In the world of procurement, artificial intelligence (AI) is no longer just a topic for futurists or tech nerds—it’s a boardroom conversation, a policy issue, and increasingly, a tool procurement professionals are expected to understand. For some, AI conjures visions of seamless automation and predictive analytics that magically cut costs and boost efficiency. For others, it sounds like smoke and mirrors—overhyped, underdelivered, and poorly understood.
So which is it? A genuine force for transformation—or a trendy distraction from the real work of delivering public value?
The truth, as always, is somewhere in the middle. And for government buyers in particular, the answer depends on how we approach it: with curiosity, caution, and a focus on responsible, human-centred innovation.
Table of Content
The Hype: AI as Procurement’s New Superpower
Let’s start with the good news. When used well, AI offers tangible, measurable benefits in procurement. It’s already helping organisations:
- Speed up routine tasks like invoice matching, supplier onboarding, and spend classification
- Flag risks early, such as financial instability or geopolitical exposure in supply chains
- Analyse massive datasets to identify patterns in pricing, performance, and compliance
- Predict demand, helping teams make better sourcing and inventory decisions
Tools like ChatGPT, large language models, and machine learning algorithms are being embedded into procurement platforms like Coupa, SAP Ariba, and OpenGov. They’re helping write scope statements, draft contract clauses, and recommend suppliers based on historical performance and ESG ratings.
In short, AI is helping procurement professionals move faster, work smarter, and make decisions grounded in better evidence—not just gut instinct.
The Reality Check: When AI Doesn’t Deliver
But there’s also a growing chorus of caution—especially from inside the profession.
Erik Oberlander, Head of Procurement Value Creation at PwC, recently told Procurement Magazine:
“I have not seen a real, live example of AI delivering strategic procurement outcomes in the field… We risk selling a dream we can’t deliver.”
Why the disconnect?
For many agencies and companies, AI hasn’t lived up to the hype because of:
- Dirty or fragmented data: AI is only as good as the information it learns from
- Siloed systems: Without integration, AI can’t see the full procurement picture
- Lack of capability: Teams aren’t trained to use or trust AI tools
- Unclear ethics or transparency: Particularly in government, where public accountability matters
It’s not that AI doesn’t work. It’s that it doesn’t work without a strategy, the right systems, and human oversight.
The Australian Government’s Approach: Cautious and Responsible
In 2024, the Australian Government released its “Interim Guidance on the Responsible Use of Generative AI”, setting the tone for how public agencies should approach AI tools like ChatGPT and Bard. (DTA.gov.au)
The guidance emphasises:
- Transparency: Public servants must disclose when AI is used to generate content
- Human-in-the-loop: AI can support, but not replace, decision-making
- Privacy and bias safeguards: Data must be protected and outputs audited for fairness
This framework goes beyond bureaucratic red tape—it protects trust and integrity, especially in high-stakes procurement involving significant spend, complex compliance, or ethical risk.
The Digital Transformation Agency (DTA) has also been trialling AI in public procurement use cases, particularly around:
- Automating contract clause review
- Classifying goods and services using machine learning
- Natural language search for better tender matching
Their focus? Use AI where it adds value—but keep humans at the centre.
States Leading the Way: NSW and Victoria
State governments are also getting serious about AI in procurement:
NSW Government
The NSW Procurement Insights Project, led by the Department of Customer Service, is trialling AI tools that automatically map spend data to the UNSPSC taxonomy and flag anomalies for further investigation. The goal is to improve transparency, detect fraud, and enhance category planning.
Victoria
In Victoria, Digital Victoria is running AI pilots to support smarter contract management in construction and infrastructure procurement—sectors where delays and overspend can quickly spiral. The emphasis is on predictive analytics to spot risk early and improve project governance.
In both states, what’s notable is the measured, iterative approach: small pilots, clear ethical boundaries, and strong procurement governance.
AI in the Private Sector: Driving Efficiency, Savings, and Strategic
Advantage
In the private sector, AI is rapidly becoming a competitive differentiator in procurement, especially among large corporations managing global supply chains. Companies like Unilever, IBM, and Pfizer are using AI-powered platforms to automate sourcing, negotiate contracts, forecast demand, and detect supply chain risks in real-time. For instance, IBM’s Watson AI actively analyzes supplier performance data and recommends sourcing strategies based on cost, ESG metrics, and geopolitical risk. Meanwhile, AI-driven procurement analytics tools are enabling procurement teams to uncover hidden cost savings and streamline supplier collaboration. A recent McKinsey report estimates that companies effectively using AI in procurement could reduce procurement costs by up to 15% and boost compliance and efficiency significantly. These real-world applications demonstrate that in the private sector, AI is more than hype—it’s delivering measurable business value when integrated with human expertise and sound data governance.
Cutting Through the Hype: What AI Actually Does Well in Procurement
Let’s stop thinking of AI as magic, and start thinking of it as a very good intern with a phenomenal memory and no judgment.
Here’s what AI can reliably help with in 2025:
| Task | How AI Helps |
| Spend Analysis | Groups and categorises line items faster than humans |
| Risk Assessment | Monitors supplier news and performance data |
| Tender Evaluation | Summarises bid documents, highlights gaps |
| Market Research | Synthesises reports, finds comparable benchmarks |
| Drafting Contracts | Suggests standard clauses, flags inconsistencies |
AI is not a silver bullet—but it can help cut through low-value tasks, reduce errors, and make space for procurement teams to focus on strategy, negotiation, and relationship management.
But… What Should We Be Wary Of?
AI tools in procurement raise several red flags:
- Bias: If your training data is biased (e.g., excluding Indigenous-owned suppliers), AI will replicate that bias
- Opacity: AI tools can make recommendations without clear logic (“black box” problem)
- Security and privacy: Feeding sensitive tender information into cloud-based AI tools poses serious risks
The AI in Government Taskforce—part of the Australian Government’s Digital and Data Ministers Meeting—has flagged the need for mandatory transparency, impact assessments, and ethical AI frameworks.
In short, don’t blindly trust the robot. Understand how it works, audit its outputs, and involve humans in the loop.
How to Get Started With AI in Your Procurement Team
If you’re a procurement leader or professional wondering how to dip your toe into the AI waters, here are five practical steps:
1. Start with Spend Data
Use AI tools to clean and classify your spend data—this will instantly unlock visibility and insights.
2. Automate Low-Risk Tasks
Look for repetitive, low-risk workflows: invoice matching, supplier data entry, clause libraries.
3. Train Your Team
Offer internal training on prompt engineering, data literacy, and ethical AI—build capability now, not later.
4. Use OpenAI Responsibly
If using ChatGPT or similar tools, don’t input sensitive information. Treat it like a public tool.
5. Write an AI Policy
Include procurement-specific clauses in your agency or department’s AI policy. Ensure your team knows where AI can (and can’t) be used.
Final Thoughts: Help, Yes—but Only If We Stay in Control
AI isn’t going to replace procurement professionals, but procurement professionals who use AI effectively might just outperform those who don’t.
The hype is real—but so is the opportunity. The difference between hype and help will come down to governance, ethics, capability, and leadership.
To position procurement as a strategic function—future-ready, efficient, and aligned with public value—leaders must drive the responsible adoption of AI.
Let’s not be dazzled. Let’s be deliberate.
