Thursday, 29 May 2014

NHS Procurement Tsar meets the Fat Controllers.

The NHS' new procurement tsar looks as if they may have an interesting first challenge - working out
a procurement strategy for 'fat clubs'. The National Institute of Health and Care Excellence (NICE) has endorsed three providers who can deliver, what appears to be, NHS funded places at 'fat clubs'.

The challenge now is how the Tsar will approach the procurement of 'fat clubs' to maximise the purchasing power of the NHS.

With only three providers operating through a network of local clubs we should see some interesting procurement questions answered.
  1. Are the local providers endorsed by NICE?
  2. Who would be the contracting bodies - the national or local providers?
  3. Will payment by results be used?
  4. Will the providers collude and carve delivery?
  5. How will alternative providers respond to potentially be excluded from delivering the service as they don't have NICE endorsement?
  6. How will the EU procurement rule be complied with?
  7. Somewhat tongue in cheek, will we see a lean approach pursued?
  8. What evaluation weighting will be used?
  9. Will the Tsar be able to shape up?

Tuesday, 27 May 2014

What could UKIPs success mean an earthquake for public procurement strategy?

UKIP have had a remarkable electoral success over the last week. Their European Manifesto is entitled 'Create an earthquake' - perhaps it's worth considering what their manifestos say and the possible implications for procurement strategy where they have become a dominant voice.

Actually, the European Manifesto, from a procurement perspective is 'Business as Usual' but the UKIP Local Manifesto states they will: 
Make it easier for smaller and local businesses to tender for local authority contracts, and Cut the councils’ advertising and self-promotion budgets.
Now, to me this is interesting when compared with my comments on last year's Manifesto. Strangely I can no longer access the 2013 Manifesto but my comments last year suggested the following:

Monday, 26 May 2014

Never be afraid to ask "are you sure?"

The star economist of the year, Professor Thomas Piketty, who has topped the best seller lists with his 577 page 'Capital in the  Twenty-first Century', has been exposed by the Financial Times as having made transcription errors, used incorrect formulas and cherry-picked data.  It makes little difference whether, as he claims, his core argument stands up or indeed whether he has been lauded for his statistical work - the method was wrong and that undermines its credibility.

You may also recall the recent discussion on research on statins. Research published in the British Medical Journal “overestimated the side effects of statins by more than 20 times”. There are fears that those who stopped taking statins as a result of the original claims may have been unnecessarily exposed to heart attacks. It may be, as they say, 'academic', to some that the data was unreliable.  

In both these cases it would have taken a lot to have challenged the assertions of the authors but it turns out they were built on foundations of sand.

Of course this isn't the first time I have discussed these problems. You may recall the case of the correct numbers being inputed the wrong way round. I could go on but that may act as a distraction.

I would like you to recall these examples the next time you find yourself being pressurised in a tender evaluation by an expert - even the great and the good can make mistakes. But then again, so can you and I. Perhaps it's wise to ask "am I sure this is robust?"

Sunday, 25 May 2014

Procurement Fraud Vulnerability: A Case Study

This case study reports on a due diligence review of vulnerability to procurement fraud in a global manufacturing organization. The review was carried out in response to the UK Bribery Act 2010’s need for organizations to put in place processes to protect against bribery in procurement. The case study organization was identified as having 41 areas of vulnerability to the risk of procurement fraud; illustrative examples are provided. It is argued that due diligence reviews to protect against procurement fraud could help in repositioning procurement and reduce costs. The article also poses the question: Are employees owed a duty of care by their employers to protection against allegations of procurement fraud?
This is an abstract of my paper published in EDPAS (EDP Audit, Security and Control) Newsletter which can be accessed here.

Thursday, 22 May 2014

Kiss and tell procurement codes

There was a lot of coverage in Wednesday's press on Ipswich Borough Council's new Code of Conduct, for example, in The Independent and The Times. The Council's new Code, we are led to believe states:
Employees must declare any close personal relationship with another employee of the council where the relationship could cause, or be perceived to cause a conflict of interest, for example, where there's a risk of the requirement for the separation of duties in connection of the with the award of contracts or funding, or a risk of conflicts arising in the employment relationship between such employees. In such instances there may be a need to consider alternative employment for one of the employees concerned. 
Long and short-term relationships between members of staff, with councillors or with outside contractors and suppliers, must be declared.
I have searched high and low on the internet to see an actual copy of the Code but have been unable to access it, so I will have to take the various reports at face value.

Anyway, while the popular press are picking up on the legality of the need to declare staff relationships, we need to reflect on the relationships between members of council staff and suppliers.

Given the rise of internet dating, for example, and, I am told, the number of 'one night stands' what would constitute a relationship which has to be declared? Would some even recognise a 'relationship'? What about someone who wasn't actually told the truth about the name and role - do they now have to keep a log book and check ID? What about if you were jilted? Will the next iteration be a need to declare connections through membership of a social network?

Without doubt I see the value of declaring potential or perceived conflicts of interest in procurement but I think to make a Code work it has to be pragmatic. If the Code isn't pragmatic breaches will take place and gradually it will lose its teeth.

I'd be interested to hear if any readers have experience of 'kiss and tell' procurement Codes and how they were implemented? I'd also be interested in learning more on Ipswich experience of policing the Code?

Monday, 19 May 2014

A Mars a day doesn't help procurement pay.

Today we have heard that Mars UK have revised their terms of doing business and expect suppliers to wait 120 days (as opposed to the previous 60 days) for payment. Alternatively, it is reported, suppliers can access supply chain finance, for a reduced payment in 10 days.

Only last week I discussed the issue of late payment and I have to admit I am surprised it is a symptom of the economic recovery as opposed to the recession. Nevertheless, it can be assumed Mars UK have a strategy behind this new policy which suppliers, in turn will have to decide on their response. Now there is a danger that others will feel this is the way forward and something to be copied - so a few thoughts:

  1. How dependent are you on your suppliers? If you need your suppliers more than they need you they may chose to say "no thanks";
  2. How easy is it for you suppliers to find alternative customers? If it is easy for suppliers to find alternative customers they may just opt to give those customers preference over you;
  3. How competitive are your competitors? If your competitors are also using the same suppliers don't be surprised that they offer your suppliers more attractive terms to suck out your supply source?
  4. Have you existing contracts in place which state the existing terms? Don't be surprised if suppliers decide to enforce those terms unless you give them something in return, for example a longer term commitment;
  5. What will you do if suppliers just say "okay, but in that case the price is higher and lead time longer"?
  6. Have you thought what you will do if the suppliers just say 'no' - how will you mitigate against that risk?

Sunday, 18 May 2014

Has the narrative changed on CIPS Licence?

Having read the latest issue of Supply Management I am mystified what all the fuss about CIPS proposed License to Practice was about - was my interpretation of the initial discussion wrong or have CIPS spun a different story rather than acknowledge a change of plan.

You may recall the fanfare of the need to professionalise the procurement world and insist on a 'closed shop'. I questioned the whole rationale and felt it was really a nonsense and distraction.

Now, if I have correctly read Richard Masser (Chair of CIPS Global Board of Trustees) and David Noble (CIPS CEO) the License isn't something new at all but MCIPS. Of course I am in support of MCIPS being a benchmark but having worked alongside many who have arrived at the profession by other routes I have no choice but to question how I justify them not being viewed as professionally competent.

Nevertheless. I am more concerned about the communications strategy of CIPS.  Did CIPS change their message on 'The Licence' as a result of listening - if they did, I would congratulate them if they were honest about it. If they didn't change their position, and it was always the intention that MCIPS was the Licence, why wasn't that clearer?

Monday, 12 May 2014

Do you really try to become a preferred customer?

18 months ago I co-authored a Whitepaper warning that adopting a short-term approach to procurement strategy could prove detrimental when recovery from the Great Recession arrives. As we approach elections in the UK we are told recovery has been reached, whether or not you feel and see that is debatable.

Today's Financial Times reports on research for the European Payment Index (EPI) that suggests, across the EU, €360bn has been written off as a result or late payment of bills and invoices. The research considered responses from the 31 European companies plus Turkey and Russia. It appears that suppliers are waiting 47 days beyond the contracted term for payment. Now just think what the impact would be on you if your employer told you that you would have to wait a month and a half for your salary.

Of course the 47 days is a sweeping generalisation, but how do you think your firm's payment record would compare if benchmarked against Sweden's delay in payment in the public sector of seven days and with days in the private sector? The Swedes have adopted a system of fining debtors with automatic penalties to protect suppliers.

In the grand scheme of procurement swings and roundabouts there is a time when suppliers have to make decisions between competing buyers as to which should receive preferential service, or indeed delivery at all. When there are plenty of alternative suppliers the buyer can perhaps be a bit complacent and arrogant, assuming suppliers will want to supply. But if you have a history of late payment, don't expect suppliers to be beating a path to supply you, others, perhaps those based in Sweden, can expect to be more attractive for the delivery of quality, price and lead-time. But things could be even worse: what if that critical source for your manufacturing line goes into liquidation due to cash-flow problems?

The report should be a warning that it may well be time to get your payment process improved before your suppliers opt to delay in supplying you.

Friday, 2 May 2014

Does Cameron understand procurement strategy?

A few months ago I drew attention to the imbalance of power between the Ministry of Justice and the legal profession, specifically the threat relating to changes in the Legal Aid system. The changes to Legal Aid mean a 30% reduction in Legal Aid cut in fees paid to barristers.

Yesterday we saw the ironic court scene of Alexander Cameron QC, the Prime Minister's brother, arguing that the trial of a £4.5m fraud case should be delayed as a result of the inability of the defendants to access lawyers prepared to defend them under the new Legal Aid rules. Barristers have effectively said, "if that's what the rate is, no thanks".

The drama is even more bizarre in that Alex Cameron had decided to argue that the case could not continue, without charging for his fee!

From a procurement perspective this reminds us of three strategies:
  1. Poistioning relative power of the buyer/supplier relationship. The barristers have the power to sell their services outside the Legal Aid system, so they can walk away without great pain;
  2. A focus on price reduction can compromise delivery. The suppliers in this case have said to MoJ the price you are prepared to pay is not attractive enough for us to deliver; and
  3. Achieving 'preferred customer' disorts the market in favour of the buyer. In this example, Alex Cameron delivered his services free of charge.
While the MoJ case is of interest and relevant to procurement, there is a real danger we are approaching replication elsewhere in the system. For example, think of the threat of the Care Quality Commission to penalise those who on deliver 15 minute home visits to those with dementia. The buyers should of course specify for longer visits based on outcomes to be delivered as opposed to inputs, and in turn pay a rate which is affordable for the providers. But what would happen if the threat continues and the care providers say "if that's what the rate is, no thanks"? Well, I suspect the health and social services commissioners would be in crisis, the Department of Health have no means to deliver the care, there are no longer sufficient places for public sector residential care in either hospitals or homes. Visualise the political impact if these services started to collapse the week before the election?