Rethink the way you look at savings in government procurement

Organisations focused on procurement-generated savings may miss equally important outcomes such as enabling process efficiencies, category management and risk management, writes contract management expert Louis Hof.

Are we focusing too much on the cost savings?

Good strategic-level procurement — the acquisition of products or services from an external source – can enable organisations both public and private to achieve sustainable cost savings. But there’s a trend emerging where the value of the procurement function of an organisation is measured purely through the potential cost savings.

Looking solely at procurement-generated savings estimates may shift the organisation’s focus away from other equally important outcomes including meeting the core business needs (or fit for purpose procurement), enabling process efficiencies, category management, contract management, procurement and probity risk management, legislative, legal and policy compliance.

In my experience, an effective organisation will generally focus on choosing products and services that are fit for purpose to ensure operational outcomes are achieved. But a procurement focus on driving savings or achieving targets can have a detrimental effect on the fit for purpose decisions, ultimately leading to declining operational performance or waste.

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