Every year the Singapore Government buys about $20bn of goods, services and construction works. Manage this spending badly, and the nation could get itself into trouble.
That’s why the Ministry of Finance is obsessed with value for money. Good procurement “ensures public accountability, value for money and meets the organisation’s and government’s needs”, says Chia Ser Huei, Director of Performance and Resource Management.
It’s his role to make this process as efficient as possible. In future, that could include using artificial intelligence to manage the country’s coffers; cutting edge techniques like crowdsourcing; and, of course, keeping a close eye on the details.
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Technology plays a key role in good financial management, Chia explains. “We are using more data analytics to analyse across the government”. For example, agencies can now compare prices for similar products to ensure they get the best deals. Different organisations buying the same items could also call for common tenders, making the process more efficient.
“Going ahead, there could be new innovations like using artificial intelligence to improve procurement decisions,” he hopes. For instance, AI could help officials find the best price for an item. It could also evaluate vendors and flag those that have performed poorly or those that have been exceptionally good.
AI could also be used to read and create legal documents. “Who knows, maybe you can have AI writing your contract terms and conditions,” he suggests. This already happens in the private sector: a Japanese insurance firm, Fukoku Mutual Life Insurance, is going to use AI to read tens of thousands of medical records to identify payouts to customers.
“Maybe you can have AI writing your contract terms and conditions”
AI trials have begun in Singapore Government already. Some agencies are using machine learning to pick out financial anomalies and flag them for audit. Meanwhile, the Agency for Science, Technology and Research built a system to alert officials to procurement fraud among vendors and government employees.
It analyses data on HR and finance, procurement tenders, tender approvals and workflows. It also looks at non-financial data like links between government employees’ family members and vendor employees. The system has been used by the agency itself and was trialled with four others last year.
Chia’s vision for artificial intelligence in procurement goes beyond crunching numbers though. It could one day be advising on more complex matters: “In the longer term, maybe you can get the computer to help us make procurement decisions,” he says.
Today the most common methods of government procurement are open tenders or requests for proposals. “That’s what everyone does,” Chia says. But this can sometimes favour tried and tested solutions.
The Ministry of Finance wants officials to also consider newer forms of procurement which allow them to quickly adapt – and also include more small players with good ideas. Crowdsourcing is one such method, and some ministries have taken an active interest in it, he says. This approach is particularly helpful when faced with complex problems where no single organisation has a monopoly on a product.
For example, the Ministry of Defence recently ran a competition for new equipment ideas. “They awarded prizes to the top ideas and, conceivably, some of these can be incorporated into future procurement,” Chia says. “This is the kind of thing that we want more agencies to think about.”
Hackathons provide another method of broadening the government’s supplier base. Next month, SGInnovate is running a two-day event to get local techies to trial robotics and other tools that support an ageing population. These could potentially be developed and used in the public sector.
Singapore is also experimenting with a new scheme based on the community principles behind hackathons. The GovTech Agency has built a site that lets departments buy lines of code directly from programmers – without a middleman company in-between. Officials can post projects under S$5,000 on this micropurchase website; developers with the lowest bid win the tasks, without having to bid for large contracts.
As Moore’s Law sees technology rapidly improve, government must continuously reinvent to keep up. This means that long-term tech contracts that specify inputs are less relevant.
Spiral contracting is a method that allows projects to proceed in bite sizes, Chia explains. Contracts are written with multiple stages, with the project progressing to the second phase only if the first is successful. “You start small and then gradually spiral up,” he says.
Meanwhile, in agile procurement, tenders specify the outcomes they want rather than the system details. “You don’t start off prescribing a particular solution”, Chia says. Instead of buying a massive package, you build a basic platform, test it with users, and build up from there based on user feedback. As a result, “you are nimble”, he adds.
New skills in demand
These methods mean that government officials must meet with industry and understand what is in the market to get the best deals, Chia advises. Officials must “not live in our own cocoon” and should “understand the industry well”, he says.
Officials must “not live in our own cocoon”
Officials should know what the suppliers potentially can and cannot do. They should also have a sense of the broader industry: “Are they going to be innovative enough to propose [unique] solutions to you or maybe they are actually more traditional?”. Officials without good knowledge of the industry could end up asking for solutions that companies are not capable of delivering.
Officials must also be mindful of current prices and demand for services. If demand is particularly high at the time, government procurement may drive costs further up. “If you can, you try to buy things at a time when it is a lull period.” For example, if the demand for construction material is at a peak globally, “maybe you want to hold off some of your construction if you can”.
Ultimately, these skills will help officials procure the best solution for each project. “The objective that we want is agile officers, who know what kind of procurement method is optimal for whatever the situation,” says Chia.
Getting value for money
With the government spending billions of dollars of taxpayers’ money, it must ensure that it delivers good value. What does that mean though?
The basic requirements are that the products are reliable and meet the government’s operational needs. But increasingly, there are new expectations, such as ensuring that the suppliers pay their labourers fair wages and do not pollute the environment, Chia says.
There is also value in government supporting local innovation. However, this has to be done in a “sensible manner”, such that public money is not used to prop up unsustainable businesses. “We want local industries to do well, but also not to the point where we discriminate against good ideas not created here,” he says.
From buying bandages to building websites and mass transit infrastructure, the government must spend its money wisely. After all, $20bn can go a long way in the right hands.