Keywords

FormalPara Learning Objectives

After studying this chapter, the reader will be able to:

  • Describe the topics discussed in this book on theories, practices, and tools of contemporary public procurement.

  • Describe important trends and developments in the field of public procurement.

  • Understand the implications of these trends and developments for the field of public procurement.

  • Understand the need to become a change agent themselves.

8.1 Introduction

Society is currently facing several challenges, like inclusive and secure societies, food security, sustainable energy supply, and a more circular economy. Although in its core, public procurement is about fulfilling a demand or need of a public organization for a specific work, supply, or service by buying from the market, in this book we explained that public procurement has matured into something that can achieve much more. Hence, we believe that public procurement can and should be used as a policy tool to drive innovation and contribute to the achievement of societal goals such as sustainable cities and communities, reduced inequalities, responsible consumption, and production, or increased good health and well-being of people.

In Chapter 1 of this book, we described a circular procurement process model and indicated how the procurement function can mature over time, from only fulfilling a demand to now contributing more and more to society. In Chapter 2 we identified different types of public values and explained how to deal with these when in conflict. We showed that EU public procurement law in the European Union allows for plenty of opportunities to purchase social and sustainable outcomes in Chapter 3. Next, we explained how different ways of organizing the procurement function and organizing joint procurement affect aspects such as local influence, flexibility, and economies of scale, process, and knowledge in Chapter 4. In Chapter 5, we discussed the importance of implementation issues and effects of an up-to-date procurement policy on sustainability or other important topics for a government. We also discussed how to develop a purchasing strategy and how several strategic decisions can be made. Moreover, in Chapter 6 we described how to conduct a tender, how to develop an effective supplier selection model, and explained specific sensemaking challenges for public procurement in the context of supplier selection. Finally, we discussed the important aspects of and considerations in contract design, as well as the importance of proactive and ongoing contract management for realizing objectives in relation to the applicable public values in the perform stage of procurement in Chapter 7.

Hence, public procurement can be a valuable instrument for achieving change, both inside and outside the organization, and thereby creating more public value that benefits society. In this chapter, we discuss ways in which public procurement is moving forward and has increasingly become a strategic asset for societal change. We thereby challenge you, the reader, to act as a change agent and help public procurement reach its full potential in this new era.

In Section 8.2, four trends and developments in the public procurement field are presented that affect how public procurement is organized and how it impacts society. Subsequently, we discuss the implications of these developments for the field in Section 8.3. The chapter concludes in Section 8.4 with a discussion of how adopting the role of a change agent can help drive public procurement forward into a new era.

8.2 Trends and Developments in Public Procurement

We identify the following main trends and developments in public procurement:

  • From efficiency and cost-based thinking toward value-driven and sustainability-oriented procurement processes.

  • From administrative procurement decisions toward digitalized and smart decision-making.

  • From procurement as a front-end practical purchasing instrument to a strategic life cycle engagement process.

  • From procuring formal dyadic supply chain relations to public procurement that facilitates relational ecosystems.

8.2.1 From Efficiency and Cost-Based Thinking Toward Value-Driven and Sustainability-Oriented Procurement Processes

As explained in previous chapters, the function of public procurement is evolving from an operational management function focused on fulfilling a need in a cost-efficient way to a policy instrument that can be used for collaborative value creation in society. While buying for the lowest price is still the norm in many EU Member States and countries outside Europe, we believe that governments should move toward a field where quality and value creation become more important. Developing applications for citizen participation can, for example, help to increase inclusiveness of stakeholders although it might not directly reduce the prize of a service. Worldwide, governments are increasingly acquiring works, supplies, or services in a way that ensures that there is minimum impact on society and the environment throughout the full life cycle of the product (Meehan & Bryde, 2011). Recent examples include changing over to changeable batteries or bioethanol for inland vessels or construction machinery to reduce CO2-emissions. Public sector procurement can make a difference to a more sustainable, circular, and innovative economy by opting for more specific solutions the market offers and developing legal frameworks that stimulate a certain kind of behavior. At the same time, such relatively new alternatives are often still perceived as being more expensive. Overall, this is true and likely to be somewhere between 1 and 6%, but evidence suggests it need not necessarily be so for individual contracts. For instance, when a government decides to purchase second-hand office furniture, this can reduce both costs and environmental impact.

Although this development is taking place in the public procurement field, this does not mean that all public organizations have transformed to value-driven and sustainable procurement. For such transitions to continue and expand, careful attention must be paid to various conditions that may drive or enable organizations to increasingly opt for a more socially and environmentally sustainable solution. Such conditions include government regulations and subsidy schemes, organization and purchasing strategy, human resource management, functional and individual processes, procedures, and incentive schemes. Hence, the transition to value-driven and sustainable procurement requires change to occur at both the macro and micro level regarding, for example, the resources, competences, and capabilities of the staff, the overall public organization, and the relationship between buyers and suppliers.

Interestingly, it seems that the law is moving toward making sustainable and social procurement the ‘new standard’ (Janssen, 2020), thereby removing—in time—the choice to procure sustainable and social outcomes. It means that contracting authorities will be faced with mandatory requirements that have to be included in a public procurement procedure in addition to the existing rules on public procurement, as described in Chapter 3. An example of this type of legislation is the Clean Vehicles Directive (2019/1161), which among other things contains minimum targets for the EU Member States to create cleaner fleets of vehicles owned by contracting authorities. Other legislative initiatives are—at least—expected based on the EU Green Deal for the field of construction, food, and batteries. This has the potential to be a substantial driver of the development toward value-driven procurement.

The traditional approach of maintaining a clear line of demarcation between buyer and supplier responsibilities, or in other words, the idea that ‘you pay, the supplier takes care of everything, and you will get the required product’ is no longer sufficient in value-driven procurement. Joint competences are more often required—especially for large or specific contracts—as the complexity and pluralism of new procurement values highlight the interdependency between buyer and supplier and, as a result, a need to cooperate more often to come to the best solution. More integrated and performance-based contract models require dialogue about the division of responsibility between a buyer and a supplier, as well as an understanding of how public and private entities vary in how they perceive accountability and value delivery. Hence, to develop for certain projects from efficiency and cost-based thinking toward value-driven and sustainable oriented would require more social dialogue and collaboration rather than formality and competition.

8.2.2 From Administrative Procurement Decisions Toward Digitalized and Smart Decision-Making

The uptake of digital technology is expected to fundamentally alter the field of public procurement on an individual, organizational, and societal level. Digitalization is already occurring in the procurement process itself. Think, for example, of electronic invoicing systems, automated contract renewal, automated data input (robotization), smart data gathering, automated answers to questions of suppliers, the use of AI in the assessment of offers, and perhaps even automated tendering for simple purchases. This opens opportunities to change the traditionally rather operational and administrative function of procurement within public organizations into fully digitalized and smart processes that support and optimize not only the purchase itself but also the management of the contract throughout its life cycle. This creates more time for public officers to invest in more tactical and strategic activities and increases the stability of buyer-supplier relations. It also enables innovation on topics such as performance-based service contracts and other long-term commitments that could reduce transaction costs.

Digitalization of public procurement is also expected to affect the power balance in buyer-supplier relationships. While information asymmetry has always been present in buyer-supplier relationships, access to data and, for example, data gathering via smart devices (e.g., smart maintenance of bridges and locks) can increase the information asymmetry (e.g., the supplier gathering the data but not necessarily sharing that data with the buyer). The implementation of digital technologies therefore warrants consideration of data ownership, how to organize data sharing, and how to deal with data-driven intellectual property and security aspects. In the context of performance- or outcome-based contracting, digital technologies are also expected to affect the measurability of performance outcomes, providing more accurate real-time data on all kinds of parameters that together determine the outcome. This impacts the importance and quality of contract management.

Finally, there is an increasing drive from citizens, journalists, researchers, public officers, and companies to make public procurement more transparent. Examples of data fields that are often still closed but could be made more accessible are data fields about names and contract values of all tenderers, identities of (sub-)sub-contractors, contract performance, contract amendments, and so on. Open public procurement data will improve transparency about public spending, increase competition, reduce collusion and corruption, and create more possibilities for research and sharing best practices. On the other hand, and especially when not organized efficiently, it will also create administrative costs and raise confidentially issues in some cases (Schotanus, 2022). Interestingly, more developed countries in public procurement tend to be more reluctant in making procurement data open, on the one hand because of a lack of awareness and on the other because of a lack of confidence in how to address the issue of commercially sensitive information (Open Contracting Partnership, 2018). Countries that share most public procurement data are in Eastern Europe (Georgia, Slovakia, and Ukraine) and in Latin America (Chile and Colombia). In those countries, the general rule seems to be that contracting information is public information by default, although exemptions on grounds of commercial sensitivity, privacy, and security apply. Some countries even developed a hybrid electronic open-source government e-procurement system because of a partnership between business, government, and civil society. Not only do such systems affect transparency, but they also help in fighting corruption, increasing competition, reducing tender costs, and improving price-quality ratios.

8.2.3 From Front-End Practical Purchasing Instrument to Strategic Life Cycle Engagement

Traditionally, public procurement used to be an operational function, supported by practical tooling to fulfill a specific need of the organization. This need for a supply, service, or public work primarily initiates the procurement process. However, as public procurement is becoming a more and more strategic asset to fulfill societal development goals, the whole procurement process also needs to become more focused on these goals. By leading by example, the public sector can set the tone for more socially responsible ways of organizing, by taking matters such as business decency, due diligence, honest competition, and sustainability into account. In this, public procurement has an important role to fulfill as a role model for other organizations.

This starts with the make-or-buy decision. Within public procurement, it should become routine to not simply replace what is already there when the life cycle ends, or directly procure something new when a need arises, but also to look for alternative ways to fulfill the need (Andhov et al., 2021). For example, by:

  • Buying as a service.

  • Sharing instead of buying.

  • Stimulating extending the lifetime of a product.

  • Considering reuse as an alternative.

  • Changing demand to more sustainable options.

  • Stimulating supply to offer more (new) sustainable options.

It should also become routine to think what would characterize suitable potential suppliers and sub-contractors before the start of a tender. Below the EU public procurement thresholds, public buyers usually only invite the suppliers who satisfy certain criteria related to social aspects, security aspects, sustainability aspects, and so on. Above the thresholds, buyers can use (customized) exclusion grounds, requirements, and supplier selection models for filtering suppliers.

By redefining procurement requirements, public procurement can actively contribute to a more circular, inclusive, and sustainable economy (McCrudden, 2004). This also requires more life cycle-focused procurement tenders. Think, for example, of requiring suppliers to contribute to broader societal goals (e.g., circularity and employment) in addition to fulfilling a specific need (e.g., a place to work). A life cycle perspective would also alter the role of contract management. If we really want to create public value, it no longer suffices to check if what has been ordered is delivered, one also needs to monitor if public value is achieved and the policy goals have been met (Keller et al., 2021). This would require a more proactive collaborative attitude of both buyer and supplier to jointly realize the desired value but also sometimes stricter measures to comply with a contract.

8.2.4 From Procuring Formal Dyadic Supply Chain Relations to Facilitating Relational Ecosystems

Tendering is often turned into a rather formalized way of coordinating supply and demand. Current procurement systems are often focused on single dyadic relationships: a particular buyer that agrees with a specific supplier on the delivery of a certain work, supply, or service under specific conditions. If an ecosystem perspective was to be adopted, this would certainly lead to a recalibration of the EU procurement law. Ecosystems refer to the collaborative arrangements through which interconnected and interdependent public and private network actors combine their individual offerings in a coherent solution focused on value creation (Adner, 2017). Other than interorganizational networks, which focus on existing ties between stakeholders involved in dyads, ecosystems draw attention to the notions of an overarching purpose for the total set of relationships for stakeholders to be included and of technical interdependence and complementarities between stakeholders. This generally requires a set of stakeholders with varying degrees of multilateral, non-generic complementarities that are coordinated by sets of roles with similar rules (Jacobides et al., 2018). Since ecosystems are network based rather than dyadic, they often avoid the need to enter into tailor-made contractual agreements with each individual partner. Ecosystem thinking assumes that each system consists of a unique set of stakeholders and interactions and therefore evolves in its own way (Valkokari et al., 2017). As the system is only partially designed and enforced, existing internal forces are responsible for keeping it in balance. Also, ownership and use are not necessarily linked, which can bring about major change for many sectors, such as construction, energy provision and drinking water supplies (Vosman et al., 2023).

Collaboration in networks and systems can replace traditional procurement and tendering because performance should not only be determined by a buying organization, but also by the end users in close cooperation with the government. Adaptive service-based contracts and collaboration agreements can therefore better match the dynamic of society’s need for values. In a world where formal procurement guidelines and contracts are still dominant, relying on social processes to ensure that resources flow through actor-to-actor connections and considering agreements and rules as just informalities is another matter. For instance, complex work will be based more on open, explorative, and evolving connections like in an innovation partnership or Small Business Innovation Research (SBIR). For more common purchases, buyers will regularly use market consultations with a small number of focused questions, will increase their knowledge about market possibilities (to bring supply in connection with demand), close more contracts using joint procurement, and work more closely with suppliers after the contract has been closed. This can mean an extension from a procurement system with a predominantly legal basis to a more social and less formal system that brings supply and demand together.

The role of the public buyer would also change structurally when moving toward collaboration in ecosystems. For example, while dyadic relations nowadays increasingly start with a pre-announced market consultation focused on potential main suppliers, a procurement professional in an ecosystem should proactively connect to numerous parties and act as an explorer and accelerator of collaborative processes. As a driving force in the creation of an ecosystem, public buyers should be increasingly aware of the active players in the market, their distinctiveness, and the values that they could deliver to the system. This requires knowledge of business models to understand the motives of the parties and to be able to arrive at balanced commitments.

8.3 Implications for Public Procurement Practice in a New Era

The trend toward more value-driven, smart, life cycle-oriented, and relational procurement processes will have implications for the public procurement practices of the future. We identify the following four main implications or challenges for public procurement that need to be addressed to bring public procurement into a new era:

  • More flexible and adaptive ways of governing the relationship between buyer and supplier.

  • Integration of public procurement values in all parts of the public organization.

  • A need for public procurers with different capabilities and competences.

  • Rebalancing the multiple perspectives on public procurement.

8.3.1 Flexible and Adaptive Ways of Governing Relations Between Buyer and Supplier

New developments, such as digitalization but also the transition toward a more circular economy or value-driven procurement, affect the power balance and relationship between buyers and suppliers. While the relationship between buyers and suppliers has been predominantly governed via contracts, awareness of the importance of the relational aspects is increasing. Given that—in most cases—the combination of formal contract management and social contract management is more effective than only managing a legal contract with formal incentives and sanctions, we expect to see an increase in relational governance mechanisms. Examples of such mechanisms are the introduction and use of social agreements (including goals and expectations of each party and agreements on how to communicate and provide feedback), appointing mediators where necessary and putting the relationship status on the agenda of regular project meetings.

Because relational governance is based on the idea that interorganizational exchanges are embedded in social relationships with interdependencies between partners, it is much better equipped to deal with uncertainty, innovation, conflict resolution, and complexity (Cao & Lumineau, 2015). Relational governance mechanisms such as information sharing, open communication, and joint problem solving allow stakeholders to adopt a more flexible and forward-looking attitude. Trust is often an important element of relational governance. We therefore envisage a need for more relational and flexible ways of governing the relationship between buyer and supplier, to deal with the four public procurement developments described in this chapter. Similarly, we expect that suppliers that do show opportunistic behavior or that are not open to this new way of working will be more often exposed (by using open data) and less often invited or selected in tender procedures.

8.3.2 Integration of Public Procurement Values in the Organization

The development of value-driven and sustainable procurement, life cycle engagement, but also smart decision-making and relational ecosystems implies that public procurement should become integrated in all parts of the organization and its network. This raises the managerial question of how to organize procurement. The answer to this question depends heavily on the purchasing maturity of the organization and its organizational coherence. For many public organizations, a step toward coordinated purchasing will already make a difference. For larger and more mature and coherent public organizations, procurement should move toward a more local-led or center-led type of organization, where decentralized expert teams from different sections work together. This would generally better ensure the necessary collaboration and integration to achieve public values together, such as a reduction of CO2-emissions or increasing the degree of digitalization, which fit with higher development stages of public procurement.

New values do not necessarily fit into the existing organizational governance mechanisms. In this context, building on existing value management tools appears to be more effective than creating totally new systems. This implies that public organizations should put increased focus on embedding new value systems into their procurement processes and reduce focus on changing existing value systems. In order ‘to lean in without falling over’ (Kuitert, 2021), innovation through integration could be counterbalanced by sustaining and defending the separation of existing value systems. An example of this is the use of an integral program at an organizational level to implement specific values, like circularity or social responsibility, while simultaneously translating these values into programmatic frames at the level of the department or project. On a national level, inspiring societal missions could be started that focus and bundle all (innovation) activities related to public procurement. Hence, the focal point for buyers should be to lean into intrinsic motivation of the procurement professional and act as a responsible procurement organization.

Finally, the role of the government as an internal buyer needs to change. Public procurement should no longer be viewed as a stand-alone process for the delivery of specific works, supplies, or services, but rather as a strategic asset in linking government policy, strategic goals of the organization, and developments in society. This requires true alignment with the developments in markets, other countries, and networks. This also implies that public procurement should be an active stakeholder in driving societal change and achieving public value. For instance, by giving social enterprises better opportunities to really participate in public tenders, rather than being socially desirable solutions to lobbying conflicts or other more political aims. Public procurement needs to have an active and more directive role in steering procurement toward specific values and behaviors, rather than executing policies that have been created by others and reacting on institutional demands from the past.

8.3.3 Changing Capabilities and Competences of Procurement Professionals

Developments like digitalization, relational contracting, and sustainable procurement all require organizational routines to change. Organizational routines are rules that allow people to select elements of a repertoire in order to construct sequences of behavior that make sense to others in the organization (Feldman & Pentland, 2003). Introducing change in an organization questions existing routines (and thus behavior) and leads to new practices (new behavior) which, if it becomes embedded in the organization, forms a new organizational routine. For example, circular procurement requires a vastly different approach than the old linear way of procuring; collaborative value-driven procurement requires public procurers to become network managers rather than administrators; and smart procurement requires competence in new ways of information sharing, while the old capabilities and competences, such as operational capabilities and fundamental legal knowledge, are becoming less central. Although more and more procurers and contract managers have begun to recognize their role in contributing to these changes, previous procurement policies and capacity shortages have made several public officers develop risk-averse behavior. Sometimes public procurers and contract managers regard legislation as complicated and, therefore, choose to play it safe to avoid situations where suppliers might appeal a contract award. Even though procurement has been acknowledged as a professional field, it has not necessarily always been classified as a profession. In those instances where it is classified as a profession, it tends to be fragmented across the organization or overlook the impact it can have both internally and externally. The developments in public procurement however require that public procurers and contract managers either change their behavior or the hiring and staff that already have the required capabilities and competences.

8.3.4 Rebalancing the Multiple Perspectives on Public Procurement

Throughout this book we have seen how in the past the financial and legal perspectives have been dominant in public procurement, with a lowest price focus and contractual governance as drivers for the design and implementation of the public procurement system and the political cycle as societal driver of the policy agenda to which procurement needs to contribute. However, the development toward strategic, smart, value-driven, and sustainable procurement implies that the societal importance of procurement practices is becoming more prominent. This requires a rebalancing of the disciplinary perspectives.

For example, the legal perspective should rebalance its priorities and move from a ‘cannot’ mentality to a ‘can do’ mentality where not necessarily the legally safest option is advised, but the safest one that creates the most public value. Price considerations will always remain important in purchasing decisions (taxpayers’ money should not be squandered), however, the focus should move toward getting the most value for your money, rather than spending the least. This entails a shift from a focus on purchase price to a life cycle perspective on quality and capturing the most public value from a transaction.

Societal challenges have a lot to do with how politicians make decisions and how to act upon them. In most European countries, politicians represent the democratic values and expectations of the people. The political system has been driving the policy agenda as well as financial frameworks and resulting budgets. To be able to move toward a more innovative and circular way of procuring with stable supplier relations, a forward-looking and less political way of governing seems necessary. One that is less focused on the short term and election cycles, but more visionary and programmatic with long-term partnerships, and an emphasis on human well-being and value co-creation rather than economic prosperity.

8.4 Conclusion: Become a Change Agent

The developments in the field of public procurement and subsequent implications for public procurement practices and organizations suggest major changes in our procurement systems. Truly bringing public procurement forward into a new era requires change agents to drive these changes. A change agent can be anybody, an individual or a team, from inside or outside the organization, that takes responsibility for initiating, sponsoring, directing, managing, or implementing a change (Caldwell, 2003). This responsibility is something that does not have to be imposed on the change agent (it not necessarily part of the job) but is often a task that change agents take up, out of a desire to do something and make change happen (Grandia, 2015). If one thinks of change agents, the image of a top or senior manager might also spring to mind. However, studies show that anybody at any level can become a change agent, from interns to director generals. It merely requires a person to act (Caldwell, 2003; Kendra & Taplin, 2004).

There are many actions that change agents can carry out to effect change, such as envisioning, initiating, sponsoring, adapting, or carrying forward change. One could also build support, provide advice, expertise, or process skills, or contribute by interviewing, directing, managing, speaking, or presenting. Furthermore, listening, reflecting, writing, cooperating, refining, giving feedback, and/or training or educating are important activities that change agents perform. The mentioned actions remain rather vague, as there is no universal change agent model that shows what kind of actions are required in which situations and under which circumstances (Caldwell, 2003). Becoming a successful change agent, however, does not necessarily require enormous actions or plans, even the smallest initiatives can ignite a change or offer a breakthrough. Sometimes merely asking questions about why things go a certain way can, in the end, lead to major changes. Long-term gradual accumulation of many small changes has been found to successfully lead to large changes in the end.

We therefore challenge you, the reader, to become an agent of change and help drive public procurement forward into the new era. As an agent of change you could, for example, present new ideas to create more public value with procurement (initiate), talk enthusiastically about the possibilities and necessity of the change (motivate), share knowledge about developments or new alternatives (educate), advise on how to incorporate new knowledge (advise), or arrange the necessary tools to make it happen (solve problems). All these types of actions can help make other stakeholders in the procurement process more willing and able to make changes and use the potential of public procurement for achieving societal impact. Let’s be this change together.

8.5 Summary

This chapter first shortly summarized the topics discussed in the book, followed by a discussion of the four main trends and developments in the field of public procurement that can be identified. First, a move from efficiency and cost-based thinking toward value-driven and sustainable oriented procurement processes could be observed. Second, a move from a focus on administrative operational thinking toward digitalized and smart decision-making in procurement processes seems visible. Third, procurement appears to move from a front-end practical purchasing instrumental perspective to procurement as a strategic life cycle engagement process. And fourth, procurement moves from supporting the formal dyadic supply chain relations to public procurement to facilitating relational networks and ecosystems. This chapter then explained that the trend toward more value-driven, smart, life cycle-oriented, and relational ecosystem procurement processes has implications for the public procurement practices of the future. The following four main implications or challenges for public procurement that need to be addressed to bring public procurement forward were identified: (1) more flexible and adaptive ways of governing the relationship between buyer and supplier, (2) integration of public procurement values in all parts of the public organization, (3) a need for public procurers with different capabilities and competences, and (4) rebalancing the multiple perspectives on public procurement. The final chapter of this book finished with an explanation of why it is important that change agents step up and help public procurement move into a new era and challenge the reader to become such a change agent themselves.