Published orginally in ICMA.
Researchers at Arizona State University share results on public procurement efficiency.
By By Yifan Chen, Nicole Darnall, Justin Stritch, and Stuart Bretschneider of Arizona State University | Apr 5, 2021
Public procurement is the process by which governments acquire goods, services, and supplies to support essential functions. In the United States, approximately 10 percent of U.S. GDP is spent on public procurement activities, and more than 60 percent of these public procurement expenditures are occurring at the state and local level.
Because of its enormous economic impact, more governments are leveraging their purchasing power to achieve a variety of sustainability objectives. These objectives include stimulating economic development, protecting the natural environment, and promoting social equity. For example, local governments often enact policies to favor veteran-, women-, and minority-owned businesses. In other instances, local governments are reducing their environmental impacts by introducing environmental criteria in their purchasing decisions. Still, other governments are using public procurement to encourage local economic development via purchasing from locally owned businesses.
As part of a research team at Arizona State University, we assess whether juggling all of these factors complicates the purchasing process. More specifically, we ask whether the presence of multiple sustainability objectives slows the procurement process and whether a centralized purchasing structure might mitigate these efficiency losses.
To assess this question, we drew on data from an original survey of local government finance, environment, and public works departments in a representative sample of U.S. cities with at least 25,000 residents.
Our findings suggest that as local governments pursue multiple sustainability objectives, their procurement systems become more inefficient. Inefficiency relates to the time it takes to complete a purchase. Increased inefficiency occurs because public purchasers spend more time searching for information and making trade-offs among sustainability objectives than they would if they were just concerned with price and quality. For instance, purchasers must consider whether vendors that are minority- or women-owned businesses that also sell products that are environmentally friendly. Fulfilling each of these sustainability criteria takes time and thus slows the purchasing process.
While these findings may seem discouraging, we also find that a local government’s decision-making structure can improve procurement efficiency.
That is, local governments with centralized decision-making can mitigate their procurement delays associated with sustainable purchasing. A centralized procurement structure is one where procurement activities are conducted within a single division, typically the finance department. This structure often leads to more specialized procurement skills. For example, the centralized agency is better able to pool resources, both human and technological, making procurement a specialized function and resulting in greater strategic planning. Therefore, a centralized structure facilitates information-sharing associated with sustainable purchasing and expedites decision-making.
In summary, our research reveals that local governments’ pursuit of multiple sustainability objectives reduces the speed of the procurement process, but that centralized decision making can mitigate this time delay. Read more about our theory, dataset, and methods. The paper was part of a larger research project developed by ASU’s Sustainable Purchasing Research Initiative.