Friday, 9 December 2011

Procurement iceberg threatens Titanic

What's the link: Belfast, iceberg, titanic, '12, procurement?

You will probably be familiar with the story of the Titanic, the 'unsinkable ship' sunk by an iceberg.  You may also know that the Titanic sank in 1912; so 2012 is the centenary.  But did you know the Titanic was built in Belfast? That's four of the five links.  What's the link with procurement?

To celebrate the centenary a landmark 'Titanic Signature Building' is being constructed in Belfast at an anticipated cost of £80m. It's the most expensive tourism project built in Northern Ireland. But a procurement iceberg has now appeared on the horizon. Although the building is unlikely to be sunk as it's already virtually constructed, there could be a dampening of the celebrations. The iceberg is in the form of the anticipated £20m European grant.  The £20m grant is now in doubt due to a perceived unsatisfactory procurement process, specifically a lack of competition in tendering for the construction.  In the midst of the current financial crisis I would hate to now try to find an additional £20m!

I've lost count of the number of times I have been told that a particularly large expenditure is 'outside' procurement as it is grant funded.  Typically it has been a research grant to a particular Professor, sometimes for a particular community initiative.  That's unacceptable and particularly naive if good procurement could make the grant go further.

All the facts of this particular case have yet to be revealed - the grant may well be received.

Nevertheless, there are clear lessons to be learnt.

  1. Always scrutinise the 'grant letter' - effectively it's another form of contract with obligations to be met on both sides;
  2. Consider funders to be major stakeholders who have specific interests - manage their expectations and ensure good communications;
  3. It would be useful to set out the strategy for delivering whatever is being funded and have it signed-off by the funder.  That would include the procurement approach;
  4. Regardless of the source of the finance good procurement practice should still prevail;
  5. For larger projects have a cross functional team which includes a procurement and legal adviser;
  6. Remember that the organisation receiving the grant is effectively a contractor to the organisation providing the funding.  Put yourself if the position of the funder and think what good contract management should look like, then put in place the means of demonstrating that, if asked, you can demonstrate exemplary performance as a 'supplier'.

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