Buying stuff


 

Putting the squeeze on

 

Sir Philip Green, the Topshop tycoon and BFF of X Factor’s Simon Cowell, recently wrote a scathing report detailing how the Government could save a fortune if only it learnt how to procure (i.e. buy stuff) better.

The figures that Sir Philip was talking about are mind-boggling and far beyond the scope of anything I, as a relatively junior local government officer, would ever come into contact with. However, like many local government officers I have had to buy things, and many of these times have found it somewhat frustrating.

I might not like Philip Green’s abrasive approach but surely local government procurement bears no relationship to how it works in the private sector, surely.

I should state that I am not a procurement officer and therefore am not privy to all the processes that go into making a good procurement.

However, my experience of the procurement process is that it is mighty complicated.

Big procurement exercises can involve pre qualification questionnaires, lengthy submissions in response to detailed specifications, interviews with the providers, further clarification interviews, visits to local authorities who had already procured the thing we’re interested in before then eventually looking at the pricing. It can take ages and in tight projects can be a mighty pain in the backside.

What’s more throughout the procurement process the focus seems to be on ensuring that we are being fair rather than simply ensuring we get the best deal. This extends down to very small procurements; even finding someone to provide catering involves proving that we have sought prices from three different companies.

As the more observant of you will realise, all of the above makes sense: after all the last thing local government wants to do is buy something that doesn’t work or end up with a product that is shoddy.

However, as I have hinted all of the above takes place without getting to the bit which really matters: the negotiation over price and service level. In fact my experience is that we do not even have a discussion about the ‘last and final’ offers etc until after we have decided which provider we want to go with (this is based on their price and the submission as to what service/system/product they are providing).

This is obviously scrupulously fair. But, surely it weakens our hand; by the time we come to negotiate the contract we’ve already told the company that we are going to go with them. We could argue that we will pull out but the much stronger position of; ‘if you don’t give us this discount we know someone who will’ is gone.

It’s not as if we’re not already at a massive disadvantage; as an ICT vendor said to Professor Les Worrall in the context of local government procurement:

I’ve been trained for 20 years to sell this stuff and you’ve never been trained to buy it.

We invest a lot of time in assessing the pros and cons of the different providers but don’t test the boundaries of what they are willing to provide in terms of cost and increased service. In fact I have been told directly that the last thing we want to do is get into a Dutch auction between the providers. In contrast, this is exactly what I want to do; let’s squeeze every penny out of them and deliver the best value for money for the tax payer.

Before I sat down to write this I asked some people who know why we can’t be more aggressive. Surely, it is simply tying one of our hands behind our back?

Well, possibly so but this is legally mandated one hand tied behind the back.

Apparently, this is because if we are not 100% scrupulously fair we run the risk of being taken to court in breach of European procurement laws, as Westminster council were earlier this year.

But why?

Are public bodies not trusted to make these decisions without over-complex procurement laws? Is this law necessary to protect the private sector? Does it need protection? What’s more, can bidders take private sector companies to court if they don’t tender contracts after a massively long and demonstrably fair process? I’m finding that doubtful.

It might be me projecting my own hopes onto the private sector but surely in the private sector they work out which companies can provide the service they want and then negotiate with all of them until one provides the best possible deal in terms of cost and service. In other words instead of focusing 80% of effort pre-negotiation I guess they spend 80% of the effort on the negotiations. Am I wrong?

And if all that’s stopping us is a little bit of procurement law why don’t we just change the law and let Local Authorities do whatever they can to get the cheapest contracts possible?

Maybe that’s what Sir Philip Green should have focused on?

PS. I’m often corrected on this blog when I am missing the point totally. I welcome this totally. If you feel this is the case then don’t be shy; comment below or drop us an e-mail at: welovelocalgovernment@gmail.com

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5 Comments on “Buying stuff”

  1. Chris Says:

    “if all that’s stopping us is a little bit of procurement law why don’t we just change the law”

    If only life was that simple. I am afraid that you need to join UKIP and set about renegotiating the Treaty of Rome.

    That’s not to say that the public procurement process couldn’t be improved in many ways.

  2. Squiggler04 Says:

    My main shout would be how this affects the little companies.

    Particularly if they are community based organisations with little time or experience on how to write a tender. Is this process really fair? Surely local authorities should be encouraged to shop local? Encouraging small businesses and social enterprise in the community they serve?

    How and when do they have the time to sit and write a lengthy tender/ get all the documents necessary. Most tenders require two years of audited accounts – that takes out a significant number of the local community businesses – setting them up to fail.

    Community empowerment through procurement. I think not.


  3. Lots of interesting points… On the treaty of Rome; I’m ok with the EU but if a renegotiation of that clause will save LAs millions of pounds and empower LAs then why doesn’t the govt argue for it??? No harm in asking? On small companies I agree totally; the whole process is too complex; partly because it needs to be so fair at the expense of making it practical… And Jon Harvey’s piece is very amusing… And sadly too true to life in my experience…

    Procurement needs fixing and I think Sir Philip Green didn’t identify all the major problems…

    Thanks to everyone for their comments; really interesting debate

  4. Roger White Says:

    The UK Public sector makes an interesting contrast with how many Japanese companies go about procurement influenced by lean or systems thinking (a.k.a. Toyota Production System – some will argue about the language/meaning of each of these terms but they also debate how many angels can dance on the head of a pin).

    The lean/systems approach is to see suppliers as long term partners who are integral to the system that makes up the enterprise. Therefore, they share the risks and rewards of production/service delivery and take part in the same improvement disciplines to better meet customer needs and drive down costs.

    Contrast the UK public sector system – precise specification; the detailed procurement processes you and others above mention; a “black box” approach as far as how the contractor carries out the work apart from meeting statutory requirements; an over-emphasis on lowest cost; time-limited contracts to ensure (they hope) contractors stay on their toes.


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