Mostly Harmless, Part XXIII
Enterprises generally fall into two categories: public or private. While the basic requirements for e-Procurement are unchanged whether the installation is intended for the public or private sector, each sector has its own standards for procurement and the system must support the standards, and quirks, of the sector in order to ensure adoption and success.
Since most of the posts to date have implicitly assumed that the application is going to be deployed in the private sector, this post will primarily discuss the public sector and some of the sector specific procurement processes that should have an impact on system selection.
In the public sector, most purchase orders for goods and / or services over a certain value are the result of a public competition. This means that once a requisition is approved for new products or services above a certain value, which can not be assigned to a standing offer or contract, the next step in the process is an RFX or e-Auction. As a result, the e-Procurement system will either need to contain RFX and / or e-Auction functionality, or integrate with such a system. The integration can be as simple as XML file export (of the details of the approved requisition that needs to go do bid) and import (of the details of the winning bidder and submitted pricing), but the workflow has to support the process and integration.
Also, as alluded to in the previous paragraph, new purchases below a certain threshold can be made against standing offers / contracts as long as the appropriate policies are followed. Some organizations will allow a buyer to use the standing contract of their choice (provided a certain dollar threshold is not exceeded in any calendar year), others will dictate round-robin selection in an effort to insure fair allocation of funds, and another group of organizations will use a hybrid policy and allow buyers to select the supplier from a set of preferred standing offers or offers that have not received their “fair” share of business.
Another area of increased complexity is approvals. In the private sector, the rules are usually cut and dry. For example, under 1K for approved products, the employee only, under 10K where all goods that can be bought on contract are bought on contract, the supervisor, under 100K, the VP, and the CPO’s approval is only required if the purchase is over 100K. In the public sector, there are approvals based on value, based on contract vs. standing offer vs. one-time buy, repeating payments, type of good or service (engineering will have to sign off on machine parts, HR on temp labor, etc.), MWBE percentages (as contracts over a certain value may be required to have MWBE components), environmental sign-offs (if the buy is for products or services with a significant environmental impact or products or services for which there are environmental standards), etc. Where it is quite uncommon for a requisition to require more than three approvals in the private sector, many requisitions can easily require six or more approvals in the public sector.
Payments are a little bit trickier too. Not only must they be processed according to standard terms and conditions, but they generally must be made on regular payment dates, and may be withheld indefinitely at any time due to orders from higher ups, which is common when governments have not approved their budgets for a year by a given deadline. Plus, many government departments are tax exempt (as it doesn’t make much sense for a government to tax itself) from local, state, and federal taxes, and the taxation rules need to be powerful and flexible.
Finally, the reporting requirements in the public sector are much more onerous than in the private sector. If the tool does not contain a modern analysis and reporting package that can meet all of the requirements of all of the departments and divisions and associated reporting requirements, it will need the ability to do a full export of all data required to produce those reports in a third party analysis or BI tool.
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