Transforming Public Procurement: A Strategic Tool for Value Creation

Special Issue volume out in Public Management Review!

October 14, 2024

Public procurement is often viewed as a transactional and compliance-driven process within government operations. Yet, as governments spend $13 trillion annually on procurement—equating to 12.9% of GDP in OECD countries—there’s a growing need to reimagine this process as a strategic lever capable of delivering more than just cost savings. Public procurement can be a catalyst for achieving policy-driven goals, from sustainability and innovation to enhancing security and economic development.

Our recently published paper, "Enhancing Strategic Public Procurement: A Public Service Logic Perspective" (published in Public Management Review), seeks to address these growing expectations. The paper provides a framework to transform procurement into a strategic tool for public value creation by applying Public Service Logic principles.

Why Public Procurement Must Evolve

Historically, public procurement has focused on cost-efficiency, transparency, and legal compliance. However, this narrow focus misses significant opportunities for procurement to contribute to broader societal goals. For example:

Procurement is linked to 15% of global greenhouse gas emissions, yet sustainable procurement is still underutilized in many governments.
Innovation-driven procurement has helped companies like Apple and Intel emerge, but many procurement practices remain risk-averse, limiting their scope to support innovation.
Cybersecurity risks are increasing, especially in IT procurements, but strategic measures to mitigate these risks are not universally adopted.

As such, we define strategic public procurement as ‘the deliberate use of procurement resources and processes to achieve both public management and public policy-driven goals’. This definition underscores the dual role of procurement: it must meet immediate organizational needs while simultaneously advancing broader policy goals. Strategic public procurement transcends the traditional focus on legal compliance and operational efficiency, positioning it as a crucial instrument in public governance for addressing complex societal challenges, stimulating economic development, and enhancing public value – all while maintaining core objectives such as legal compliance and operational efficiency.
Governments must see procurement as an opportunity to shape markets and influence the behavior of suppliers towards sustainable and innovative solutions.

The Role of Public Service Logic
To achieve this transformation, our paper proposes the integration of Public Service Logic (PSL) into procurement strategies. PSL emphasizes:

User-centricity: Engaging stakeholders (citizens, suppliers, NGOs) early in the process to co-create solutions that meet societal needs.
Collaborative ecosystems: Forming partnerships between public agencies, private sector suppliers, and civil society to tackle complex challenges like sustainability and innovation.
Agility: Ensuring procurement processes are flexible and responsive to changing market conditions, regulatory shifts, or emerging technologies.
Evidence-based decision-making: Using data to guide procurement strategies, ensuring alignment with long-term policy objectives and measuring the broader impacts of procurement choices.

A Strategic Framework for Practitioners
Incorporating PSL principles into public procurement allows governments to adopt a more strategic role. The framework we introduce highlights the key actors, competencies, processes, and practices required to:

Align procurement activities with sustainability and innovation goals.
Foster a culture of collaboration between public and private sectors.
Create procurement systems that are adaptive to changing demands and policy environments.

For example, applying PSL in procurement could mean more proactive engagement with suppliers to ensure that goods and services adhere to circular economy principles, or developing procurement criteria that prioritize cybersecurity and data protection in IT projects.

Challenges Ahead: perspectives offered by the papers included in the special issue

Despite the recognized potential, many governments struggle to fully leverage procurement strategically. Issues like limited resources, risk aversion, and an over-reliance on traditional, transactional procurement processes remain barriers. However, by adopting PSL, public procurement can become a powerful tool for public policy implementation. The paper included in the special issue provides empirical and theoretical evidence on how these challenges can be overcome and government can use procurement toward these strategic outcomes.

Casady, C. B., O. H. Petersen, and L. Brogaard. 2023. “Public Procurement Failure: The Role of Transaction Costs and Government Capacity in Procurement Cancellations.” Public Management Review 1–28. https://doi.org/10.1080/14719037.2023.2231945

Duong, L., W. Phillips, J. Roehrich, and C. Cook. 2024. “Realizing NetZero in Social Housing: The Roles of Strategic Public Procurement and Internal Stakeholders.” Public Management Review 1–24. https://doi.org/10.1080/14719037.2024.2352546

Grandia, J., and R. Warsen. 2023. “Procurement Under Pressure: Shifting Governance Strategies in Turbulent Times.” Public Management Review 1–19. https://doi.org/10.1080/14719037.2023.2281973

Grimbert, S. F., J. M. Zabala-Iturriagagoitia, and V. Valovirta. 2024. “Transformative Public Procurement for Innovation: Ordinary, Dynamic and Functional Capabilities.” Public Management Review 1–24. https://doi.org/10.1080/14719037.2024.2326079

Selviaridis, K., D. Luzzini, and C. Mena. 2023. “How Strategic Public Procurement Creates Social Value: Evidence from UK Anchor Institutions.” Public Management Review 1–29. https://doi.org/10.1080/14719037.2023.2277814