Monday, 30 December 2013

A procurement prediction for 2014

I generally don't make either New Year resolutions or predictions but this year I am going to break that habit and make a prediction. My prediction is that the blind belief that public sector PQQs are evil personified will be seen for what it is, a folly.

At some stage during 2014 it will dawn on those lobbying for the death of the PQQ that organisations in the private sector, who have no need to follow the herd of public sector political rhetoric actually use PQQs too and see them of use as both buyers and sellers.

I predict that those business organisations who have lobbied for the removal of PQQs will recognise the transaction costs of single-stage procurements, borne by every bidder, are more costly than the bidding costs of only pricing when the bidding organisation has a high probability of success. Common sense will prevail and we will see PQQs recognised, for what they are, as a useful tool.

Linked with that, I also predict that, rather than DCLG mandating the removal of PQQs, when they consult with councils, they will learn that councils would prefer the right to chose when a PQQ is appropriate.

So, that's my prediction for 2014.

I hope it is successful for you, thanks for reading the blog.

Saturday, 28 December 2013

Is putting on the Ritz compatible with centralised purchasing change management

Some of the greatest challenges which face procurement have been how to put in place collaborative purchasing arrangements, avoid maverick buying and ensuring adherence to  corporate framework agreements. We heard yesterday that the Crown Commercial Services are making use of outside support and one of the areas of help is centralised buying. We're also familiar the preciousness of identity, for example, the difficulties of getting England's 43 police forces to agree on a common specification for white shirts - a problem which the Gershon Review highlighted a decade ago, yet still persists.

Part of the problem is that individuals like to suggest they are in such a position of power and in that position they have the the freedom to exercise choice by opting to step outside what is okay for others - what is good for the goose isn't always perceived as good for the gander. The problem is also actually about change management - you need a compelling justification for the 'corporate deal', you need to have brought key stakeholders with you and won their heads, if not their hearts, and you need clear and consistent leadership by example. If you can get the Chairman and CEO to use the corporate deal, for example, for travel policy, you're well on the way - if you can't get them to adhere, then all sorts of excuses, justifications and exceptions start to materialise.

So given that CCS hope to get greater adherence for their bulk purchasing better buys, today's revelations in the Times that the Chancellor has opted out of lower cost (free) accommodation at 'The Ambassador's' and instead chosen to stay in private hotels (£289.97/night) is either a a threat or an opportunity for their strategy.

Tuesday, 24 December 2013

Case studies in Procurement fraud for Dummies

Who would immediately spot the likeness between a Sony Vice President and an NHS learning & technology manager. Yet, apart from both making the news today, both carried out simple procurement frauds.

The Sony VP submitted false invoices and pocketed the dosh, while the NHS manager was slightly more creative in that he set up his own company and supplied the Trust at inflated prices.

These types of procurement fraud are straight out of the introductory pages of Procurement Fraud for Dummies and could have been easily avoided. Three-way matching is the traditional protection: the person responsible for the Purchase Order, the person confirming delivery and the person authorising the invoice payment need to be different people. An effective eP2P system is another solution - when you're dealing with £1m fraud the business justification easily stacks up, but the system needs to be properly implemented with the right protections.

Slightly more protection is needed to protect against the likes of the NHS fraudster, yet still fairly basic. He was able to invoice for services received from his own company at inflated rates, for example, invoicing £10,750 for a service which cost £1,500. Why on earth did the organisation not require a 'ballpark' estimate of the price compared against the invoice price? Although I am not a great fan of low thresholds for RFPs, it would be interesting to know what the Trust's thresholds were and whether those internal rules were policed. Then again, how was it so easy for an employee to sell to his employer - it may not have stopped the fraud but signing an annual declaration of interests may have helped.

Monday, 23 December 2013

When the Ministers met the CLG procurement inquiry

At last, I hear you say, we've reached the seventh, and final, oral evidence session of the CLG Committee Inquiry into procurement. The witnesses being Baroness Stowell of Beeston (Parliamentary Under-Secretary at DCLG with responsibility for procurement) and Nick Hurd (Minister at the Cabinet Office). When you recall the central government's CPO reports to the Cabinet Office these witnesses should be in a very strong position to speak with authority on the political objectives of procurement.

The Baroness took an early opportunity to volunteer her view of procurement effectiveness:
They should understand that it is not just about buying the relevant services at the best price possible but that this is also an opportunity to make sure that procurement is a way of getting the best service you can and that it is possible to improve the services that are provided locally. If we start putting a [savings] target on things, the focus then is on that rather than what I would see as the more important outcome, which is a better local service for local people.
It is important to note that this was stated in response to a question on what could be potential savings from procurement as opposed to "what would good look like". The Minister responsible for local government procurement, therefore, sees procurement as not about lowest price but better local services. It is really disappointing that the Committee didn't take the opportunity to compare that view with the Cabinet Office Minister's, as you may recall his boss, Francis Maude, told the Public Administration Select Committee in May of this year: that the "primary objective through procurement is getting the goods and services needed by the citizens at the best price". Is it just me, or are the Cabinet Office and DCLG at odds on what epitomises good procurement?

Then compare, former Local Government Minister Michael Heseltine's view, which has the implied endorsement of the Chancellor:

Thursday, 19 December 2013

Can the loss of £100m be a good news story for procurement?

The PwC report into the failed BBC Digital Media Initiative has now been published. We know masses
 of public money was wasted and we know, with the benefit of hindsight, that we'd all have done a better job and pulled the plug earlier. But I think this report is actually a good news story, particularly for complex contracting, if the high profile of the debacle leads to the report being read and learnt from. Learning the lessons could lead to many more doomed projects being aborted earlier and therefore unnecessary costs avoided.

The report suggests that there was an absence of an effective governance structure which enabled challenge of time, cost and quality. This has been a common problem with complex contracts and reminds me of the problems with the Scottish Parliament building when David Steele announced he was kept in the dark by civil servants on progress. It is not enough for those in decision making roles to 'approve' they also need the confidence to ask challenging questions as part of risk management.

There was a failure recognise that the DMI was more than a technology solution and needed effective business change management too. Reporting was based on the technology risks and failed to give due attention to the business change management risks. Again this isn't a first but remains, to me, one of the key reasons IT projects fail - it's a bit like giving someone who has never had a telephone a brand new iPhone and assuming they will immediately understand why and how to use it. The power in technology, to me, isn't in the machine but the capacity and willingness of stakeholders to harness its potential.

Wednesday, 18 December 2013

Celebrity advice, BMJ and lessons for procurement scrutiny

The latest issue of the British Medical Journal includes an interesting paper on the why the public follow celebrities' medical advice. To me, this paper is particularly relevant to the current CLG Committee Inquiry into local government procurement but is also relevant to procurement decision making, in general, when perceived 'experts' (celebrities) provide advice.

The BMJ paper discusses the positive influence which celebrities can have in highlighting health issues, but cautions against celebrity 'quacks' whose advice is listened to, even when it is dangerous, if adhered to. The question is 'Why do celebrities utterances and endorsements carry so much weight even though they lack any evidence, qualifications and specific experience?' The paper draws on economics, marketing, and psychology literature to provide an answer.

One of the reasons is that the public are bombarded with competing information and in order to make sense of that information:
people naturally look for signals that indicate one source as being more credible and effective than another. Owing to the vaulted status of celebrities in society, their endorsements act as signals of superiority that distinguish the endorsed item from competitors, encouraging people to change their health behaviors accordingly. 
[Celebrity] credibility may stem from the halo effect of celebrities' success, which biases people's judgments of celebrities' other traits and gives them a cloak of generalised trustworthiness that extends well beyond their industry or expertise. Celebrities are in turn perceived to have greater credibility than their non-celebrity counterparts, such as doctors, despite having less medical knowledge and experience.  
I don't see the problem of celebrity advice being isolated to the medical world. I also feel that 'celebrity status' can be more widely defined - isn't it something about putting someone on a pedestal. I have frequently observed the advice of procurement specialists being swallowed up in the aura of 'celebrity' status.

Tuesday, 17 December 2013

Evaluation drama for 'the Queen'

Back in August I discussed the Foster's Comedy Awards and their approach to evaluation. Now I turn to the drama of the theatre, rewriting the script and a novel approach to declaring best Actress Award at the Evening Standard Awards. Pantomime may just be seasonal.

In this real-life drama we learn of a secret ballot between five judges which ended in a dead heat. In a very bizarre piece of casting, the two actresses, who could have been equal winners, found themselves relegated to joint second position as they were overtaken by a new winner, Helen Mirren for her role as the Queen in 'The Audience'.

While a secret ballot took place to determine Best Actress, the results were seen by two of judges, who were employed by the sponsor (The Evening Standard). The two judges saw the results of the ballot, then altered their votes and the completely new winner emerged.

One of those who changed their vote did so by eliminating one of the contenders for the starring role by creating a new category, Best Musical Performance. Whether or not that particular actress was given the choice or asked their preference between the existing and the new award, we don't know.

There was no attempt made to reach an agreement with the other judges, but three of the judges have now resigned. Wouldn't it have been interesting if the culprits had watched Twelve Angry Men and learnt from that instead.

For the winner some of the shine has been removed from what could have been a well-earned accolade. For those shortlisted who lost there will remain the doubt of whether or not they should in a just award been the shared winner. For the judges there will remain the lingering doubt that they were just pawns. Who can have pride in such a piece of shoddy workmanship. Who would want to be associated with such a pantomime.

Next year there won't be judges, just an advisory panel. I'd expect the new advisory panel to ask for some terms of reference before participating to satisfy themselves they've more than walk-on parts in a granted play.

Could you just imagine the outcry if, in a tender award, you couldn't work out which of two bidders is the winner and arrived at solution by deciding 'let's give the award to someone both beat and create an additional award to take the bad look of it' - I'm sure that would never, ever happen.

Monday, 16 December 2013

CLG Committee procurement inquiry: What are the 10 characteristics of good local government procurement?

Regular readers will recognise that I have been following the CLG Inquiry into local government procurement and have not found the approach to taking evidence robust. Nevertheless, we live in hope, while, the Committee persist in asking witnesses, who probably have really good evidence to give, questions which are beyond their ken and fail to ask 'How could this witness possibly know?'.

And so arrive at the sixth oral evidence session when the Committee should have been able to ask a senior manager from the Audit Commission Information and Analysis Group, the Head of Counter-Fraud at the Audit Commission, and the Director of Cabinet Office and Cross Government Studies at the National Audit, 'What they knew?'.

Now, I think these three witnesses should have been in a position to talk about research method, so it was reassuring to hear, buried within the Chair's opening airing of opinion, the following:
How do we get a real feel about whether local authorities in general are using best practice in the area of procurement?   
Neither of the three witnesses recommended a research approach to the Committee but instead said they were not in a position to answer whether or not local government is adopting best practice. I'm sure you have recognised the difference: the witnesses were being asked about method, which should have been their area of expertise, but answered an entirely different question. We know the Audit Commission's role has changed (previous witnesses have reminded the Committee of that too, and we know NAO has a focus on central government, but that's not what the Committee asked about! Sadly the Committee allowed themselves to be distracted and didn't return to the witnesses specialism, evidence gathering.

Friday, 13 December 2013

Retail buyers need to think about reducing the impact of factory fires

Only a few months ago I cautioned against retail buyers relaxing their guard due to the proposed agreement on minimum safety workers for Bangladesh factory workers.

Now we learn that factory fires are a weekly occurrence and there appears to be a culture among those responsible for the factories  'comes with the territory'. Would it be acceptable if 800 garment workers in the UK were dying as a result of factory fires.

Don't get me wrong, I am not the enemy of retail buyers but I really think they are in a position to make a difference through their procurement approach. My question is 'Are retail buyers including in their contracts and obligation to provide adequate fire escapes, fire alarms, first aid, fire fighting training and evacuation training?' if they are not they can't claim they are taking commitments to sustainable procurement as seriously as they could. If they are, what are their processes to ensure those commitments are honoured? 

Even if they buying firms don't view fire safety of their supply chain workers are their concern, perhaps they need to reflect on reputational risk and adverse impact on supply chain flows. 

Now let's accept that there are always a range of alternative ways of solving a problem, and the problem is that factory owners want to reduce their costs as opposed to investing in the 'option' of worker safety, equally they don't want to make investments which place their own factory at a disadvantage. That being the case why don't the UK retail buyers combine their influencing power and insist that those in government improve worker safety through stronger health and safety regulation and building regulations, and the effectiveness of the inspection regime? 

Wednesday, 11 December 2013

Nelson Mandela's memorial lesson for procurement

With the focus of the world's media on Nelson Mandela's memorial, it would have been assumed, not only that the security for the world leaders was going to be exceptionally tight, but also that those delivering any 'front-of-house services' would have a gone through a rigorous assessment to demonstrate their capability. Yet, somehow, the platform party included an impostor, a fake sign language translator.

This is the stuff you just couldn't make up, not only was there a serious breach of security (the fake was standing beside Obama behind the security screen) but, if there was some sort of procurement exercise to provide translation services, it broke down completely. Mind you, there was also an official translator on stage although no-one seems to have questioned what was going on.

So we have the procurement of security which seriously failed. It failed not only in that the fake was on stage, but also it appears no-one has the faintest notion who this person is. That's pretty damming stuff.

But to make matters worse, the fake was only waving his arms about and no-one in the 'signing' world has been able to read a word of which he signed. Serious as this saga is, the clip is worth watching as it is very entertaining:

12 Dec: PS so now it has emerged this was a procurement failure - a company with a poor history of performance and no evidence of checking qualifications.

Tuesday, 10 December 2013

The adverse impact of cost reduction strategy

I'm sure many of you will have come across one of the 750,000 who suffered embarrassment or frustration as a result of the RBS system failures on Monday, 2nd December. Customer perception of RBS took a nosedive. While it didn't appear clear what was the specific cause of the failure, the chief executive was clear that the route cause was a flawed cost reduction strategy and lack of investment in IT.

I've been thinking about this for a few days. The CPO should be concerned with future costs and whole life costs in particular. The CIO and CFO should be concerned with the IT investment strategy. But should the CPO have a role in raising the risk of a lack of forward investment, its impact on customer and shareholder value, and its impact on future costs? Its very similar to the procurement option appraisal of planned/preventative maintenance as opposed to reactive maintenance. I really can't make up my mind on this one and its not something I have ever personally been involved in.

What's your experience?  What do you think?

Friday, 6 December 2013

Strangers on a Train - Procurement Theatre review

Yesterday, I took on the role of procurement theatre reviewer with 'Twelve Angry Man'. Unfortunately, it's not a role I envisage being able to do often and I am unlikely to be able to justify giving up the day job, not least as I am so rarely in London now. 

However, I recently also had the good fortune to see 'Strangers on a Train' - £11.50 for a £63 ticket seemed a remarkably good start to the night. The joys of buying a cheap deal and receiving an upgrade.

As with 'Twelve Angry Men' I could see procurement lessons. 

The story is that of a causal encounter on a train journey. Two strangers fall into conversation. One of the strangers falls into the trap of saying more than he should to his fellow traveller, who of course entrapped him and he never thought he would see again. In a bizarre twist he then finds himself blackmailed and obliged to act in a way which would have previously have been inconceivable. 

The play is set in the days before mobile phones and those 'private and commercially sensitive' telephone calls which are effectively 'broadcast' in train carriages and executive lounges all over the world. The procurement message is that 'careless words can cost dearly' so be cautious what you say and of your boasts, but equally, be wary of entrapment.

While not as good as 'Twelve Angry Men' I did find myself gripped by the play and drawn in to the extent I actually jumped at one stage. An excellent thriller. While I felt Laurence Fox was really good I just couldn't get past Lewis' sidekicks accent; to me, it was Jack Huston who really shone - an excellent performance. Sadly the benefit of a great set was sometimes detracted from by some of the action being  blocked by the ceiling of the rear stalls.    

Twelve Angry Men - Procurement Theatre review

The film version of 'Twelve Angry Men' was released the month I was born, yet I have never seen it. Yes, I am of the vintage which remember Robert Vaughan when he was 'The Man from U.N.C.L.E.' and Martin Shaw as one of The Professionals. Perhaps that was why I couldn't resist the opportunity to see the stage version at The Garrick tonight.

The high-level story is a comparatively well known court drama played out in the Jury Room. One Juror isn't prepared to go with the pack and eventually the pack go with the original solitary Juror. It is brilliantly played out at the Garrick by Shaw, Vaughan, et. al., and I couldn't recommend it highly enough.

But it struck me that the procurement lessons didn't just lie in getting a good deal from but in the play itself.

The Jurors each bring their own personal judgements to the Jury Room. Some were formed by the appearance and pedigree of the defendant. Some were based on racial prejudice. Some were influenced by the urgency of prior commitments and a preference to be somewhere else. Some too strongly influenced by others 'opinions'. Some even viewed changing their initial impressions as something to be defended, as if in a competition. Having said that, this is a play which will have you laughing out loud - it actually makes use of some brilliant irony and comedy.

It stuck me how effective questioning led to a better decision as the lack of robust evidence was highlighted.

However, it also struck me that this was a bit like some of bid evaluations I have witnessed. The need for a quick decision and pre-conceived ideas led to a poor decision, if not, wrong decision. The dominant voice for a strong individual subtly, and sometimes not so subtly, bullying others into a decision. I could go on with the parallels. But, if, instead of a Jury Room drama, this was recast as a Tender Evaluation Panel, I wonder which character would represent the CPO?

Twelve Angry Men may be a great play, but I think a DVD of the film would be a useful procurement training resource the next time a complex contract award is being approached. Come to think of it, it would be a very useful procurement training resource (full stop).

Wednesday, 4 December 2013

CLG Procurement Inquiry could ask 'why bother?'

I have been discussing the oral evidence sessions at the CLG Committee Procurement Inquiry. I assume those of you following my observations can sense my frustration that this excellent opportunity appears to be slipping away. I'm sorry to say the second panel session of the fifth evidence saw some of the same methodological flaws being repeated.

The opening question of this session asked witnesses from the Federation of Small Businesses, Market Dojo, and Bangor University:
Could I just begin with a subject where we have perhaps had slightly different points of view expressed by yourselves and your organisations? It is about trying to achieve greater opportunities for SMEs and micro-businesses to obtain contracts, and the extent to which there is a potential conflict between that and the council getting the best value for money from its contracts.  
So, ask yourself, if that was the exam question, what would the correct answer look like? Set aside that 'best value for money' is frequently 'in the eye of the beholder'. Were the Committee asking: 'Is the objective of achieving greater opportunities for SMEs and micro-businesses incompatible with the objective of achieving best value for money?'

If that was what the Committee were trying to establish, quite simply, they didn't hear. They heard about a new term for me, 'stickability' (that's the amount of contract value which stays in the local community). They heard that local sourcing can lead to better social cohesion. They heard that local businesses employ a range of employees. They heard that there could be growth in the local economy. They heard that local government procurement processes can act as a barrier to SMEs. They heard that "SMEs are the reason why a lot of large companies fail and yet local government procurement does not take account of this very well in the process" (What on earth is that about?). They heard that councils could not take account of innovation in the award process. But did they hear if the objective of achieving greater opportunities for SMEs and micro-businesses is incompatible with the objective of achieving best value for money?' - in a word, 'No'!

To me this is a serious weakness of the oral evidence sessions - poorly focused questions are being asked and the Committee just aren't extracting what they need to know. There are also opinions being expressed which appear to lack any foundation yet are not tested and lack of clarity of definitions which  mean answers are given but there is no shared understanding.

Monday, 2 December 2013

Social Value Act, social benefit clauses & SRO at CLG Committee Inquiry on procurement

And so to the fifth evidence session of the CLG Committee Inquiry into procurement. The first panel representing the Centre for Local Economic Strategies, National Council for Voluntary Organisations, and The Joseph Rowntree Foundation - all organisations which have previously helped move the procurement improvement debate forward.

To set the witnesses off to a good start and feel relaxed, the Chair started with one of those classic sextuple questions witnesses must, by now, be starting to expect:
One of the things we will be looking at is how procurement might be used for a number of objectives. We will begin by looking at how it might be used by local councils to tackle social disadvantage and poverty. Do you think councils are actually doing this effectively? Are they getting it right, or is there more they could be doing? Who would like to start?
Would anyone seriously have expected the witnesses to answer: "Actually, I think councils are really doing the absolute maximum that could be done". 

That reply wasn't heard but instead we heard that making an impact was down to the culture of officers and how procurement and economic development work together. I agree that there needs to be effective linkage between economic development and procurement but there's a flaw in the answers as they suggest officer driven policy and strategy and made no reference to political leadership. To me, in local government, elected members need to drive and lead the initiative - it is elected members who have to decide on competing priorities and then officers implement and are performance managed. If officers lead, to me, there is a high risk that their own personal agenda are pursued contrary to those of the democratically accountable leadership.

Now, let's reflect on that a bit further, three witnesses and not one of them initially mentions political leadership, yet, in the follow-up question, when political leadership is mentioned by the questioner, surprise, surprise, suddenly: "Political leadership is key, because it tells officers this is a high priority on the long agenda of things they have to deal with..." - call me a cynic, but had the questioner not mentioned political leadership would that key ingredient have been identified?