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Comparing government and private sector procurement is unfair

 

The travails of healthcare.gov earlier this year threw thejack miles-headshotJack Miles spotlight once again on government procurement, providing the public and pundits alike plenty of fodder for criticism. 

 

But let’s put things in perspective. The high cost and lack of performance of the healthcare.gov website is not the sole responsibility of the current administration. It’s just the latest installment in an ongoing series that has brought us the $600 toilet seat, the $100 hammer, and the $900 control switch.

 

Before we jump to conclusions about government ineptitude and corruption, we need to realize that the bigger problem is the system itself. Comparing government and private procurement is not a fair comparison. They’re two different processes. We get the outcomes our process drives.

 

What drives these kinds of outcomes? Having been in both corporate and government procurement, I chalk it up to four things: Budgets, management, RFPs, and the protest process.

 

Public vs. private budgets

Government budget constraints sometimes haveapples to orangesComparing governement and private sector procurement is an apples to oranges comparison. the opposite of their intended effect because they don’t allow for flexibility. Everybody knows that the economy changes, and business conditions change. In the corporate world, you have more flexibility to respond. You can often move dollars from one budget line to another.

 

In government it doesn't work that way. Many budgets involve money earmarked for certain things. There is no latitude to move money from one bucket to another, even if doing so could result in efficiencies or cost savings.

 

Private sector management vs. public sector management

Rigid, procedure-heavy public sector management makes it nearly impossible to run procurement as fluidly and efficiently as in the private sector.

 

In the private sector, procurement works with executive management and a board of directors, maybe ten or twenty people who have hired the procurement chief for his or her expertise and delegated authority over the function to that person.

 

In government, procurement has to deal with a legislative body made up of hundreds of people, all of whom have a say and believe they know how to do the job better.

 

In the private sector, there are rules in place governing what you can and can’t do-- but some rules can be modified and exceptions can be made. But in government the rules aren't just rules --they're laws, and bending them can land you behind bars. If you don't agree with the rules, you have to work with the legislature to get them changed, which is a crusade unto itself.

 

 

RFPs created in a vacuum

There's really no getting around the rules in government procurement, and this makes for RFP’s the size of War and Peace, which often raise more questions than they answer. As we have seen in recent programs such as the Department of Defense’s helicopter fleet procurement, the cost and complexity of responding to these tomes can reduce competition right from the get go.

 

The other dirty little secret is that sometimes RFPs are written with a specific suppliers in mind, and the ability of the open market to respond may be limited.

 

You also have to contend with the protest process, which puts a chill on collaboration. Because of the protest process, there’s a tendency to view suppliers as the enemy and avoid them, to avoid opening yourself to charges of corruption or favoritism. So, suppliers who bid on a government RFP are essentially taking their best guess at it.

 

The protest process

Once you understand the protest process, you can quickly understand how the federal government winds up buying $600 toilet seats. In fact, once you understand the protest process, you might wonder why anyone would do business with the government at all.

 

The way it works is, after a procurement process is conducted and a supplier is awarded the contract, if any of the suppliers who failed to win the contract are unhappy, they can throw a wrench into the works by filing a protest. That stops the award and freezes the entire contract while the protest hearing process takes place.

 

“Unhappy” is the operative word. There are certain criteria for filing a protest but they are pretty broad, such as that the process was “not fair and appropriate.”

 

What happens then is--and you have to love lawyers for this--through the discovery process the protesting supplier gets to hunt through all the documentation, which they can then use to prove their hypothesis.  The burden of proof is on the government, not the unhappy supplier.

 

These protests can go on for a very long time. For example, in 2011, Boeing won a $35 billion contract for replacing aerial fueling tankers after nearly a decade of multiple back and forth protests with European Aeronautic Defense and Systems, the maker of Airbus airplanes, to settle the matter.

 

Once the contract is awarded and execution begins, all the unanswered questions with the RFP have to be resolved. The supplier and the procuring agency finally get to have conversations with one another, and they start to rationalize what was asked for. The actual bidding of the contract may have been competitive, but there's no more competition when it comes to the extras and changes. 

 

So, you can’t make a fair comparison between procurement in the public and private sectors.  It’s not a level playing field. Over time, we’ve created a very cumbersome, inefficient system governing the public procurement process. This bureaucracy has become an entity unto itself, independent of either political party, and it will take both parties working together to change it.

 

Jack Miles is the former Secretary for the Department of Management Services for the state of Florida and served as the Chief Procurement Officer of several Fortune 100 firms. He serves on Coupa Software's Visionary Council. This article, the first in a three-part series, previously appeared on GovTech.com.

 

 

 

Cloud transformation and supplier innovation - The Coupa top 5

What is the second machine age and how can supplier innovationProcurement must champion supplier innovation.we prepare for it? Should the worlds of AP and procurement collide? How can we continue to drive innovation?

 

Keep up with the changing finance and procurement landscape by reading the latest and greatest articles about the cloud, strategic procurement and finance and supplier innovation, all in one place.

 

Coupa 1For CFOs, Tech Transition Is A Matter of When, Not If

According to a survey by financial services company UBS AG, over half of American and European CIOs plan to shift to cloud services. The speed of adoption depends their ability, willingness and commitment to the change management processes and education of their employees when rolling out new cloud applications.

 

Coupa 2Where Will Technology Take Procurement?

The second machine age is coming! That was the keynote at a recent Procurement Leaders event in Frankfurt. What can procurement do to prepare? Data must become central to everything we do, and decisions taken by gut instinct must become a thing of the past, says David Rae. 

 

Coupa 3Procurement Must Champion Supplier Innovation

How can business leaders best ensure that their companies generate new ideas and retain a competitive edge? Innovation from the supply base can come at a lower cost than from a formal R&D group when properly managed by procurement, yet this avenue is often undervalued and overlooked, says Paul Teague.

 

Coupa 4Where AP and Procurement (Should) Collide

AP and procurement teams have historically operated independently, but as companies increasingly rely on the two to work together to increase savings, improve processes and compliance and drive innovation, they will succeed or fail together says CPO Rising’s Andrew Bartolini in a new report. PYMNTS.com recaps and comments.

 

Coupa 5The Five Traits of “World Class” Procurement Organizations

Companies are looking to sourcing and procurement organizations to do a more than cut costs, although ironically it is their success in doing so that’s led to them gaining trusted advisor status. Here are five ways to live up to new, higher expectations and deliver value beyond cost cutting. 

 

 

 

Birds of a feather: Coupa joins user-centric IT movement

I’m thrilled to announce that Coupa has joined thdaryush mistry  Darayush Mistrye User-Centric IT (UCIT) movement. The name sums up the group’s charter; UCIT is aimed to guide IT in moving toward a framework that puts the needs of employees first, empowering them to be more productive, agile and effective. This aligns with Coupa's commitment to building software that works the way people do, and not the other way around, so when we heard about this initiative from Box, a Coupa customer and charter member of the group, we immediately raised our hand to join.

 

The initiative was launched recently as an outgrowth of a series of conversations between thought leader and author Geoffrey Moore and business leaders from Box, Marketo, GoodData, Jive, Zendesk and Okta, in which they defined these five guiding principles of user-centric IT:

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Coupa hits the road with One Vision 2014

onevisionsf2014

Engaging, thought-provoking, delicious and dare we say, fun? Well, we had fun hosting fifty or so local Coupa customers and prospects at the Mandarin Oriental in San Francisco for a day of conversation, exploration and inspiration. Thanks to everyone who joined us. We loved having you!

 

Every year at this time, we hit the road to share a sneak peak at our product roadmap and provide a forum for Coupa customers to share their successes and best practices with each other and with companies evaluating our suite of solutions. Our San Francisco event kicks off a world tour that continues on to Chicago, New York, Toronto, and Zurich before wrapping up down under in Sydney in November.

 

At Tuesday's event, we had a Q&A from Mark Arrigotti, Head of Purchasing and Operations at Salesforce about his three-year journey with Coupa, which has included deploying the solution globally and rolling it out to an acquired company. Based on participant feedback from last year, we had roundtable discussions both before and after lunch for everyone to talk shop and share best practices. 

 

We have equally great customer and speaker lineups for the rest of our tour. If you haven't signed up for a One Vision Roadshow yet, click here and register to join the fun.

 

 

 

New, larger iPhone 6 will advance enterprise mobility

 

New, larger screen size options for the iPhone 6 are a step forward for enterprise mobility, as Coupa CEO Rob Bernshteyn noted in his comments on Bloomberg News about Apple's announcement

 

As a sales executive, I'm keenly interested in mobility. I sell a solution that's mobile, and I travel a lot for work. gabe perez   Gabe PerezI work while I travel, so naturally, I’m a big user of apps. I love apps. I use the United app to check my flights, Uber to get around town and the USA Today app to keep up with the news while I’m on the road.

 

These apps work great for those specific tasks, but when it comes to getting work done, it takes more than just apps to have true mobility. To me, true mobility means being able to easily complete eighty to ninety percent of my regular work activities from a mobile device.

 

Larger mobile screens should help with that, but there's a bigger mobility issue

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Explosive growth of cloud computing predicted to continue

 

Did you know the idea of cloud computing originated in the 1960s? It wasn’t until the widespread availability of Internet connectivity that cloud applications became available to the masses. Salesforce.com made its debut in 1999, leading the charge to deliver enterprise applications on the web.

 

Since then, cloud computing has become big business, and woven inextricably into the fabric of the Internet. In 2008, the global cloud computing industry was estimated at $46 billion in annual revenues. By the end of this year, that will have more than tripled to $150 billion, with 86% of companies reporting using one or more types of cloud computing service.

 

With studies predicting that more than 50% of all information technology will be in the cloud in the next five to ten years, there’s more growth to come. Here’s a look at the growth trajectory so far and what is yet to come.

cloud computing growth

 Infographic courtesy of VisualCapitalist.com

Crazy 72-hour dash leads to new venture funding round

 

Emboldened by the success of our rob-blue-shirt   Rob Bernshteynunconventional reverse auction-style approach to raising our third round of venture capital for Coupa Software, there was no question we would follow the same process for our next round, only faster, in four weeks instead of five.

 

As it turned out, we raised round four in about two and a half weeks. Along the way, we fielded a surprise proposal, resolved an ethical dilemma and ended with a frenzied, exhilarating 72-hour sprint to the finish line, landing $40 million in funding from Meritech Capital.

 

We began at the end of February of 2014. We had executed above plan on our previous funding round, we were beginning to scale globally, and all of our metrics were looking good. The funding climate was better than it had been in a long time and

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Coupa Benchmark: Invoice OK-to-pay times


ravi thakur Ravi Thakur Through Coupa's cloud platform, we track hundreds of metrics to both continually improve our platform and help our customers be successful. 

 

The annual  Coupa Benchmark is designed to help companies by publishing data on key finance and procurement performance indicators. The Benchmark includes metrics about ten critical areas we commonly find that companies can easily improve in once they gain insight into what is possible. 

 

This week's featured benchmark is invoice OK-to-Pay hours. This metric (measured in total hours, not business hours) represents the length of time it takes

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5 communication tips for procurement initiative success

 

How do you get widespread adoption of your spend management initiative? It's critical to have an easy to use tool, but you also have to communicate. You have to let people know what you're doing and why you're doing it. It helps to take a page from marketing best practices, says Jim Heininger,  a brand strategist whose firm Dixon-James has done award-winning work in procurement communications, such as the McDonald’s Corporation SpendSmart program.

 

Writing in SpendMatters recently, Jim shared five communications tips to build support for a new procurement initiative. His article caught our eye since we touched on this topic earlier this year, in a conversation with Andrew Bartolini who in this year's CPO Rising report suggested roadshows as a way to get the word out procurement communication A variety of communications are needed to ensure the success of your procurement initiative. about your spend management initiative. Between Jim's and Andrews recommendations, we're starting to wonder if procurement shouldn't start thinking about having its own marketing department!

 

Here are Jim's tips:

 

 

1) Consider branding the initiative. Create an internal branded program to address the cultural and structural obstacles that need to be overcome for success. For example, if moving from a decentralized structure to a more centralized procurement approach, the branding needs to convey the value and simplicity of everyone working together under one common system. Make the name or brand of your initiative aspirational to get people excited. Keep it short and simple, and if possible, articulate the goal and aim of the project.

 

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SaaS best practices: What to do when the customer isn't always right

 

A couple of months ago, our CEO, Rob Bernshteyn wrote ravi thakurRavi Thakuran article titled The One Question Not to Ask Your Startup SaaS Vendor.  That question is, “how much individual attention will I get?”

 

Rob’s point was that while attention is important, the core value proposition from SaaS is the ability to leverage crowd-sourced best practices gleaned from data collected from all the users of the platform, versus the individual customizations that were prevalent in the on-premise software world.

 

The article resonated with me, (as well as some other SaaS folks) because as the leader of a SaaS customer success organization, I have to balance executing on the traditional customer service principle, “the customer is always right” with

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