As per our damnation post, everyone, or at least everyone in sales, wants the government as a customer because once you’re in, you’re in, and it’s almost impossible to get thrown out unless you do something really, really egregious because the process to replace you is so long, arduous, and painstaking that no one wants to do it, especially since management will likely change half-way through the process and put all projects on hold until a new assessment is done. They sign the contract, sit back, and rake in the commission year-after-year as the evergreen renewals keep coming in.

But Procurement doesn’t have it so rosy. Not only can government customers be very demanding, and require you to work extensively with Engineering, Manufacturing, IT, and the Supply Chain to design custom solutions to meet their needs, but they can be quick to pass on the blame to your company even if it’s not your fault. Plus, now many government agencies mandate that you provide bill of material data, shipping manifests, country of origin determinations, quality inspections, and other information with every product that you provide the government so they can meet their accountability mandates. And if that’s not enough, if the government runs out of budget and can’t get agreement to run a deficit, there can be an indefinite spending freeze while the situation is resolved.

Governments can be your organization’s best and worst customer and Supply Management’s biggest point of leverage and largest risk. So what can you, as a Procurement organization, do?

1) Regulatory Compliance

It is critical that you can show you were in full compliance with all of the requirements when you bid, when you signed the contract, and when you delivered the goods and services — at any time. The day after signing. The year after signing. Two years after delivering the last product. You never know when someone is going to rain down fire upon you to deflect the blame from themselves.

2) CRM and Communication Management

Make sure all interactions and communications with the government customer are logged, project and changed plans signed off on by the appropriate authority, and full audit trails always accessible. This is the key to good relations and problem avoidance.

3) Complete Supply Chain Visibility

The key is to always know:

a) what comes from where, all the way down through the components and sub-components down to the raw material (for labelling and country of origin)
b) CSR and Sustainability monitoring for all suppliers in the government product supply chains so that you can insure you are always in compliance to the best of your ability

4) SCF: Supply Chain Finance

Your suppliers need cashflow, so be sure to do your best to arrange Supply Chain Finance / invoice factoring that they can take advantage of any time that they need it.

5) Contract Completeness

Be sure to have any services you deliver deemed as “essential” in the contract as many spending freezes will exempt “essential” services.

And, above all, maintain good relations with the stakeholders at all times.

It’s not just unexpected labour strikes that can throw a wrench into your best laid plans, but political unrest as well, both on the public side and the government side.

Political unrest on the public side can lead to widespread walkouts across the public and private sectors, including unauthorized strikes where unions are involved and unauthorized on-the-job walkouts in the private sector where unions are not present, and shut down the better portion of a city, state, or even a country. It’s like a port strike coupled with a driver strike coupled with a warehouse worker strike coupled with a retail sales outlet strike as your entire supply chain inbound and outbound in that city, state, or country is brought to a screeching halt. And this might be the best outcome as a result of widespread unrest.

If the people really get upset, they might not settle for walk-outs and instead decide that they are going to full-scale riot, which will, of course, result in looting, destruction of property, and possibly even terrorist-like actions that result in burning and destruction of entire facilities. So, not only might your supply chain come to a screeching halt literally overnight, but your inventory might be stolen, your production line destroyed, and your building burnt to the ground.

While political unrest on the public side can get quite bad, especially if your facility gets destroyed, political unrest on the government side can be even worse. If, all of a sudden, a government agent takes a strong dislike to your country of origin or your company, every one of your shipments can be held up at the border, any items that appear to be in violation of a directive (such as REACH, WEEE, or a country equivalent) seized until appropriate tests are conducted, each drum or container of a perishable food item at risk of contamination opened for inspection or confirmation (forcing an entire shipment to be destroyed), and each item deemed to be misclassified under the countries HS code held until you pay the maximum fine. And this is again the better outcome.

Your company can be put on a denied parties list and all imports blocked. Your country can be put under embargo for one or more categories of goods that your company produces, also blocking all imports. Your company can be suspected of engaging in, or doing business with companies that engage in, illegal activities and all of your operations in the country effectively shut down when your bank accounts are frozen, all of your files and servers confiscated, and your inventory seized. A government (agent) that has it out for you — possibly even because of the country your HQ is in, the country you are importing from, or the country you are exporting to — can effectively shut your entire operation down seemingly overnight with almost no notice whatsoever.

Political unrest is a very bad thing, and a very deadly damnation when it rises up to consume your supply chain operation whole.

In today’s post we’re taking on the first of the consumer damnations — the government. Everyone wants them as a customer because, as the saying goes, once you’re in, you’re in and it’s impossible to get thrown out unless you do something really, really egregious because the process to replace you is so long, arduous, and painstaking that no one wants to do it, especially since management will likely change half-way through the process anyway and put all projects on hold until a new assessment is done. Salesmen love government contracts because they can sell once and then sit back and rake in their commission year-after-year as the evergreen renewals keep coming in.

But, as a Procurement professional, you don’t have it so rosy. Not only can government customers be very demanding, and require you to work extensively with Engineering, Manufacturing, IT, and the Supply Chain to design custom solutions to meet their needs, but they can be quick to pass on the blame to your company even if it’s not your fault. (You didn’t specifically say that we couldn’t put low-grade transparencies with a low melting point through this high-output, high-temperature laser printer that specifically said only 50 lb or better paper stock in the trays.) And if they get caught knowingly outsourcing to China, when they preach “Buy American”, they’re going to blame you and redirect the public outcry your way even though they told you “lowest cost, American or not”. And if it comes to pass that there was child labour or unsafe working conditions two tiers down in your supply chain that you didn’t know about because your supplier used unapproved raw material suppliers, they’ll be the first to throw you under the bus, the plane, and the cargo ship they threaten to use to ship what’s left of your corpse back to China when they are done with you.

Plus, now many government agencies mandate that you provide bill of material data, shipping manifests, country of origin determinations, quality inspections, and other information with every product that you provide the government so they can meet their accountability mandates. It used to be you just shipped the product. Now you have to ship the product and, in some cases, a literal CD’s worth of information — even though they don’t need 90% of it to fulfill their mandates and answer the questions they need to answer. (Your organization needs all of it to maintain import / export / product / regulatory / security compliance across the supply chain, but most parties you sell to only need a small subset of that data.)

And if that’s not enough, if the government runs out of budget and can’t get agreement to run a deficit, there can be an indefinite spending freeze while the situation is resolved. And, unlike the private sector where you have the right to suspend delivery of goods and services until payment resumes, if your organization is providing goods considered necessary for essential services, your organization can be (legally) ordered to continue providing those goods and services during the spending freeze (as your organization will be paid when the freeze is over as a provider of essential goods and services). If the spending freeze drags on for months, this can put your organization in dire financial straits, and additional stress to reduce costs below the baseline established during the sourcing phase will be put on Procurement.

Governments can be your organization’s best and worst customer and Supply Management’s biggest point of leverage and largest risk (as the volumes required can often allow the organization to negotiate great deals but the reputational and legal liability as a result of a single mis-step in the supply chain can be exceedingly costly).

However, in this rather stagnant economy, for many companies, it’s a damned if you do (get Government as a customer) and damned if you don’t (have Government as a customer). Have fun!