Categories: B2B Payments

Government Entities Face An eProcurement Wake-Up Call

The U.S. economy has never seen a clearer picture of the consequences of friction in government procurement practices than it is witnessing right now.

Earlier this week, The Washington Post described the current state of medical supplies procurement as “chaos,” and despite a surge in private sector companies stepping forward to volunteer their services, adjust supply chains and connect governments with necessary products, state-level officials said a lack of clarity into available inventory, rising costs linked to spiked demand, and an overall sense of disorganization are preventing the flow of supplies from getting to where they need to go.

COVID-19, the disease caused by the coronavirus, could prove to become a catalyst for digitization in government procurement operations, according to Mark Eigenbauer, president of BidNet.

“I think COVID-19 has taught many of us the need to be more flexible in how we do business,” he recently told PYMNTS.

Finding The Right Connections

Unlike B2B trade, government procurement involves a complex web of interactions between public sector entities and private sector businesses. In times of normalcy, governments must balance driving up competition to lower prices while, at the same time, supporting local and small businesses whenever possible.

This presents hurdles for both buyers and suppliers from the very beginning of the request-for-bid process, as Eigenbauer explained, adding that for governments, reaching out to vendors, heightening response rates, and addressing the friction of manual procurement processes are key hurdles.

“Addressing these challenges starts with vendor outreach and getting a strong enough response rate that encourages local competition, and thereby creates cost savings,” he explained. “Once that is achieved, the next step is looking at internal inefficiencies to identify areas to lower costs.”

He highlighted opportunities for technology to digitize and automate processes like bid distribution, receipt response and contract management.

But a government entity cannot boost efficiency of its sourcing and procurement practices if suppliers don’t have the resources they need to actually respond to those bid requests, he added.

“One of the biggest challenges for vendors is trying to find government business opportunities that match their capabilities,” said Eigenbauer.

For suppliers, that not only means identifying which solicitation may be best suited to their industry and expertise; it also means finding opportunities in their local area and keeping tabs on these available contracts to follow up with any leads.

A Catalyst For Digitization

As more government entities on the local, state and federal levels embrace eCommerce-like processes to purchase goods, they’re also gradually expanding this demand for digitization and optimization in the broader, more complex process of sourcing, bid management, contracting and payment.

In addition to greater efficiency, Eigenbauer pointed to the value of data that eProcurement platforms can provide to government entities to assess their performance, identify cost saving opportunities, and track metrics of their local businesses — all of which are key data points that government entities can use to make decisions about longer-term contracts with certain suppliers, as well as to foster communication and stronger relationships.

“I believe that eCommerce and eProcurement tools have had a positive impact on the way data is used to make strategic sourcing decisions,” he said, “and we see that benefit expanding as we work with government professionals on their evolving needs for procurement, project and contract management.”

That evolution has drastically accelerated in the face of the coronavirus, which Eigenbauer said he predicts will become the catalyst to government procurement digitization and automation on both the buyer and supplier side of contracts.

One area that has been most intensely affected is governments’ supplier outreach strategies. Historically, this has occurred through phone calls and emails to potential vendors. During times of crisis, such inefficiency cannot yield the results necessary to keep business (and goods) flowing.

Eigenbauer noted that platforms like BidNet are able to consolidate the supplier base and allow for accelerated outreach based on quickly matching the demand for emergency supplies with the vendors that offer them — and do it in an automated way, even when government officials are working remotely.

Adoption of digital portals that support connectivity between government entities and vendors is also critical to ensure that suppliers are able to embrace automation to keep up with crisis-level demands.

“With a remote workforce, vendors don’t have the capacity to put hard copy bid packages together — and government entities aren’t on site to receive them,” Eigenbauer explained.

Today’s market climate presents an opportune moment for the government procurement process to adopt technologies to electronically submit and receive vendor bid responses, evaluate bid responses and manage contracts. While these capabilities can help the nation more effectively address the coronavirus pandemic, Eigenbauer said making the shift from manual to automated processes will likely have long-lasting effects.

“Government entities tend to be a little slower in adopting new technology” he said. “One of the biggest hurdles is overcoming change management. I believe many entities will be more open to change in the wake of COVID-19.”

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LIVE PYMNTS ROUNDTABLE: MODERNIZING & SCALING FOR THE NEW NORMAL

The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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