11 September 2019

How AI will revolutionise Public Procurement

Public Sector Procurement has to constantly navigate buying procedures as complex processes under a tight budget with a focus on adding value through purchasing as a means of deliberate use of public money. This entails procuring innovation as well as tackling key challenges of our time such as climate change. Trends such as e-procurement and further digitalisation of work processes already lift the weight and boost the efficiency of procurement.

In recent years a topic that has gained traction across sectors is the role and potential impact of Artificial Intelligence (AI). AI can be understood as the capacity of a computer to perform operations analogous to learning and decision-making in humans.

Even though AI at this point is in its infancy – only being applied to specific tasks such as traffic management or smart energy grids - experts keep emphasizing its disruptive potential. What could this mean for public procurement?


3 ways how AI will revolutionize public procurement

Smarter decision-making

Public procurement processes demand deliberate decision-making based on fixed criteria and a variety of other factors. These processes stretch beyond a selection procedure but involve management and monitoring of awarded contracts. AI has the potential to help procurers work smarter by processing data and identifying patterns on key themes such as supplier selection, supply-chain disruption or compliance issues. Here the added value lies in the ability of AI to provide a neutral basis for informed and effective decision-making.

Focus on high-value tasks

Public procurement processes involve a demanding administrative tasklist such as invoicing or classification of purchased products. These repetitive tasks are currently tackled through intense manual labour. AI holds the capacity to automate those processes. Consequently, procurers could focus on higher-value tasks such as relationship building with suppliers or strategic coordination of procurement policy.

Value Chain Transparency

Public procurement in the 21st century means to be part of global supply chains that - despite efforts for transparency through audits and due-diligence - often remain black-boxes. Existing approaches towards socially responsible supply-chains as well as improving resource efficiency face significant challenges of data complexity going beyond the 2nd tier stage of suppliers in the value chain. AI applications could foster the end-to-end digitalisation of global chains, transparency from raw material producer to end consumer.


The role of Innovation Procurement

At this point, the above mentioned three ways need further exploration and testing. The approach of innovation procurement provides an ideal entry point for public authorities to become an early adopter of innovative solutions that are not yet commercially available. Public authorities working together with suppliers in a PCP or PPI process creates the space to discuss needs, constraints and specific examples for AI in procurement.

Moreover, the public sector must engage in this rising topic that is AI. Procurement offers a unique opportunity to make sure that AI applications have a public return on investment at heart.

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