“It’s now likely that 2023 will mark a critical inflection point for artificial intelligence,” – Brad Smith, Microsoft vice chair & president.
“Just as electricity transformed almost everything 100 years ago, today I actually have a hard time thinking of an industry that I don’t think AI will transform in the next several years.” – Andrew Ng, Google Brain founder.
How do we know that we’re at the precipice of something truly transformational? What permits a new technology to scale? Lowered cost, established frameworks, user-friendliness, and wide applicability? Much of this is starting to be true for generative AI. Large language models have been around for years, but ChatGPT has broken ground through mass-usability, making it a household name. We will look back on 2023 as the year in which generative AI unmistakably took flight. If a technological inflection point requires mainstream reception, we have more than enough evidence to indicate that that time is now for generative AI.
Hundreds of generative AI application tools have been built in the last four months. According to a recent Accenture survey, 98 percent of global executives agree that AI foundation models will play a key role in their organisational strategy in the next three to five years. Under pressure, companies are rapidly releasing their AI policies and implementation plans. The rise of generative AI has brought about a transformative shift, the impact of which will not spare even procurement practices.
The UK Government’s annual budget allocates a significant 32 percent of funds towards procurement. The tendering process imposes large costs on potential suppliers, who must articulate their value to commissioners, and on commissioners themselves, who must assess suppliers’ risk, capacity, price, and quality standards. The introduction of generative AI has the potential to revolutionise procurement processes by accelerating content creation, similar to how the internet accelerated idea-sharing. The potential impact on procurement is significant, and as yet not fully determinable. I asked Genny-1, our General Language Engine at AutogenAI, how generative AI could be used in procurement. This is what it said it could do:
- Identify potential suppliers and vendors for government contracts, allowing for more efficient procurement processes.
- Create more accurate cost estimates for government projects, reducing the risk of budget overruns.
- Generate documents such as requests for proposals (RFPs) and bids, reducing the labour costs associated with writing them.
- Improve supply chain management, allowing governments to better manage their resources and materials.
Huge amounts of time and resources are funnelled into procurement processes. Generative AI presents an opportunity to streamline these processes by reducing the time and cost required to design specifications and to reach potential suppliers. Furthermore, it allows suppliers to articulate how they meet requirements more efficiently. AI can also be utilised to examine data and identify patterns, trends, and opportunities, leading to more effective decision-making. By leveraging AI to automate, simplify, and improve quality and efficacy, procurement professionals can use the freed-up capacity to focus on more strategic and high-value activities.
The Centre for Economics and Business Research found the UK to have the longest and most expensive public sector procurement process in the EU: 90 percent more expensive than the EU mean. The cost of competition is thus inordinately high in the UK, and reducing this would mean lower cost for the taxpayer, better choice and innovation, and a democratised bidding process.
The high cost of bidding – and sometimes its sheer complexity – potentially excludes SMEs and VCSEs from securing contracts. The pursuit of competitive grants costs each Local Authority around £2.25 million per year. Moreover, VCSEs aren’t submitting proposals at scale, nor are they succeeding at scale, with just 10 percent of the 10 percent of available contracts listed on contract finder being awarded to them.
With the potential for generative AI to streamline and democratise the bidding process, accessibility will be improved, leading to increased competition and enhanced government outcomes. This will allow for more competition from VCSEs, the public sector, and SMEs who could previously not afford to compete with larger private firms. This would contribute to the government’s ‘levelling up’ agenda – helping to boost local communities and create opportunities for those who previously have not had access.
As generative AI drives business process transformation, it raises a corresponding question: at what point does procurement adoption of AI become the norm?
