5 Ways Political Factors Influence Procurement

In our previous edition of the Procurement Leaders Playbook, we discussed the 5 Elements of a “Quality Contract”. This week, we’re diving into something more macro when it comes to decision-making in procurement—the Influence of Political Factors in Procurement.?

Political factors are essential in shaping procurement policies as they directly impact the regulatory environment.?

From trade agreements and tariffs to political stability and government policies, these elements determine a lot.?

Here are 5 ways political factors impact procurement decision-making:?

Influence #1. Importance of Geopolitical Considerations in Procurement:?

Political considerations extend beyond just trade. Governments prioritize sourcing from specific countries due to national security concerns or the need to build strategic relationships.?

Take, for instance, a situation where a government prioritizes sourcing vital technology from a close political ally.??

This can impact your procurement options, but it can also present opportunities to build strong partnerships with suppliers from specific regions.

Influence #2. Significance of Public Sector Influences?

In many countries, the public sector is the largest buyer of goods and services, and its procurement decisions are heavily influenced by the political climate.?

Government contracts are lucrative, but they come with a high level of scrutiny and the need for absolute compliance with public procurement laws, which can be shaped by the prevailing political ethos.?

Changes in government often lead to shifts in procurement priorities—what was funded under one administration can be scrapped by another.

Influence #3. Alignment With Trade Agreements and International Relations

Global procurement decision-makers must consider the impact of political alliances and trade agreements, which dictate the range of potential suppliers available and influence the cost and ease of cross-border transactions.?

You must be aware of existing trade agreements and anticipate potential changes in the political landscape.?

This knowledge allows for the identification of alternative suppliers and the development of contingency plans to mitigate disruptions caused by shifting international relations.

Influence #4. Government Budgetary Allocations Impacting Procurement Priorities

Government budgetary priorities directly impact organizational procurement. Political agendas and policy initiatives often translate into specific funding allocations.??

You must be aware of these budgetary shifts to adapt their strategies. This may involve prioritizing specific types of suppliers or adjusting purchasing volumes to align with allocated funds.??

Maintaining open communication with relevant government agencies and stakeholders is crucial for staying abreast of budgetary changes.

Influence #5. Rise of Ethical Sourcing and Corporate Governance

As political awareness and activism increase, so does the pressure on companies to engage in ethical sourcing.?

Political movements and ideologies often drive expectations around corporate governance, pushing companies to prioritize suppliers that adhere to ethical labor practices, environmental standards, and anti-corruption laws.?

This trend is accelerated by legislative actions like the UK’s Modern Slavery Act and the US’s Dodd-Frank Act, which require companies to disclose their supply chain due diligence on human rights and conflict minerals, respectively.

Check Out Our Upcoming CIPM Session!?

If you’re interested in learning more about the influence of political and other external factors in procurement, check out our upcoming CIPM session here.?

Led by Dr. Graw, with over 20-years of experience in supply chain, this is one of the most leading procurement certifications in the industry.?

Dr. Graw in supply chain management, brings a range of knowledge and insights that have dramatically enhanced the understanding and capabilities of thousands of procurement professionals.?

This session not only covers political influences but also dives into economic, social, and technological factors that are shaping global supply chains.

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