Procurement Industries

Why Do Governments Use Cloud-Based Procurement Systems?

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5 minutes

Written by

Logan Price

Why Do Governments Use Cloud-Based Procurement Systems?

It is a fact that the movement of money within a country dictates how well its economy performs. Consequently, governments often use a considerable effort to keep a keen eye on their procurement management process. In the past, the aim was simply to procure a lot with the least amount of money possible. Today, societies now require that public funds be used to address a variety of socio-economic issues, such as housing, education, and medical care.

Social governance dictates that a government should implement policies, laws, and regulations which result in the creation of a sustainable economy while managing project costs effectively. In furtherance of this goal, governments must establish an effective procurement management plan that not only ensures value for money but is also dynamic, efficient, and sustainable while meeting important project requirements. Hence, the birth of digital procurement transformation in government.


Additionally, the impact of the Covid-19 pandemic on the procurement of goods and services has reiterated the importance of stepping away from the traditional, manual modus operandi to a more streamlined, digital process flow for each procurement cycle. Therefore, governments across the world have been diligently seeking out advancements in the digital procurement world to handle their procurement actions. Following the basic laws of economics, which state that "high demand increases supply," there has been an increase in the creation of government-focused software solutions for procurement, specifically cloud-based procurement management tools. These new software help streamline the process of purchasing goods and services within the project scope of various government agencies.  

A cloud-based procurement system enables an organization to create, monitor, and complete a procurement process electronically, with the data being accessible through a cloud. A government procurement software helps to eliminate manually generated supplier invoices and automate the entire procurement process from end to end.

The implementation of such systems typically includes the use of cloud-based procurement software to ensure that the procurement process progresses smoothly. Sometimes, a procurement system may consist of multiple software, including, but not limited to, a cloud-based purchase order software, contract management, and vendor management tool. It could also be a complete system working as one. This type of software reduces inefficiencies in the procurement process and results in a more streamlined procurement process flow.

Some governments refrain from implementing systems like these as they believe that public project procurement laws and policies are too cumbersome to fit into such systems. Additionally, the procurement of a system that maps the procurement process from end to end is typically expensive and takes a long time to develop and implement. This is another hurdle for governments that are endeavoring to maximize their budgets while following standard procurement practices and maintaining overall project quality.

However, with the demand to increase sustainability through the use of technology, more and more SaaS companies have responded to the need for the creation of software solutions that meet the project needs of government institutions. They do this by either adding specific procurement features tailored to the government and public procurement procedures to their existing products or creating a completely different product, that is, a government procurement software. Procurement management follows a logical order of steps regardless of the organization or nature of the team involved, which is why a procurement solution would work efficiently regardless of where it is being applied. 

The main advantages of using cloud-based procurement software are; increased spend visibility, optimal cost savings, and improved supplier relationships.

Increased Spend Visibility in Procurement Management

One of the major shortcomings of public procurement of product or service is that multiple sub-groups, procurement teams, and stakeholders within the project team are often involved in the procurement process. This results in the process becoming so fractured that the ability to accurately monitor spending throughout the organization and in real-time is almost impossible. However, with the advent of cloud-based procurement systems such as Tradogram, senior management is able to gain 100% visibility into the organization's spending and track budgets in real-time for the entire procure-to-pay cycle. Tradogram offers its customers the ability to track, manage, and report on procurement activity within the company regularly. 

Increased visibility into the activities of the procurement professionals will enable management to be more decisive in matters that are important and have time constraints. It will also help the organization control maverick spending and maintain the allocated budget for each department/sub-unit that work on the project.

Reports generated by a cloud-based procurement software may allow management to practice strategic procurement and adhere to its strategic objectives as set out in the procurement plan. These reports may also be able to highlight areas of overspending or fragmentation of contracts. Increased visibility of an organization's spend will definitely enable its management to stick to its "value for money" procurement mantra, as well as increase efficiency.

Optimal Cost Savings

Optimal Cost Savings in the Procurement Process 

Apart from the savings that will result from the generation of requisitions, purchase orders, RFQs, and other documents relating to the procurement process digitally instead of manually printing hardcopies, an organization will also save money in other ways if procurement software is at the center of its procurement process. This is so as the pricing strategies of this software may allow for a monthly subscription that is much cheaper and more flexible than if a system were to be designed from scratch. 

Additionally, they are generally ready to use upon installation and very simple to understand. Consequently, there will be little to no downtime for staff. The learning curve would be flattened due to the perceived smooth transition, and you can get started with purchasing of goods and services right away once the system is set up. As much as they are standard, value can be added to the procurement software, as most, if not all, of these types of software can be tailored to suit the specific needs of a project organization.

Improved Supplier Relationships within the Procurement Cycle

Government projects often require suppliers and contractors to bid for the chance to handle projects or deliver procurement services. A procurement system helps with this process because it also doubles as a vendor management platform that ensures that the negotiation and contract management process is performed in full compliance with laid-down standards. 

Tradogram is a cloud-based procurement software that can be used by both suppliers and government agencies to manage procurement, control spend, and procurement relationships. It is an effective government procurement software as it provides the ability to record supplier information and performance, as well as maintain communication with the supplier.

Effective Procurement Contract Management Process

More than just maintaining a list of suppliers, having an open and consistent channel of communication also strengthens the relationship with potential suppliers. This will result in better bids received from suppliers, as well as increased participation by bidders for government procurement contracts. Some modern procurement management solutions may also have features to request for proposals, scoring systems to determine supplier's qualification for the contract, and other tools to help users select the best suppliers for the goods or services. This is needed even for less complex projects. With a system like this, governments analyze bids based on supplier performance scores, assessment of potential risk, pricing comparison, and other factors. Based on these, the suppliers with the best performance score win the bid.  

A cloud-based procurement management software will enable you to keep a detailed database of suppliers within specific markets. This will help to improve strategic sourcing, which will result in better outcomes when you negotiate with these suppliers. Using a procurement tool also ensures contracts are being followed at every stage of procurement.

Additionally, financial information from the suppliers, such as preferred payment currency and payment terms, can be automatically applied to orders and will shorten the time taken to process payments. Most cloud-based software also provides suppliers with the ability to track orders, invoices, and payments easily, thus creating transparency and accountability for all parties involved. Possible additional features include payment of bills and closing of procurement contracts. 

Adopting a cloud-based procurement software is becoming less of a nice-to-have and more of a must-have to stay ahead and grow. Start your journey with this complete guide to procurement management. 

Procurement Transformation
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