Guest article:
Professor José Ramón Pin – Chair of Governance and Leadership in Public Administration at IESE Business School

When I started my management studies, one of the first things I learnt was the importance of procurement management. The procurement of products, services, consulting, etc., is the first step in any production process. Operations begin here.

These purchases gradually create a company’s added value. If that added value is quality, the product or service offered is more likely to respond to the user’s real needs. They also tend to be an important part of the cost, so procurement savings significantly influence the whole process. Finally, I learned that a saving of one euro on procurement is more than one euro. It is that euro plus its financing from when the purchases are paid until the related goods or services are charged.

In the case of public administration, it is from when they are paid until the taxes are collected to finance them. In some cases these interests could double the cost or more. A cost that is not allocated to the purchase, because it is in the section on debt interest, but it is implied.

Consequently, addressing this issue is one of the keys to reducing public expenditure, which also is silent. It does not cause the commotion of savings on personnel or investments that are not made. It is therefore politically efficient. It is not unusual that there is a European mandate to further its implementation, with dates included. But the process is not without its difficulties. Therefore, understanding it in depth and studying success stories is important.

I would just like to mention two further issues:

The first is that reinventing the wheel is not very profitable. It has already been invented. Trying out new Cloud platforms can be a waste of time.
In recent years we have seen how there has been a public infrastructure bubble in Spain. In the age of new technologies, “access” is better than ownership, as Rifkin argues. Pay-per-use has great advantages. The first is that it requires little investment. The second, which is the important factor, is that it is more flexible. Renting is a more reversible decision than buying. In an era when technology is advancing at breakneck speed, committing to one in particular is a mistake. Obsolescence is the great danger. This is a warning to web users, which as a responsible communicator I cannot refrain from mentioning.

The second issue is that the use of Electronic Tendering is not just a technological change. It may be an important cultural change facing e-government. It involves a process of renewal not only within organisations, but also outside; bidders, for example. Considering it only a technological change will lead to mistakes difficult to resolve.

About IESE Business School

For over fifty years, IESE, the graduate business school of the University of Navarra, has been at the forefront of management education, developing and inspiring business leaders who strive to make a deep, positive and lasting impact on the people, companies and society they serve.
In 2015, IESE Business School has taken the top spot in this year’s overall Financial Times Executive Education ranking. IESE also ranks 1st in the world for its Custom programs, moving up two spots from last year mainly due to the school’s leading international clients, and 3rd in the world for its Open programs.