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Public procurement teams are being asked to do more with less as they navigate increasing tender volumes and declining supplier participation. Inefficient manual processes, fragmented data, talent shortages, and a complex regulatory environment further add to the challenge.
Artificial intelligence (AI) has the potential to transform this landscape. From streamlining tendering to improving compliance and unlocking new supplier relationships, AI can bring much-needed efficiency and intelligence to every stage of the procurement process.
But the path to impact isn’t automatic. Procurement teams must actively embrace AI and implement it thoughtfully and responsibly to realize its benefits. In this blog, we unpack the core challenges facing public procurement and explore how AI, when applied responsibly, can help overcome them.
Private and public procurement teams are facing a range of challenges. Many are overlapping, but some of them are unique to public procurement teams due their highly regulated environment. We’ve reviewed the most prominent ones below.
Procurement data is often dispersed across disconnected platforms, making it difficult to conduct meaningful spend analysis or track supplier performance effectively. This fragmentation limits transparency and impairs strategic decision-making. While this problem exists in private companies as well, the technical infrastructure is often more rudimentary or outdated in the public space, which amplifies this challenge.
Public procurement is growing—not just in scope, but in complexity. As governments ramp up investment in infrastructure, sustainability, and digital transformation, procurement teams face an unprecedented influx of tenders and contracts. Yet many processes remain manual, time-consuming, and prone to bottlenecks. The consequences are significant: unspent budgets, delayed delivery of essential services, missed out return on digitization, and deterioration of infrastructure. When procurement operations can’t keep up, the ripple effects are felt across entire communities. This is a direct effect of limited flexibility due to…
Public procurement is heavily regulated, particularly in the EU, UK, and US, making even routine purchases bureaucratic and complex. While the UK Procurement Act and DOGE in the US aim to increase agility and efficiency, evolving policy goals and regulations are adding further pressure. For example, last year, Germany’s former Economy Minister Robert Habeck proposed an environmental quota for public tenders as part of a broader push to decarbonize industry. While such measures aim to align procurement with climate goals, they also introduce additional compliance requirements that procurement teams must interpret, implement, and audit, further stretching limited resources.
Supplier participation in Europe’s public procurement market has declined sharply. According to a report by the European Court of Auditors, between 2011 and 2021, the average number of bidders per tender dropped from around 5.7 to 3.2 in just one decade. In many cases, single-bid contracts now account for over 40 % of awards. SMEs are especially affected: rising administrative complexity, high entry costs, onerous documentation, and lengthy processes make bidding increasingly unviable for smaller firms. The result is reduced competition, higher public sector pricing, and fewer opportunities for innovation via new entrants.
Procurement roles require a rare mix of legal, commercial, and behavioral skills. Yet, the public sector often struggles to attract and retain talent as it lacks the agility, appeal, and compensation of the private market. The situation is made worse by a wave of upcoming retirements, threatening both institutional knowledge and operational continuity.
AI has the potential to help public procurement organizations solve many of their challenges, with use cases covering the end-to-end procurement process. We have collected key AI use cases that can help increase efficiency and provide valuable insights to public procurement.
AI helps overcome the challenge of siloed and fragmented systems by establishing a centralized, reliable procurement data foundation. It automates data cleansing and harmonization to standardize and structure disparate inputs, creating a single source of truth. Advanced techniques like Named Entity Recognition and Knowledge Graphs further enrich and connect data, enabling more holistic decision-making across procurement functions.
AI can help teams reduce their reliance on manual processes. By embracing AI-driven automation, public procurement teams can do more despite limited resources, increasing the speed of the procurement process without compromising on accuracy. For example, generative intake tools convert free-text requests into structured sourcing documents, reducing the need for continuous back-and-forth communication to clarify requirements. Furthermore, AI agents can create, manage, and evaluate routine tenders automatically with human oversight. By selecting an integrated AI platform, rather than siloed tools, teams can flexibly scale automation across additional workflows as needs evolve.
AI simplifies regulatory compliance by embedding controls directly into procurement processes. Rule-based compliance checks automatically enforce internal policies and legal requirements, while audit log generation ensures every action is traceable and well-documented. Explainable AI further strengthens transparency, enabling procurement teams to justify decisions to regulators and auditors.
AI can help reverse the trend of declining supplier engagement by expanding access and simplifying interactions. Smart discovery tools use semantic search and AI-driven matchmaking to identify qualified, (sustainable) suppliers beyond the usual network. Meanwhile, AI-enhanced supplier relationship management supports better onboarding, communication, and performance tracking throughout the supplier lifecycle.
AI enhances team capacity and continuity in the face of talent shortages and looming retirements. Knowledge capture tools preserve institutional expertise, ensuring that critical insights remain accessible as experienced professionals leave the workforce. Human-in-the-loop automation allows teams to offload routine tasks while maintaining control over key decisions. This enables teams to manage increased workloads more effectively.
While the opportunities offered by AI sound promising and should be deeply sought after, public procurement teams are again slow to adopt the new technology compared to the private sector. There are a few key reasons why:
Procure Ai’s AI-native Procurement Automation Platform is designed to overcome these challenges and make AI adoption in the public sector secure, responsible, and practical. The following key features enable this:
Public procurement teams are under immense pressure—from rising volumes and complexity to shrinking resources and outdated systems. AI has the potential to unlock real digital transformation in public procurement, but only if the sector's unique requirements are baked into the solution design. With a secure infrastructure and deployment approach, and human-in-the-loop design, Procure Ai makes it easier for government agencies to adopt AI rapidly—without compromising on trust, compliance, or real-life impact.
Contact us to learn how AI can ease the pressure on your procurement team—securely and responsibly.
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