AI for Government Procurement
Continuing on from our overview of the DTA's Interim Guidance on Generative AI (the Guidance), our Procurement Specialists now explore the potential benefits and risk considerations for generative AI within strategic sourcing and procurement strategies and processes. These AI tools, used according to the Guidance, could include publicly available platforms such as ChatGPT or purchased RFx procurement AI software.
Departments and agencies are exploring potential use cases for generative AI tools and technology to drive greater efficiency, cost savings, and data-driven decision-making such as strategic sourcing and procurement. However, AI use does come with its share of advantages and challenges. Let's take a look at some of those benefits and considerations below:
BENEFITS
Streamlined template creation - Generative AI tools can assist procurement specialists in drafting comprehensive templates and well-structured evaluation plans, Request for Tender documents, and Statement of Requirements. By analysing past procurement data, these tools can generate evaluation criteria and methodologies, saving valuable time and effort.
Market intelligence and vendor identification - Generative AI tools can automate the process of matching procurement requirements with potential suppliers. This could include the identification of suitable vendors and products in the market through analysing market trends, performance, and risk factors.
Data-driven evaluations - As part of the evaluation process, generative AI can be used to support the assessment against evaluation criteria for shortlisted vendors such as through benchmarking, and financial viability of vendors to identify potential risks.
Enhanced contract management - Contract management can be enhanced through analysis of supplier contract performance data and metrics, sentiment analysis to support relationship management and contract negotiation insights, review of contract terms and clauses to identify potential risks or non-compliance.
RISKS AND OTHER CONSIDERATIONS
Team members involved in the procurement processes should be mindful in ensuring they uphold probity responsibilities and requirements when using generative AI. This includes:
Transparency - Decisions driven by generative AI must be transparent and explainable. This includes being transparent about the use of AI within the sourcing and procurement processes and ensuring stakeholders are clear on how AI arrived at its decisions (e.g. such as rationale for shortlisting of vendors).
Data security, privacy, and confidentiality - Ensuring the security and confidentiality of sensitive procurement data is critical including complying with regulations (such as the Privacy Act 1988, and the Protective Security Policy Framework). Only publicly available or non-classified data should be ingested by AI tools.
Inaccurate and out-of-date data - Accuracy of results and information generated from AI tools are dependent on the quality and completeness of the input data. It is still critical to apply professional judgement and critical thinking over analysis generated by AI. The application of AI should be well-governed and supported by an assurance framework to limit bias and promote accuracy.
WHAT IS NEXT?
While the benefits of generative AI can reshape strategic sourcing and procurement processes it is essential to navigate associated risks and considerations thoughtfully. By embracing generative AI responsibly, departments and agencies can elevate their procurement practices but should also consider whether the benefits/rewards outweigh the risks. Procurement areas can start thinking ahead and embrace these technologies. This may include updating procurement processes and policies to provide guidelines to responsible use of generative AI and establishing a robust data governance framework to ensure data used in AI tools is compliant with regulations.
If your department or agency is already thinking about these considerations - reach out to our team at Terrace Services to see how we can support you ensure governance remains at the forefront of your transformation journey!