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March 23, 2021 | Bonfire Interactive
Procurement teams play a valuable role in helping public sector agencies thrive with limited resources. If you follow our blog, you know we’re pretty big fans of everything you do to make citizens’ lives better and communities stronger.
In the near future, procurement’s capacity for agility and strategic thinking will be put to the test even more, as agencies across North America face mounting economic fallout from COVID-19.
To survive and thrive, organizations will increasingly turn to procurement to guide cost-cutting efforts and make smart decisions that support the bottom line.
Is your team ready to step up and address the unique financial challenges of the coming months and years? Let’s look at how you can manage costs, optimize your spending, and strategically reevaluate budgets in 2021 and beyond.
One of the most important activities procurement teams are undertaking in 2021 is reevaluating budgets to ensure spending aligns with new priorities driven by the pandemic and (eventually) post-pandemic recovery.
For some agencies, that means deprioritizing capital projects and focusing on digital initiatives that help them work efficiently and deliver services from anywhere. The exact priorities will differ from one agency to the next, but the role of procurement is clear. Your team is best positioned to apply a bird’s-eye-view as budgets feel the strain of COVID-19.
Reevaluating budgets inevitably means scrutinizing current contracts to identify which ones should be cancelled or renegotiated. This includes weighing the potential financial impacts of altering project timelines or switching vendors.
Consider taking a deep dive into existing contracts to see if there’s scope for revisiting payment terms, changing purchasing frequency, leveraging volume discounts, or bringing prices in line with market competitors.
If you have access to up-to-date procurement data, you can review past purchases and supplier performance to identify opportunities to save money and renegotiate contracts.
Although it may seem counterintuitive, cutting costs in the post-pandemic economy could require strategic investments in pricier vendors and new digital platforms that streamline processes. (More on that in the next section.)
While cost is still one of the most significant factors in purchasing decisions, your team will also need to weigh criteria like supply chain agility and organizational resilience more heavily when choosing suppliers and prioritizing projects.
Having strong, high-quality relationships with reliable, established (and, yes, sometimes more expensive) vendors will be crucial to preventing unexpected costs down the road.
In 2021, procurement leaders are also looking to save money in the long run through upfront investments in digital solutions that improve relationships and communication with vendors, reduce administrative burden, increase compliance, and streamline workflows.
When it comes to managing costs, communication is especially important. Having strong relationships with suppliers helps procurement teams collaborate to keep costs down and make partnerships more sustainable. Centralized information-sharing and communication in real time will be crucial to navigating disruption now and into the future.
A centralized procurement approach can also drive significant savings for public agencies by eliminating overlapping supply requests across business groups and ensuring your procurement pipeline aligns with key priorities.
A unified process gives you greater visibility into purchasing across the organization, helping you work more collaboratively with senior managers to understand where and when departments are planning to spend their budget. In turn, leaders can forecast spend and reprioritize as necessary to make it through financially demanding periods.
Your procurement team has lots of tools under its belt – not least of which is creative thinking. Exploring innovative, non-traditional approaches can help you unlock significant cost savings.
Consider alternative supplier structures and purchasing strategies, including co-ops, best and final offers (BAFOs), invitations to negotiate (ITNs), and split award notices, which can drive competition and give you access to better pricing.
As we’ve discussed, cutting costs in public procurement isn’t just about finding the best value. It’s also about mitigating risk to avoid negative fallout and unplanned expenses. Procurement teams are delivering that strategic leadership to help agencies manage today’s economic challenges through better sourcing, purchasing, and negotiation.
Looking for more guidance on how procurement teams can guide agencies through a post-pandemic world? Download our eBook, The Rise of Procurement’s Next Normal.
Bonfire helps public procurement teams reach better sourcing outcomes through an experience that’s blazingly fast, powered by peer insights, and so easy to use—vendors love it just as much as buyers do.
Discover more cost-saving strategies to bring with you into the next normal of public procurement.