Tuesday, 27 March 2012

Missing the point in contracts

Imagine your dream job offer comes along and you are offered a £200,000 contract to relocate.  Well that's the amount it should have been but the actual contract had a 'typo' and said £2,000,000 as opposed to £200,000. Anyway, that was the wonderful position which a JP Morgan Chase trader found himself in.

Once an offer is made and accepted a legally binding contract exists - the offer and acceptance represent a 'meeting of the minds' alongside legal capacity and intention to create legal relations (consideration of course, in this case was either £2m or £200k).  We're all familiar with the stories of misprints in advertising when the supplier has to stand over the price for those who accept the offered price before the supplier realises the mistake and rescinds the offer. Well, that's what the professional training says but the High Court judgement in the above case appears to have rewritten that fundamental of contract law.

The case came about as a result of the commodities trader, Kai Herbert, recognising a mistake had been made by JP Morgan Chase, and his decision to accept the contract in the knowledge that a mistake had been made.  He then didn't turn up for work, JP Morgan then rescinded the offer and Herbert took a case against JPMC for loss of earnings.  You couldn't make it up. The court ironically has ruled in favour of JPMC.

We now have potentially interesting implications for procurement.

Monday, 19 March 2012

Maude's procurement speech impediment

Back in November I spent some time reviewing Francis Maude's speech on revolutionising procurement.  My key messages at that time included:
  1. The ideas espoused would not revolutionise how government buys because most of initiatives were far from new but recycled;
  2. Policy makers need to concern themselves less with rhetoric and more with delivery.  Just saying something is going to happen, evidence would suggest doesn't make it happen - embedding in practice is the challenge;
  3. Policy makers need to make greater use of evidence based research, have consistency in definition of key terms, understand existing policy and commitments, and, collect and learn lessons from the past; 
Francis Maude made, what to me was, a follow-up speech at the Procurex Conference on14 March.  It seems sensible to consider what he said.  

Maude describes himself as "the Minister who gets excited about procurement". Whether or not that is a good thing will be judged in the fullness in time.  However, I wonder if his 'excitement' is a barrier. I honestly question whether those advising him are intimidated by his excitement and are being as diligent as they should be in their advice.

Tuesday, 13 March 2012

You've got to accentuate the positive,

Eliminate the negative,
Latch on to the affirmative,
Don't mess with Mr In-Between. 

I tweeted recently to that effect: 'Student loans misunderstood, Health reforms misunderstood, DWP reforms misundertood: Dave and the Commotions, 'Please don't let me be misunderstood''.

Communication misunderstandings aren't unique to public policy reform, they are also a frequent procurement weakness; the procurement 'end' appears to be misunderstood.  An example was provided as recently as 2 March with the furore over the supposed 'police privatisation'. The only message which appeared to have been communicated was the 'negative'.  Why was there such a complete lack of confidence in the affirmative that the procurement could deliver a better outcome for citizens even though so much appears to have been contracted in the past? Highly respected procurement commentator, Peter Smith, even went so far as to refer to it as an example of 'stupid sourcing'  While I largely agree with Peter, in terms of a questionable sourcing strategy but the stupidest aspect is the associated communications strategy.

A lot of my blogs ask the simple question, 'Did the procurement deliver the anticipated results?'  I have argued that effective political leadership, scrutiny and use of 'fearless' gateway reviews all have a contribution to effective procurement outcomes - they certainly would have helped with the police procurement debacle.  But these are concerned with the procurement 'means' as opposed to the procurement 'end'.  The achievement of the outcome sometimes gets lost in the bureaucratic process or indeed in debating the process.

Yet I have also argued that suggesting some ends can be met when the process constrains that is also political folly.

Nevertheless, too many times investment just hasn't delivered what it was supposed to - that epitomises ineffective procurement;

Thursday, 8 March 2012

Reserved contracts: Disabling Article 19 and Regulation 7?

The government have announced the closure of 36 of Remploy's 54 factories.  Supposedly the rationale behind this being that it is wrong to subsidise Victorian era segregated employment of those with disabilities.  On the back of questions over the success of assisting those with disabilities back into employment and the perceived attacks on disability benefits claimants, this seems inconsistent with 'Compassionate Conservatism'.

Yet there is also a procurement dimension.

Within Regulation 7 of the Public Contracts Regulations (sometimes known as Article 19 of the Directive) there was the option of reserving contracts to those businesses considered to be 'sheltered workshops'. Eligible UK businesses are listed in the Supported Business Directory.

A quick scan of the Directory would suggest that if you delete 'Remploy' there will be questions over how competitive reserved contracts can be in the future. For many areas of the market there there will now be a monopoly. That will bring real problems for ensuring value for money.

The previous aspiration of every public sector body having at least one contract with a supported business also seems to have been forgotten about - that shouldn't surprise readers as I have already discussed this type of policy ignorance and contradiction in the past.

Equally, for many public sector bodies hoping to deliver social benefits, an easy way of achieving that aspiration is now going to be lost.

There are also risks which procurement practitioners now have to consider:

Tuesday, 6 March 2012

A national procurement performance management system

I'm sure, like me you were delighted to learn of the successful outcome of negotiations on the failed NHS IT system.  We've discussed this contract many times but today's Times announced that the previously stubborn 'provider' has now backed down and agreed to a renegotiation of the contract.

We're told a team of Cabinet Office and Department of Health heavies exerted pressure on the defaulting contractor but I think most would accept that little would have happened had it not been for the stance taken by The Times in highlighting the debacle.   Why on earth was it necessary for a media campaign to drive the change as opposed to pro-active procurement?

There's now talk of 'getting tough'  on suppliers, but I would caution against such cavalier, bully-boy tactics.  They presuppose sufficient long-term power in the market and that fault is solely with the provider.  They also fly in the face of the espoused 'lean sourcing'.  Let's not forget a badly entered into contract is no justification.

In the background though a new spectre is looming though, Margaret Hodge, a cheer leader for public procurement improvement and chair of the Public Accounts Committee has said "... it becomes even more important that we take a government-wide view of the performance of these contractors".

However, behind all this are other issues:
  1. Had The Times not drawn attention to the non-delivery would the contract have been renegotiated?
  2. Will officials now be more frank and honest in highlighting procurement risks?
  3. Who will take the lead on national procurement performance management, and what will that look like?
  4. How does a national performance management approach sit with localism and local procurement priorities?
Background reading:
Pitel, L., Kennedy, D., and Smyth, C. '£1bn boost for hospitals in 'cowboy' climbdown', The Times, 6 March, p1 and p.14
Pitel, L., Kennedy, D., and Smyth, C. 'British taxpayer isn't a soft touch, contractors told', The Times, 6 March, p.14

Friday, 2 March 2012

MoJ Procurement capability lost in translation

Tonight's Channel 4 News carried an unfortunate story which seemed to once again call into question public procurement performance. I'm not going to try to defend the Ministry of Justice  but I do think there's a wider issue here - the effectiveness of the central government procurement improvement programmes.

When first mooted I was impressed by the concept of Procurement Capability Reviews.  They were an adaption of the former IDeA's successful Fitness Check programme.  The Fitness Check programme was considered part of the success of the National Procurement Strategy for local government.  The idea was simple:

  1. develop a best practice strategic procurement benchmark; 
  2. ensure senior management ownership and desire to be compared against the benchmark;
  3. carry out a diagnostic 'critical friend' review;
  4. identify priorities for improvement; 
  5. communicate the outputs of the diagnostic review to the political and managerial leadership; and 
  6. provide access to support, if desired.
The diagnostic could be traced back to the former OGC's Procurement Excellent Model, which in turn could be traced back to the EFQM.

A Procurement Capability Review was carried out in the Ministry of Justice. Although it now appears impossible to find the report on the web, references in the NAO report and an  associated presentation imply that a lot of room for improvement was acknowledged.  But what happened next?  A review for its own sake isn't sufficient.

Thursday, 1 March 2012

Commissioning on a wing and a prayer

We have been inundated with discussions around the Work Programme and the associated  communications debacle.  For example, the coincidental removal of what appeared to be inconsistent guidance from the DWP website and my own comments on the due diligence associated with the appointment the 'Tsar of Contract Manipulation'.  However, I now want to draw on some insights from an  excellent academic paper which strikes me as pertinent, namely Don Harradine's paper published in Public Money and Management.

Don explored a different DWP initiative, 'LinkAge Plus', and interviewed staff from DWP, a local authority and the third sector. His findings are intriguing and resonate with some of my previous blogs:

  • Proposals were developed in haste for political expediency while funding was available and it is was therefore accepted they would be flawed;
  • Pilots were agreed and funded partly to justify a political agenda;
  • DWP were reluctant to probe potential third sector providers' quotation costs: "if they say they can do it for that cost, that will do me"; 
  • Third sector providers though lacked sufficient financial expertise to understand the relative costs associated with service delivery;
  • There was a lack of agreed definitions on some aspects of contract delivery, for example, what constituted 'a contact';
  • Third sector providers acquiesced on agreement of targets just to obtain the funding, even though the targets were not understood.
We need to be wary of reading across too much from Harradine's research to other DWP programmes, but