Sunday, October 30, 2011

Does Decentralization of Procurement Work in Tight Budget Times?

According to one recent estimate, public agencies cutting 35,000 jobs a month as the Great Recession takes its continuing toll.  

Job Cuts in Procurement and Contracting:  As agencies eliminate jobs, the area of procurement and contracting is not exempt.  And yet the work of developing bids and solicitations, negotiating contracts, complying with grant requirements, and administering contracts continues - just with fewer centralized staff.

Impacts of Decentralization:  The economy has forced some agencies to decentralize parts of their procurement and contracting functions by delegating authority to departments who have the direct need for the services.  There are a number of risks associated with decentralization including the following:
  • Increased Bid Protests:  Increased bid protests as inexperienced staff manage the process.
  • Project Delays:  Delays in projects due to lack of familiarity with how to procure goods and services.
  • Audit Findings:  Audit findings by state and federal auditors for failure of agencies to follow applicable procurement regulations.
  • Loss of Accountability:  Unclear scopes of work written by department staff without the benefit of centralized review.  This may result in contractual problems of holding businesses accountable for the work contracted for.
  • Higher Costs:  Higher costs for agencies who no longer have the strategic procurement and contracting experts to help get the best deal for the public agency.
  • Ethical Issues:  Questionable ethical behavior by public sector employees not sensitized to, or aware of, the importance of maintaining a fair and transparent bidding and selection process.
What Work is Decentralized?  Some agencies have decentralized lower dollar value procurements back to departments.  Others have increased use of government issued credit cards as a means to deal with reduced staffing.

Managing the Decentralization:  As the economically driven decentralization continues, here are a couple of actions that agencies can take to help reduce negative consequences:
  • Training:  Provide in-depth training to staff who have been delegated with responsibility for procurement and contracting.  The training should also include training on ethics in public contracting.
  • Procedures:  Establish clear policies and procedures to deal with the new environment.
  • Checklists:  Develop simplified checklists that can help those doing procurement and contracting with knowing how to follow the right steps.
  • Check and Balances:  Ensure there are sufficient checks and balances in place to reduce risks of one person taking inappropriate procurement and contracting actions.
  • Ongoing Pre-Audits:   Establish a process for regular pre-audits by either agency staff or outside experts to ensure the process is working properly, and to help make changes where necessary.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC

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