Public procurement ‘S-words’ and cronyism

By Rich Purtell

Standardization. Single Sourcing. Sole Sourcing. Strategic Sourcing. These have all become common techniques used in the purchase of government goods and services. “Procurement” is the term used to mean the professional buying profession. Without proper accountability in the use of these S word techniques, these processes mirror another S word – Stealing. Much has been written about the “1%” and cronyism, but it seems that most such writings are in broad, general terms. More specifically, it should be better known how the road to the 1% club will often involve market limiting tactics. Finger pointing at elected officials is the easy, knee jerk reaction to the perception of cronyism. A deeper truth is that core processes have been created which need more scrutiny. A better understanding of these processes would enable the voting public to offer targeted complaints about what to repair.

If Vendor A has marginally more power and government influence than vendor B, he may steer/influence elected officials (and non-elected government and private sector employees) to direct a buying process in a favorable way using one of the many free-market limiting traps which government has sought to implement. Once such a strategy is put to use, the power gap between vendor A and vendor B will only widen. Price gouging and profiteering which are enabled for vendor A form a feedback loop, whereby vendor A is able to exert even more effort to bias the free market towards crony practices.

Aside from the direct and immediate impact on prices, over time the lack of proper free-market competition causes further damage. Innovation suffers from lack of emphasis on product/service improvement. Vendor A’s marketing department gets a loud and clear message to focus on crony policies, rather than to build a better mousetrap. As market choices are continually cut due to crony policy, virtual monopolies are formed. Or if not monopolization, vendors are driven to form cartels in order to survive. Either way, the taxpayer is damaged.

What’s most surprising is how often one of the competitive bypass techniques is put to use without even so much as a CONCRETE cost-benefit-analysis. Typically a very subjective case is built, with words such as “convenience” thrown around without any hard numbers, that is dollars and cents, to back them up. Even if a case could be built for a market-limiting technique to satisfy an immediate need, such process should look beyond the immediate need, and to how the market-limiting activity can bring jeopardy and damage in the long term. A truly thorough cost-benefit-analysis should look beyond the immediate purchase and to long term impacts.

So as a voter/taxpayer, charge your elected officials to see that market limiting techniques are implemented with proper scrutiny by professional buyers, i.e. public procurement agents. Seek always a cost-benefit-analysis, and such analysis should always include a risk assessment for cost impact from a market limiting choice. But even beyond this effort, a broader view of the impact of those techniques is prudent. How does this one choice, combined with other very similar choices in the future, affect costs and availability of services moving forward?