Over the past decade, governments have taken a number of steps to improve the procurement function: the introduction of category management, contract vehicle consolidation, and the roll out of more sophisticated IT systems for managing purchases. These actions have improved the performance of procurement offices, yet pain points still persist. Fragmented buying practices, increasing complexity of the procurement process, and administrative layers make government buying more expensive and less efficient. The labyrinth of rules, processes, and paper-based procedures are incompatible with today’s pace of business. The convergence of digital technologies, analytics and collaboration enables government procurement offices to unlock cost savings, improve performance, and deliver a public sector that works better for citizens.

1. Legacy to leading:
transforming public
sector procurement
Global Government and Public Sector
EY Knowledge Insights

2. |
Legacy to leading:
transforming public
sector procurement
Digital procurement for maximum public value
As the technological renaissance
unfurls, public sector leaders
are embedding digital into the
government enterprise and
reinventing public sector delivery
— the procurement function is
no exception. The long-standing
operations of public sector
procurement — centered on
thorough processes and minimizing
risk above all else — is outdated
and increasingly unresponsive to
digital disruption. Recognizing the
outsized importance of government
procurement and its outdated and
legacy operations — digital adoption
can unlock significant value for
public sector procurement.
Legacy to leading: transforming public sector procurement | EY Knowledge Global Government and Public Sector Insights2

3. 3Legacy to leading: transforming public sector procurement | EY Knowledge Global Government and Public Sector Insights
Procurement’s growing role
Delivering a leading public sector procurement focuses on three
critical functions. These core functions comprise delivering services
and public goods to citizens directly and indirectly such as health care,
infrastructure, and defense and security; a strategic economic and
social policy lever such as economic development, reducing inequality,
and raising standards of living and; operation of public sector agencies
and programs. Global government procurement ranges from 12.6% of
GDP in high-income countries to 14.4% of GDP in low-income countries.
The largest shares of spending are located in South Asia and Africa,
while spending as a percentage of GDP is on similar levels in North
America, Europe and Central Asia (Figure 1).1
Figure 1. Global government procurement as a share of GDP by
country income group and region
13.6
13
12.6
5 10 15
Low income
Upper middle income
Lower middle income
High income
Percent
19.3
14.9
14.5
12.3
11.7
11.4
9.3
5 10 15 20 25
South Asia
Sub-Saharan
Africa
Latin America and
Caribbean
Europe and
Central Asia
North America
Middle East and
North Africa
East Asia and Pacific
Percent
14.4
1
World Bank, Public Sector Data. Accessed February 2018.

4. 4 Legacy to leading: transforming public sector procurement | EY Knowledge Global Government and Public Sector Insights
Figure 2. General government procurement spending as a percentage of GDP and total
government expenditures, 2007, 2009, and 2015
The expansive purchasing power of public sector entities
can be leveraged into greater impact on the broader
economy — through doubling down on digital investment.
2
OECD, 2017 Government at a Glance.
MEX
IRL
CHE
USA
PRT
ITA
ESP
TUR
GRC
OECD
LUX
LVA
POL
KOR
AUS
SVN
CAN
AUT
GBR
ISL
NOR
EST
DNK
ISR
BEL
CZE
FRA
NZL
DEU
SWE
HUN
JPN
SVK
FIN
NLD
CRI
RUS
LTU
ZAF
COL
in terms of GDP in terms of general government expenditure
29.1
0 10 20 30 40
2015
2009
2007
(%)
11.9
05101520(%)
And as a percentage of government expenditures,
procurement averages 29.1% of general government
expenditures among OECD and other key countries (Figure 2).2

5. Digital across the procurement
enterprise
Procurement offices have long been stymied by
inefficient administrative functions and poorly
performing digital tools across the enterprise.
These challenges have been caused by siloed
information and information systems, lack of data
analytics, limited view into costs and difficulty
adhering to procurement mandates. These
inefficiencies and duplicities in the procurement
office cost governments billions. A report from the
US Government Accountability Office found that if
agencies engaged in more strategic sourcing, shifted
away from numerous individual procurements to an
aggregate approach and reconciled using digital tools,
they could achieve $1.3 billion in savings.
Over the past decade, governments have taken a
number of steps to improve the procurement function.
This includes the overhaul of procurement function
through category management, contract vehicle
consolidation and roll out of more sophisticated IT
systems for the procurement function. These actions
have improved the performance of procurement
offices, yet significant pain points such as lack of
automation, visibility in operations and integration
still persist. The convergence of digital technologies,
analytics and collaboration enables government
procurement offices to unlock a myriad of cost-
savings and value propositions (Figure 3).
5Legacy to leading: transforming public sector procurement | EY Knowledge Global Government and Public Sector Insights
Moving government
procurement from legacy
to leading ment from legacy to
lg
Public sector procurement offices still rely on paper-based,
process-oriented systems that lacks full coherence into
spending, cost management and performance. The overlay
of traditional contract management that had a place in a
lower-tech world is now ill served for the digital economy.
Manual sourcing for low-complexity tasks, inconsistent
and nonstandard procedures, and tedious reporting
tasks with minimal output hamper the function of public
sector procurement offices. Moreover, there is a lack of
integration between human and digital processes, drawn
out practices for complex procurements, and inactive
monitoring of performance.

6. 6 Legacy to leading: transforming public sector procurement | EY Knowledge Global Government and Public Sector Insights
The convergence of digital technologies, analytics and
collaboration creates a step-change in the function of
public sector procurement offices. Digital-first enables
governments to dramatically alter the life cycle of
the procurement function from a legacy to leading
operation. Achieving full value is the combination of a
strategic procurement organization enabled by digitally
focused operations and capabilities. Digital procurement
enablement focuses on building a strategic operation
that integrates cost reduction, improves and enhances
compliance, accelerates processing of procurement
functions, provides greater visibility into the supply chain
and monitors proactive risk management of operations.
This leads to smarter collaboration among internal teams,
vendors and support functions of the procurement office
across the acquisition process (Figure 4).
Figure 3. Digital enablers value proposition to the procurement
Robotics and
automation
Secure transaction
leveraging multiple points of
verification
Enable singular, global view
of supply chain and financial
systems
Leverage social networking
tools to trade, communicate
and collaborate via a shared
infrastructure
Develop communities of
loyal users that can provide
instant feedback and support
the development of a holistic
approach to strategies and issues
Proactively manage disruptions
across multiple dimensions
(beyond reactive information and
“negative news”)
Blockchain
Professional
social
collaboration
Robotic process automation,
(RPA) to automate processes/
capture and analyze data
Cognitive robotics can
manage the variations
through learned interactions
Chatbots can be powered by
artificial intelligence and serve
humans via a chat interface
Internet of
Things
Smart, connected devices
Increased availability of big data and
systems to aggregate it
Connection of everything (machine-
to-machine, Internet of Things) and
3-D printing drives customization
and significantly accelerates time to
market
Cloud-based
platforms and
trading networks
Open network to specific network
users to drive an increase of
supplier/buyer information and
automation
Enabled device flexibility
(mobile devices can all access
eProcurement systems)
Improved transparency and
relationship with trading partners
Increased data availability
through increased digital
technologies
Providing larger sets of data
Enhanced analysis support
more informative decision-
making
Big data analytics
and machine
learning

7. 7Legacy to leading: transforming public sector procurement | EY Knowledge Global Government and Public Sector Insights
Figure 4. Digital enablers across the procurement enterprise
► Automated go-to-market and bid
process with minimal human
interaction
► Enhanced sourcing leverage driven
by increased access to impactful
data sets and market sensing
► Improved collaboration among
internal and external stakeholders
through cloud-based exchange
platforms
► Real-time updates of goods received
using IoT �to improve process
cycle time
► RPA-enabled detection system to
compare goods receipt to PO
► Advanced analytics to efficiently
measure quality and feed into
non-procurement systems �in
real time
► Returns automatically routed for
approvals
► Blockchain integration ensuring �
process compliance
► Real-time tracking of goods across
multiple POs using advanced
analytics and AI
► Intelligent PO processing through
cloud-based trade networks with
predetermined external partners
► Minimized administrative/
non-value-add through the
deployment of RPA
► Customizable, enhanced end-user buying experience
that guides to the proper buying channels
► Procurement social collaboration platforms to
share leading practices in real time
► Automated reordering to improve demand
management and order fulfilment
► Contract expiry and analysis based on buying patterns
without spend analysis
► A cloud-based, mobile platform for
requisitioning on the go or at the
plant site with user self-service
► Automatic requisitions created based
on predefined triggers, such as
connected device ‘’wear and tear’’
trigger points
► Expedited/automatic approval of
requisitions through predefined
rulesets
► Enhanced contract compliance and
approvals enabled by blockchain
authorization and big data contract
compliance reporting
► Blockchain enabled smart contracting
technology to increase trust between parties
► Continuous real-time contract monitoring
► AI based automatic allocation
of work �to optimize resources
Sourcing
Robotics and
automation
Cloud-based
platforms and
trading networks
Internet of Things
(smart devices)
Blockchain
Big Data data
and analytics
Professional
social
collaboration
Digital enablers Requisition
Category managementPO processing
Invoicing
► Approved invoices are auto-matched
based on �contract terms defined
in blockchain
► Tracking invoice compliance using
blockchain �and AI
► Automated generation of accruals at
period-end
► Cryptocurrency on blockchain
platform for instant �and secured
vendor payments
► Real-time supplier scorecarding, leveraging big
data analytics to obtain real-time information
from multiple, disparate systems into
meaningful insights
► Suppler collaboration and innovation virtual
portals and workspaces to enhance connectivity,
knowledge and idea sharing both internally and
externally with supply base
► Use advanced analytics to manage and mitigate risks
proactively and to calculate the cost of identified risks
Supplier management
Contract and catalog management
Goods receipt/service entry
Returns and replacement

8. |
8 Legacy to leading: transforming public sector procurement | EY Knowledge Global Government and Public Sector Insights
Helping governments build a
digital procurement strategy
The key to building a digital-first procurement office is
assessing digital maturity. How are the value drivers of
government procurement being affected by digital? To
what extent does public sector procurement strategy ease
the risks of digital disruption while leveraging the potential
upside? Most governments have invested in digital to
varying levels of success. Laying the groundwork for a
digital-first public sector procurement strategy involves
setting out leading practices that demonstrate successful
use-cases followed by building a digital procurement
strategy.
Digital enablement in support of procurement adds
immediate value through increased productivity, spending
Figure 5. Digital strategy approach and assessment
Digital strategy
approach
5
4
3
2
1
Rapid diagnostic baseline sprint
Assess digital
maturity
Assess the �
impact of digital �
on strategy
Agree digital
aspirations and
ensure strategic
alignment
1
Assess the current
digital capability
against aspirations
2
Define future �
omnichannel
experience and
required capabilities
3
Plan and prioritize
capabilities
4
Develop
digital road map
5
Createphase—sprint1-5
and cost reduction and improved working capital flows
and asset management. Leading practices across the
procurement function include artificial intelligence, robotic
process automation and cloud integration tools with
requisitioning, approval, and purchase order generation,
blockchain integration for contract management and
cost optimization, and smart contracting ensuring better
transparency and compliance. Overall organizational
effectiveness comes in the form of procurement
operations that are faster, better, smarter, more secure
and cheaper.
These gains can be translated across the public sector’s
procurement enterprise at all levels of government by
aligning digital solutions with an organizational strategy.
Evaluating a government procurement office’s ability to
leverage digital technology begins with assessing digital
maturity and measuring current capabilities against
aspirations (Figure 5).

9. 9Legacy to leading: transforming public sector procurement | EY Knowledge Global Government and Public Sector Insights
Next, define future channel and required capabilities. The
final steps encompass planning, prioritizing capabilities
and building the business case. The end result is the
development of a digital road map centering on investment
and implementation.
The path forward for digital
procurement
Recognizing outdated technologies and processes,
governments are reforming public procurement systems
by developing and adopting new technologies, tools and
governance in order to better manage public resource
spending. Efficient and effective public procurement
is essential to responding to the needs of the citizens,
standing as a beacon of good governance and helping
to restore trust in the public sector. As digital tools are
linked across the enterprise, procurement leaders are
empowered to make the right decisions in a way that’s
responsive to internal and external challenges. Most
importantly, this will lead to a clearer understanding of
where their resources go, what they get in return and
whether the investment works.

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Contacts
EY Knowledge Insights author
Justin Badlam
EY Global Government and Public Sector, Strategic Analyst
Ernst & Young LLP
+1 202 327 7011
justin.badlam@ey.com
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