Interview: Supply Chain Vital For Public Service Delivery

Public procurement, the process by which government entities acquire goods, services, and works from external sources, significantly differs from corporate procurement in both its scope and objectives. While corporate procurement primarily focuses on maximizing value for the company, often measured in terms of cost savings and efficiency, public procurement is governed by principles of transparency, fairness, and the broader public good. It must adhere to strict legal and ethical standards to ensure that taxpayer money is used effectively and equitably.

The professionalization of public procurement has become increasingly evident globally, marked by the adoption of standardized practices, enhanced training for procurement professionals, and the integration of advanced technologies. These advancements have led to more strategic sourcing, better risk management, and improved public trust in government spending.

To gain a deeper insight into the workings of public procurement, particularly within law enforcement and amidst the diverse landscape of government departments, Beroe engaged in a detailed conversation with the Chief Procurement Officer (CPO) of the Victoria State Police Department, AJ Karliner. The objective was to comprehend how this key department adapts to evolving market dynamics and legislative changes.

In Victoria Police, AJ holds a position where he reports directly to the Executive Director of the Information Governance and Assurance Division, a significant segment within the organization. Additionally, in the Victorian Government structure, Chief Procurement Officers (CPOs) like AJ have a 'dotted line' relationship with an Accountable Officer, which in AJ's case is the Chief of Police. This structure means that all procurement reviews and documents are ultimately overseen by a relevant financial delegate, who could be the Chief of Police or another authorized individual.

Significantly, the role of the CPO is designed to be independent. AJ's commercial reviews and the changes he implements can only be overridden by the Accountable Officer. This arrangement is intentionally established to ensure integrity and impartiality in the procurement process.

AJ's procurement team is tasked with sourcing essential items and implements typically required by a police force, including firearms, uniforms, batons, tasers, bulletproof vests, and various IT services, software, and tools.

At 3 PM in Melbourne, amidst an air of festive cheer as 2023 neared its end, AJ Karliner answered a video call from Beroe.

The Operating Model

AJ started the discussion by outlining the implementation of a five-year strategy for the Procurement department, which involves a change in the operating model.

"Firstly, it's important to understand that autonomy in government procurement, including at Victoria Police, is never absolute. There's always a layer of governance to ensure integrity in our processes. This means ensuring that everything is done correctly from a propriety perspective, achieving value for money, and meeting the organizational standards in terms of commercial dealings.

“This governance layer exists regardless of the procurement model being center-led, decentralized, or a hybrid. However, the challenge with a completely decentralized system is maintaining the requisite skill set for effective procurement, especially commercial oversight. Without a supporting structure, it's difficult to both maintain appropriate skill levels and avoid being stretched too thin across numerous deals,” AJ explained.

AJ is committed to developing a future-proof and flexible center-led procurement function within the public sector. To actualize this vision, the center-led operating model was chosen -- and the question then is why this model works best?

“There are several reasons for this approach. One issue with procurement is its slow pace. Centralizing it can exacerbate this problem, raising concerns about its impact on service delivery. There's a crucial balance to be struck between operational and commercial integrity. In any organization I've worked with, I've always prioritized operational integrity over commercial integrity. This means I won't let procurement processes hinder critical business functions.

“For instance, consider the IT support structure. There's no logical reason to run a lengthy procurement process, especially if it's unlikely to yield a different outcome or if there's not enough time to conduct a full process. In such cases, it's essential not to impede the business's ability to support key parts of their infrastructure, whether it's IT, operations, or even something as basic as uniforms. You can't simply halt the use of an incumbent service, even if it's reached its end of life. Take the police force, for example – officers need their uniforms and equipment. So, there's always this balance to maintain," AJ elaborated.

He also emphasised that his approach with the center-led model is not to centralize all procurement activities but to intervene with specialist skills for significant deals. This means bringing in individuals with expertise not just in general procurement management, but specifically in negotiation, legal aspects, and project management.

On the contrary, he opined that in decentralized setups, procurement teams or individuals tend to become overwhelmed.

“They often lack the necessary support for validating negotiations and managing the complexities of commercial contracts in real time. This can be manageable for smaller deals, but not for high-risk, high-value transactions, which might involve substantial financial implications or potential reputational damage.

“By opting for center-led model, we aim to harness the best market opportunities effectively,” he said.

Shortening the Approval Cycle

The next key element as part of AJ’s five-year plan is the role of technology in ensuring a future-proof and flexible operation, particularly in addressing business needs with shorter turnaround times. Technology is crucial in enhancing operational efficiency and adaptability. It would be insightful to understand how the latest digital technologies are being leveraged to improve procurement efficiency and adaptability.

AJ shared that he is currently in the midst of designing a new e-procurement system, though it hasn't been fully implemented yet. He added, "The first thing we're focusing on is leveraging efficiency in two core areas of procurement. The first is in running physical tenders. We plan to introduce a new source-to-contract system to automate many of our processes. Our current system is very linear, moving from one step to the next. I aim to automate much of this to speed up our process. Last time we did something similar, we achieved a 20 to 30% increase in speed, and we're aiming for the same here."

He continued, "The second area is the approval process. In a large and complex organization, many people need to review, approve, and adopt documentation. The challenge is making this process flexible yet maintaining its integrity. We've been using an interim solution, which locks down a document and allows only authorized alterations. However, we're working towards a more humanistic design. We want a review process that incorporates views from the procurement organization and allows the business to add comments as needed, all while reducing the time it takes for a document to move from one person to another. My goal is to reduce the approval cycle by about 75%."

AJ elaborated on the specifics of the procurement process, saying, "Regarding the purchasing side, the procure-to-pay, we’re in the midst of upgrading it, which will introduce new features to simplify things, like making catalogs and purchasing more user-friendly and aligning with global standards such as UNSPSC."

He further mentioned their approach to integrating procurement specialists. "We've established a webpage to make it easier for our customers to find what they need. Additionally, we've ensured that access to the procurement team, and myself, is straightforward. One of our key practices is to encourage the team to engage directly with the broader organization."

AJ continued, explaining his proactive involvement strategy. "We want to be informed about potential sourcing events months in advance. Currently, any procurement process needs to be registered with us. We manage these entries in a database, giving us a more comprehensive view of what's happening organization-wide. It's not perfect and can be quite manual, but it does the job for now.

"This system allows us to see a snapshot of ongoing projects and their stages in the sourcing cycles. It also helps us gauge how quickly we are engaged in the process and identify where there might be impediments," he explained.

Significance of Effective Project Management

The importance of project management tools that offer a comprehensive overview of all ongoing activities is increasingly recognized in the procurement world, particularly in large teams across Europe and the U.S. These tools, often integrated into Project Management Office (PMO) systems, are being adopted to provide CPOs with clear visibility of their team's projects. This includes insights into the progress of each project, adherence to timelines, and overall workflow efficiency.

Such systems have become essential for effective management, especially as they enable CPOs to monitor the status of various projects comprehensively. This trend, which has been more prominently observed in the last year, highlights the growing acknowledgment of the value these tools bring in streamlining project management processes. They not only ensure that projects are progressing as planned but also help in identifying and addressing potential issues in a timely manner, thereby enhancing overall efficiency and productivity.

AJ emphasized the crucial role of project management, stating, "It's really important for two main reasons. Firstly, if you're focusing on process improvement, understanding the flow of operations in your organization is key. For instance, if the negotiation phase consistently exceeds expected durations, it might indicate either the complexity of solutions is underestimated or the negotiating team is struggling with the process."

He explained that monitoring the time taken for assembling tender documentation could pinpoint areas needing attention. "This helps in identifying bottlenecks in your end-to-end processing. Additionally, from a reporting perspective, it's vital for the head of the organization and the leadership to understand in real-time what's happening in their specific areas."

AJ continued, "Leaders need to be aware of where the procurement cycle stands -- whether it's behind or ahead of schedule. This helps in planning and prevents last-minute rushes in contract implementation. Providing maximum visibility is essential."

He also highlighted the usefulness of individual project reports. "My team uses a 'traffic light' report to indicate where gaps exist, whether in gathering requirements, legal services, or framing KPIs. This level of reporting is invaluable for a CPO. Without such information, you're essentially operating in the dark, and everything becomes guesswork. So, at the bottom line, information is indispensable in the CPO role. Lacking this reporting means you're flying blind."

In the realm of procurement tenders, it's almost a given that things will not always go as planned. This is particularly true for non-commoditized purchases. Similar to a military operation where strategies need to adapt once the action starts, procurement processes often encounter unexpected challenges. Even with meticulous planning, the need to pivot quickly is common, especially when dealing with unique or specialized items, according to AJ.

“The more promptly the CPO and the overseeing board are informed about these developments, the easier it is for the project team to make necessary adjustments and navigate through the evolving landscape of the procurement process,” AJ added.

Change Management Involves Communication

Change management is a critical component when implementing new processes or altering the operating model, particularly in the context of digital transformation. This process often involves changing roles, managing business processes, and effectively engaging with stakeholders. Best practices in managing such changes include ensuring effective communication flows and actively involving stakeholders at every stage. These practices are essential to navigate the complexities of change and ensure a smooth transition within the organization.

AJ explained his approach to change management, starting with, "We created a communication strategy. Communication is at the heart of change management. People need to understand, adopt, and agree to the change - and this includes not just users but also stakeholders and senior executives, who are crucial as change champions."

He emphasized that even the best team and processes in procurement would be ineffective without the buy-in of senior executives. "It's vital to engage and communicate the changes and their benefits. For every change we make, we publish it and present it in forums, get executive sign-off, and have a board overseeing the changes. This board then becomes change champions, spreading the word and explaining why these changes are happening."

AJ believes that change starts from within. "We need to first change internally and then expand that change to the broader organization. It's not just about new policies and processes; it's about setting a vision, an agenda, and ensuring staff training and understanding of this vision. Not everyone will agree with the vision, and that's okay. Communication is key, and it must come from the team, stakeholders, and customers."

He encourages his staff to challenge decisions, especially regarding change. "I tell them they can argue any point, except 'that's how it's always been done'. I'm open to debate alternatives and reasons for keeping things the same. Our change process involves setting a five-year vision and strategy with one, three, and five-year deliverables. We share this with the team for feedback, lock it in for a 12-month cycle, and then review and adapt as needed."

"Change is a journey, not a destination. It's about taking your staff, stakeholders, senior executives, and customers on this journey. Consistency is key, even if not everyone likes the changes,” he reasoned.

Specialist Team

In the context of future-proofing procurement and enhancing flexibility, AJ has assembled a team of specialists to manage specialized requests.

"Everything's still a work in progress. We're continually building out the skills and intelligence we need. We're expanding our sourcing team and developing deeper market knowledge across various organizational categories. This includes understanding best practices, leveraging pricing, and assessing risk profiles.

"In the next 12 months, we aim to complement the commercial skills of our team. We're looking to implement new systems and tools to support not just the procurement team but the broader organization. Our goal is to establish a single repository for all procurement-related commercial activities -- a unified contract database and a single portal for supplier interactions," he said.

AJ emphasized the importance of making the procurement team more capable in areas like negotiation, contract law, and category management.

He added details about his team, "Currently, we have  a team of four and looking to add another member. They are strategic sourcing specialists, adept in market analysis and managing high-risk, high-value tenders. These individuals bring a diverse set of skills, from negotiation and project management to legal and IT expertise. Their role is not just to achieve the right market outcomes but also to challenge our processes and ensure we're asking the right questions and taking appropriate risks for the best outcomes. Their focus is on outcomes rather than just processes, asking critical questions that perhaps the business hasn't considered".

Supplier Relationship and Pressure from Tax-Payers

In the context of supplier relationship management, especially for public procurement organizations that procure a broad array of goods and services globally, there's an added pressure of responsibly spending taxpayer's money. This consideration becomes even more critical when suppliers are not locally based. The challenge extends beyond just building and maintaining robust, collaborative relationships with these global suppliers; it also involves fostering innovation, which is often supplier-led. Engaging in productive dialogue and partnerships with suppliers, while ensuring the wise use of taxpayer funds, is essential in incorporating innovation and achieving the best value in the procurement process.

"Speaking broadly, government organizations tend to be wary of forming close relationships with strategic suppliers due to the perceived risk of corruption. However, when managed correctly, about 70% of an organization's innovation can originate from its supply base. The challenge is in changing the perspective, not about getting too close to a vendor, but setting up the right structures for collaboration," AJ said

He continued, "For instance, in a project involving leading-edge technology, we negotiated for a 'seat at the table'. This means we have input in the future roadmap of the vendor's technology, which helps shape our future plans and understand upcoming changes."

AJ also noted the need for improvement in government-vendor relationships. "Traditionally, governments haven't excelled at this, but we're working to change that. We aim to reach a point where vendors inform us about changes, especially in areas that could impact us positively or negatively. We need to understand how to use and safely integrate new products, features, and functionalities."

He emphasized the careful consideration required in government decisions. "In government, implementing new solutions requires thorough planning due to low risk tolerance and the imperative to use public funds wisely. It's crucial that we use taxpayer money in the best interest of the public to avoid criticism of wasteful spending, and this careful approach is exemplified in large-scale projects."

AJ acknowledged the inherent pressure in a government CPO role, stating, "There's always that pressure, and it's quite easy to swing to one extreme or the other. The key is to find a middle ground where maximum value is achieved." He explained that this doesn't always equate to the lowest price but might mean securing the best or most sustainable long-term outcome, even if it costs a bit more.

From a government perspective, he remarked, "If I were to push a supplier to their lowest possible margin, I'd be aware that this could jeopardize the long-term viability of that relationship. They might either seek to recoup their losses or fail to meet their deliverables."

AJ emphasized the importance of incentivizing vendors to work collaboratively for the best outcome without excessive expenditure. "It's about striking a balance and building relationships that lead to mutually beneficial results."

Supply Chain Vital For Service Delivery

Given the crucial role of managing procurement within law and order, a cornerstone of any modern, civilized society, it raises an interesting question for someone in AJ's position: Have there been any unusual or out-of-the-ordinary sourcing experiences?

AJ shared an example to illustrate challenges in procurement, particularly those beyond control. "One issue impacting law enforcement globally is the shortage of bulletproof vests. This is largely due to the war in Ukraine, which has redirected resources, affecting police and military organizations worldwide.

"We had to assess how our current supplier was performing under these circumstances and whether it was worthwhile to explore other market options, considering the focus on Ukraine," he explained.

He added, "While I can't delve into specifics due to confidentiality, it's important to understand the range of technologies and equipment a police force, akin to a paramilitary organization, requires. This includes helicopters, firearms, tasers, and a robust IT infrastructure."

He also touched on cybersecurity challenges. "Considering recent cyber-attacks in Australia, data security becomes paramount for law enforcement. The level of security and effort put into the infrastructure at Victoria Police is significantly higher than what might be typical in other organizations”.

As the conversation began to wind down, AJ emphasized the critical nature of the supply chain in law enforcement. "For a law enforcement organization, the supply chain is vital for service delivery. Items like bulletproof jackets and other equipment are essential for the safety of officers and the public. In such scenarios, financial concerns become secondary to the risk to human life," AJ concluded.