Should Public Sector Procurement Be Outsourced To Private Enterprise?

Posted on March 15, 2017


Talk of privatizing or outsourcing the public sector procurement function is nothing new. Referring to a post I had written on this blog back in October 2007, Dr. Ronald Utt had actually proposed the privatization of the General Services Administration or GSA through an employee buyout.

In a Heritage Foundation paper dated May 26, 1995, Utt explained his logic for this large scale transformation when he said “Of all the agencies and departments that have been discussed for privatization this year, the GSA would be one of the easiest to privatize.  Its many services are available from the private sector, whose more successful firms offer a blueprint for how a privatized GSA could survive and thrive in a competitive environment.”

While not on the same ambitious, overarching scale as the one presented in the Heritage paper, a June 2013 report by the Asian Development Bank provided the following outline of the circumstances under which outsourcing public sector procurement would make sense;

“When the problems of weak institutional capacities, high costs, delays, and high integrity risks are systemic in a government, outsourcing the procurement function may be a sound option to consider, whether as a short-term gap-filling measure or as a longer-term strategic approach.”



Given what is now happening in Santa Clara County, I could not help but wonder if this is a factor in the recent controversy regarding the extended KPMG engagement. The fact that some have pointed out that it would appear that “KPMG is going to be getting, even more, money before this is over,” suggests that their involvement could evolve beyond a consulting role.

At this stage, and until I have had the opportunity to interview County Executive Jeffrey Smith, it may be a bit of a stretch to say that Santa Clara County is actively looking to outsource its procurement function. However, in January KPMG did post a job requirement on LinkedIn for a Manager, Procurement and Operations Advisory in Santa Clara. Here is the link;

Given that the County’s current procurement practice is one of the best in the country, I am still trying to understand why the KPMG engagement is being extended for an additional $2 million. Especially since the SCC procurement team only had a cursory involvement in the process.

Maybe that is the problem; the lack of clarity from the County Executive as to the ultimate goal of the continuing KPMG engagement.

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