International lessons on austerity strategy

This blog provides a preview of the content of a paper, just published in the International Journal of Public Sector Management. The paper was written a year ago and some of the predictions have now materialised.  If you want a copy of the paper please let me know. For those specifically interested in procurement strategy, the lessons learnt present a real cause for concern as the research suggests no other country has ever successfully embarked upon a strategy so radical and yet so fundamental to overall success. 

Some have suggested that the recent recession is probably the worst recession in 100 years.  The Office of National Statistics acknowledged it as the longest period of decline in UK output since records began in 1955 and there are predictions that the worst of the impact on jobs and unemployment in Europe is yet to come. Fears of a ‘double-dip’, heard daily, now have materialised, and the over-riding concern of the UK government appears to be speedy deficit reduction.

In its repsonse to the financial crisis the UK government centrally imposed public sector cuts on local government which go beyond political and managerial leaders direct experience. English local government is now faced with a 28% reduction in central government funding over a four year period.  With front loading this means councils are projected to have a shorttfall of £6.5bn during 2011/12. 

Ministers claim the reductions can be achieved without a deterioration in frontline services if a four-pronged cost reduction strategy is followed, namely, reducing senior staff pay, improved procurement, back-office shared services, and removal of non-value adding jobs; this strategy has been criticised as lacking an empirical basis.  Although the scale and perceived need for urgency in addressing the deficit is somewhat unique there are examples of how other countries have addressed finacial crises which could be drawn upon.  The paper now published in the International Journal of Public Sector Management reports on an investigation of lessons learnt from other countries responses to previous and the current crisis.

Discussions have been well rehearsed elsewhere on potential responses and what should be done in addressing the recession. The paper’s contribution is that it reports lessons from others in the international local government community, highlighting examples of what they have done and the impact. The evidence cautions that local recovery can be expected to be significantly longer than one political cycle, that social impacts will be greater than expected, and there is over-optimism in some of the strategic tools being adopted in the UK’s deficit recovery.  It is intended that these lessons are constructive in shaping responses to the current and future financial crises. 

Veering towards procurement bravery or stupid sourcing?

On 9 May, despite others criticising the government's U-turn on fighter jets, I tweeted that the U-turn was worthy of praise.  It took bravery to recognise a wrong procurement decision had been made and then change direction rather than 'keep calm and carry on'.

Today we saw another potential act of procurement bravery.  This time it was the decision to place in custody the outsourcing of £1.5bn of police services.

Regardless of whether or not these were initially examples of stupid sourcing, to me there's a need to acknowledge that stupid can become brave and clever procurement.  Revisiting and changing procurement decisions before it's too late has to be one of the key benefits of Gateway Reviews. It also requires bravery. (Although somehow I doubt that a gateway review prompted the revisiting of the above two examples). Why do we so rarely hear of procurements being aborted or changed as a result of Gateway Reviews - surely that is a cause for celebration that the risk management processes worked!

Having said that,

"Never take your foot of the [procurement] reform pedal"

"Procurement reform remains one of the biggest challenges and its success is vital to ensure that hard-won gains do not unravel. Reform has to be a process of constant revolution, with the toughest decisions pushed through as quickly as possible, often in the teeth of opposition. If you lose momentum in this process, you are done for." 

 I read the above Opinion piece by Liam Fox, the former defence Secretary of State, in today's Times (p.20).  The comment was specifically about Ministry of Defence procurement but I felt it was so transferable to procurement improvement, in general, it just had to be shared.

'What money can't buy' (Book review)

If you have spent most of your life, like me, working in procurement you are also likely to see most things as something which can be bought.  In fact one of the most satisfying challenges is demonstrating to others that what they need can be bought more effectively.  So Michael Sandel's latest book, 'What money can't buy',  sits a bit uncomfortably.

I first came across Mike Sandel a few years ago when I listened to him speak at the LSE on his book 'Justice'. A fantastic book which really made you think and see things differently. His latest book 'What money can't buy' is every bit as challenging and does not disappoint. It is not about what money can't buy; more about what money shouldn't buy; the procurement manager's dilemma, making the decision about what should not be sold. For example,

If the cap fits: Thoughts on procurement strategy lessons from the retail market

It's not often I discuss retail procurement but sometimes it strikes me that there's something worth saying beyond stating the blindingly obvious.  Tuesday's Daily Mail was one such occasion. Two procurement issues were separately discussed.

The first article anticipated an announcement in Wednesday's Queen's Speech that major supermarkets  will be fined, named and shamed,  if they coerce their small suppliers unreasonably in squeezing prices, changing contract and payment terms. That sounds a reasonable piece of legislation but I wonder how that will pan out in reality? I like the sentiment but this presents a new strap-line for all those mega-posters celebrating the local sourcing of the major supermarkets - will they now shift to a unique selling proposition of 'fair deals for local providers'?  Will they now move their supply base away from local providers to lowest cost providers? Either way the procurement strategies of the major supermarkets are now in disarray and instead of creating competitive advantage may comprise sales - not a happy place to be in.

Set this scenario alongside public procurement austerity strategy and

"Events, dear boy, events"

Reputedly, when asked what he most feared, Harold Macmillan replied, "Events, dear boy, events".  

As I watch some of the spectacular public sector funded events I often wonder if  "events, dear boy, events", is uttered by procurement and others, when asked, "what are the key no-go areas for procurement?".  I get the impression that events are an exclusion zone for the profession.  Yet these are big expenditure decisions and have big time, cost, quality and risk implications. They also provide plenty of scope for procurement to demonstrate a meaningful contribution.

The assumption seems to be that events are special and can only be delivered as a 'personal service' through an exemption of the normal procurement rules, but is that really the case? There are alternatives.