Trade Uncertainty and its Impact Upon Public/Private Supply Chain Procurement Management Presented by Daniel G Bauer School of Public Administration, Florida Atlantic University September 13, 2018 Institute for Supply Management (ISM – Florida Palm Beach-Broward Inc. Regional Board)

Trade Uncertainty Background United States and vast majority of world operating under open trade “policy” since 1990s. Trade Policy earmarked by duties and countervailing duties defined trade prior to 1990s. The rise of Globalization changed the course of business administration and public administration (Farazmand, 1999). Quarter century has passed where certainty reigned in the marketplace. Increasingly larger share over the quarter century of US Gross Domestic Product (10% - 15%+) due to public procurement Meanwhile, United States has seen a ballooned trade deficit approaching US$1 trillion per annum

Trade Uncertainty Globalization Impact upon public procurement process and private supply chain ecosystem

Trade Uncertainty Where are we Today? Contextually, manufacturers, service providers, public sector entities, and non-profit organizations (all international in scope and mission) can no longer assume direction of trade policy is towards freer trade. Estimated impact and the general consensus is that U.S. tariffs and retaliatory duties imposed or under consideration by trade partners affects 1% of global trade.

Trade Uncertainty Present Timeframe Current marketplace disruptive Marketplace dominated by review of trade treaty procurement Retaliatory European Union Tariffs Retaliatory Canadian and NAFTA Tariffs Retaliatory China Tariffs

Trade Uncertainty Where are we Today?

Trade Uncertainty Public Dilemmas and Implications Five Dilemmas in Public Procurement Many contend differences between public and private sector (Bozeman, 1995; Johnson, Leenders & McCue, 2003). However, research also suggests similarities Including inter-governmental network and type of public service provided (Johnson, Leenders, & McCue, 2003). And the nature of the supply chain marketplace and availability of private sector participants (Harland, Gibbs, & Sutton, 2000). However, the extant research was performed during periods of certain, stable, free trade marked by globalization. This presentation claims that little to no research has been conducted during periods of globalized trade uncertainty. Five dilemmas in public procurement provide a framework for “testing” and “juxtaposing” the implications, presence, and extent of impact globalized trade uncertainty has upon public procurement processes.

Trade Uncertainty Dilemmas Five Dilemmas Framework in Public Procurement (McCue, Prier et al, 2016). Accountability/Responsibility Dilemma: Develop flexible procurement systems while maintaining accountability and control Fraud/Red Tape Dilemma: Limit opportunity for fraud/mismanagement while reducing operational constraints Principal/Agent Dilemma: Identifying best value in the presence of competing goals and common agency Short-Term Benefit/Long-Term Cost Dilemma: Short term economic efficiency vs. long-term monitoring costs Cost of Empowerment Dilemma: Responsiveness to “end user” through decentralization while increasing training and evaluation costs.

Trade Uncertainty What To Do? Planning, Implementing, Testing Impact of Five Factors – Social, Political, Economic, Environmental, Financial SWOT Analysis per Supplier Map vulnerability to trade risks beyond primary suppliers (List of top 5, 10, 20) Greening the Supply Chain Management (SCM) Ecosystem Source Standby List with flexible terms and conditions Regulatory Mapping (e.g., medical healthcare – changing suppliers not possible absent regulatory approval) Time Horizon Chart for Length of Contracts

Trade Uncertainty Becoming Part of the Normal Course Scholarly driven Practicum Determine Presence of Efficiency – Incentives embedded in public procurement contracts (Samuelson, 1959, 1971; Markowitz, 1952, 1959, 1976) vs. Organizational Transaction Costs (Williamson, 1979). Geometric Mean Maximization and the Efficient Frontier Procurement Best Practices Lean Thinking in both private and public procurement Implement a Sustainable Framework Conduct Program Evaluation – determine Net Present Value (NPV) of Net Social Benefit/Net Social Cost Monitor and Track Suppliers’ Trade Impacts Establish a Synthetic Suppliers’ Tracking Index – singularly focused on tariffs, duties

Trade Uncertainty Conclusion Trade Uncertainty, Tariffs, and Duties have existed up to the 1990s. Only in last 25 years has there been presence of freer trade Massive Export Trade Deficit Implications Recommendations Scholarly Inquiry

Trade Uncertainty Questions