Long time readers of this site know that I am a strong advocate for eSourcing. I am an advocate based upon extensive first-hand experience developing, using, researching, and evaluating eSourcing solutions over the last 13+ years. For example, I have led or managed sourcing projects totaling more than $500 million via eSourcing and I have led or managed dozens of market research efforts where I have found that groups that use eSourcing save more, have higher compliance, and do so with fewer resources.
A few years ago, I wrote numerous articles focused on a concept or policy that I called eSourcing 2.0 (click to read a good summary of the idea which says that “Every negotiation that results in an executed contract should use an eSourcing solution”). There are many benefits that a Chief Procurement Officer and team can achieve from the use of an “eSourcing 2.0″ policy including savings and efficiency; but, the underlying premise behind eSourcing 2.0 is not price discovery, but rather, visibility (and knowledge management). By capturing (and thereby documenting) the price/contract negotiation in an eSourcing tool, procurement leaders can better understand the details around a specific negotiation. Things like:
- Who led the sourcing project
- Who was on the internal team, if one existed
- What was communicated to the supplier(s)
- Why a certain supplier was selected
- Which, if any, other suppliers were considered
- The time frame of the negotiation
- The final negotiated terms
- Considerations, if any, in making the final award decision
- Who was involved in making the final decision
All of this great and valuable information is captured whether there was a reverse auction with 12 bidders, a single price bid taken from one supplier in a non-competitive negotiation, or anything in-between if…. an eSourcing tool was used.
In terms of procurement fraud, what eSourcing does more than anything else is provide visibility. Visibility into the negotiation, visibility into the supplier communication, visibility into internal communications, visibility into the bid evaluation, etc….
eSourcing cannot eliminate procurement fraud but it can certainly limit it by providing visibility into the sourcing process and enabling the perpetual threat of a review or audit. If sunlight is the best disinfectant, eSourcing is the magnifying glass that can be used to fry procurement fraud “ants.”