In the fast-evolving landscape of government procurement, emerging technologies are reshaping traditional practices. One such innovation that holds immense potential is Generative AI, a subset of artificial intelligence (AI) that can create new content, images, or even solutions based on patterns and data inputs. In this blog, we delve into the realm of Generative AI, exploring its fundamental concepts, its applications within government procurement processes, and our government e-commerce platforms. Through understanding the capabilities of Generative AI and its potential in streamlining procurement operations, we aim to shed light on how government agencies can leverage this technology to enhance efficiency, accuracy, and transparency in their procurement endeavors.

What is Generative AI?

Amazon said, “Generative artificial intelligence (Generative AI) is a type of artificial intelligence that can create new ideas and content, such as conversations, stories, images, videos, and music. (...) Generative AI is the next step in artificial intelligence.” 

Google defined it as “the use of AI to create new content, like text, images, music, audio, and videos,” highlighting that it is “powered by foundation models (large AI models) that can multi-task and perform out-of-the-box tasks, including summarization, Q&A, classification, and more.”

IBM believes that Generative AI “refers to deep-learning models that can take raw data and ‘learn’ to generate statistically probable outputs when prompted. At a high level, generative models encode a simplified representation of their training data and draw from it to create a new work that’s similar, but not identical, to the original data.”

If its definition is still not clear, let’s put it like this: Generative AI is like having a super smart robot friend that can create things out of thin air. Imagine asking this robot to draw a picture of a unicorn. Instead of just copying a picture it's seen before, this robot can come up with its own unique unicorn drawing, all on its own. It's like magic, but with computer brains!

Well, it’s not THAT easy, but it's not that complicated either. Like any AI, generative AI operates using machine learning (ML) models, which are large models pre-trained with extensive data. These models could be foundation models (FM), trained on a wide range of generalized, unlabeled data, or Large Language Models (LLM), which belong to the FM class. What distinguishes LLMs is their multitasking ability, attributed to their numerous parameters enabling them to grasp complex concepts.

Is There a Role for Generative AI in Government Procurement?

In a recent report, Deloitte stated, "Government procurement professionals need help." What does this mean? And how does it relate to Generative AI?

The big firm said that, “If the government is to achieve the ambitious aims that the public expects, procurement professionals need tools to process large volumes of data with precision and with attention to the unique circumstances of every contracting action.” They believe that “by pairing the analytical strength of AI with the judgment of human workers, technology can make government procurement both more efficient and more effective in how it serves the public.” But how? Let's delve into 10 ways!

1. Streamlining Documentation: Generative AI can automate the creation of procurement documents such as RFPs (Request for Proposals), RFIs (Request for Information), and RFQs (Request for Quotation), reducing manual effort and errors.
2. Enhancing Decision-Making: By analyzing vast amounts of data, Generative AI can provide insights and recommendations to procurement professionals, aiding in strategic decision-making processes.
3. Improving Supplier Selection: Generative AI algorithms can evaluate supplier profiles, performance metrics, and historical data to suggest the most suitable vendors for specific procurement needs.
4. Facilitating Contract Management: It can assist in drafting and managing contracts by generating standardized templates, tracking contract milestones, and identifying potential risks or compliance issues.
5. Enhancing Market Research: Generative AI can analyze market trends, competitor activities, and pricing data to support procurement professionals in making informed purchasing decisions.
6. Predicting Demand: By analyzing historical procurement data and external factors, Generative AI can forecast demand for goods and services, optimizing inventory management and resource allocation.
7. Automating Procurement Processes: Generative AI-powered bots can automate routine procurement tasks such as purchase order creation, invoice processing, and supplier communication, freeing up time for strategic activities.
8. Ensuring Compliance: It can analyze regulatory requirements, contract terms, and procurement policies to ensure adherence to legal and organizational guidelines throughout the procurement lifecycle.
9. Enhancing Negotiations: This AI can simulate negotiation scenarios, analyze bargaining positions, and suggest optimal negotiation strategies to achieve favorable outcomes for government procurement contracts.
10. Continuous Learning and Improvement: Last but not least, its algorithms can continuously learn from past procurement experiences and feedback, refining their recommendations and predictions over time to further optimize government procurement processes.

Is There a Role for Generative AI in Our Government e-Commerce Platforms?

Considering that Generative AI was a trend that gained momentum during 2023 and promises to continue being so throughout 2024, we believe that our government e-commerce platforms can also benefit from its advantages in order to enhance user experience, streamline processes, and improve decision-making. We have identified 5 potential applications:

1. Product Recommendations: Generative AI algorithms can analyze user preferences and past purchase history to provide personalized product recommendations, enhancing the shopping experience and increasing customer satisfaction.
2. Natural Language Processing (NLP) Chatbots: Implementing chatbots powered by generative AI can facilitate customer support interactions, assisting users with inquiries, order tracking, and resolving issues in real-time through natural language conversation.
3. Image Recognition: Generative AI-powered image recognition technology can enhance product search functionality by allowing users to search for products using images, improving search accuracy and user engagement.
4. Fraud Detection: Generative AI algorithms can detect and prevent fraudulent activities on e-commerce platforms by analyzing transaction data, user behavior patterns, and identifying anomalies indicative of fraudulent behavior.
5. Content Generation: Generative AI can automate the creation of product descriptions, reviews, and marketing content, saving time and resources for content creation while ensuring consistency and quality across product listings.

Why are we discussing Generative AI? The market size in the Generative AI market is projected to reach $66.62 billion in 2024, with an annual growth rate of 20.80%, resulting in a market volume of $207 billion by 2030. In the U.S., it stood at just under $45 billion at the end of 2023, nearly double the size of 2022. There is no doubt that there are multiple opportunities around this AI, and we believe it can achieve great potential in the field of government procurement.

This blog was written by Gisela Montes, GovTech Community Lead at Glass.