By Paul Emanuelli

(This article was originally published in the August 2015 edition of Purchasing B2B magazine.)

To the casual observer, electronic bid submissions and electronic fund transfers may represent a brave new world of “artificial intelligence” that will take us to a higher orbit of automation. However, as this article explains, these technological innovations are relatively minor operational improvements to our procurement systems. To help solve the deeper systemic issues that lead to procurement delays, cost overruns, bid challenges and other project failures, we need to harness human intelligence by automating project design planning, digitizing tendering call drafting and leveraging procurement data analytics.

Going GIGO With Artificial Intelligence

The expression “garbage in-garbage out” (GIGO), which has its origins in the computer industry, recognizes that bad quality input leads to bad quality results. We see this every day in the field of procurement, where the failure to engage in proper project planning and coordinated RFX drafting repeatedly leads to project delays and project failures. However, rather than focusing on addressing these critical initial design planning flaws and using statistics to identify process bottlenecks, most procurement automation efforts tend to focus on the more mechanical downstream stages of the procurement cycle.

For example, many organizations are implementing “e-procurement” systems that help them automate invoicing processes. These systems, which tend to view the payment of bills as the main event of the procurement cycle, are a classic example of the GIGO principle. These back-end systems do nothing to prevent the award of flawed contracts, and are a poor substitute for the proper automation of project design planning and tender call drafting.

Moving further upstream to the middle of the procurement cycle, we see a proliferation of electronic tendering platforms that allow purchasing organizations to post their RFX documents and allow bidders to electronically submit their bids. While they bring long-overdue tactical improvements to our tendering systems, these platforms are the ultimate manifestation of procurement GIGO since they focus on the transmission of content but do little to help us create it.  For example, these systems are not designed to help plan content that goes into our tendering documents, deal with delays in document drafting, or capture meaningful data on how to properly manage crucial front-end processes.

Leveraging Human Intelligence

Creating advanced tendering systems requires a deeper human understanding of the procurement process. To fully leverage technology in the tendering cycle, we need to integrate human intelligence into our procurement systems by automating project design planning, digitizing RFX drafting and leveraging the use of procurement data analytics.

Automated project design planning should be the entry point into the procurement cycle. By taking an end-user through a series of standardized questions created by human intelligence, we can create digital project blueprints tailored to that end-user’s purchasing requirements. These design blueprints should be based on the “95/5 rule” of procurement project design planning, which recognizes that ninety five percent of project failures can be traced to the failure to properly address the five core design planning issues that are universal to every tendering process: (i) scoping of requirements; (ii) pricing structures; (iii) evaluation criteria; (iv) contract formation process; (v) tendering format selection. If end-users are unable to answer the core questions required to create a proper project design blueprint, this should serve as an early warning system within the procurement department and enable the deployment of proper resources to assist with design planning before the project goes GIGO.

While more and more institutions are quickly adopting a broad range of professionally designed tendering formats, digitized tendering templates will bring the automation of human intelligence to a higher level. In the near future these electronic tendering templates will “speak with” digital project design blueprints and assemble the project-specific content drafted by project teams with the push of a button. Once these systems are enabled, this will allow institutions to significantly accelerate their tendering cycles by avoid drafting bottlenecks as they coordinate the concurrent drafting of different RFX document components.

By leveraging procurement analytics, institutions can also embed their procurement departments within highly-functioning project teams. While current systems offer no clear window into the procurement planning and drafting process, automation can serve as the portal into the front-end of the cycle, allowing purchasing departments to monitor incoming projects, assign drafting roles and responsibilities across project teams and carefully monitor internal deadlines to better ensure that RFX documents are posted according to their project schedules.

By leveraging human know-how, we can move beyond mechanical automation to reach a higher orbit of project success. That type of automation will take use light years ahead of our current practices and help us truly launch the new digital era in procurement.