Procurement should not be used as industry policy: Gartner VP

Governments using procurement as an industry development policy will most likely increase the perception of picking winners and losers according to John Kost, VP analyst, government research at Gartner.

He used the example of Australian governments using procurement as an industry development policy and Kost said this will never be received well by the Australian public.

Kost has had several conversations in the past with Australian states during COVID to try and invent an industry, which he said brings forth problems.

“First of all, the government cannot do a lot more than being an anchor tenant. Government has money and if it can spend a lot of it to create an industry, great. But you're up against the wall here if you have to create the supply side to begin with, that's a problem,” he said.

Kost had a conversation with one state who wanted to buy something and build an industry, however, they did not have the capability to do so.

“You're going to start by having to bring somebody in who's not native, you've already violated the intent of the premise. They'll spend money here recirculating the economy, but you've got to start by picking somebody who's not here now.

“It’s a great concept but the practical application of it typically has some pretty significant barriers that stood in the way from that industry being here, to begin with,” he said.

When making decisions within government sectors there is always bureaucracy which Kost said is in place to prevent bad things from happening.

“Governments are very risk-averse, they can hide behind all of this process and say look procurement is in the way,” he said.

When he was the CIO for the state of Michigan, he took the role under the guise that he could control the procurement processes.

“[The governor] gave me procurement and told me to change it to commercial best practices, because it was in the way of progress. What the underlying mental concept is that governments are risk-averse so let's not hide from risk and stop everything, because risk is in the way. Let's figure out how do we mitigate it, or at least recognise the trade offs,” he said.

Kost said if you examine issues from a trade-offs perspective, upside versus downside, it changes the whole mindset around what you're doing.

“The problem we have in government is you take procurement or some of the HR functions, their job is only to prevent bad things from happening. They don't have to make the trade off decisions,” he adds.