AI & Automation: The Road Ahead For Suppliers And Public Procurement

Artificial Intelligence might bring two very different examples to mind.

1) The Terminator and all self-aware robots that eliminate human life on Earth.

2) Tony Stark’s (Iron Man’s) AI called J.A.R.V.I.S (Just a Rather Very Intelligent System) that delivers all of Stark’s impossible requests.

These are obviously far-fetched examples from rather far-fetched films, right?

Well, not necessarily. 

We’re zeroing in on JARVIS with massive advancements in AI, like Gemini and ChatGPT.

As far as the Terminator is concerned, we’ve got humanoid robots. They do all sorts of things, like replacing human workers in hazardous conditions and providing companionship to those who need it, primarily the ill and elderly.

What has this got to do with AI in public procurement?

It shows the breadth of AI incorporated into procurement processes, easily revolutionising how public sector buyers and suppliers conduct business, particularly in essential areas like contract management, analysis, and cognitive procurement.

We’ll explore the potential of AI and Automation in public procurement below.

How AI Influences Public Sector Procurement

AI and automation in procurement come in many forms, providing many benefits to different stages or steps in public procurement.

For example:

• Data capturing, organisation, and analysis provide insight into procurement processes, which enables contracting authorities to make informed decisions in key areas. Suppliers can use the data to refine their services, products, or works and reassess how they structure their tender response. 
• Crunching and interpreting big data enables AI tools to identify new opportunities for SMEs and other suppliers, while buyers benefit from risk assessment and management when they publish contract notices and must evaluate new suppliers. 
• Automating manual, time-consuming tasks enables employees to focus on key areas of business. The speed and accuracy with which these tasks are completed can streamline operations to make them more efficient and cost-effective.
• Data is captured from several sources, both internal and external (internet media, social media), providing a greater base of information to detect patterns and trends. The data can be used in new supplier selection and to detect opportunities for growth in new markets – even international markets.
• Transparent and ethical use of AI and automation can improve supplier engagement, management, and relationships. 

 

Types of Artificial Intelligence in Public Procurement

Artificial Intelligence is an umbrella term that encompasses many types with specific areas of operation.

Machine Learning (ML)

Self-learning software that is applied to procurement challenges to improve business processes, especially procurement processes. One area that seems to benefit the most from machine learning is spend analysis and risk assessment for both buyers and suppliers.

Natural Language Processing (NLP)

The focus is on understanding, interpreting, and manipulating human language to make insightful and practical data accessible to stakeholders. It’s commonly used in contract management where vast volumes of contract information are scanned and interpreted to provide critical information related to any aspect of the contract.

Word Embedding

A subset of NLP that is designed to map words and phrases in similarity and relation to other words. It’s good for analysing text fields in purchase orders (for example) where it identifies similar groups of purchased items in similar categories or sub-categories. 

Cognitive Procurement and Self-Learning AI

Cognitive procurement uses self-learning AI and automation to mimic human intelligence in procurement decisions.

It’s actually a subset of cognitive computing in which software ‘thinks’ like a human brain, for example, how humans reason and develop solutions for specific challenges.

Cognitive analytics also falls under the cognitive computing umbrella. As with all analytics processes, the idea is to crunch large amounts of data and then use human intelligence to identify and interpret patterns which provide insights that allow the software to come to conclusions within certain scenarios.

Another subset is cognitive sourcing. It uses data to identify new suppliers and opportunities in the sourcing process and automate sourcing tasks to improve efficiency.

Ethical AI in Procurement

The Procurement Act 2023 has had a significant impact on public sector procurement in the UK, for example, overall value, transparency, and ethical operations (including ethical supply chains). We’re going to look at some AI ethics in procurement and how they impact the public procurement cycle.

• Transparency in public procurement means that all stakeholders can easily access contract-related data. Data is user-friendly, as in it’s easy for stakeholders to understand conclusions and follow the process that leads to suggested solutions or courses of action.
• Accountability for decisions and actions is imperative in all links of the supply chain. Accountability isn’t based on say-so. Instead, AI systems can track and audit supplier behaviour to ensure suppliers always comply with ethical standards.
  It works both ways because suppliers can also use these AI systems to ensure they are always compliant with industry and national regulations. Furthermore, suppliers can assess their relationships with contracting authorities and how buyer behaviour impacts suppliers’ service delivery.
• The Procurement Act emphasises sustainability and that includes sustainable labour conditions – a safe working environment, and green operations that improve health and safety. It also includes environmental impact (carbon emissions), corporate governance, and engagement to ensure buyers and suppliers are on the same page ethically and quality-wise.
• Data privacy is paramount in the private and public sectors, but laws governing privacy in the public sector are particularly important because the sector manages a lot of highly sensitive and confidential data. Ethical practices in data capturing, storage, analysis, and use are non-negotiable, demanding complete compliance.
• Ethical AI procurement systems are designed to be neutral with no bias, prejudice, or favouritism. This ensures fairness in processes and equal treatment for suppliers and potential partners. 

Is There A Connection Between AI And Job Displacement In Procurement?

One of the biggest concerns (and perhaps the biggest hurdle) about incorporating AI and automation into procurement processes is the potential for job losses and unemployment.

But is there a link between the two?

Not really.

AI will take over certain roles in procurement, but it creates new jobs and advancements in current positions. For example, AI crunches, interprets, and analyses data, but someone must use the information proactively, practically, and positively to benefit suppliers, contracting authorities, and the procurement cycle.

Devising and implementing strategies and solutions requires creativity, emotional intelligence, flexibility, complex problem-solving, and critical thinking. None of which can be automated or entrusted to AI.

Existing employees can benefit from upskilling training, so they can assume these more advanced roles and likely increase employee satisfaction and retention.

Job creation specific to public sector procurement tends to favour skilled professionals, for example, data scientists who work with data on a micro level and specialists in procurement ethics. All these specialist roles drive public sector innovation and create new roles to optimise the use and management of new services and products.

 

UK Public Sector AI Adoption: Where Does The UK Government Stand?

Governments in general aren’t known for their early adoption of new technology and advanced services. The UK government (surprisingly) is on the ball when it comes to AI-powered public procurement technology and automation.

For instance, it adopted a regulatory framework for Artificial Intelligence and automation. The framework is based on five core principles.

1. Safety, security, and robustness
2. Appropriate transparency and explainability
3. Fairness
4. Accountability and governance
5. Contestability and redress

Currently, the framework will not be mandatory, but as AI challenges in government procurement become more apparent, targeted legislation is inevitable.

The government is preparing for this by setting aside £110 million to accelerate the deployment of AI technology throughout the public sector.

One area that is expected to benefit most from AI is contract analysis.

AI-Powered Contract Analysis In The Public Sector

Contract analysis has the following six benefits for the public sector:

1. Speeds AI analysis by converting documents into searchable text
2. Monitors contracts and sends automated notifications reminding suppliers of their ongoing obligations, as well as alerting them to risks and opportunities. 
3. Creates visual dashboards that clearly capture and demonstrate contracting trends in the market so buyers can make proactive, informed decisions.
4. Ensures the recommendation of clauses and templates is automated so they are consistent across the board.
5. Saves time and money that come from more efficient practices and streamlined processes that enable legal teams to focus on more important tasks, like managing strategic partnerships and honing negotiating skills.
6. Improves accuracy and consistency in contract reviews and management, delivering insightful data in real-time.

AI, Automation & Public Sector Marketing

AI and automation can certainly assist with the more routine marketing tasks, as well as data capturing and analysis to provide accurate market-related data in real-time. But marketing is one of the industries that rely almost entirely on creativity, flexibility, innovative thinking, problem-solving, and a genuinely human touch.

This means that it’s perfectly fine to use AI to review public tenders, manage contracts, monitor spend analysis, and identify risks and opportunities, but leave the marketing to specialists like Cadence Marketing. 

Contact Cadence Marketing and book a free consultation and we’ll show you how our specialist marketing services leverage all the benefits gained from AI and automation in public procurement.