With so many billions in buying, procurement needs a better dashboard

When a multi-billion dollar transportation and airline company sought to get its arms around its unwieldy procurement operation, it turned to a tried-and-true tool to do it: the balanced scorecard. It deliberately and methodically consulted with acquisition stakeholders, developed metrics aligned to the organization’s goals, and used the resulting scorecard to improve its efficiency and save millions of dollars in the process. Countless other private sector organizations rely on this same tool, so why not the federal government? 

Federal agencies just spent more than $600 billion on contracts in the last year, almost 20% of that in September alone. That rush in spending, to state the obvious, is not a good business practice. But, in addition to waiting until the last minute to push out so many contracts, there is an array of additional challenges in government contracting. Many are well known. Skill gaps, poor transparency, and fraud are just some of the issues procurement officials have to navigate. 

GAO wrote in 2021 that procurement executives could improve the use of metrics, including outcome-oriented metrics, in their acquisitions. Adherence to the dizzying acquisition regulations is also critical to ensure fairness and reduce the chance of protests. A balanced scorecard would provide procurement executives the insights they need to better manage contract operations and get the government a better deal. 

With so many billions in annual spending on goods and services, procurement executives need a holistic view of their organizations' performance. The balanced scorecard can help organizations accomplish this by 1) aligning procurement performance measurement with strategic goals; 2) focusing performance metrics on all aspects of the organization; and 3) promoting accountability across the organization from leadership to contracting end-users. Here’s how: 

1. Alignment with Strategic Objectives: The balanced scorecard allows executives to measure whether activities and processes of the procurement office are aligned with the organization's strategic objectives. Moreover, it enables clear communication of these objectives throughout the organization, guiding decision-making and resource allocation. Is our planned procurement spending aligned with the leadership’s top priorities? Can we reallocate contract dollars to better achieve the agency’s mission?  These are questions a balanced scorecard can help answer and that leadership should demand. 
2. Focused Performance Metrics: By defining specific performance metrics for each perspective, the procurement office can concentrate on what matters most to achieve its strategic goals. This prevents a narrow focus solely on financial metrics and encourages the consideration of other critical factors. Per the 2021 GAO report, procurement organizations' outcome measures should track (1) cost savings / avoidance, (2) timeliness of deliveries, (3) quality of deliverables, and (4) end-user satisfaction. It is critical that the business, not the process, drive these important outcomes. This suite of metrics can help ensure that is happening. 
3. Organizational Accountability: The balanced scorecard holds individuals and teams accountable for their contributions to performance. It encourages a sense of ownership and responsibility for achieving objectives across various dimensions. The balanced scorecard may rely on disparate data sources to track performance and, if so, it is essential that all parties involved, especially the end users, be included in continuous reviews of performance. 

Using a balanced scorecard in a procurement office can lead to more well-rounded and effective performance management, aligning activities with strategic objectives and improving decision-making at various levels of the organization. More importantly, it can help the organization demonstrate return on investment not only from overall contract spending, but in the procurement organization, itself. 

Like many organizations, the transportation and airline company mentioned above saw tangible benefits from adoption of the balanced scorecard. They identified a number of strategic initiatives across the procurement organization that resulted in millions in savings. They saw the opportunity to standardize payment terms for specific vendors, for instance, and pinpointed processes that could benefit from automation. Ongoing use of the scorecard will invariably lead to even greater benefits. Perhaps the greatest benefit, though, is a more stable procurement environment with clear performance metrics available to leadership and across the organization. 

As the tool’s inventor, Robert Kaplan, says, “The Balanced Scorecard provides managers with the instrumentation they need to navigate to future success.” If commercial organizations are benefiting from this proven tool, the government should, too! 

Shane Bechtold is a director with Alvarez & Marsal Public Sector Services in Washington, D.C.