Tuesday, 30 April 2013

Make or buy train sets

There was a time when every boy (or perhaps his father) wanted his own train set. I had one but it was a torture putting it up, trying to get it to work and then putting it away. I never really found  enjoyment watching a train going round and around and around in circles.

Perhaps the joy was in gaining ownership or putting things together which worked. But imagine the joy which must come if you're a train enthusiast and able to tinker with a real train, not just any train, but the 'big daddy' of them all, 'The Flying Scotsman'.

Perhaps the opportunity to own and tinker with the real 'Flying Scotsman' was just too much a temptation for the National Railway Museum.

Anyway, in 2004 the museum bought the real thing for £2.3m. Then, in 2005 they recognised the need for repairs, which they estimated would take one year and cost £250k. Now, in 2013, the repair work has cost, not £250k but £2.89m. That, in turn, has diverted funds from other areas, and indeed from the wider public purse. The hope is that the 'Flying Scotsman' will be operational in 2015 - that's quite a delay for what was a record breaking locomotive. As part of that journey it is now thought a decision will be taken on whether or not to 'buy' the remaining repair work.

Recently I applauded Liverpool on its decision to call a halt to a procurement which wasn't going to be delivered on time or budget. While I congratulate the National Railway Museum in questioning whether they should outsource the repair work, answers should be sought why a red line hadn't been drawn earlier, why the total costs of repair hadn't been better estimated in 2004, and why a robust 'make/buy' options appraisal wasn't carried out in 2005 regarding the repairs? It would also be useful to make sure that the current make/buy appraisal is robust and risk assessed. Have wider social objectives also been considered, for example, using the repair work as a training scheme or even using volunteer enthusiasts as potential repairers?

But I wonder when make/buy decisions are made, if there is a wider issue - could there be innate bias within our DNA which leads a buyer towards 'buy' and a techie towards 'make'?

Setting that aside, ironically, the 'Flying Scotsman' saga has some resonance with yesterday's blog on Glasgow's George Square revamp. There too a timely options appraisal was absent.

Perhaps there's an even bigger issue though, namely, are procurement specialists even involved in these decisions early enough to make a difference or at all?

Monday, 29 April 2013

Political procurement brohaha in Glasgow

Only days after celebrating some of the best in UK public procurement we are brought down to earth
with a jolt, reminding us that all is not as good as it could.

One of the benefits of local government procurement is the centrality of political leadership in the decision-making and councillors personal accountability to the electorate, through the ballot box, for their stewardship of the public purse. But there is a fine and delicate line which delineates when public and councillors should be involved in procurement, and when they shouldn't. Getting it wrong jeopardises public confidence in the system while getting it right enhances public confidence. So councillors and their advisers need to get the balance right.

Of course design contests as part of procurement invariably add an element of subjectivity to the whole process too. It's not easy to prove you've made the right decision.

Then, particularly in an age of austerity, there are questions as to whether spending £15m on a project represents what the public want or when a cheaper option, of say £500k, makes more sense?

With all those ingredients, this Glasgow case is particularly interesting and should provide lessons for all involved in public procurement.

A design contest was held for a £15m  revamp of George Square. Six designs were received along with a public protest to the effect that the work should not go ahead and a cheaper alternative option, at £500k, be pursued instead. A decision was taken to drop the project and pursue the cheaper option. The council Leader was praised for that decision although questions were asked why there hadn't been sufficient public consultation earlier. Then the RIAS complained that the Leader had compromised the process and had showed bias towards a particular design. Now the Leader, Councillor Mattheson is allegedly being investigated by the Police Major Crimes and Public Protection unit. Ironically, the Leader had previously said:  "... I'm sure whichever design team is chosen, Glaswegians will have a George Square to be proud of again".

So, at this stage, what are the lessons:
  1. Define clearly the role of the public, councillors and officers in any procurement process;
  2. Make effective use of scrutiny and gateway reviews in the process;
  3. Carry out an appropriate needs assessment and establish what the public want;
  4. Avoid costly procurement exercises for both bidders and buyers until you have completed a full options appraisal process.

N.B I've a paper published on the role of councillors in the Journal of Public Procurement - let me know if you want a copy.

PS on the 27 September George Matheson was cleared of any misconduct

Saturday, 27 April 2013

What will Fallon do, what can he do?

'Any Questions' is a great programme on Radio 4. The episode on 26 April (repeated on 27 April) (specifically the section at 11 minutes) was all the more interesting since the panelists were discussing procurement in the context of the Dhaka factory collapse which I discussed earlier today.

Michael Fallon MP, currently, Minister of State for Business and Enterprise, gave an interesting undertaking "that [UK Government] will look at what responsibility can be put on retailers". When pressed, the only clarification he gave as to what that meant was "we'll look at the various codes that they're signing up to and see whether they are sufficiently transparent and whether enough retailers in this country are actually signed up to them and whether there are significant gaps".

Another panelist, Sir Ming Campbell, suggested accurate labelling may be part of the solution, yet we know 'accurate labelling' didn't protect against 'horse meat in the UK food supply chain'.

We also know that the government have not been able to effectively mandate their own spending departments to use centrally set up contracts.

Yet bizarrely Stephen Kelly, in his evidence to PASC, was implying the public sector should look to retail as exemplars!

So what will Fallon do, or more specifically, what can Fallon do?

He can hardly tell those who have just had their benefits cut to buy more expensively.

However, given that it is alleged it was only the need to meet buyer deadlines that caused the workers to be in the factory on Wednesday in spite of the obvious risks, perhaps he could ask UK retailers to demonstrate that they were not culpable through placing undue pressure on supply chains. Could he initiate legislation which would bring about a new criminal offence of supply chain culpable negligence which may well help strengthen political relations? Or could he have the issue addressed through the G20?  I suppose it all depends on whether there's a will!

The voice of the buyer and the voice of the worker

Compare and contrast the following "Save us brother, I beg you brother. I want to live. It's so painful here. I have two little children" said Abdul Hossain while the buyer said "[we are] shocked and deeply saddened".

One is the voice of a victim, Abdul Hossain, who was dead before 6am yesterday.and one is the voice of the buyer who also said it wasn't aware of any problems relating to the structure of the building which collapsed killing in the region of 360 people. Mango, Matalan, Bonmarche, and Primark are among the buyers.

Like all of its international suppliers, one of the buyers claimed, the supplier had been subjected to regular checks on health and saftey, working hours and overtime. The buyer knew that while "there are building regulations in place in Bangladesh but nobody enforces them".

On Tuesday a crack was identified in the wall and the bank staff, who work in the same building, were told not to come into work on the Wednesday. However, factory managers, under the pressure of buyer deadlines, told their workers to work. On the Wednesday many of the factory workers paid a high price for the need to meet the buyer deadlines when the building collapsed.

64 workers in the same town were killed in a similar incident in 2005.

When you look at it like that maybe it's time for a redefinition of procurement risk management and responsible procurement.

Friday, 26 April 2013

Time to celebrate excellence in procurement

I'm as guilty as the next person of highlighting the omnishambles we frequently see in public procurement. That unfortunately feeds the lie which says incompetence reigns. But last night's GO Awards was the antidote - there we celebrated excellence. We also celebrated impact, innovation and the ability to implement effective change. Yes, example after example after example of excellence in procurement regardless of which sector you come from.

We celebrated the work of the NHS Blood and Transplant collaboration who conceived and put in place a collaboration across Europe between disperate organisations. Standardising specifications, standardising blood collection, sharing inventory, reducing bureaucracy, sharing resources, and, yes, saving doshFrom a personal point of view it was great to see my old classmate Eugene Cooke up there on the platform - I'm sure our MSc lecturer would have been proud of seeing the theory being stretched and applied.

But you don't have to be big to be great as Fabrick Housing demonstrated. if the team were any smaller they couldn't even fit the traditional definition of team. Yet, from a standing start they had reduced the supplier base by 8%, reduced the number of non-contract suppliers to 39% (that was an improvement of 25%), reduced the number of invoices by 21% while increasing the average invoice value by 33% and the average spend per supplier by 65%.To me this was exemplary - a vision, a passion, a plan and delivery.

Of course one of the things which makes public procurement different is that it makes a difference to people's lives. I don't think anyone in the room wouldn't have been moved by the two young people who joined the acceptance speech of the Children's Commissioning Care Consortium Cymru. Two people who's lives had been changed through excellence in procurement - that's some testimony for procurement.

But there was something else worth celebrating last night - public procurement professionals can enjoy themselves. They were helped by the comedian Rod Woodward. I particularly liked his story about the concerns in his Welsh Village when the film 'Babe' was released - I'll not spoil the joke for you when you hear it on the tele but the gist of it was 'naming and shaming'.

Naming and shaming was not what the GO Awards were about - they were about naming and proclaiming excellence in public procurement. That's something worth celebrating.

Wednesday, 24 April 2013

Scepticism is a procurement virtue

We all hold up Harvard, home of the HBR, as having a reliable voice worth listening to. That's where Michael Porter's 5 Forces, value chain and so much of procurement's basic academic theory derives from.  Yet we have now discovered that two of its esteemed professors, who influenced UK austerity strategy, got it wrong in their research. Fortunatelty one of student, Thomas Herndon, a PhD candidate (pictured), had the sense to question their data.

There is a not insignificant problem though in that the Chancellor may relied on Reinhart and Rogoff's flawed evidence which told him what he wanted to hear about austerity strategy, even though it has now been proved wrong.  But Osborne is not alone in being gullible.

We have also learnt that a key influencer in childcare policy was feted yet without much testing of his credentials.

Then we have the health nightmare unfolding in Wales as a result of the nonsense propagated by the now discredited Dr Andrew Wakefield over the dangers of MMR vaccinations. Many of the population, including the Lancet proved gullible.

That's not to mention the £50m spent on fake bomb detectors.

Is there not something which suggests that when you get someone who is coming up with a 'flat earth theory' you maybe should test a bit more, after all is that not what the scientific method is all about. The   student who have the bravery and tenacity to challenge the findings of the two Harvard professors was not welcomed with open arms but has been proved right.

As procurement professionals perhaps we also need to be bravery, more tenacious and sceptical.

Two examples of what I mean in terms of procurement: I recently critiqued a bid and found 25 assumptions stated by the bidder - when the buying organisation were challenged on the assumptions I found that raised a hare in terms of readiness to accept the bid without being contractually open to additional costs and risks. Secondly, some 20 years ago, I was asked to review a recommendation for a tender award a few hours before it was to be recommended to councillors for acceptance. I received many cynical looks when I strayed beyond my 'look at the process' remit and revealed that the 'numbers just didn't add up'. Of course the "specialist consultants couldn't be wrong" - well actually, sorry, they were wrong.

We should use the low risk option of questioning validity in procurement more often - all we need is to be more sceptical and recognise that scepticism can really add value.

So, why is it so difficult to be a sceptic? Isn't scepticism a procurement virtue?  

Jeremy Hunt's recommendations for procurement improvement

On the 26 March the Heath Secretary outlined his response to the Francis Report; the investigation into healthcare failings at Mid Staffs. I have been watching some of the NHS discussions and, in parallel, following the Public Administration Select Committee (PASC) Inquiry into Public Procurement. As I listened to the discussions on the Francis Report I had a vision of Bernard Jenkin (Chair of PASC) having had coffee with the Health Secretary and each accidentally leaving with the others papers. Just to clarify, I wondered what would have happened had suggested improvements for the health service been transferred across as recommendations for public procurement improvement.

First a caveat, I am not in any way trying to undermine or trivialise the significance of the horrors experienced by patients and their families at Mid Staffs, but merely exploring transferability of the proposed NHS improvements to public procurement. PASC will need to come up with something significant in the light of the conflicting evidence their Inquiry uncovered and decades of inertia, while CIPS has long argued that the procurement profession should be viewed as an equal of other professions. Now I pose the question: "Is what's good for the goose, good for the gander?".

Let's consider the Health Secretary's rationale for a response as an example of what I mean:
"Actions that must ensure [public procurement] is what every [procurement] professional and [citizen] wants - a service that is true to [government] values, that puts [citizens] first, and treats [it's users and the market] with dignity, respect and [professionalism]." 
Hopefully the above provides a feel for this blog, so let's see what you think?

It is recognised there is a need for culture change in the NHS. It is also inconceivable that PASC will not agree there is a need for culture change in the light of the evidence they considered. While the NHS needs to ensure a culture of 'patients first' is embedded, public procurement, I would suggest, needs to get on top of implementing policy, reducing costs, managing risk, working more strategically and collectively across silos, and with perhaps a little more honesty and humility.

I applaud the government for recognising mistakes happen in healthcare and there is a need to learn from those mistakes while fostering a culture of managed risk. Is it not true that public sector has too high a level of risk aversion embedded within its culture. Public procurement needs to also accept that mistakes happen and yet proactively encourage more innovation through prototype procurements. I think the current NHS system of explaining risks to patients prior to an operation is good but I have very, very rarely seen anything remotely similar applied in public procurement - why is that acceptable?

Monday, 22 April 2013

Global Manufacturing Festival talks Procurement Strategy

Thursday's Global Manufacturing Festival was not the place to be if you think procurement is about 'lowest price wins'. That's where Andrew Miller MP, Chair of the Science and Technology Select Committee (the sort of person you would expect to be able to do quite big sums) weighed in to the current debate on the role of UK public procurement. I don't think Miller was invited to give evidence to the Public Administration Select Committee inquiry into procurement, but it would be interesting to have his views expressed.

Miller argues that the government needs to be "more holistic" in procurement strategy and take into account strategic economic benefits such as job creation, skills and tax income:
They've got to also take into account whether procuring from a foreign company genuinely produces overall better value for money or whether if you take into account the potential tax revenues, people in employment, the re-skilling of people that come through having high value jobs, whether sometimes they ought to give greater priority to British companies.
That's not the voice of a mere a lone critic but, to me, an echo of Heseltine's definition of public procurement:
While PASC deliberate on the role of public procurement and one of the Chancellor's allies, IMF commander-in-chief Christine Lagarde, tells George Osborne his austerity strategy isn't working, I wonder are we starting to reach the tipping point which moves political procurement from cost cutting to value adding. Pursuit of wider procurement policy objectives would be healthy. However, the reality is that cost cutting, economic and social benefits, and sourcing from non-British firms are not mutually exclusive, yet, narrow-minded jingoism is unlikely to deliver long-term benefit if other countries follow suit. Equally, you have to consider what would have been the impact on the UK economy if it were not for foreign owned hotel chains, car manufacturers, steel companies, IT companies, communications network providers, banks, newspapers, and even teabag providers.

I've procured quite a bit of sponsorship in the past.  There's something ironic about criticising sponsors when they're paying the bills, therefore it would have been interesting to have been a fly on the wall when the sponsors of the Global Manufacturing Festival heard that non-British companies were persona non grata!

Perhaps it will fall on procurement policy makers to inject reality and pragmatism into the debate.

N.B. I confess that although the views expressed in this blog are my own, I work for an Indian organisation which employs over 50,000 in the UK.

Friday, 19 April 2013

Oyez, oyez, all ye who have something to say on public procurement

I'm sure you have something to say about public procurement. Have you ever thought of expressing your opinion in the form of a debate piece or like to share a new development (some of GO Awards entries would be ideal), or completed some relevant research which you'd like to share? 

Public Money and Management is an international, academic and professional journal covering public sector finance, policy and management. A special themed issue on Public Procurement is planned for January 2015 - yes, I know that's a long way away, but that's how long these things take. But the good news is that you also have plenty of advance notice to consider either completing some research or putting down some thoughts.

If you would be interested in potentially having a paper published in the Public Procurement themed issue, we'd be interested in hearing from you.  

Below is a copy of the formal call for papers, so give it some thought:

Call for papers: PMM theme on public procurement
Guest editors: Gordon Murray and Andrew Erridge
Public procurement is centre stage in public service delivery yet dogged by controversy: corruption allegations from Indian helicopters to Hawaiian university construction contracts; aircraft carriers which are not fit for purpose; wrongly awarded rail franchises; and trailblazing initiatives, such as the private finance initiative, which have questionable benefits. Public sector procurement is not easy because it is complex and high profile.
A public procurement themed issue of PMM is scheduled for January 2015 (Public Money & Management, Vol. 35, No. 1). The issue will provide an opportunity for debate pieces (1000 words), main papers (no more than 5500 words) and new development articles (up to 3000 words) to contribute to making a positive impact on policy and practice. Submissions must be of benefit to academics and reflective practitioners.

Submissions that relate their findings to practice are particularly welcomed, as PMM is widely consulted by practitioners. Equally, as PMM has international influence, international comparative analysis is encouraged. Articles may cover some of the following suggested topics, but we welcome contributions beyond this list:

  • Lessons from decades of public procurement policy initiatives. 
  • The effectiveness of public procurement as a political strategy. 
  • The appropriate role of politicians in public procurement. 
  • The impact of public procurement policy, for example innovation, SMEs, third sector. 
  • Combating corruption in procurement.
  • Evaluation of organizational structures. 
  • Public perceptions of public procurement. 
  • The measurement of procurement savings. 
  • The effectiveness of public procurement performance management. 
  • The impact of digital strategy on public procurement.
  • The future of public procurement.

Outline proposals of around 300–400 words for main papers should be submitted by 1 January 2014 to both editors at drgordonmurray@gmail.com and AF.Erridge@ulster.ac.uk, and manuscripts for debate and new development articles should be emailed as Word documents by 1 April 2014. See http:// www.tandfonline.com/rpmm fir information about preparing an article for PMM.

Wednesday, 17 April 2013

Stop this madness

One of the key reasons people enjoy working in procurement is, quite simply, like many budget holders, they like spending money. You could say we are shopaholics. But enjoying spending money is also perhaps one of our greatest weaknesses, too often we should be stronger in questioning the justification for the procurement and cry out loud 'stop this madness'.

So, in a perverse way I congratulate both Liverpool and Tesco for both effectively saying 'stop this madness'.

Liverpool had been planning a new Column to celebrate the 2012 Olympics. The problem is that the Olympics are past and the 'Column' still isn't completed. Over £500k of arts funding has gone down the drain (excuse the pun) on the three mile high water vapour art project. You don't need to be particularly clever to have recognised the deadline for completion was missed. Going over budget also justified questioning the project. But was there ever a business justification, and if there was, when was it tested?  The whole rationale behind Gateway Reviews is to make sure projects deliver to time, cost and quality and if that looks highly unlikely, cry out, 'stop this madness'. But crying out also requires bravery and to be in a position to have your voice heard at the right time. But maybe if gateway reviews had been used at Liverpool they would also have recognised and addressed some of the potential problems much earlier - ambitious and innovative projects are very far from being immune to technical and environmental impacts, and of course we have also discussed the perennial 'planning approval show stopper'. My personal favourite was the H&S issues of Manchester's 'B of the Bang'  which Liverpool's solicitors may want to read up on.

Tesco is slightly different. Today we have learnt of their decision to withdraw from the US market  at a cost of £1.2bn.  I am sure that Tesco have difficultly celebrating their withdrawal but Procurement need to be braver in following their example of saying, 'Stop this madness'.

Could it be that if shopaholics said 'stop this madness' more often with clear business justifications their voices may resonate more.

Tuesday, 16 April 2013

How seriously have the government taken the food supply chain?

I have been discussing the food supply chain for months now. It seems horsemeat has had such a massive impact on retail that it has reshaped both procurement risk management and consumer buying behaviour too. Yet, despite all the concern expressed by politicians it is only today that we learn the government has ordered a review of Britain's food chain and the risks to health. I really think we have been dragging our feet on this one; let's hope it has not been injurious to public health.

Of course meat scandals aren't unique to the UK but I wonder how much attention is being given to learning from other countries responses. While we talk of delisting suppliers and rapping them across the knuckles, others aren't just so laissez faire.  If the UK are considering others responses I would be interested to hear how effective and transferable they consider the response from Johannesburg, specifically the risk of 10 years in prison for false food labelling

While lost sales may be a real cause for concern we still don't seem to be getting on top of the situation, in fact if anything things are getting worse. There needs to be something which really says this will never happen again - perhaps a jail sentence is required or a ban from supplying any food products anywhere in Europe. What are the chances?

Monday, 15 April 2013

Procurement Benevolence

I wonder how many of you have heard of the Burghers of Calais? No this doesn't have any connection whatsoever with the horse meat scandal. The Burghers of Calais are to me one of the most fascinating examples from history of how people should behave. So recognising that there are memorials to them in a wide range of the world's cities, but most particularly in Calais and Westminster, what happened in 1347 which justifies their memorial and a discussion in a procurement blog?

First, I want you to recognise that the statues depict a group of city leaders (the Burghers) with the keys of the CIty of Calais in their hands and ropes around their necks - ropes ready for the hangman.

The 100 years war was on. Things were not going well for France and the English had led a remarkably successful siege on Calais. Those inside the city walls had reached the end and total destruction looked likely. The English king, Edward III, gave the city a way out - send out six of your top men with nooses around their necks and carrying the keys of the city, and those who remain inside will be spared. Six leaders volunteered to give up their lives for the sake of the citizens. Could you visualise an equivalent sacrifice from modern day councillors? Nevertheless, fully expecting a brutal death, a message came through from the pregnant English Queen petitioning on their behalf. The Queen's view was that killing the Burghers would bring misfortune on her unborn child. Edward III, who I assume wasn't known for his softness, had a change of heart. He spared the six Burghers.

So now we have memorials throughout the world to the six Burghers. One, in Calais, depicting the pain, anguish and fatalism of the six Burghers.  A second in Westminster depicting the King, having the power to kill, choosing not to - it is something similar to the image of the Caesars deciding on whether the gladiator should live or die.

So what on earth has all this got to do with procurement? Well it strikes me that on many occasions we can are faced with the option of 'beating suppliers up'. I am sure you all can think of an example of the 'bully boy' CPO - the tough guy who makes sure suppliers know who is in charge. But does that really make sense in the long run. There are no prefect CPOs - we all make mistakes and need to eat humble pie. When we need a supplier to help us out and the supplier has the choice of whether to be benevolent to the buyer in need, will that be pay-back time?

It has always struck me as strange that many buyers forget one of the worst things which could happen is that the market just decides it does not want to supply a particular buyer. The more I think of it, the person who gains most in the long-term, isn't the CPO who 'beats the supplier up' continually, but the buyer who shows benevolence and recognises that mistakes happen. That's the buyer who gets preferred customer status. That's not to say that we shouldn't be concerned about good supplier and contract management - no, it's to say that sometimes benevolence is the best strategy in the long term.

Think about it, nearly 700 years after the event you're reading a blog about six Burghers who made a sacrifice and a King noted for his military success and reigning over 50 years, who dealt out mercy.

Friday, 12 April 2013

The supply chain behind might be a bit of a mess

3.4m Toyota, Honda and Nissan cars have been recalled as a result of human error in the supply chain: "[a] worker forgot to turn the switch for a system that weeded out defective product parts" and improper storage of parts. Seems an amazing coincidence that last week I blogged on avoiding mistakes in procurement through using checklists - a checklist could have avoided the failure and a loss of reputation and potential profits.

Of course this isn't the first time we have discussed Toyota's supply chain woes and my heart goes out to all those buyers who must been accessing their personal procurement risk management. One recall is is understandable but this is becoming a habit - I suppose it means you get your car washed for free.

But then is it fair to point the finger at the automotive industry - is this not just just another version of the horsemeat supply chain problems which even this week refuse to gallop of into the sunset. In spite of unsuccessful  ministerial efforts to off-shore the blame and say there was no risk to health we may now have a health risk.

Nevertheless, pause, take a step back and recall that the rail franchise disaster also appeared to be based on human error in the evaluation formulae.

Then reflect on the PASC evidence that the adoption of 'lean' (which had its origins in Toyota) will be the panacea to all central government public procurement woes. Personally, I'm a great believer in Lean, indeed its application in public procurement was the focus of my MSc, but lean will not solve public procurement's core problems which appear to be much more related to culture and resistance to change.

Regardless of the sector, perhaps the real human error lies in trying to believe that systems work in absence of people and not recognising mistakes happen, therefore you need to put in place a comprehensive procurement risk management system. The car manufactures do not appear to have had the risk profile and impact right for the airbag issue.

Lean, for all it's benefits doesn't remove risk - ask the guy in front if he happens to be driving a Toyota, Honda or Nissan.

P.S. 12 April 2013 it has now become clear that Toyota have joined an automotive industry risk community with a strategic approach to risk management - the question remains though whether the proposed approach is too strategic to have identified the airbag risk? 

Thursday, 11 April 2013

Government Purchasing and The Iron Lady

You may recognise that we have spent quite a bit of time recently discussing the Public Administration Select Committee's current Inquiry into Public Procurement. There is a strange irony, which I suspect some may have missed, that the father of Bernard Jenkin (the PASC Committee's Chair), Patrick Jenkin was a Minister in Thatcher's Cabinet when Government Purchasing was published. 

Another Minister in Thatcher's 1984 Cabinet was Michael Heseltine,  Michael Heseltine has continued to demonstrate an interest in procurement as a political tool, and his voice on procurement is still listened to in the corridors of power as was evidenced by the recommendations set out in his October 2012 report being generally accepted in the March 2013 budget.   

So it appears timely and appropriate to reflect on what Government Purchasing said in 1984. Perhaps those messages were part of Bernard Jenkin's early induction into the world of public procurement. Equally so, we can ask ourselves about the progress made in the 29 years since the report's publication given 'the Iron Lady's' focus and determination. 

Purchasing objectives

Tuesday, 9 April 2013

Is there a risk of procurement dysfunctionalism on CSR?

Procurement Leaders have just published some findings from their research on the embedding of CSR in procurement. I don't have access to the full report but you can gain a feel through the freely available Executive Summary. The research suggests that 82% of respondents have managed to include CSR in supplier selection and evaluation criteria yet "it barely features in the overall procurement strategy".

The question I want to pose is quite simply: 'Without a procurement policy or procurement strategy commitment, is it right to include CSR in supplier selection and evaluation criteria?'

I truly believe procurement could and should make a major strategic contribution to CSR. Indeed I have been arguing that for 20 years. However, is it appropriate for procurement professionals to pursue CSR objectives without a mandate from the corporate leadership? I don't think it is.

Shareholders, and in the public sector the electorate through their politicians, need to set the priorities of the organisation. The CPO has a role in shaping those objectives and helping the organisation understand what can be achieved through procurement. But if the corporate leadership of the organisation have not said CSR is a strategic priority why should a penny more be spent on it by procurement? Is procurement not acting as a maverick pursuing goals not strategically agreed?

We all recognise that to embed CSR in procurement will be a major challenge and we have to salute those Procurement Leaders the research has identified as embedding CRS in tactical decision making. However, I would argue that CPOs first need to agree a Procurement Policy or Strategy which embraces CSR before embedding it in their decision-making. Of course embedding CSR in short-term decision making means that it can just as easily be dropped from short-term decision making at the whim of a new CPO - excuse the pun but if we want a 'sustainable' approach to sustainable procurement we need to gain the ownership of the C-suite.

Taking another perspective, is it not likely we would be concerned if CPOs sought to embed personal prejudices in procurement decision making, so what's the difference?  

Sunday, 7 April 2013

Is our vision for Big Data in procurement big enough?

My recent discussion on Digital Procurement Strategy included Big Data. The latest BBC2 Horizon programme, 'The Age of Big Data' caused me to give some more thought to Big Data and led me to conclude that if we were to harness Big Data we could see a paradigm shift in procurement performance.

As an aside, first a lesson from decision theory which the Horizon programme drew on from the planning of the manned mission to Mars (and perhaps more importantly the return journey). Faced with a gigantic range of Big Data and the need to make complex decisions, a simple principle, transferable to procurement, was used, namely, focus first on identifying those decisions which narrow down most options, they, in turn, cut out the need to consider many of decisions which would only have been relevant to the eliminated options. Simple principle but sometimes overlooked.

However, back to the core point. I began to think of the potential of Big Data for procurement decision making. Most recognise that spend analytics provide a core foundation for procurement improvement but I think that is now Level 1. If we were to capture a wider range of data, mine it and uncover patterns, we could:
  • Predict the demand/level of consumption of a good/service and help profile demand; 
  • Predict the optimum supplier capability and capacity required to deliver a required outcome in a given situation, and therefore reduce paying for over-capacity;
  • Identify the costs which could be removed to deliver a given solution;
  • Predict supplier behaviour and their likely negotiating responses;
  • Predict the optimum form of contract pricing, for example, fixed price, rise and fall, index linked;
  • Predict the optimum contract term;
  • Predict the most advantageous time to 'go to market';
  • Predict the optimum period required to solicit the best bid;
  • Predict the optimum budget and whole life costs;
  • Identify the key areas to focus on in contract management;
  • Predict procurement risk profiles and optimum mitigation strategies; 
  • ...
I can understand your cynicism of prediction and using big data in procurement, but as one of the examples in Horizon programme illustrated, even knowing that there's a 52% probability that you are right can significantly increasing effectiveness.

We now need to shift our thinking about Big Data from 'what if?' to 'why not?'.

Friday, 5 April 2013

Avoiding mistakes in procurement

Horizon had an excellent programme on 27 March, 'How to Avoid Mistakes in Surgery', which I think had some useful lessons for procurement. Dr Kevin Fong explored how 'no room for error' firefighters, aircraft pilots and F1 motor racing pit-stop teams have developed tools which minimise the risk of getting it wrong.

The primary problem appeared be that those in operating theatres could lose 'situational awareness'. This is an acknowledgement that our brains lack the capacity to focus on more than one issue at a time and having such a singular focus blinds us to other key factors. Like me, I am sure you are aware of situations when you have been so focussed on the problem in hand that when you reflected later. you said to yourself, "if only I'd spotted that". However, recognising that risk enables us to develop strategies to cope. 

The adoption of one tool has reduced deaths and complications in surgery by >35%. That tool is now used in every operating theatre throughout the UK and has been found to provide benefits beyond avoiding mistakes, for example, the tool has acted as an 'equaliser of rank' avoiding 'errors of dictatorship' and overcoming the fear of speaking out by those perceived as more junior. The tool has also helped develop a more collaborative approach. I think we can all recognise procurement situations when such a tool would have been beneficial, if for no other than quality assurance. Well that tool is available - it is the use of checklists.

The programme also acknowledged that, the more people involved in an operation the more likely it was for mistakes to happen. As procurement becomes more involved in cross-fucntional teams, inter-organsational collaborations and outsourcing there are many involved in decision-making and many 'hand-overs' of information. Ensuring one person is in charge and jobs are broken down so that everyone has a simple but effective role is reducing mistakes in surgery, as it should in procurement.

But crises happen and in a crisis there isn't necessarily time to think. I can recall recently being asked to step into a procurement of £600k and within minutes make a strategic decision as to the way forward - I am sure you have similar horror stories. The programme identified that in aircraft emergencies catastrophes have been avoided in minutes as a result of standardising protocols as much as possible and making them 'second nature' so that improvisation is only required when it is absolutely necessary.

But mistakes do happen and things go wrong beyond the big procurement fiascos we tend to focus on. The programme stressed the need to avoid 'witch-hunts' and instead be positive about errors, analysing them, learning what went wrong and then taking corrective action for the avoidance of future failures.

You will have a few days to watch the programme on iPlayer but here's my summary for avoiding procurement mistakes:
  1. Retain situational awareness; 
  2. Use checklists;
  3. Be clear who is in charge;
  4. Ensure every one has a simple but effective role;
  5. Standardise until you absolutely have to improvise;
  6. Be positive about errors so that you can correct for the future.

Wednesday, 3 April 2013

Is 78% non-compliance with procurement procedures the tip of the iceberg?

Waterford City Council, reported to have 78% of a sample of procurements audited to be non-compliant with procurement procedures and, 40% of contracts awarded without a procurement process must be up there with a claim for the Guinness Book of Records - it certainly places them on the procurement map. Almost €219k had to be returned to funders as it was not spent in accordance of the rules (mind you this is not the first time we've encountered this risk of claw back of money previously spent).

 The Council's defence is also potentially worthy of an award in itself:
"Whilst acknowledging that the full rigours of the procurement rules were not adhered to, the adhered to principle of obtaining value for money was of upmost importance" 
    It is inconceivable that the Council can believe their own rhetoric in the absence of a more comprehensive review. Unfortunately, I can visualise that flawed defence being echoed many times in the future by CCGs given their poor foundation.

    Insofar as I can base my views on the Internal Auditors Report, I agree the need to professionalise their procurement and embark on a skills development programme but I personally don't think that will be suffice.

    I suspect that what we are seeing is only the tip of the iceberg. The administrative processes for the receipt and opening of bids, and a sample review of tender evaluations were not included in the review. I suspect the inclusion of those areas within the audit could have revealed a minefield open to corruption and awards not made to the most economically advantageous tender. Nor did the review consider the effectiveness of contract management - can the constituents of Waterford really be confident that their Council are getting what they have paid for?

    Why not give the Internal Auditor's Report a read and use it as a test of your own organisation - it would be great to hear from you if you can beat the benchmark of 78% non-compliance.

    What are the national strategic objectives of procurement?

    We all know that a strategy is forward looking and circumstances sometimes justify a change of direction. The general idea though is that you are consistent in your logic and what you are trying to achieve, your objectives.

    Today’s raft of announcements from George Osborne suggests the Treasury haven’t yet read that chapter of the strategy book though.

    Mr Osborne holds the view that those with vested interests always complain, with depressing predictable outrage, about every change in a system which is failing. According to the Chancellor “They want to take the cowardly way out, let debt rise and rise and just dump the costs on to our children”. That’s his view on those concerned about welfare reform. 

    Yet, if we were to substitute ‘environment’ for ‘debt’ there seems to be some inconsistency. Does the Chancellor really want to bow to pressure groups and pass the costs of negative environmental impact on to our children?  While the Chancellor won’t bow to pressure of lobby groups on welfare reform, he does appear happy to bow to those pressure groups with vested interests who want more road traffic – haven’t the UK made major global commitments to reduce the UK carbon footprint? Has it now been decided that carbon footprint reduction is no longer an objective?

    We find that decisions about investment in road infrastructure, which were rejected in 2010 and some rejected 10 years ago, have been revived. We will have £1bn investment to get us back on the road to recovery through investment in roads. It looks very like we know that vehicles aren’t good for the environment and we’re merely passing the environmental costs on to our children, and we know some of the road schemes will drive through the centre of environmentally sensitive areas, but that appears okay now. Unlike those lobby groups arguing unpalatable messages against welfare reform, it certainly appears that a lobby group’s report, which was also being conveniently published today, supporting road investment has had some bearing on the Chancellor’s U-turn.

    While the Chancellor hopes that the investment will help stimulate economic recovery why did he not adopt the policy when he took the reins of our economic strategy?

    Separately the Chancellor has also argued today that the new Prudential Regulation Authority must learn the lessons from the past. I previously suggested we could learn from Australia’s response to the GFC by putting in place the approval schemes necessary to have major projects ready ‘to go’ – clearly that advice wasn’t heeded.

    Monday, 1 April 2013

    EU, Brazil & Russia public procurement treaty: A folly

    Today the Public Procurement Treaty between Russia and Brazil, and the EU comes into force although it appears procurement managers are poorly prepared.

    The tripartite agreement has gained little attention in either the mainstream or procurement press. Negotiations were personally led by EU President, Herman van Rumpuy. The 'Rumpuy van', as it have become known, was signed this time last year. Initially viewed as an innovative response to the global financial crisis through easing access to Brazilian and Russian public procurement contracts, it now seems to be riddled with flaws and likely to backfire. UK Procurement Policy wonks failed to realise that UK public procurement managers will now be required, under law, to accept bids in the native languages of both Russia and Brazil. The associated costs of translation and delays in procurement processes now look crazy. The very thought of reading Cyrillic is beyond me, let alone the need respond to points of clarification and debriefing in the native tongues.

    Portugal have long standing treaties with Brazil and will face least disruption, but even Portuguese is not the easiest language to master for those of us who have been able to previously require bids to be submitted in English.  At least the Russians have taken the steps to understand UK procurement through the work of the Transeuropean Centre for Commerce and Finance. CIPS on the other had haven't even briefed their members on the implications and there appears to be no guidance on the Cabinet Office website. In the absence of more explicit guidance the most reliable source is the EU interpretative note and associated training video.  Alternatively you can read the Law Society's 'Idiots Guide' for CPOs.

    To me the whole thing is destined to fail and looks remarkably foolish, but then it is that time of year.

    P.S. No need to panic - this was an April Fool.