Vanguard Magazine

profitability Recently, governments all around the world have added "carrots" and "sticks" to contractors, providing extra points in evaluations of major bids – meaning com- panies can win or lose based on what they offer, as well as adding penalties (financial penalties or the threat of blacklisting) to companies that don't fulfill their obliga- tions. To very little surprise, when there is a contract dangled or a real financial penalty, companies react accordingly. That is one of the beauties of the simplicity of the capitalist economic system: you can predict behavioural outcomes quite ef- fectively, under the assumption that com- panies are purely motivated by one thing – profitability. Beyond defence procurements, we are seeing requirements in the energy, mining and infrastructure sectors to demonstrate social and economic benefits to local com- munities, in "benefits agreements," or else, you guessed it, face the risk of not having a major multi-billion dollar project approved or financial penalties. In addition to incentivizing sourcing locally from small businesses, we are also seeing increased attention on having di- versity within organizations. Lately, City of Toronto Councillor Michelle Holland made a motion to require gender diver- sity on the boards of companies bidding on City of Toronto procurements. When I spoke to Councillor Holland for this ar- ticle, it was clear that she was passionate about the topic. "My motion at Toronto City Council aimed to encourage compa- nies doing business with the City to mea- surably move towards gender diversity on their boards because if the public sector fails to take the lead on this issue, change simply will not come." And not surprisingly, this had an imme- diate impact. I was involved in the round- table feedback session and watched as the largest suppliers of city procurements, primarily major international construction companies, scrambled to make changes in order to ensure they could bid on future work. This policy is a big carrot towards future profitability. Councillor Holland went on to say, "The public sector must take the lead with respect to gender diver- sity, and representation on boards of direc- tors is one area that is glaring in its failure to be representative." A powerful lever As the Founder and CEO of OMX, a pro- curement platform for companies in the defence, aerospace, mining, energy and infrastructure sectors, it is pretty clear to me that procurement is absolutely the most powerful lever we have to make an impact in our society and economy. And technology is how we scale it to have the most impact. The President of SAP Ariba, Alex Atz- Technology WatCh 48 DECEMBER 2017/JANUARY 2018 www.vanguardcanada.com Procurement more carrots, fewer sticks The defence secTor is unique, in ThaT in mosT counTries around The world, defence conTracTors are conTracTually required To give back To local economies, primarily Through procuremenT opporTuniTies. By nicole Verkindt

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