Washington Dispatch No. 9: Roundtable Discussion on Transparency and the Economy

Today’s post is the final excerpt in the series from the Transparency in Government Procurement white paper that has run on both the Procurement Insights Blog, as well as the Official Event Blog Essential Connections.

As the lead-up to the release of the white paper later this week, we examined the observations and revelations from the April 27th Washington Roundtable discussion on Transparency in Government Procurement with leading industry experts Karen Evans, Colin Cram, Tim Cummins and Judy Bradt.

Suffice to say, the depth of insight and perspective that the 90-Minute Special provided into the world of government procurement was fascinating, thought-provoking and, in the end, highly informative.

To obtain your complimentary copy of Transparency in Government Procurement white paper, use the following link to activate your free subscription to the Essential Connections Blog.

In the meantime, enjoy this final excerpt on Transparency and the Economy.

“Building a Transparent, Collaborative and High-Performance Government Capable of Addressing the Challenges of the 21st Century”

“In the summer of 2006, I chaired the Summit Roundtable that reviewed the critical elements of the Canadian Federal Government’s Way Forward initiative.  Based on the input that was received through a series of meetings in which representatives from both the public and private sectors were in attendance, I drafted a procurement Blueprint.

Highlighted in this Blueprint, was one of the key findings of the discussion in terms of the purchasing guidelines that define public sector practice.  Specifically, “the general consensus that government is not a corporation and therefore has different priorities and imperatives to meet when procuring goods and services.  This acknowledgment takes into account socio-economic implications including the importance of developing key Canadian business sectors or industries.  Examples of key sectors or industries include the SME/minority-owned business community, or Canadian-based manufacturing sectors such as shipbuilding where job creation and community financial stability are taken into consideration.”

Fast forward ahead to the April 27th, 2010 Roundtable Discussion on Transparency in Government Procurement which aired live from the 3rd Annual Business of Government Summit in Washington, D.C. on the PI Window on Business Show, and you will find that little has changed in terms of the critical role that Government procurement plays in driving both domestic and global economies.

According to recent studies, Government procurement accounts for 10% to 15% of a “developed” country’s economy, and up to 20% of a “developing” nation’s economy.  In short, government or public sector procurement is not an island unto itself in which the consequences of the process is isolated to the siloed interests of the buyer.  There is a greater reach that has to be considered, in which a best value transaction has many facets including the need to drive innovation.

It is however in this area of an expanded point of view according to 35 year public sector veteran Colin Cram, that there are two important issues that must be understood and addressed if government procurement is to achieve its maximum potential as a key economic contributor both domestically as well as globally.  This of course includes working with other nations.

In this regard, and other than a few exceptions such as contracting to build military aircraft, Cram contends that few governments are capable of working with other nations.  Specifically, the “collaboration between two parties means that both parties have to be fit to collaborate.”   This is a capability according to the author of the seminal paper Towards Tesco – improving public sector procurement, that few nations posses.

From a domestic economic standpoint “public sector procurement” continued Cram, is “so huge that it can have a major impact on public sector providers” in two important areas; major developmental impact on services or products they (being suppliers) offer and, the ultimate value for money these suppliers provide.

Focusing on the effectiveness of his own government, Cram “doesn’t think that the UK would be a good partner with anyone, other than a select few.”  This of course coincides with one of many articles on public sector collaborative practices including an October 13th, 2007 post here in the Procurement Insights Blog titled “Cluster Development and the CAC (PWGSC): Facilitator or Competitor?.”  In that article I talked about the UK government “Way Forward” report from 2005, which stressed that stakeholders in the government procurement process “have to find a way to identify and remove the obstacles to true collaboration.  Otherwise another 3 years will pass without any discernible progress being made.”  Based on Cram’s comments the desired progress has not become reality.

Referring to the biometric card project that was discussed earlier, the question regarding the dual purpose of government procurement in terms of  suppliers being able to generate revenue domestically while simultaneously opening up their technological innovation to the global market, was posed to Karen Evans.

Evans, the former US Federal Government CIO under the Bush Administration who oversaw more than $70 billion in IT expenditures, delivered a perspective that centered on the influence governments such as the US have on the global stage.

While the biometric card project was definitely one instance of a successful collaborative effort between the public sector and private sector, Evans pointed to the US government’s decision to move from Internet Protocol version 4 to version 6 relative to providing an example of government influence both domestically, as well as on a global basis.

IPv6 was defined in December 1998 by the Internet Engineering Task Force “IETF” as a means of addressing amongst other things what is referred to as IPv4 exhaustion.  Without getting into the specific technological differences between the two versions (which in and of itself would warrant a separate paper), we will content ourselves with the fact that IPv6 as Evans explained it would create an limitless ubiquity that would further open up both the performance and capabilities of the Internet.

Relating to this paper, Evans indicated that when the government “signaled to the market” that the US was moving in this direction two things occurred.  From a supplier perspective, and in line with Cram’s earlier statement regarding the major developmental impact governments have on supplier products and services, Evans alluded to the directional instruction the move had on government vendors.  In short, if the US government is moving to IPv6, does it make sense for a vendor to focus on improving IPv4?  (Note: as an aside, and according to a 2008 study by Google Inc., “less than one percent of Internet-enabled hosts in any country” have adopted the IPv6 protocol.  However, the same study indicates that “IPv6 has been implemented on all major operating systems in use in commercial, business, and home consumer environments.”  This is a reminder of what panelist Judy Bradt referred to as the importance of a prospective supplier having a clear understanding of the opportunities they are pursuing including the costs, time lines and ultimate potential to actually win the business.)

The US government’s decision to pursue an IPv6 strategy also prompted a flurry of calls from other governments around world, who wanted to gain a better understanding of the decision to make the move to the new protocol, which as Evans indicated was freely shared as it was information that was in the public domain.

The IPv6 discussion was a natural segue into the much larger question of a nation’s economy.

Citing my research and subsequent articles on the Clark and Fourastie “three sector hypothesis of industry” (now four with the introduction of the Quaternary Sector), and in particular a September 24th, 2009 post titled “Will Britannia Rule the Waves of the Vast Sea that is the Global Economy?,” I introduced this element into the discussion.

Under a “general pattern of development,” a wealthy nation progresses through each phase or industry sector which includes the Primary sector (the extraction of raw materials), Secondary (manufacturing), Tertiary (services) and, Quaternary (knowledge-based) industries.

Effectively managing this progression is critical to what Fourastie referenced in his 1949 publication “The Great Hope of the Twentieth Century” as “the increase in quality of life, social security, blossoming of education and culture, higher level of qualifications, humanization of work, and avoidance of unemployment.”

While there are similarities or overlap between the service-based Tertiary sector and knowledge-based Quaternary sector, knowledge-based industries are incredibly important to the future evolution of existing and emerging economies.

A point that was succinctly (perhaps even acutely) made by the incomparable Arianna Huffington of the famous Huffington Post, who in a controversial article titled “When It Comes to Innovation, Is America Becoming a Third World Country?” discussed the US’ failure to keep pace with the rest of the world in these key industry service/knowledge-based industries.

This of course is one of the reasons why I previously asked the question in the September 24th post “is the UK and India positioned to emerge as economic titans over the next decade.”

Let’s look at the United Kingdom. The Tertiary and Quaternary sectors represents the largest part of their economy, employing 76% of their entire workforce.

With India, the indigenous software engineering talent has made that country the off shoring destination of American high-tech firms, each of which have committed to investing $1 billion into its economy. The result of this boom is that India has seen double-digit wage growth for much of the 2000s.

While Cram expressed some concern that the “UK is too dependent” on these emerging sectors, he reiterated his earlier point that “government expenditures are so large that they could have a much larger and more meaningful impact on the development on both the service and knowledge-based industries.”

Washington-based expert author Judy Bradt, who’s 7-Part “Seven Steps to Success: Winning Government Contracts” Series on the PI Window on Business concludes on Monday, May 10th at 3:00 PM EST, expressed her belief that the discussion regarding the government’s role in driving the emerging sectors of industry was “timely,” and that this ultimately emphasizes the “importance of transparency and collaboration” in the the public sector procurement process.

Referencing the Recovery.com website, which provides “easy access to data related to Recovery Act spending,” and the opportunities this represents to potential suppliers, Bradt focused her comments on the specific role of maintaining a technological leadership capability from the standpoint of leveling the public sector contracting playing field.

Through advanced technologies smaller vendors according to Bradt, are now in a better position to build relationships with key government decision-makers through the ability to “remotely and easily access meaningful contacts.”

This Bradt concluded, is cause for a great deal of excitement as the increased accessibility means that government is not going to be limited to dealing with large vendors.

The importance of bringing the smaller vendors to the table was highlighted in a December 2007 article in the Defense AR Journal by Timothy T. Nerenz titled “Government contract bundling: myth and mistaken identity.”

The article, which “summarizes” Nerenz’s 2006 doctoral dissertation Federal Procurement Policy Analysis: Has Extent and Effect of Government Contract Bundling on Small Business Been Overstated? challenges the then long held belief that “contract bundling–the combining of separate smaller contracts into a single large contract unsuitable for small businesses–is the most important barrier to small business participation in the $300 billion-plus federal government contracting marketplace.”

Nerenz’s opening paragraph packs a powerful punch in that it refers to a U.S. Small Business Administration “SBA” report which “estimated that 34,221 new bundled contracts were awarded from 1992-2001, transferring $840 billion of contract revenue from small to large businesses.”  The end result the SBA report concluded was “a 56 percent decline in the number of small businesses contracting with the government.”

Despite sharing in Bradt’s excitement relative to small business enterprise’s “SME” growing access to government opportunities , IACCM’s founder and CEO Tim Cummins cautioned that there remains many significant challenges in the public sector procurement process.  In this regard, the Nerenz article provides telling statistics and, may provide at least a partial explanation for Huffington’s “Third World” concern relative to declining US-based innovation.

According to Cummins, smaller companies are indeed more innovative than their larger enterprise counterparts because they are more prone to take the risks associated with “driving the good (or innovative) idea.”

The problem is the somewhat symbiotic view of risk shared by the government and its bigger suppliers.  This “risk averse” mindset to which Cummins referred, has led to the inclusion of onerous contractual terms and conditions that are “not conducive to engaging the small innovators.”  The end result lamented Cummins is that “small players are forced into participating as a sub-contracting supplier to a bundled contract,” which the IACCM CEO correctly pointed out can be”rather stifling.”

Unfortunately, and in an effort to offset or reduce said risk to tolerable levels, large enterprises including of course governments introduce what Cummins called “draconian terms,” which ultimately “flow down to smaller suppliers in the form of consequential damages” such as limited liability.  Besides stifling innovation, this “unbalanced approach to contracting cause it (being innovation) to go other places.”

In illustrating the negative impact of this unbalanced approach, Cummins concluded with an example from the telecom industry.  Highlighting the fact that while “most of the telecom industry’s innovation is taking place in Western Europe and the US,” the majority of the resulting pilots “take place in the Far East.”  The reason is simply because the “big players in those markets do not place the same onerous terms” in their contracts.  In essence, the Far East giants “understand the principles of relationship and partnership in a way that unfortunately seems to be very often alien to the rather risk averse Western cultures.”

The question this raises is how does one combat the risk averse natures that follow a onerous and somewhat arbitrary “belt with suspenders” mindset to drive the innovative engine that fuels the new economy?

Judy Bradt’s answer to “show or demonstrate success” is succinct and to the point in that you are more likely going to be able to generate public sector opportunities if you have an established track record.

Cummins’ response came in the form of a real-world analogy where the “client indicates that they absolutely want to be leading edge, and then asking who else has already done this?!”

This tongue in cheek perspective garnered Cram’s sympathy for the smaller firms especially given the “onerous nature of the existing tendering process.”  That said and referring back to Bradt’s earlier statement, Cram was quick to point out that smaller firms by virtue of their size are not precluded from demonstrating that they can “solve a specific problem” through their technological innovation.

This was also a sentiment mirrored by Karen Evans, who talked about the tendency on the part of suppliers to attend a meeting with a government buyer without having done the proper homework relating to the actual problems their prospect is facing.  Or to be more precise, if you have to ask me what my problems are, then I am not likely going to deal with you.

Or as the self-possessed Bradt, who has assisted more than 6,000 clients to win in excess of $300 US in government contracts so eloquently put it, “what problems do you  (as a supplier) solve and, who has those problems.”

Epilogue:

In the end, the best way to sum up the 90-Minute Roundtable discussion on Transparency in Government Procurement is as follows; “Transparency is not the holding fast to the illusion of a level playing field, but is achieved through a clear understanding of the layout of the field itself.”

Using the above axiom as the starting point represents the first step towards removing the silos of misunderstanding and misinformation, and laying the groundwork for making essential connections to ultimately work towards an open and effective collaborative effort between all interested stakeholders both within and external to the government.

This leads to generating tangible best value business that in turn ultimately drives a nation’s economic engine in the emerging global economy.

NOTE: The post came from the new Essential Connections Blog. For complete summit information including additional articles, visit the Essential Connections Blog

Session Spotlight

What Is Transparency In Government Roundtable Session

In my keynote address “Contracting To Win: Buyer and Seller Responsibilities in 21st Century Government Procurement” this morning I made the statement that “transparency is not holding fast to the illusion of a level playing field, but to a clear understanding of the layout of the field itself.”

To expand on this concept of transparency further, I will refer to a comment that was made by Washington-based expert author Judy Bradt during Part 3 of our 7-Part “Seven Steps to Success: Jump Start Government Contracts” Series on Blog Talk Radio. Specifically, Judy’s point that “the process for winning government contracts is truly based on the ability of a supplier to legitimately and transparently win preference with government buyers.”

Joining me in this probing 90-minute segment on what transparency really means in the realms of public sector or government procurement is a guest panel of experts whose experience, expertise and insights will shed some much needed light on a subject that has often eluded a practical, real-world definition.

Guest Panelists:

Tim Cummins is CEO of The International Association for Contract & Commercial Management (Link to Tim)

Judy Bradt is an expert author an is the Principal of Summit Insight in Washington DC who has helped more than 6,000 clients to win in excess of $300 million US in government contracts. (Link to Judy)

Colin Cram is a Senior Adviser to the Office of Government Commerce, a Fellow of the Chartered Institute of Purchasing and Supply and held senior positions for over 30 years in central government, higher education and local government. (Link to Colin)

Karen Evans is a Partner at KE&T Partners, LLC and the former Administrator, E-Government and Information Technology at Executive Office of the President, Office of Management and Budget. (Link to Karen)

About the Summit:

The PI Window on Business took its show on the road on April 27th and 28th thanks to sponsor Elcom and the tremendous work of the 2010 Business of Government Summit’s organizer, Shared Services and Outsourcing Network (SSON).

It was a first rate venue that saw us broadcast “live” 5 incredibly informative sessions centered on “Building a Transparent, Collaborative and High-Performance Government Capable of Addressing the Challenges of the 21st Century.”

The attendees of mostly senior officials and executives from the public sector world were exposed to an incredible array of thought leaders, whose shared insights and experiences provided much needed (and welcomed) perspectives on both the challenges and potential strategies for effective government practices in the 21st century.

Look for us at the 10th Annual Fall eWorld Purchasing & Supply Conference, where we will be broadcasting live from the Novotel, St Pancras, in Central London, UK on the 28th and 29th of September. (Use #eworldlive to follow event tweets on Twitter.)

eWorld: “The UK’s most comprehensive business forum for eProcurement, eSourcing and Supply Chain Technologies”

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