Smarter Procurement: Agile

In the second of our 3-part series on smarter procurement, we look at how agile procurement of digital products results in better value and creates space within the development process for innovation.

Many public sector organisations are missing out on the benefits of agile development because of incompatible procurement practices. You can’t be agile in development and waterfall in procurement. It just doesn’t work.

What does agile procurement mean in practice?

Agile procurement is used to describe two related aspects: the approach to purchasing services and the management of procurement processes themselves.

Agile procurement in terms of purchasing digital services means moving away from contracts and payment schemes tied to traditional full-scope product specifications. Instead, contracts are based on outcomes. Rather than approaching suppliers with a fully scoped project, you approach them with your problem and let them do the thinking around how to solve it.

Agile in terms of the procurement process, means adopting an agile management approach that involves stakeholders, suppliers and procurement to improve the speed of procurement.

When it comes to public sector procurement, it’s generally taken that ‘agile procurement’ refers to the first aspect. The second is still very much the domain of commercial technology companies.

Why move to agile?

For some the prospect of a contract for the development of a digital product drawn up around outcomes may seem unworkable and risky. Yet it works for other types of services we already procure in the public sector, and research by The Institute for Government has shown that there’s been a shift towards outcomes-based contracting. We do it already.

Save on internal resource

Developing detailed project specifications eats up time and resources. Unless you’ve procured something similar before, you’re essentially starting from scratch every time. If you’re going to out-source to solve a problem, let the supplier solve it. Or at the very least let them help you solve it.

Improve products and services

Detailed project specifications developed internally are built around your team’s beliefs and preconceptions. Many of them you’ll be totally oblivious to. The agile approach is based on iterations and continuous improvement fuelled by user testing. There are far more opportunities to develop what is really needed, rather than what you think is needed. These constant changes to the final product are only possible if you have contractual flexibility, which is what an outcomes-focused agile approach enables.

Create opportunities to innovate

Besides taking up a lot of resource to develop, detailed project specifications also take away autonomy from the supplier. Being told exactly what to do, means there is little incentive to think creatively. Someone else could have a far more elegant solution to your problem, but detailed product specifications shut that down. The supplier will bring a fresh perspective and a host of other experience to solving your problem.  Let them.

Faster delivery and response times

With agile procurement you can shrink the first part of the procurement process – developing product specifications. Once you’ve articulated the problem – which you could do in a couple of pages – you can start talking to suppliers. It also enables you to be more responsive to changes in technology.

Making it work

An agile process is not an easier process, it’s a different one. Its benefits are in the value it can bring and the contribution it can make towards solving complex challenges. For it to work you need the following to exist:

A good buyer: supplier relationship

Trust and openness are essential to agile procurement working. You need to establish good communication practices and agreement on contract management early on. You might want your in-house developers to work with the suppliers’ team, for example. Or to have members of your team included in the daily scrum meetings that are part of the agile development processes.

A cross-functional internal team

For agile procurement to work, the procurement team needs to be involved from the very beginning of a project. They can help identify potential problem-solving suppliers, and when it comes to negotiating contracts, they’ll have a thorough understanding of the project goals, and translating them into outcomes. It will also make contract management that much easier.

Agile suppliers

Large, traditional suppliers are unlikely to be as keen or as flexible when it comes to agile procurement. Or indeed as agile in adopting new technologies. That’s when having access to smaller suppliers through G-Cloud or other digital marketplaces is useful.

In summary

Agile is a different way of doing things, and it may be hard to convince some stakeholders initially. However, it brings a number of benefits, including:

• Better products and services
• Increased potential and opportunity for innovation
• A focus on outcomes and value rather than costs
• Less time and resource spent on developing product specifications

Missed the first part of our Smarter Procurement series: Collaboration? You can read it here.