Monthly Archives: August 2011

Public Procurement in 2020 — Are You On Track? Part I

Last month, Bob Lohfeld of Lohfeld Consulting, a consulting firm that specializes in creating winning proposals for government contractors, published a commentary on 5 predictions for 2020 in Washington Technology that was, well, pretty generic and not all that useful. Jon Hansen of Procurement Insights did a deep dive into the 5-predictions in a 5-part series back in July that were much more detailed, in-depth, and, for the most part, at least in SI’s view, more accurate than Lohfeld’s.

This week, SI will review Hansen’s five part series on Hansen’s predictions for the Government Market, Workforce, Process, Technology, and Transportation. SI will take it one post at a time and try to paint a partial picture of 2020, based on what it feels are accurate predictions from Hansen. Where SI feels it is necessary, it will endeavour to fill in the gaps. It’s challenging to look ahead nine years, and impossible to predict everything, but it is possible to extrapolate some likelihoods based upon historical developments and current directions. Similarly, it is equally possible to rule out certain directions as they will be significantly unlikely.

Today, we’ll start with the Government Market. In his piece, Lohfeld prognosticated, in a nutshell, that:

  • Government and industry will be partners, working together to streamline acquisition processes and reduce wasteful proposal requirements.
  • The need for hard-copy proposal submissions will have disappeared or diminished sharply.
  • Performance-based contracting will finally be understood by both government and industry.
  • Government procurement organizations will have been substantially rebuilt.

In response to this predicted reformation of the public procurement sector, Hansen noted that there are three major stumbling blocks:

  1. leadership and the need to replace the old guard,
  2. a compelling need to address what has become an over-bloated workforce, and
  3. the absence of creative originality in the approach to solving said problems.

This is definitely the case. As noted in SI’s recent post on how Perfect Procurement Processes Will Not Save the Public Sector, major changes need to occur, including the need to:

  1. stop ignoring past performance,
  2. remove arbitrary MWBE requirements, and
  3. pay salaries at scales in line with the public sector

but none of this will happen without strong leadership who feels the sudden need to address the over-bloated under-performing workforce and has the open mindedness to find create solutions to age-old problems. And this is a problem because, as Hansen says, most governments are a morass of competing and conflicting interests that rarely if ever align themselves within the framework of a cohesive strategy for change.

Furthermore, as Hansen says, the extent to which paper-based transactions will dissipate into a cloud of electronic efficiency is uncertain. While paperless may be taking off in Europe, it’s really lagging in North America. Most places offer tenders online, and many will allow, or even insist on electronic copies of the full proposals, but still insist that that cover page, or summary, be submitted in hard-copy, five times, with original signatures from all officers of the submitting organization. It’s inevitable that we will get there, but it may take another lifetime, until the last public purchasing offer who ever insisted on paper has retired. And if life-spans, and retirement age, keep increasing, it could be a long lifetime.

Performance-based contracting may eventually be understood by the public sector, but until outdated legislation is taken off of the books, what can they do? And as to the extent that government procurement organizations will be rebuilt, as Hansen says, at the end of the day, the reality of the economic condition both at the federal and local levels trumps everything. For the first time since the Great Depression state’s and municipalities are facing the very real prospect of having to claim bankruptcy. As a result, the public sector procurement practice is likely to remain in a kind of non-active limbo for the foreseeable future and for some time to come.

Novice Negotiators – Your Counterparts Will Use Your Emotions Against You

As per this recent article over on eSide Supply Management on “Using ‘Micro Expressions’ to Your Negotiation Advantage”, negotiators who can read body language often have an advantage. And if you are emotional, they are sure to pick up on your unfiltered emotional actions and use those against you.

In particular, as per the article, they will be looking for signs of these universal emotions to use to their advantage:

  • Anger
  • Disgust
  • Fear
  • Sadness
  • Happiness
  • Surprise
  • Contempt

In particular, they will be looking for signs of Fear, since that means they can strong-arm you, Surprise, since that means they can pull a fast one while your mind is otherwise occupied, and Happiness, since that means that they don’t have to sweeten the deal any further to get you to sign.

That’s why, no matter what happens, you should always be cool, calm, and collected against an experienced pro. Don’t take it personally. It’s business, and, more importantly, it’s the organization’s business. No matter what happens, look at it from a neutral, outsider’s perspective. Pretend you’re a third party arbitrator and it’s your job to find a fair resolution to an argument. You might still be out-negotiated, but your counterpart will have less of an advantage.

That’s the reason that good negotiators have a Poker Face.

Look for the InSourcing Bandwagon to Start Boarding in 2012

As per this recent article over in World Trade on “The Next Generation of Outsourcing”, Michael Corbett, Chairman of the IAOP (International Association of Outsourcing Professionals) has been quoted as stating that outsourcing has reached its “threshold moment” with its ability to drive global socioeconomic and technology progress.

And we all know what happens when a business craze has been pronounced as reaching its “threshold moment” or “inflection point”. The big 5/7/8 consultancies look for the next craze that they can build excitement around to keep the consulting dollars pouring in. And since they believe that business trends, like the economy and “retro” social trends are cyclical, I can guarantee that it won’t be long before “insourcing” is announced as the next big thing.

Just like “downsizing” turned into “rightsizing” when the consultants realized that ( a) “downsizing” is a very easy thing for the media to spin negatively (because it is negative) and ( b) taking out too many people cripples the company to the point that it can’t do anything, the consultants will suddenly discover that “outsourcing”, which is ( a) also capable of being spun negatively by the media, is very similar to “downsizing” and then rediscover that ( b) taking out too many people internally is bad and some should be “brought back” to prevent the company from being crippled. As a result, prepare for the influx of “insourcing” bandwagons in 2012, which are being built as I write this (and launched as the economic debate for the 2012 Presidential Election focusses on the economy and the lack of Jobs at Home).

But just like you shouldn’t have hitched a ride on the outsourcing bandwagon, you shouldn’t hitch a ride on the insourcing bandwagon either (even if you did hitch a ride on the outsourcing bandwagon). For many companies, that have spent the time, effort, and resources to not only develop a close working relationship with the outsource provider, but to integrate their best practices and knowledge into their operations, continued outsourcing is the right way to go. Disruption, which occurs when something is pushed out or pulled in, is extremely costly. If the relationship is working well, and the provider is providing the services in a lower cost locale, pulling it back in doesn’t make sense. As with any major strategic decision, a thorough analysis has to be done to make the right decision. And that never happens if you just jump on a bandwagon.

Listen to BrainNet – Invest your Avoidance Savings to Keep Costs Down

In the recent CPO Executive debate on public sector spend and savings measurement, transcribed in “Cuts from the Centre” and previously referenced in our post on how your Organizational Data is Organizational Data — NOT Department Data, Fredrik Henzler, Partner and MD, of BrainNet, made a great point — while there is no incentive for a provider to offer the same product or service at a 10% discount if they can continue to get what you are paying now, if you offer to split the savings and let the provider invest a portion of the savings in long-term operational and infrastructure improvements, then there is incentive. If the provider can reduce the cost of their product or service, then they have money to invest in new technologies to further improve efficiency and reduce cost, which will keep the provider competitive as time goes on.

Furthermore, if you don’t get greedy and allow your provider to keep a larger margin if, and only if, they invest in operational improvements, then you know that costs will continue to drop over time and you have likely bought yourself years of cost “savings” and will be able to acquire new products and services at a lower price point than your competitors. Not only is it a win-win, but it incentivizes your providers to reach new heights of efficiency and effectiveness. So invest your savings, and just like money deposited in a high-yield savings account, watch your savings grow over time.

Risk Management Is Your Top Priority – But Are You Prepared for the Billion Dollar Threat?

As per this recent article over on Chief Executive that asks [if] your company is vulnerable to cyber-sabotage, if your company gets hacked, like Sony had its PlayStation Game Network hacked, then you too could be looking at about $1 Billion in tangible damages and an incalculable toll in lost customer goodwill, tarnished brand equity and sleepless nights for the corporate brain trust. Especially if you are in the Financial, Retail, Restaurant, or Hospitality sectors.

Cyber-Sabotage is on the rise. According to IBM, more than 8,000 new cyber-sabotage “vulnerabilities” were identified last year, up 27% from 2009.

But what can you do? The article recommends that you:

  • Become the Security Champion
    And put cyber-security at the top of corporate priority lists.
  • Beware of “Social-Engineering”
    Make upper managers aware of their own vulnerabilities to attacks that exploit the behaviour of strategically positioned individuals rather than involve a broad cyber-sabotage campaign.
  • Draw the Difficult Lines
    And set up an early warning system since it’s impossible to prevent every possible attack.
  • Dig to the Roots
    Be aware that unhappy contractors, customers or partners can become cyber-accomplices, and even cyber-criminals, if they are financially desperate enough.
  • Survey the Changing “Threat Landscape”
    The rapidly rising number of smart-phone “apps” is providing cyber-criminals with opportunities to exploit mobile-data networks.
  • Know the Four Common Categories of Cyber-Saboteurs
    • Foreign Government Intelligence Services
    • Transnational Criminal Enterprises
    • Corrupt Competitors
    • Corporate Insiders

It’s not bad advice, but it doesn’t really help. It’s great to fly a flag, but that’s not enough. And even if a manager knows he is vulnerable to social engineering, that doesn’t tell him how to tell when an individual might be trying to socially engineer information out of him. And just what should an early warning system look like? And how do you identify what individuals inside your four walls might turn on you? And how does knowing what types of cyber-saboteurs are out there help you stop them from penetrating your networks?

You need to know A LOT more than you do. And you’re not going to figure it out on your own. So you pretty much have two choices.

  1. Outsource to a “Cloud” Company that are masters of SaaS and Security or
  2. Hire a Security Consultancy with the Expertise to Not Only do a Security Analysis but to Train you on what needs to be done to Minimize Risk from a Technical and Social Perspective.

That, in a nutshell, is what you need to know, because unless IT Security is your business, you won’t master it.