce network inventory
Tactical Focus – guilt	Strategic Focus –
Price	TCO
Auctions & bidding	Cost models
Arms-length & Punitive	Collaborative
Poker chip (delivery, quality, inventory, admin)	Game changer (NPD, CI, interdiction & innovation)
Efficiency	Effectiveness
Avoid risk	Monetize risk
Firm optimization / inter-firm competition	Network optimization / inter-firm collaboration
Vendor Compliance	Supplier-driven Innovation
Procedures and standards	Relationships
Vendor performance measurement	Supplier development (enhance 360º performance)
Relative	Absolute
Save	Prevent
Quantitative Goals	Processes & Leadership

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