- July 31, 2020
This article originally appeared in Governing.
The onset of COVID-19 has not only highlighted a critical shortage of ventilators, along with masks, gloves and other protective gear, but also has stress-tested government procurement processes that too often are slowed by outdated rules and regulations. In addition, the CARES Act's funding for cities and states, as well as any additional forthcoming federal pandemic aid, will only be successful if the funds are spent quickly and well.
In the midst of this global pandemic, the poor federal response to the needs of stressed health-care systems has left states and local governments to develop emergency procurement processes for the personal protective equipment (PPE) urgently needed for health-care and other essential workers. What has resulted has been a Wild West system of procurement as states had to bid against one another for resources and hospitals desperately resorted to extreme measures. Hospital administrators beseeched procurement teams to purchase foreign-made PPE on open markets, thus skimping on quality inspections, standards and other common protocols for "peacetime" procurement. Meanwhile, traditional medical-supply distribution companies insisted on following peacetime procedures undermining the urgency of the situation, such as asking possible suppliers for PPE product samples and submitting them to standard compliance protocols.
This issue is exacerbated by other procurement complications: With economic uncertainty, manufacturers have demanded heftier down payments on orders. It is more difficult to verify the exponentially growing number of potential suppliers. New, inexperienced suppliers are not prepared to manage complicated international shipping and customs processes. And purchasing in an emergency increases risks for governments, such as when unvetted, faulty suppliers receive contracts worth tens of millions of dollars only to fail to deliver.
With the urgency of the COVID-19 pandemic, it is clearer than ever that the standard procurement procedures governments have been operating with need a transformation — and hopefully one that will permanently improve procurement protocols beyond the global health crisis. Procurement systems are designed to prevent corruption and not, as a rule, to quickly solve problems. Yet in the time of emergencies, when new demand arrives rapidly, governments need to be flexible with rules and think about the benefit to public value versus archaic procedures that slow down necessary procurement.
One state that has been looking at procurement differently is Pennsylvania, which under the leadership of Curt Topper, the secretary of the Department of General Services, has been piloting the use of a startup tech platform called Procurated. Procurated, which is free for government users, allows procurement professionals to provide feedback on suppliers through a private social media-esque platform.
That's of particular benefit when it comes to the use of cooperative purchasing agreements, such as those that enable municipalities to piggyback on one another's contracts. But cooperative pricing is highly unregulated, resulting in a "buyer's-beware kind of system," says Topper, "so there's still a fair amount of due diligence that's required of the local municipalities when they use these contract vehicles."
The kind of communication across jurisdictions that Pennsylvania is pursuing is one reform that can help both during emergencies and normal operations. But the stresses during the current emergency underline a few other principles for creating stronger, more agile procurement systems:
• Value speed. There are always opportunity costs for waiting, and those costs should be explicitly weighed against cumbersome procurement practices.
• Compensate with transparency. Much of the rationale for today's procurement codes developed before open-government systems and in the face of local abuses. Sunlight compensates for a great deal. Maximum transparency concerning the process, award criteria and award rationale might not always prevent second-guessing or even mistakes, but it will insulate against charges of favoritism or cronyism.
• Purchase off of the contracts of other agencies and jurisdictions that used a competitive process to procure the same service. A well-managed acquisition with clear competitive standards by one public agency should be sufficient for another.
• Get elected officials to inoculate procurement teams. Speedy procurement is valued more than ever in an emergency like the pandemic, yet speed increases second-guessing. Elected officials need to understand the risks and rewards, including the risk of gotcha local journalism, and make clear to the public why new procurement processes are needed not only for the emergency but beyond.
• Pay attention to service levels as much as price. Purchasing officials considering cooperative purchasing with other jurisdictions should study those jurisdictions' service-level agreements and review the reputations of their vendors. Cheapest often means unacceptable compromises.
Spending the taxpayers' money wisely and prudently is always going to be a challenge for governments. No procurement system will ever be perfect, but if the pandemic's urgent needs leave a legacy that timeliness and opportunity cost matter, the taxpayers of the post-pandemic future will reap the benefits.