Key insights:

• • • Non-compliance is significantly more expensive than compliance 鈥� Data consistently shows the cost of non-compliance can be greater than proactive compliance investments.

    • Reputational damage and hidden costs often outweigh direct fines 鈥� Beyond financial penalties, the damage from legal fees, loss of customer trust, and operational disruptions from non-compliance can inflict long-term harm.

    • Strategic investment in compliance yields a competitive advantage 鈥� A robust compliance program builds trust, attracts investors, and demonstrates greater operational resilience in a complex regulatory landscape.

There’s a persistent myth in the business world that compliance programs are a necessary burden, a line item to be minimized and managed rather than invested in strategically. The data tells a very different story, however, and it has for quite some time. For organizations still treating compliance as an overhead expense, it’s time to reconsider the math and view the broader strategic picture.

The numbers don’t lie: Non-compliance costs more

Non-compliance costs are 2.65-times the cost of compliance itself, a finding that dates back to the of multinational organizations. While the average cost of compliance for the organizations in that study was $3.5 million, the cost of non-compliance was much greater. That means simply by investing in compliance activities, organizations can help avoid problems such as business disruption, reduced productivity, fees, penalties, and other legal and non-legal settlement costs.

According to a later report from from 2017 (the most recent set of analytical data on the subject), the numbers have only grown more striking. The study showed that average cost of compliance increased 43% from 2011 to 2017, totaling $5.47 million annually. However, the average cost of non-compliance increased 45% during the same time frame, adding up to $14.82 million annually. The costs associated with business disruption, productivity losses, lost revenue, fines, penalties, and settlement costs add up to 2.71-times the cost of compliance.

And these non-compliance costs from business disruption, productivity losses, fines, penalties, and settlement costs, among others aren’t simply abstract risks. They’re real, recurring, and measurable, and they don’t stop with the fine itself.

Beyond the fines themselves, legal costs are a significant and often underestimated component of non-compliance.

This gap between compliance and non-compliance provides evidence that organizations do not spend enough of their resources on core compliance activities. If companies spent more on compliance in areas such as audits, enabling technologies, training, expert staffing, and more, they would recoup those expenditures and possibly more through a reduction in non-compliance cost.

While the math here is straightforward, the strategic case is even clearer. Compliance isn’t overhead; rather, it’s an investment with a measurable, proven return.

The hidden costs: Legal fees, fines & reputational fallout

Regulatory fines get the headlines, but they represent only part of what non-compliance actually costs an organization 鈥� a cost that has only risen over time. As of February, a total of 2,394 fines of around 鈧�5.65 billion have been recorded in the database, which lists the fines and penalties levied by European Union authorities in connection with its General Data Protection Regulation (GDPR).

Beyond the fines themselves, legal costs are a significant and often underestimated component of non-compliance. Regulatory norms are shifting constantly and navigating them requires specialized expertise. As quickly as the rules change, outside counsel and compliance specialists must keep pace, and that knowledge comes at a price. Every alleged compliance violation triggers an immediate need to engage qualified counsel, adding to a cost burden that compounds quickly and unpredictably.

Then there is reputational damage, perhaps the most enduring consequence of all. The cost of business disruption, including lost productivity, lost revenue, lost customer trust, and operational expenses related to cleanup efforts, can far exceed regulatory fines and penalties. Consider , whose compliance failures around its anti-money laundering (AML) efforts became a cautionary tale for the industry. TD Bank’s massive $3 billion in fines from US authorities wasn’t just the result of a few missteps; rather, it was caused by years of deep-rooted failures in its AML program, pointing to a culture that prioritized profit over compliance.

The findings from both the 2011 and 2017 studies provide strong evidence that it pays to invest in compliance.

TD Bank’s failure to make compliance a priority not only led to a huge fine but also seriously damaged its reputation, with revising TD’s outlook to negative in May 2024, where it remains. This is the kind of a reputational stigma that can take years to repair.

Leveraging compliance as a competitive advantage

There is also a positive side of the ledger that often goes unacknowledged. A robust compliance program signals to investors, partners, and clients that an organization is well-governed and trustworthy. That reputation doesn’t just retain market value; it actively attracts it.

Organizations that cut corners in compliance risk engaging in a short-sighted, high-risk strategy that will ultimately result in a negative outcome for the organization. Businesses that take compliance seriously tend to operate with greater predictability, fewer surprises, and stronger stakeholder confidence.

The 2017 Ponemon and Globalscape and study found that, on average, only 14.3% of total IT budgets were spent on compliance then, not much of an increase from the 11.8% reported in 2011. This clearly indicates that organizations are underspending on core compliance activities in the short term and aren’t prepared to allot further resources as the years go on. That gap represents not just risk, but a clear missed opportunity.

“The findings from both the 2011 and 2017 studies provide strong evidence that it pays to invest in compliance,鈥� explains Dr. Larry Ponemon, Chairman and Founder of the Ponemon Institute. 鈥淲ith the passage of more data protection regulations that can result in costly penalties and fines, it makes good business sense to allocate resources to such activities as audits and assessments, enabling technologies, training, and in-house expertise.”

The organizations that recognize compliance as a strategic function, not a reactive one, are the ones that will earn the trust of clients, the confidence of investors, and the operational resilience to weather an increasingly complex regulatory environment. The data is clear, and the choice is a critical one.

Please add your voice to 成人VR视频鈥� flagship , a global study exploring how the professional landscape continues to change.听

Key takeaways:

• • • The US achieved conventional military dominance, but it hasn’t solved the core problem 鈥� The navy that was destroyed was never the one controlling the Strait of Hormuz. The asymmetric force that is, the IRGCN, retained 80% of its small-boat fleet and may be able to replenish losses from civilian infrastructure faster than the US can eliminate them.

    • All three pathways to a quick resolution are blocked 鈥� The regime has hardened rather than collapsed, the diplomatic positions are nowhere near overlapping, and the US military posture is escalating, including possible ground operations, while allied support remains symbolic.

    • The conflict is likely measured in quarters, not weeks, and the economic difference is not linear 鈥� Businesses should be stress-testing against sustained disruption rather than planning for a return to normal, because the conditions required for a rapid resolution would each need to break favorably 鈥� and right now, none of them are.

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This is the first of a two-part series on the impact of the war with Iran as the conflict continues. In this part, we look at different ways the war could wind down quickly, and why none of them offer an immediate pathway.

The war with Iran is not going to be over by the end of this week.

That sentence shouldn’t be controversial four weeks into the ongoing war with Iran being waged by the United States and Israel, but it runs against the grain of how markets, policymakers, and many business leaders have been processing this conflict. The dominant assumption, visible in equity markets that have wobbled but not cratered, is that this is an acute shock with a definable end date.

However, very little about the military, political, or strategic picture supports that assumption.

While I make no claim to predict the war’s exact duration, I can lay out why the most likely scenarios point to a conflict measured in quarters, not weeks 鈥� and why that difference matters. In the next part of this series, we’ll sketch the economic consequences on a quarter-by-quarter basis, drawing on the latest projections from top economic thinkers. First, however, here is why this war probably drags on.

The wins aren’t winning鈥�

By a surface level scorecard, Operation Epic Fury has been exactly the kind of lopsided success one would expect of a global superpower that鈥檚 going up against a regional player. Iran鈥檚 Supreme Leader was killed in the opening strikes, Iran’s conventional navy was sunk at anchor before they could sortie, and full air supremacy by the US appears established. If you were grading this on the metrics that won wars in the 20th century, you’d be forgiven for thinking it was nearly over.

Yet it is not nearly over. The Strait of Hormuz remains effectively closed. Daily transits have collapsed from 138 ships to fewer than five. Approximately 2,000 vessels and 20,000 seafarers are stranded in the region with nowhere to go. Brent crude is at $108 per barrel as of March 26, up roughly 50% since the war began. The International Energy Agency has called the current situation the largest disruption to global energy supplies in history.

The disconnect between the military scorecard and the strategic reality comes down to a single, underappreciated fact that the US destroyed the wrong navy. To be fair, it’s not like they had much of a choice. Iran’s conventional fleet had to go, and it went; however, that was playing on easy mode. Iran’s conventional fleet, its frigates, corvettes, and submarines, was a prestige force built for Indian Ocean power projection.

You can find out more about the here

The force actually designed to fight America, however, is the Islamic Revolutionary Guard Corps Navy (IRGCN), and it is something else entirely: a dispersed network of hundreds of armed speedboats, coastal missile batteries, thousands of sea mines, drone systems, and midget submarines spread across dozens of small bases along hundreds of miles of Persian Gulf coastline. The IRGCN’s entire doctrine, training, and equipment procurement were optimized for exactly one scenario, that of denying the Strait of Hormuz to a technologically superior adversary. That is the war Iran is now fighting.

Even though the IRGCN lost its most advanced platforms, those were not the workhorses of their fleet. The IRGCN retains an estimated 80% of its small-boat fleet, the fast boats that hide among fishing dhows, the crews that can scatter onshore and remount on surviving craft. The US is tasked with the mission of hunting small boats hiding among civilian vessels, in a fight in which Iran is willing to lose dozens of them a day to keep the Strait closed. This is not a mopping-up operation; rather, it is a war of attrition that the US is not structured to win quickly, and one in which Iran can replace its losses in ways a conventional navy cannot. For the US, it鈥檚 like trying to empty a bathtub while the spigot is still running.

Further, the math of the Strait itself is unforgiving. Iran had an estimated 5,000 sea mines before the war and has begun laying them. The US Navy decommissioned its last Gulf-based minesweepers in 2025 鈥� timing that, in hindsight, looks catastrophic.

Indeed, the US can sink every major Iranian warship afloat and still not reopen the waterway. That, in fact, is roughly what has happened.

鈥nd the off-ramps are blocked

If conventional military victory hasn’t solved the problem, there are three other ways this war ends quickly. As of late March, however, all three are jammed.

1. The regime isn’t collapsing

A US intelligence assessment completed before the war concluded that military action was unlikely to produce regime change even if Iran’s leadership was killed. That assessment has proven accurate. Iran鈥檚 constitutional succession mechanism activated as designed, and a new Supreme Leader, the previous one鈥檚 more hardline son, was installed within days. Also, protests are not sweeping the streets. Ideological regimes under external threat tend to harden, not fracture. Indeed, both the Taliban and Hamas have survived worse. The Iranian Islamic Republic, whatever else you want to say about it, appears to be surviving this conflict as well.

2. Diplomacy has nowhere to go

Iran rejected the 15-point plan offered by the US and published five counterdemands, including recognition of Iranian sovereignty over the Strait of Hormuz, which is a nonstarter for the US. Iran’s foreign minister says Tehran has no intention of negotiating, even as President Donald J. Trump insists talks are continuing. These positions aren’t close to overlapping, and both sides are staking their credibility on not budging first.

And Iran has good reason to believe time is on its side. The war is deeply unpopular in the US and the same affordability anxiety that swept Republicans into power is now threatening to sweep them out in the midterms. Tehran knows for every day the war goes on, they get to roll the dice that Trump will back out, giving them a strong incentive to get as many rolls as they can.

3. The military posture is escalating, not resolving

Ground troops, including paratroopers from the 82nd Airborne, are en route to the Gulf or have received deployment orders. Reports indicate the White House is weighing a seizure of Kharg Island, Iran’s primary oil terminal, an operation that would put American boots on Iranian soil for the first time. Seven allied nations signed a statement supporting Strait security, but it鈥檚 a paperwork alliance, lacking the kind of committed hardware needed to force a solution to the Strait鈥檚 closure.

What does this mean for business?

The Iranian regime isn’t folding, diplomacy doesn鈥檛 seem to be catching on, and the US military posture is expanding. None of the conditions point to a rapid resolution, and in fact, several of them point to a prolonged conflict.

If this war is measured in quarters rather than weeks, the economic consequences stop being a temporary, albeit painful price spike and start being a structural disruptive event, one that reshapes supply chains, reprices risk, and forces companies to make hard choices about where and how they operate. The difference between a three-week war and a three-quarter war is not a difference of magnitude, it is a difference in kind.

In the concluding part of this series, we’ll walk through what a quarter-by-quarter economic scenario would look like if the war continues.

Key highlights:

• • • Tax credit transferability survived intact鈥� The OBBBA preserved Section 6418 transferability rules despite earlier proposals to sunset or repeal them.

    • AI-driven data center boom may revive renewable energy tax credits鈥� With data centers projected to consume 12% of all US energy by 2028, large operators have strong incentives to advocate for preserving and expanding renewable tax credits to meet massive energy demands through solar, geothermal, and battery storage solutions.

    • 2026 market conditions favor buyers due to supply-demand imbalance鈥擨ncreased supply of tax credits (particularly Section 45Z clean fuel production credits) combined with reduced buyer competition from provisions like Section 174 and bonus depreciation has created advantageous pricing.

At the start of the current Trump administration, green energy tax credits were expected to be slashed or disappear altogether. In reality, significant changes emerged instead of ceasing to exist. More specifically, the One Big Beautiful Bill Act (OBBBA), passed in July 2025, kept the transferability rules around green energy tax credits intact.

As a result, the market for these credits remains robust in 2026 and 2027, says , an energy tax authority and principal at accounting firm CliftonLarsonAllen (CLA). In addition, multiple credits still have runway, and near-term dynamics in 2026 may favor buyers.

OBBBA鈥檚 changes result in shifts in marketplace conditions

When the OBBBA bill passed, the specifics revealed a more optimistic picture than many understand. According to Hill, specific examples include:

• • Wind and solar projects 鈥� Developers that begin construction by July 4, 2026, still have a four-year window to complete their projects and still claim credits. Even projects that miss this construction deadline can qualify if they’re placed in service by December 31, 2027.
  • Clean fuel production credits 鈥� Clean fuel production credits, detailed in OBBBA鈥檚 Section 45Z, received an extended runway through 2029.
  • Tax credit transferability 鈥� The tax credit transferability aspect under Section 6418 remained whole, despite previous versions of the bill proposing either a sunset date or outright repeal of transferability. This fact provides a level of marketplace certainty that can act as critical liquidity for developers that typically lack the tax liability to use credits themselves.

In addition, the legislation altered the buyer and seller environment. Provisions including OBBBA鈥檚 Section 174 and bonus depreciation generated additional deductions for certain companies, and as a result, reduced those companies鈥� 2025 corporate tax liability. Simultaneously, Section 45Z clean fuel production tax credits came into force and created a supply-demand imbalance that favors buyers.

Overall, in the latter half of 2025, Hill describes the marketplace as favorable for buyers because of an increased supply of tax credits that were for sale previously with fewer buyers. Into 2026 and beyond, both developers and corporate buyers still have significant opportunities to participate in the tax credit marketplace, explains Hill.

AI-related data center demand may spur new proposals for renewables tax credits

The explosive proliferation of data centers because of the growing AI demand across the United States may become the unexpected champion for renewable energy tax credits. Hundreds of facilities are currently under construction, and the energy demand implications are staggering. In fact, the projects that by 2028, data centers will consume 12% of all US energy.

Renewable energy technologies are emerging as essential solutions to meet these demands. Solar power, as a tried-and-true technology, offers ideal supplementation for data center operations; and geothermal heating and cooling systems directly address the massive temperature control challenges these facilities face. Perhaps most significantly, battery storage is rapidly becoming standard operating procedure, with both grid-based and solar-array-tied battery systems providing critical backup power.

These developments carry substantial policy implications. In fact, large data center operators have incentives to become vocal advocates for preserving and expanding renewable tax credits, says , a leader in federal tax strategies at CLA. “We want our AI, we want our cloud-based services. To do that鈥� we need massive data centers and massive computing demands,鈥� DePrima explains. 鈥淎nd that in turn requires massive amounts of energy consumption, which renewables can certainly supplement.鈥� This, in turn, creates the potential for a renewable energy tax credit “comeback” within two to three years, he adds.

Guidance for buyers and sellers

Looking ahead to 2026 and beyond, both buyers and sellers of renewable energy tax credits should recognize that significant opportunities remain despite regulatory changes. More specifically:

For buyers 鈥� Buyers should act now to capitalize on favorable market conditions. With increased credit supply and reduced buyer competition due to provisions like Section 174 and bonus depreciation, pricing has become more advantageous. Buyers of renewable energy tax credits should consider structuring 2026 transactions to directly offset estimated tax payments throughout the year, thereby improving cash flow by making payments to sellers rather than the IRS. Financial institutions remain particularly well-positioned as buyers, as many have explored tax credit carryback opportunities to increase their tax savings even further.

For sellers and developers 鈥� Renewable energy tax credits sellers and energy project developers can use tax-credit monetization as a critical component of project financing because the ability to convert credits into immediate cash proceeds is essential for paying down debt and funding new projects. Despite initial concerns, substantial opportunities remain with credits outlined in Sections 45Z, 45X, 48E, and 45Y which are transferable and viable through 2029 and beyond.

In either case, tax credit transferability under Section 6418 offers key opportunities in the marketplace. Whether buyers are looking to reduce their corporate tax burden while supporting clean energy goals, or developers are seeking to monetize renewable projects 鈥� tax credits offer incentives to move forward.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, or tax advice or opinion provided by CliftonLarsonAllen LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader鈥檚 specific circumstances or needs, and may require consideration of nontax and other tax factors if any action is to be contemplated. The reader should contact his or her CliftonLarsonAllen LLP or other tax professional prior to taking any action based upon this information. CliftonLarsonAllen LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

You can find out more about renewable energy tax credits here

Key insights:

• • • Geopolitical crises fuel financial volatility and illicit activity 鈥� Conflicts have traditionally accelerated capital shifts and flows, creating cover for bad actors.

    • Predictable patterns emerge 鈥� Financial institutions should watch for sudden cross-border activity, unusual cash deposits, and transactions from border areas.

    • Conflict zones enable black market expansion 鈥� They also should adapt their compliance systems to detect more sophisticated methods used by criminals, tightening screening and enhancing staff training.

While business and international politics may appear cold and calculating, these things are often driven by emotion, especially fear 鈥� and fear of instability often drives market volatility.

So it goes as the United States attacks one of the world’s largest militaries and supporters of regional terror groups, causing deepening instability in a Middle East already beset by violence. It is certain that there is already a surge of money flowing in and out of the region for different reasons. Legitimate and illegitimate actors alike will seek to both run away from the crisis and profit from it. However, there are some anti-money laundering specific thoughts that financial institutions need to consider during a time of global uncertainty.

The bottom line 鈥� lots of money is on the move. Funding will send aid groups towards the crisis; it will also send logistical supplies, war material, and other necessities. All of these cost money, and defense sectors in multiple countries will be pumping out munitions to refill stockpiles in any country that is related to or in the neighborhood of the conflict.

Not every large transaction is an unusual, reportable event, but financial institutions now need to look one or two layers below the surface. What does not seem related on the surface is always a red flag. Look at beneficial ownership of companies and vessels, look at relations of the owners, not just the 听(OFAC) results of those people themselves. The financial system will, and should, allow the legitimate funds to flow. However, financial investigators must remain diligent to catch bad actors that take advantage of the surge in non-profit activity or the urgency with which legitimate businesses operate in a conflict zone.

Risk Factor 1: Capital flight from regime change

Just as the fall of the Al-Assad regime in Syria caused family funds to flow to as regime members fled the country, you will see the same with politically exposed persons (PEPs) who are inevitably fleeing regime change in Iran. A political crackdown will come. Whether the victors are on the side of the West or not remains to be seen, but some factions are going to flee the country and take family wealth with them.

Banks and other financial services should watch for anyone connected to people moving money through neighboring countries in which they may have literally hiked or driven before depositing cash into a financial institution. There are stories of refugees leaving places with gold bands on their arms, cash and false bottom purses, and diamonds in the lining of sweaters. These things will be converted to cash in neighboring countries and put into financial systems less affected by the conflict. An influx of cash throughout the region, therefore, could indicate this type of capital flight.

Risk Factor 2: Illicit finance and black markets

Since the fall of Syria, we have also become aware of that helps fuel addiction and armed conflict. There are certainly other substances and drug trafficking networks about which we know very little on this side of the secrecy veil.

Therefore, this instability will be seen as a time of opportunity for criminal groups. Indeed, with Assad鈥檚 security forces no longer controlling middle eastern captagon and other narcotics trade and various armed groups looking for funding sources, this is an illicit business opportunity.

Financial institutions can expect rapid movement of money between unrelated shell corporations, new corporations, and shadow vessels. They also should expect the black market to boom with drugs, contraband Iranian oil, and funds tied to narcotics that they have only yet to discover. Illegal arms will also generate funding, so all of the methods, both formal and informal, used to transfer value will become active.

In fact, large portions of such funding will flow through financial institutions; and peer to peer payment providers, FinTechs, and money transmitters should be especially wary of funds moving rapidly through their platforms. A burst in conflict means a burst in activity from illicit sources; therefore, enhanced, targeted monitoring is a must.

How financial institutions鈥� risk & compliance teams should respond

First, all financial institutions鈥� risk & compliance departments need to assess their institutions鈥� OFAC and sanctions screening search parameters. This is a good time to dial up fuzzy logic capability and reduce match percentage thresholds. In other words, risk tolerance should go down while the metaphorical dragnet gets wider. Surge the department鈥檚 personnel capability to compensate if you have to, because that is better than a strict-liability OFAC fine. Remember, OFAC sanctions are closely tied to national security, especially when it comes to Iran. This is not an arena in which leniency can be expected. Compliance teams should look at monitoring systems and thresholds immediately, create geographical targeting models to cover the conflict zone, and consider a command center approach to deal with the fluidity of the situation until things settle.

If your institution has not already taken the hint from regulators, this also is an opportunity to double down on Customer Due Diligence and identity verification. Front line staff and embedded business compliance personnel should receive updated training and job aids to increase awareness and hone internal reporting. Indeed, it is an advanced business skill to understand complex corporate beneficial ownership, much less to detect when it may be tied to illicit activity or corrupt regimes. Now is the time to increase that level of knowledge and thereby make the culture of compliance more robust.

In every crisis there is opportunity as well as risk: Managing the risk allows every company to take advantage of the opportunity, shore up its mission, and strengthen the institution.

You can find out more about听the geopolitical and economic outlook for 2026听here

Key insights:

• • • Pushing innovation in the financial sector 鈥� The OCC is actively enabling innovation among financial service institutions, not resisting it.

• • • Regulation is being refocused, not removed 鈥� Priorities may change with each administration, but oversight remains, and crypto is increasingly central.

    • Compliance is a growth requirement 鈥� Regulations around the BSA, sanctions, and KYC still apply, so durable controls and experienced teams do matter, even with AI.

Shortly after being named Acting Director of the Comptroller of the Currency in early 2025, Rodney E.听Hood in the financial sector. Hood spoke about improving bank-fintech partnerships and providing regulatory frameworks for digital asset activities.

As expected, the Hon. Jonathan V. Gould was sworn in as the 32nd on July 15, 2025. Under his leadership of the Office of the Comptroller of the Currency (OCC), the spigot of technology-enabled financial innovation is set to remain wide-open, with blockchain-based products at the forefront.

In his speech to the , Comptroller Gould laid out a road map to a future that includes more de novo charters, with many of them coming from the ranks of blockchain and digital or virtual asset service providers (VASP). He refuted notions that these things cannot be done under current rules and reaffirmed the agency’s ability to regulate such institutions.

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Institutions that fail to embrace these emerging technologies as they arise risk falling behind, Gould said, describing how any legal framework that treats digital assets differently than existing electronic means is risking 鈥渁 recipe for irrelevance.鈥� Such an antiquated approach keeps companies, institutions, and indeed the nation鈥檚 entire financial system, mired in the past, he added.

Digi-mon go!

In word and deed, the current OCC continues to offer a green light to VASPs as well as to traditional financial institutions that are looking to dabble with blockchain, stablecoins, and the like. Regulatory action in the past year mostly served to end prior enforcement against traditional institutions while putting ancillary companies in check. For example, of US/Mexican border casinos, crypto ATM-style terminals, and armored car companies demonstrates the regulatory shift that takes place after each change in administration.

Government rarely gives up its authority, but it does shift the focus. Border cash is out, crypto is in. Clear regulation for this sector is important, necessary, and will continue to create an entirely new set of financial products & services.

Institutions that fail to embrace these emerging technologies as they arise risk falling behind… [and] any legal framework that treats digital assets differently than existing electronic means is risking ‘a recipe for irrelevance.’

Normally I advocate more caution but, in this case, having any regulation is better than having no regulation. Blockchain is here to stay and having any kind of clarity around it is the right way to begin. Those who legislate have an opportunity to improve the regulatory framework over this technology as it evolves 鈥� as long as a framework exists. It’s sort of like the slippery slope argument in reverse: When we build a foundation on regulations that encourage innovation while protecting consumers, including the companies themselves, we create a healthier economy. These rules can always be improved and adjusted as we understand better what we have unleashed upon the world.

Compliance is on the 鈥渃an鈥檛 cut鈥� list

Rumors are swirling of cuts to many corporate compliance budgets. Many compliance pros think this administration will let companies do as they please! Let a professional risk manager urge caution here instead. The power of the Bank Secrecy Act (BSA), the extraterritorial reach of sanctions, and the requirements to know your customers (KYC) are not going anywhere. Regulations are refocused, not removed. A proliferation of nouveau financial institutions will provide a target-rich environment for the regulators of today and tomorrow to find things they dislike and prosecute those offenses. A business that hopes to make it big should be built to withstand the winds of change and weather different regulatory conditions over time.

Therefore, smart compliance professionals will keep an eye on the horizon and keep their risk controls tight. Yes, it may be a good time to start a crypto company; but no, that does not mean you can process drug cash, ignore sanctions, or fail to collect basic personally identifying information.

With increasingly ubiquitous AI tools, your humans in the loop are more important than ever. As entry level jobs become automated, depth of experience becomes more valuable. Retain talent and institutional knowledge on your compliance teams because those individuals will train the AI as well as the investigators of tomorrow.

Indeed, no matter who is in charge of the government鈥檚 regulations, enforcement will come when you let your guard down and ignore basic risk management principles.

You can find more about how government agencies are managing various risk, fraud, and compliance issues here

Key takeaways:

• • • Real-time oversight and strict compliance 鈥� Mexico鈥檚 SAT now requires digital platforms to provide real-time access to transaction data and withhold taxes at the source, with severe penalties, including service blocking, for non-compliance.

    • Major technological and operational demands 鈥� Platforms must invest in secure, scalable systems for data sharing, billing, and cybersecurity, and small businesses likely will face extra challenges adapting to these requirements.

    • New roles for legal and tax professionals 鈥� Lawyers and accountants will be essential in guiding businesses through compliance, privacy, and operational risks, as well as supporting technology integration and adapting to the demands of Mexico鈥檚 digital tax environment.

Mexico鈥檚 digital tax overhaul is more than a regulatory update 鈥� it鈥檚 a fundamental shift that will reshape how businesses in that country operate online. By granting the Tax Administration System (SAT) real-time access to platform data, the government aims to curb tax evasion and strengthen collection in the digital economy. This means platforms like Amazon, Uber, Netflix, TikTok, DiDi, and Mercado Libre must now share transaction details as they happen, which will mean unprecedented compliance, technology, and operational challenges for companies and professionals alike.

Platforms must also 鈥� 2.5% for income tax (ISR) and 8% for value added tax (IVA). If a seller does not give a tax ID number (RFC), the platform will keep up to 20% of the payment; and, if the platform does not comply, SAT can block the service in Mexico until the problem is fixed. That means users will not be able to access the platform until it follows the law.

The goal of all this is to make tax collection fair and stop fake invoices and false transactions. The law also adds ; now, selling fake tax documents online can lead to two to nine years in prison.

These new tax measures also raise questions about with the United State-Mexico-Canada Agreement (USMCA or T-MEC), because some proposals 鈥� such as increased data access and stricter penalties for digital platforms 鈥� could conflict with the treaty鈥檚 provisions on cross-border data flows and platform liability.

Indeed, this shift is part of a wider digital transformation in Mexico, as seen not only with the new biometric CURP for identity verification, but also with SAT鈥檚 adoption of AI-driven smart auditing 鈥� both of which bring new opportunities and challenges for compliance, security, and public trust.

Technological impact on companies

These latest rules mean big changes for tech systems. Platforms must create secure connections for SAT to access their data, although they may use APIs or that send transaction details in real time.

Companies will need stronger cybersecurity policies because opening a permanent link to SAT creates risks, especially considering the high value of data that will be flowing through the system en masse. At a minimum, businesses will need to invest in heightened encryption to protect data, authentication systems to control access, and monitoring tools to detect unusual activity

Platforms also need to update their . Every sale must include correct tax retention and generate a digital invoice (CFDI). For larger platforms that process millions of transactions daily, this means building high-capacity systems to avoid delays or errors. These platforms will also need data pipelines to handle the huge volumes of information and, in turn, send that to SAT without slowing down the services of SAT or themselves.

Small companies and startups may face extra challenges. They might not have the money or staff to make these changes quickly; and they likely will require the assistance of technology providers or consultants to implement new solutions such as compliance-as-a-service and automated tax reporting software.

Challenges and opportunities for tax and legal professionals

For lawyers, these rule changes will create new work areas. Companies will need legal advice to comply with the new rules and protect user privacy. Lawyers, for example, can help draft policies, negotiate limits on data sharing, and design compliance programs.

There will also be litigation opportunities. Many that real-time accesses could violate privacy rights and even the Mexican Constitution, with legal challenges likely by companies as a result. However, due to the recent amendments to the Amparo Law, many of these lawsuits could be frustrated at the outset, because the new Amparo requirements demand the claim of direct and personal harm and impose stricter limits on judicial suspensions, making it harder for platforms to obtain effective protection against real-time monitoring.

For accountants and tax advisors, the challenge is operational. They must help businesses manage new tax retentions and keep accurate records. Many smaller businesses, especially in retail, will need help registering with SAT, issuing invoices, and recovering taxes withheld. Accountants will also need to plan for their clients鈥� as a result of the retentions potentially reducing liquidity.

Both professions are likely to see more demand for their respective services. Lawyers will focus on compliance and defense matters, while accountants will handle routine tax activities; however, both will be involved in technology integration. Professionals who combine legal or tax knowledge with these needed tech skills will have a big advantage.

Adapting to Mexico鈥檚 real-time tax landscape

Real-time tax monitoring is a major shift for Mexico鈥檚 digital economy, and it aims to increase tax collection and reduce fraud, but it also brings big risks and costs. And the success of this big fiscal change depends on balance. Authorities must ensure strong security and clear limits on data access, and they should also offer support to small businesses, either in educational or instructional fashion, to help those enterprises that may have fewer resources at their disposal to navigate this turbulence.

If implemented well, however, this system could make Mexico鈥檚 tax collection more efficient and fairer. If not, these changes could lead to privacy violations, higher costs, and even less participation in the digital economy by smaller entities.

Indeed, Mexico is entering new territory with these rule changes, and the world will be watching carefully as this could become a model for other countries鈥� digital tax compliance 鈥� or it could become a cautionary tale of what happens when technology and regulation collide without enough safeguards.

You can find out more about the听regulatory and legal issues impacting Mexico听here

Key insights:

• • • The awareness crisis 鈥� Nearly half of Gen Z workers have never been exposed to local government career opportunities, which means that an entire generation enters adulthood unaware these jobs exist.

    • Values alignment paradox 鈥� Gen-Z individuals trust local governments more than other institutions, and they strongly align with public service values like making a difference and solving community problems.

    • Beyond salary solutions 鈥� Some cities are proving that targeted marketing campaigns can be successful; and connecting public sector work to meaningful impact rather than simply raising wages can attract interest.

San Francisco鈥檚 local government has been stretched to its breaking point. Mayor Daniel Lurie signed his this summer, which would eliminate 1,000 positions permanently, potentially resulting in layoffs for 140 employees. The city still grapples with a vacancy rate among its city workers that hit 13.7% two years ago, with . Residents have experienced delayed emergency responses, understaffed public hospitals, delayed city buses, and other gaps in public services.

State and local governments have sought workforce stability in the five years following the Covid-19 pandemic. Generational retirements, the so-called Great Resignation, a shrinking workforce, low unemployment rates, and heightened work environment expectations have had a dramatic impact over the last five years, leaving many states and public sector organizations trying a myriad of approaches to build and enhance their talent pipeline.

The root cause of our public sector workforce woes may surprise you. A decline in civics education in the classroom means that young people aren鈥檛 as exposed to government institutions as they once were. And many enter the workforce wholly unaware of the problems governments can solve or the career paths open to them within it.

Invisible institutions: Bridging the civics gap

Depending on your age, you may recall civics exposure as a mandatory part of your K-12 education. Civics education has been largely absorbed into the social studies curriculum, and the results are damning. Less than of one-quarter (22%) of 8th-grade students in the United States are working at a . Civics exposure and knowledge have a direct correlation to higher rates of voting and participation in civics activities, but currently, cannot name a single branch of the federal government.

Now, many states are taking matters into their own hands through legislative action, with states like requiring that all 8th graders take a civics test aligned with a year-long course on citizenship and federal and state government.

For adults already out of the K-12 system, the U.S. Chamber of Commerce Foundation piloted a geared toward employers in 2025. The Civics @ Work program addresses the unfortunate fact that an estimated 70% of Americans could not pass a basic civic literacy test. When civic awareness is low, young people enter adulthood with a limited sense of how government institutions function and what professionals are needed to keep those institutions running reliably.

Interestingly, members of the Gen-Z generation are quickly becoming the largest demographic in the workforce, but they are overwhelmingly not choosing public sector careers. Gen-Z members currently represent 18% of the US population but as of this past spring. A on civic learning and engagement found that while Gen-Z has higher rates of trust in organizations, they appear to be less likely to see themselves working there. And a McKinsey study on attracting Gen-Z talent into public service notes that this demographic is more likely than other generations to be aligned with public service values.

Rebuilding the pipeline through exposure

The city and county of Denver is no stranger to targeted public sector recruitment campaigns. The city and county have partnered with AOR, a Denver-based branding and marketing firm, in 2016 and in 2025 for public sector recruitment marketing efforts. The , for example, targets individuals in the hospitality, security, nursing, education, and coaching industries to consider a career pivot to public safety.

The 2025 city and county-wide campaign launched with AOR, , highlights career paths that many may be unaware exist within local government. Denver saw increased growth in both awareness, click-through rates on Google and LinkedIn, and an increase in job application rates.

Successful methods in this area could potentially find a wide audience, research shows. Mission Square Research Institute鈥檚 on undergraduate attitudes toward careers in public service notes that business, accounting, and finance undergraduate students had the lowest level of awareness around public sector career paths. Exposure to a public sector career path is just the beginning, however, these organizations need to connect to the issues young people care about and demonstrate that a public sector career offers meaningful work and growth opportunities.

Investing in the next generation of public servants

Mission Square鈥檚 findings noted that in 2025, undergraduate Gen-Z students are prioritizing salary, work/life balance, personal satisfaction, and job security. Those students who were surveyed perceive government salaries as negative (when compared to the private sector).

How the public sector paints the picture of a career is crucial to success and presents an opportunity for recruitment. Gen-Z, as a demographic, is highly motivated by public service values, and can relate strongly to messaging around making a difference, solving local problems, and delivering real impact. The Minnesota Citizens League report on points out that employers should consider loosening restrictive job requirements (such as degrees, years of previous experience, etc.) and instead recruit for mindset and soft skills and invest in the talent development of younger employees.

This doesn鈥檛 come without some risk, of course. Job tenure for younger workers averages 2.8 years 鈥� less than one-third of the tenure of Baby Boomers and Gen X in the workforce, according to Mission Square.

Civics education as the first step, not the final one

As San Francisco is reconciling, increasing wages can鈥檛 always be the final solution. Exposure and education around public sector opportunities are a critical first step to building a workforce pipeline. Legislative approaches taken in recent years at the state level 鈥� include for example, requiring student-led civics projects in middle and high schools; and forming a task force to study civics education, engagement, and media literacy 鈥� can certainly help, because civics education alone is likely insufficient.

Students need a formal introduction, in K-12 and beyond, to public sector opportunities, and these introductions should address the stereotypes that government is inefficient, clarify the non-political role of day-to-day operations, and highlight meaningful work, problem-solving, and personal career satisfaction.

For those governments and local organizations that are already struggling with persistent vacancies and a shrinking workforce, investing in the student pipeline is essential.

You can find out more about the challenges around talent and other issues faced by government agencies and their workers here

Key insights:

• • • Fraud prevention presents systems challenges 鈥� In the current advanced tech-enabled environment, AI-driven tools in the public sphere need human coordination and oversight to be employed properly.

    • The intangible cost of fraud is public trust 鈥� When public programs that are designed to support vulnerable populations fall victim to exploitation, confidence in the ability of government-administered programs falters.

    • The full scope of fraud is unknown 鈥� Many improper payments from government programs aren鈥檛 criminal. It鈥檚 that we need better data, clearer definitions, and a stronger understanding around what fraud truly is.

As public programs and the scale of fraud become the subject of national and state political discourse, more state governments and public sector agencies are evaluating the potential of data analytics and AI tools to curb fraud. As these institutions are realizing, effective fraud prevention is easier said than done, and investment in new detection tools will fail to keep pace with fraud if they don鈥檛 address structural, cultural, and coordination challenges.

Early fraud detection

Early detection of fraudulent activity, aided by AI tools and systems, may still be the most effective way to deter future problems. For example, California Community Colleges, the largest higher education system in the United States, currently serves more than two million students and has in two-thirds of its institutions in order to detect fake students. With open access for enrollment, the system is a magnet for fake students who apply, enroll, and fill seats in virtual classes that real students should be occupying, while fraudulently collecting federal and state student aid.

In 2024, it was estimated that nearly one-third (31%) of financial aid applicants at California Community Colleges were fraudulent, resulting in approximately $13 million in state and federal aid dollars being disbursed to fake students.

California Community Colleges employed a three-phased approach seeks to catch fraudsters who may slip through at the time of application, when they register for courses, and when they apply for financial aid. The system engaged in cross-agency collaboration with the California Department of Motor Vehicles and deployed a mobile ID system to authenticate student identity. Further, its data analytics looked at factors such as students鈥� IP addresses, time zones, age, and contact information to flag those patterns that could indicate a fake applicant. An AI tool analyzed course registration patterns, as well, identifying whether applicants have illogical or unusual patterns in the courses they are taking.

Then, system educators integrated into their virtual courses early on, requiring students to submit an introductory video, for example. This allows educators to cut non-participating students (presumed to be fake) before financial aid is disbursed.

These early detection tools, paired with human judgment, showed how a proactive approach can stop fraud before funds are lost.

Gaming government systems

While fake students illustrate small-scale exploitation in California, provider fraud is where large dollar amounts and case complexity arise. When fraudsters illegally obtain Medicaid funds for services they never rendered, for example, individuals in need of services suffer.

Minnesota鈥檚 now-shuttered Housing Stabilization Services program intended to help move individuals who were experiencing housing insecurity into transitional and then permanent housing solutions. According to a , the well-intentioned program enriched sophisticated fraudsters, who formed business entities and falsified employee hours, reimbursement claims, and patient identities 鈥� even going so far as to manufacture false case notes as a precaution against their records ever being audited. Not surprisingly, illegally gained reimbursements were used to fund high living expenses, luxury shopping, and cars.

Similar fraudulent providers have been charged by the U.S. Attorney’s Office for the Northern District of Texas as part of . Four individuals fraudulently billed around $20 million to federally funded programs and other insurers.

In another case that showed that fraudsters sometimes can come from inside the house, a group of were ruled against by a federal judge in a whistleblower lawsuit alleging that four insurers and six health systems routinely, improperly billed the state鈥檚 Medicaid program. Part of the reason for the judgment was because the disputed claims were still paid by the Indiana Medicaid program, despite it being aware of alleged issues. In this case, oversight gaps and a consistent pattern of not flagging improper payments revealed a structural weakness within the state office.

Different approaches for data analytics

Some agencies are employing different methods to leverage advanced tech to help in the fight against fraud. For example, the Louisiana Department of Health is using AI to scrutinize Medicaid recipients and their eligibility. A developed at the University of Louisiana at Lafayette will allow the Louisiana Department of Health to share data with the state鈥檚 Office of Motor Vehicles. By analyzing whether individuals have duplicate licenses in other states, their eligibility to receive benefits in Louisiana may be rescinded.

Focusing on a different tack and target, the Center for Medicaid and Medicare will deploy a six-year pilot program of the across six states: New Jersey, Ohio, Oklahoma, Texas, Arizona, and Washington. The pilot program will specifically target low-value services with little to no clinical, evidence-based benefits and will expedite review of those services that are at a higher risk for provider fraud, waste, or abuse. This heightened scrutiny of providers seeking Medicaid reimbursement is in alignment with recommendations from the around program integrity.

These varying approaches raise a difficult question: Is it better to risk inefficiency by targeting providers, or it better to risk inequity by targeting recipients?

Understanding the measures of fraud, waste, and abuse

The total cost of fraud is difficult to calculate, as there are countless incidents of fraudulent reimbursement requests, overbilling, or unnecessary medical treatment that cannot be counted. Two data measures that we have to understand to truly gauge the efficacy of public health systems’ financial health are the payment error rate and the dollars recovered through fraud controls.

are those payments that fail to meet statutory, regulatory, or administrative requirements. They may be for non-eligible services, be inappropriately or inaccurately coded, or may exceed program maximum amounts 鈥� but their common denominator is that they represent funds that were misspent or out of step with fund guidelines.

Improper payments are calculated and reported to Congress annually across all federal healthcare programs. The dollar recovery rate calculates the amount of inappropriate reimbursements recovered from fraudulent actors each year, usually through the pursuit of civil or criminal damages. However, it鈥檚 important to remember that not all improper payments are lost to fraud. For example, within the Medicaid program were most often tied to missing appropriate documentation for individuals receiving care.

Understanding these definitions determines how we measure success, design large government systems, and allocate enforcement dollars across states. Such preventative measures, especially now aided by AI and other advanced tech, will help the next generation of fraud detection professionals who will come to rely on the tools and platforms that we design now.

And as more state governments and public sector agencies seek to leverage AI tools and platforms, they would be wise to focus on efforts that collect and analyze real-time participant data and incorporate ethical AI oversight, while balancing an investment in prevention as well as prosecution.

You can learn more about the challenges that government agencies face today here

Key findings:

• • State-level changes 鈥� States are responding to the impact of OBBBA on state-level taxation.

  • Budget shortfalls may result 鈥� Several states are already projecting reduced revenue collections because of the OBBBA.

  • Multi-state business impacts 鈥� Businesses with multi-state operations should re-evaluate where their operations are located for tax purposes.

The One Big Beautiful Bill Act (OBBBA) ushered in sweeping federal tax changes including provisions aimed at stimulating domestic business investment, particularly in manufacturing and research & development. While many businesses welcome the enhanced federal deductions, the changes are also significantly shifting the landscape for taxation at the state and local levels.

The impacts of the OBBBA are playing out differently across states, depending on each state鈥檚 own tax rules. In addition, the Act is likely to have fiscal ripple effects for states, including new budget challenges. How states respond to these combined impacts promises to dramatically reshape the tax environment, particularly for businesses operating across multiple jurisdictions.

These are among the considerations that seem to be keeping clients up at night 鈥� despite the federal tax benefits of the Act, many business owners and tax professionals are nervous about what it鈥檚 going to be mean at the state and local levels.

Impact on state-level tax policies

For businesses that operate across multiple states, the state and local tax landscape is suddenly more dynamic and much less predictable. States generally start their income tax calculations based upon federal taxable income, but they then modify those numbers based on their own rules and legislative priorities. That means federal changes, such as bonus depreciation or research expensing, are often partially or fully clawed back at the state level. So key provisions of the OBBBA, particularly those involving deductions and R&D expenses, will impact specific businesses differently depending on a state鈥檚 existing tax rules and policies.

For example, the OBBBA allows immediate 100% expensing for federal purposes for fixed assets placed in service after January 19, 2025. However, many states already decouple their assessments from federal bonus depreciation. Other states adjust the percentage or disallow the bonus entirely, forcing an addback and requiring businesses to instead use standard federal depreciation schedules. In fact, OBBBA threatens to widen these differences for deductions.

The impacts of the OBBBA are playing out differently across states, depending on each state鈥檚 own tax rules.

Similarly, the OBBBA enhances the ability of businesses to expense qualifying domestic R&D costs. Historically, only a few states followed the federal shift from expensing to capitalization under prior law. Some states, such as Indiana, may now conceivably permit a double deduction for these expenses under concurrent federal and state codes. Meanwhile, other states will likely reassess or restrict the treatment of these deductions because of concerns over the potential negative impact on state revenues.

Michigan and Rhode Island, for example, recently enacted legislation decoupling from the OBBBA provision that allows for the immediate deduction of domestic research and development expenses, resulting in the continued requirement to capitalize such amounts for state purposes.

State budget concerns

Meanwhile, concerns about the effect of the Act on state revenues could result in far more significant impacts.

One of the most immediate consequences of the OBBBA has been already observed in several states: Illinois, Maryland, Nebraska, and Oregon are among the states that have publicly acknowledged that major federal funding cuts in programs like Medicare, Medicaid, SNAP food assistance, and broader social services are likely to trigger budget shortfalls. And Colorado recently announced a projected $1 billion shortfall, prompting tax increases and a November 2026 referendum to raise income tax rates on certain high-income levels.

While clearly, nobody has a crystal ball, the OBBBA is already putting a lot of strain on state budgets and more states will likely follow in Colorado鈥檚 footsteps.听 Indeed, at a Massachusetts Department of Revenue roundtable held September 30, Commissioner Geoffrey E. Snyder declared that the OBBBA is projected to reduce the state鈥檚 revenue collections by almost $700 million in their 2026 fiscal year.

Impact on businesses

For businesses, navigating through all these changes complicates everything from daily operations to long-term strategy planning 鈥� and the stakes are considerable.

New tax increases or other changes in state tax rules could change asset deployment strategies, shift business expansion plans, and even encourage relocation to more favorable jurisdictions. Robust proactive tax planning is now a competitive necessity rather than a defensive maneuver.

To get on top of this, tax professionals should look into adopting more customized, multi-state mindsets for their clients. It鈥檚 essential that tax professionals fully grasp the substance and trajectory of each material state, or those states in which their clients鈥� businesses have significant business activity. Given that most states currently apportion taxable income primarily based on revenue, rather than physical presence, the rules governing each material state should be monitored closely in addition to the state in which the client is headquartered.

To get on top of this, tax professionals should look into adopting more customized, multi-state mindsets for their clients.

Further complicating matters is that the ripple effects from state responses will vary considerably in terms of timing. Some state legislatures only meet biennially, while some states may call special sessions to address urgent revenue needs or adjust their rules to conform with federal law. States also may enact rapid changes in response to headline-making budget projections 鈥� often with little warning.

Tax professionals need to stay proactive and vigilant, and most importantly, keep their finger on the pulse of state tax policies to best keep their clients informed. Some key steps for tax professionals include:

• • • Conduct a 鈥渕aterial state鈥� audit 鈥� Proactively identify and monitor those states in which clients have meaningful revenue, as those locations will now drive new tax risks and opportunities.
    • Stay informed on legislative developments 鈥� Closely track statements from state governments, economic development departments, and relevant tax and economic authorities on budget forecasts and discussion of anticipated responses.
    • Educate and advise clients with flexibility and understanding 鈥� Provide clients with regular updates on state-level changes and counsel them to build flexibility into their business forecasts and strategies, especially around capital expenditures and R&D investments.

While the OBBBA is ultimately a federal catalyst 鈥� the state and local reverberations of the Act are just beginning to be felt. For tax professionals, this is a moment to lead by educating clients, anticipating legislative shifts, and building resilient tax strategies across jurisdictions. State and local responses to the OBBBA will be diverse and are only beginning to unfold. Steady guidance from tax professionals can make the difference between whether their clients thrive or flounder amid all these changes.

You can find more of our coverage of the One Big Beautiful Bill Act here

Key insights:

• • Benefits of cooperation 鈥� Cooperative purchasing can significantly streamline procurement and level the playing field for smaller government agencies.

  • There are various models to follow 鈥� Different cooperative models offer distinct value: piggybacking improves access to competitive pricing with flexible adoption, while joint solicitations aggregate demand to secure more aggressive discounts by committing volume across multiple agencies.

  • Support is needed, and questions remain 鈥� Policy and institutional support are accelerating adoption, but trade-offs remain. State-backed entities and regional cooperatives expand contract access and scale, yet questions persist about true cost savings.

As of 2019, $4.45 trillion was spent across all levels of government, 50% of that spent by state and local entities, according to the U.S. Congressional Budget Office. These agencies have a fiscal responsibility to taxpayers to ensure that they receive competitive pricing on the goods and services they purchase.

Larger government agencies may have sophisticated procurement divisions with professional buyers and individuals responsible for soliciting and negotiating contracts in the best interest of the municipality. Meanwhile, smaller municipalities, which are less likely to have standalone procurement divisions, often receive less competitive pricing and haven鈥檛 had the staff capacity or expertise to negotiate the best terms for their purchasing needs.

Fortunately, new cooperative purchasing models are on the rise, and that could level the playing field between local governments no matter their size, while they also streamline procurement processes and save taxpayers money.

Cooperative procurement basics

Cooperative procurement takes two main forms: .

Piggybacking, the more common form of cooperative procurement, is when one agency utilizes another agency鈥檚 contract (even though they were not part of the original solicitation process.) This piggybacking allows for one agency to receive competitive pricing based on another agency鈥檚 solicitation efforts; and because suppliers are not guaranteed volume of purchase, discounts are not the most aggressive in this format.

Joint solicitation is less frequently used and occurs when two or more agencies combine their purchasing needs into a single solicitation 鈥� the equivalent of buying in bulk. Each agency is bound by the contract, but one entity is typically the lead agency. This offers suppliers an opportunity to guarantee larger purchase minimums and command more aggressive pricing discounts.

There are also membership-based entities that are helping to make government procurement easier and quicker, especially for smaller entities.

For example, is a Texas-based technology engine that connects government agencies and suppliers to facilitate peer engagement for public sector entities. Their leadership described a traditional local government solicitation process as lengthy, taking anywhere from 6 to 9 months for agencies to identify a need, solicit bids from suppliers, evaluate, and then execute a contract. The timeframe is streamlined up to 60% for Civic Marketplace users by accessing templates for solicitations, cooperative contracts, shortcuts to connect with pre-vetted vendors, and centralized vendor data. This platform also works to address another barrier of local government purchasing 鈥� the inequity between agencies of different sizes and sophistication.

New cooperative purchasing models are on the rise, and that could level the playing field between local governments no matter their size, while they also streamline procurement processes and save taxpayers money.

While Civic Marketplace is membership-based, it is not tied to a regional geography. Members can access volume-based pricing by aggregate demand across cooperative members as well as accessing shared contract language. States including Michigan and Minnesota have created special government entities to provide access to cooperative purchasing mechanisms.

Overall, these methods offer government agencies, especially smaller ones, a way to remain compliant with regulations, award contracts impartially, and remain transparent, all while engaging with peer communities with similar needs that can help agency procurement professionals foster a better understanding of pricing, scope of work, and vendor relationships compared to a wholly decentralized approach to purchasing.

Further, several state legislation and executive actions have also driven cooperative development. In Minnesota, for example, is a membership-free cooperative enacted by the state legislature, and public sector entities in the United States and Canada can access shared contracts and piggyback off them at no charge. Suppliers are also able to access the network at no fee, although a percentage of the contract fee is paid back to Sourcewell when a contract is utilized.

In Michigan, the (MMSA) was created as a virtual city by the governor鈥檚 office in 2012. The entity provides a small number of local municipalities within Michigan with procurement for very specific services including managed IT, cybersecurity, electronic payments, and more. MMSA has received positive feedback from vendors, noting that the streamlining of this process connects them with more prospective clients and allows them to flatten their pricing.

What are public procurement鈥檚 future needs?

The need for automation and streamlining in public procurement is evident, as the estimates that the size of the public sector鈥檚 purchasing manager workforce will lag behind private sector growth over the next decade by 1.3%. Fortunately, cooperative purchasing will enable smaller government agencies to be more agile with limited resources, and using pre-vetted, competitively solicited contracts will save them time and money.

Yet, the evolving space of cooperative procurement is not without criticism. Some argue that cooperative procurement is more about convenience than it is about realizing cost savings, and others argue that public procurement is a space that will likely be dominated by private sector players that are compensated off the top of executed contracts, costing taxpayers more than they might have paid otherwise. So far, there is limited data to speak to whether cooperative procurement opens opportunities for small, diverse, or local vendors 鈥� but anecdotally, it appears that broad online process benefits larger vendors who can deliver at scale.

As government agency leaders evaluate cooperative procurement for their own internal processes, they must weigh what is more important for them: convenience and time savings, realizing true cost savings, or directing more procurement dollars toward local and diverse-owned public suppliers.

You can find out more about the challenges that government agencies face here