Procurement: Then, Now & Future

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PROCUREMENT – THEN, NOW AND THE FUTURE Omesh Jethwani, Government Projects and Programs Manager caught up with Celia Jordaan, Principal Procurement Advisor and Don Jones, Principal of Flaming Star Consulting and former NSW Government Policy Director for their insights on procurement

In the noughties, the mere mention of procurement would result in builders and subcontractors running for the nearest exit. Does it still have the same “stampede” impact a decade later?

Celia: Procurement is often perceived to be the “bad cops” that hold back progress and only focus on paperwork. This is not a fair judgement however, as procurement, just like any other business unit, has a function to fulfil.

In my opinion, if we can open the lines of communication between procurement, other business functions and contractors, we will all understand each other’s roles and responsibilities better and will be able to work in a far more constructive manner together. It has worked for me in the past as procurement leader, and is the philosophy I continue to promote in my own business.

Don: I am not sure it does create a stampede, anymore. There are now about 2,000 small builders offering to work for the NSW Government, and many thousands more work for local councils or as subcontractors for larger firms. The interest in being part of the largest infrastructure program in NSW’s history is attracting more builders than ever before.

As a procurement professional, what are the current industry concerns that may keep you awake at night?

Celia: The lack of women in procurement and what I can do to build the foundations for the women procurement leaders of tomorrow.

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The lack of investment in developing procurement team capability, and how I can add value to lift the overall performance of procurement, and how I can improve the lines of communication, collaboration and connection between procurement and contractors to allow both to succeed and excel.

Don: I have a two-year-old daughter, and she is the only thing that keeps me awake at night.

More seriously, the biggest issue is corruption.

It affects everyone’s reputation, regardless whether you are involved or not. It reduces the number of new suppliers and business opportunities, and it corrupts markets, which puts good people out of business. This is why there is a more paperwork and time in procurement. Not everything should be done on a handshake.

Which gender currently dominates the world of procurement? Why do you think this is the case?

Celia: There are more women in the lower levels of procurement. When looking at management levels however, men are dominant. Personal experience has shown that many women are really great at getting the job done, fixing the problems and building good contractor relationships. Our big draw back however, is that we expect others to see and acknowledge our efforts, whilst men appear to be better at “tell and sell” more often.

In addition, I believe that we do not invest enough time and money for growth and development for procurement staff, and specifically not our women procurement leaders. To make matters worse, women are being paid significantly less than their male counterparts.

Don: Good question. The days of the stodgy old quartermaster filing receipts for pencils issued to staff has gone. Good procurement people now work inside or alongside a business, getting to understand the needs and then driving good commercial outcomes.

Procurement is becoming a profession for talented women and men.

How would you promote procurement as a career choice to overcome gender diversity, equality and skill shortages?

Celia: Procurement’s glass ceiling seems to be made of concrete. We need to increase the number of role models and invest in the career paths of women in procurement. I am also

a firm believer that mentoring along the way is critical.

Don: There are a number of really good pathways into a procurement job career. A wide range of courses exist and an increasing number of employers are offering traineeships and careers. The key in the next decade will be to retain the people it is now attracting by introducing more flexible ways to work.

How would you describe the following to a classroom of six year olds in a show and tell?

Aboriginal Procurement Celia: Providing an opportunity to Aboriginal businesses in order to give every six year old the same chance in life.

Don: Right now, where the action is.

Government Procurement Celia: The way Government goes about finding the best companies to buy from and work with.

Don: Not for everyone; but do not ignore it as Governments make up a third of the economy.

Coordinated Procurement Celia: Everyone working together.

Don: Much preferred over the alternative.

Cooperative Procurement Celia: Everybody following the rules to do better together.

Don: In construction, Early Contractor Involvement (ECI).

ICT Procurement Celia: Connecting the dots.

Don: Frankly, still far too much ‘big boys with toys’.

The current issues facing procurement today caused by the sins of our founding fathers Celia: Our forefathers were quite comfortable with getting someone else to do the dirty

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work with little reward in return. In many organisations we still expect our contractors to “serve”, notwithstanding the cost or expense or whether the contractor will be making a profit in return or not. When we take into consideration that our supply base is changing and we have a significant number of small and medium enterprises, this attitude results in failure not success.

Don: The notion that everyone could participate in an open tender. Markets are now so global and large that even with electronic tendering, procurement people are needed to pick the best strategy to source goods and services.

What are three common mistakes made in tender submissions that can be easily avoided?

Celia: 1. Not answering the criteria with enough detail to show that your business is a capable business.

2. Thinking tendering will be an easy solution, and not including it in your business planning process.

3. Not clearly showing how your tender submission will add value to the customer by using generic sales and marketing information.

Don: 1. Thinking more is better is a big mistake. I routinely see 200-page tender submissions and 170 of those pages are irrelevant. Short and sweet still gets noticed by tender panels.

2. Your experience must be relevant and recent. While it is nice to read your whole career, anything older than five years will probably get discounted unless it is extraordinary.

3. Don’t wait to the last minute to file your tender submission because this is when your competitors are filing. You run the risk of having a technology failure (this happens!) and panels notice. If you are filing two minutes before the deadline it is likely that the impression will be that you are not sufficiently organised.

For a newly start-up business, which three important objectives must Procurement perform?

Some businesses have rebutted the notion of better procurement practices yielding economic benefits. How would challenge them in a debate?

Celia: The old saying is that time is money.

With improved procurement practices we do gain more time and when we have time we can actually develop strategies, plan for success and build relationships with contractors that deliver results for all parties.

Don: In terms of the impact on a business, effective procurement policies should be saving a business two to five per cent of its goods and services bill each year, every year, through reduced and avoided costs.

Calculating the dividend is difficult sometimes, but the bottom line is the bottom line.

Do you think Australia is on par with the rest of the world when it comes to setting the direction of procurement?

Celia: I think we are followers more often than leaders and we often seem to reinvent the wheel rather than learn from other countries – particularly in the areas of technology and innovation and Indigenous procurement. In other countries so much more is done to invest in procurement capability.

Don: Yes, I do. It is tempting but a bit lazy to say that the North Americans do this better or the Europeans do that better. But I seriously believe there are good Australian construction firms who can demonstrate world-class performance, albeit in a relatively small domestic market.

How has the recent announcement of the 2017-2018 Australian Federal Budget, impacted the world of procurement, and what ripple effect will it have on the various industries?

Celia: Innovation and procuring innovation will become more important. Providing opportunities to small business and Indigenous business will also have greater focus.

Don: The announcement that the Commonwealth Government will build

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Celia: The high performance procurement teams and leaders are the ones who: 1. build good relationships that work both ways, and are not only focused on reducing margins and grinding suppliers; 2. communicate well instead of dictate; and 3. work from a total cost of ownership perspective rather than just a short term costsaving focus.

Don: Perhaps it is easier for me to say that when I see good procurement professionals, I can also usually see people: 1. working hard to understand the business need and then being able to translate that need into something that a market understands.

2. letting the market do its work – by not over specifying deliverables in a way which inhibits the capacity of the market to respond with solutions that they find most comfortable in delivering.

3. Working from an ‘enabling’ mindset, rather than a rule making/breaking mindset.

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Sydney’s second airport will have a massive impact on Australia’s east coast construction industry. With the other infrastructure work already underway or in planning, firms can plan a growth strategy that is not just riding the boom and bust cycle. If there is a reasonable schedule for the airport’s build, we can assume solid demand through to the late 2020s.

Indigenous businesses are more likely than non-Indigenous businesses to employ Indigenous Australians.

However Indigenous businesses are not participating in Government contracting opportunities at a level comparable to non-Indigenous businesses. Why do you think that is the case?

Celia: I think that fundamentally there is distrust in the system. Smaller Indigenous businesses may also not be aware of the opportunities that exist. Providing opportunities to Indigenous SMEs will require leadership, commitment to both failure and success, and have to be more than just ticking boxes.

Don: I think this is changing pretty rapidly and we are on a threshold of a new era. It is difficult in construction to get accurate figures, but we know that $90 or every $100 spent on Government construction projects goes into the contractor’s supply chain. So that is where the opportunity is. Recent policy changes in several Australian Governments, including NSW, shift the emphasis to indirect spend for this very reason. You can see from the NSW Government’s ProcurePoint website that some very big numbers are flowing through to Indigenous businesses.

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The Disney-inspired formula has been described as a “successful technique in Procurement Change Programmes.

Organisations are encouraged to drive change programmes like a Disney Executive. What are your views on this?

Celia: One would assume that ‘Disney Executives” are inspired by the transformational leadership of Walt Disney. Change is constant and any programme set to “drive” change has to take into consideration that the direction of the drive may have to change during the course of the journey. Leadership takes hard work, dedication, perspiration (yes, I meant perspiration) and lots of inspiration to keep going. It certainly is not an overnight success story. Walt Disney’s’ early years included losing his job, closing companies down because of financial stress, a nervous breakdown and a number of errors until his first Academy Award in 1935 for a short cartoon, Flowers and Trees, in technicolour. His leadership success in business took many years and many failures before he could claim success.

The transformation journey in the building and construction industry, starts with leaders with the courage to see a future that looks different to what the construction industry looks like today and who are willing to lead their teams on the journey.

Don: I have great respect for the person who used the Disney analogy, and who doesn’t love a good Disney fairy tale? But rather than adopting a model and then applying it to a functioning business, I think it is usually more productive to take time to deeply understand a business before initiating any change program.

Unless you are going out of business fast there is no real excuse to adopt a formulaic approach to change. Most organisational change programs, including procurement changes programs, start before they really should, are prosecuted with haste, and a fair proportion are never completed.

The transformation journey in the building and construction industry, starts with leaders with the courage to see a future that looks different to what the construction industry looks like today and who are willing to lead their teams on the journey.

Don: Most business leaders I know tell me that they think they have a responsibility to leave the business in better shape than how they got it. This necessarily means change is a given. In my opinion, the better leaders start by convincing their teams that some change is always necessary, and involving their people in the process.

Do you think the Disney-inspired formula is applicable for the building and construction Industry? If yes, where and how does one begin in its implementation?

Celia: Managing change and managing the risks relating to change are critical to success.

Many programmes and formulas are applied to business without considering the change required or the risks introduced as a result.

It took Walt Disney many years to transform a minor studio into a multinational leisure industry giant and leader, and it happened because of his focus, determination, alliances and most importantly courage. It all started with a mouse and the ability to imagine a future where this little mouse made an amazing difference.

“The announcement that the Commonwealth Government will build Sydney’s second airport will have a massive impact on Australia’s east coast construction industry.”

– Don Jones

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