How the Procurement Sector Can Use AI to its Advantage

Public sector AI adoption is accelerating globally, but the rush to deploy new technology is exposing uncomfortable gaps in how governments evaluate and purchase these systems. 

The result is a growing number of failed projects that waste taxpayer funds and undermine confidence in government technology initiatives.

Researching this issue, the Open Contracting Partnership has released a report titled “Buying AI: Tools and Tips for Public Procurement” that warns governments must rethink how they buy and deploy AI systems. 

The organisation, which operates across more than 50 countries, works to ensure public money is spent fairly and effectively with transparency around where funds actually go.

The main AI challenges the procurement sector faces

The research draws on interviews and workshops with more than 50 public sector practitioners and reveals a troubling pattern. 

Governmental bodies are eager to adopt Gen and agentic AI but are skipping the groundwork. 

They’re buying systems without the in-house capacity to integrate them properly or challenge vendor claims about what the technology can actually deliver. 

The pressure to “get into AI” is pushing agencies to make expensive purchasing decisions they’re not equipped to execute.

Kaye Sklar, Senior Program Manager for Content and Insights at the Open Contracting Partnership and one of the report’s authors, says: “Governments are racing to adopt AI, but too often they’re doing it without the preparation and guardrails to make those investments succeed.

“Public agencies are under pressure to’ ‘get into AI,’ but without strong procurement practices, they risk buying expensive tools that don’t work, don’t get used, or even undermine public confidence.”

Examples of the procurement sector getting the best out of AI

However, not every government agency is getting it wrong. 

Some bodies demonstrate that structured procurement can deliver tangible results rather than expensive disappointments. 

The US Centres for Medicare and Medicaid Services partnered with Skyward IT Solutions to procure AI and machine learning (ML) services that modernised operations whilst actually reducing costs. 

The agency deployed a chatbot that cut ticket creation time and a procurement analysis tool that now saves approximately US$3m monthly – real money with measurable impact.

Meanwhile, Australia’s Digital Transformation Agency created a framework for AI deployment that includes policies, technical standards and model contract clauses integrated directly into the government’s digital marketplace. 

The policies update regularly to keep pace with developments in the field, though the agency candidly acknowledges that delays still occur when procurement teams get involved too late in planning processes.

Chile’s national digital agency took yet another approach by creating an internal sandbox environment to test and verify vendor claims before committing to full-scale deployment. 

These cases show that when governments combine flexibility with proper accountability mechanisms, AI can deliver measurable value rather than becoming another line item in reports about wasted public spending.

How the procurement industry can achieve AI success through a people first strategy

The guide outlines specific roles required for effective AI procurement. 

Procurement officers should articulate the scope and strategy of procurement and provide oversight during contract implementation. 

Project team leaders facilitate the overall discovery process to ensure smooth collaboration and progress. 

IT and data science experts provide guidance around responsible AI use, limitations and capabilities, as well as security requirements. 

Legal officers help navigate regulations and legality around data, liability, intellectual property and AI use cases. 

Getting these teams working together early matters more than many agencies realise.

The consequences of poor procurement extend well beyond financial waste. 

Failed AI projects damage public confidence in government’s ability to deploy emerging technologies responsibly, creating political resistance to future adoption even when projects are actually well-planned.

Kathrin Frauscher, Deputy Director at the Open Contracting Partnership, says: “Poor AI procurement can cost governments millions, not just in failed projects, but in lost public trust.

“Done right, though, it can modernise services, boost efficiency and prove governments can use emerging technology responsibly. 

“This guide gives public institutions a practical roadmap to do exactly that, turning AI’s potential into measurable results for the people they serve.”