Balanced decision-making – What does this mean for procurement professionals?

Government’s Five Principles of Procurement make is clear that procurement agencies should ‘make balanced decisions, that consider the social, environmental and economic effects of the deal’.

But what does this mean in practice, for clients who are aiming to find best value for money?

We see similar phrases in the procurement rules that apply elsewhere in the world, indicating the growing awareness of the effect of procurement on the wellbeing of our communities in ways that extend well beyond the tender box.

Procurement professionals operating in many countries are having to negotiate the balance between international trade obligations, and more local economic outcomes – and this is not an easy task.

If you’re putting out a RFx document, you should consider such factors as:

  • What effect will the purchase of foreign goods and services have on our national and regional economies? Will it boost our skill-base through the introduction of best practice technologies that have been proven elsewhere – or will it undermine employment or social outcomes?
  • Have we fully accounted for costs of compliance of products sourced elsewhere? Will they meet our local quality standards and/ or environmental compliance requirements?
  • What is our appetite in this procurement for attracting new suppliers to our area? Will this boost competition, and if so, are there any trade-offs that we need to consider, in order to meet the government’s requirements for balanced decision-making?

It’s common practice elsewhere in the world (especially in provincial Australia and also in some countries within the EU, for example) to discount the prices of local suppliers, by a transparent, agreed percentage between 5-20%. This discount recognises the trade-offs between local economic benefits and cheaper suppliers from elsewhere.

Sustainability – in local as well as world-wide terms – is a key factor that should drive procurement decisions. That means that procurement decisions should provide transparent off-sets between pricing and other potential costs, both in the short term and over the life of an asset; to local as well as wider regional stakeholders.

The important factor to remember is that practices that are intended to balance sustainability objectives against more tangible or short-term considerations need to be defensible. They should be made clear within the RFx documents, together with the rationale that underpins them.