A procurement prediction for 2014

I generally don't make either New Year resolutions or predictions but this year I am going to break that habit and make a prediction. My prediction is that the blind belief that public sector PQQs are evil personified will be seen for what it is, a folly.

At some stage during 2014 it will dawn on those lobbying for the death of the PQQ that organisations in the private sector, who have no need to follow the herd of public sector political rhetoric actually use PQQs too and see them of use as both buyers and sellers.

I predict that those business organisations who have lobbied for the removal of PQQs will recognise the transaction costs of single-stage procurements, borne by every bidder, are more costly than the bidding costs of only pricing when the bidding organisation has a high probability of success. Common sense will prevail and we will see PQQs recognised, for what they are, as a useful tool.

Linked with that, I also predict that, rather than DCLG mandating the removal of PQQs, when they consult with councils, they will learn that councils would prefer the right to chose when a PQQ is appropriate.

So, that's my prediction for 2014.

I hope it is successful for you, thanks for reading the blog.

Is putting on the Ritz compatible with centralised purchasing change management

Some of the greatest challenges which face procurement have been how to put in place collaborative purchasing arrangements, avoid maverick buying and ensuring adherence to  corporate framework agreements. We heard yesterday that the Crown Commercial Services are making use of outside support and one of the areas of help is centralised buying. We're also familiar the preciousness of identity, for example, the difficulties of getting England's 43 police forces to agree on a common specification for white shirts - a problem which the Gershon Review highlighted a decade ago, yet still persists.

Part of the problem is that individuals like to suggest they are in such a position of power and in that position they have the the freedom to exercise choice by opting to step outside what is okay for others - what is good for the goose isn't always perceived as good for the gander. The problem is also actually about change management - you need a compelling justification for the 'corporate deal', you need to have brought key stakeholders with you and won their heads, if not their hearts, and you need clear and consistent leadership by example. If you can get the Chairman and CEO to use the corporate deal, for example, for travel policy, you're well on the way - if you can't get them to adhere, then all sorts of excuses, justifications and exceptions start to materialise.

So given that CCS hope to get greater adherence for their bulk purchasing better buys, today's revelations in the Times that the Chancellor has opted out of lower cost (free) accommodation at 'The Ambassador's' and instead chosen to stay in private hotels (£289.97/night) is either a a threat or an opportunity for their strategy.

Case studies in Procurement fraud for Dummies

Who would immediately spot the likeness between a Sony Vice President and an NHS learning & technology manager. Yet, apart from both making the news today, both carried out simple procurement frauds.

The Sony VP submitted false invoices and pocketed the dosh, while the NHS manager was slightly more creative in that he set up his own company and supplied the Trust at inflated prices.

These types of procurement fraud are straight out of the introductory pages of Procurement Fraud for Dummies and could have been easily avoided. Three-way matching is the traditional protection: the person responsible for the Purchase Order, the person confirming delivery and the person authorising the invoice payment need to be different people. An effective eP2P system is another solution - when you're dealing with £1m fraud the business justification easily stacks up, but the system needs to be properly implemented with the right protections.

Slightly more protection is needed to protect against the likes of the NHS fraudster, yet still fairly basic. He was able to invoice for services received from his own company at inflated rates, for example, invoicing £10,750 for a service which cost £1,500. Why on earth did the organisation not require a 'ballpark' estimate of the price compared against the invoice price? Although I am not a great fan of low thresholds for RFPs, it would be interesting to know what the Trust's thresholds were and whether those internal rules were policed. Then again, how was it so easy for an employee to sell to his employer - it may not have stopped the fraud but signing an annual declaration of interests may have helped.

When the Ministers met the CLG procurement inquiry

At last, I hear you say, we've reached the seventh, and final, oral evidence session of the CLG Committee Inquiry into procurement. The witnesses being Baroness Stowell of Beeston (Parliamentary Under-Secretary at DCLG with responsibility for procurement) and Nick Hurd (Minister at the Cabinet Office). When you recall the central government's CPO reports to the Cabinet Office these witnesses should be in a very strong position to speak with authority on the political objectives of procurement.

The Baroness took an early opportunity to volunteer her view of procurement effectiveness:

They should understand that it is not just about buying the relevant services at the best price possible but that this is also an opportunity to make sure that procurement is a way of getting the best service you can and that it is possible to improve the services that are provided locally. If we start putting a [savings] target on things, the focus then is on that rather than what I would see as the more important outcome, which is a better local service for local people.

It is important to note that this was stated in response to a question on what could be potential savings from procurement as opposed to "what would good look like". The Minister responsible for local government procurement, therefore, sees procurement as not about lowest price but better local services. It is really disappointing that the Committee didn't take the opportunity to compare that view with the Cabinet Office Minister's, as you may recall his boss, Francis Maude, told the Public Administration Select Committee in May of this year: that the "primary objective through procurement is getting the goods and services needed by the citizens at the best price". Is it just me, or are the Cabinet Office and DCLG at odds on what epitomises good procurement?

Then compare, former Local Government Minister Michael Heseltine's view, which has the implied endorsement of the Chancellor:

Can the loss of £100m be a good news story for procurement?

The PwC report into the failed BBC Digital Media Initiative has now been published. We know masses
 of public money was wasted and we know, with the benefit of hindsight, that we'd all have done a better job and pulled the plug earlier. But I think this report is actually a good news story, particularly for complex contracting, if the high profile of the debacle leads to the report being read and learnt from. Learning the lessons could lead to many more doomed projects being aborted earlier and therefore unnecessary costs avoided.

The report suggests that there was an absence of an effective governance structure which enabled challenge of time, cost and quality. This has been a common problem with complex contracts and reminds me of the problems with the Scottish Parliament building when David Steele announced he was kept in the dark by civil servants on progress. It is not enough for those in decision making roles to 'approve' they also need the confidence to ask challenging questions as part of risk management.

There was a failure recognise that the DMI was more than a technology solution and needed effective business change management too. Reporting was based on the technology risks and failed to give due attention to the business change management risks. Again this isn't a first but remains, to me, one of the key reasons IT projects fail - it's a bit like giving someone who has never had a telephone a brand new iPhone and assuming they will immediately understand why and how to use it. The power in technology, to me, isn't in the machine but the capacity and willingness of stakeholders to harness its potential.

Celebrity advice, BMJ and lessons for procurement scrutiny

The latest issue of the British Medical Journal includes an interesting paper on the why the public follow celebrities' medical advice. To me, this paper is particularly relevant to the current CLG Committee Inquiry into local government procurement but is also relevant to procurement decision making, in general, when perceived 'experts' (celebrities) provide advice.

The BMJ paper discusses the positive influence which celebrities can have in highlighting health issues, but cautions against celebrity 'quacks' whose advice is listened to, even when it is dangerous, if adhered to. The question is 'Why do celebrities utterances and endorsements carry so much weight even though they lack any evidence, qualifications and specific experience?' The paper draws on economics, marketing, and psychology literature to provide an answer.

One of the reasons is that the public are bombarded with competing information and in order to make sense of that information:

people naturally look for signals that indicate one source as being more credible and effective than another. Owing to the vaulted status of celebrities in society, their endorsements act as signals of superiority that distinguish the endorsed item from competitors, encouraging people to change their health behaviors accordingly. 

[Celebrity] credibility may stem from the halo effect of celebrities' success, which biases people's judgments of celebrities' other traits and gives them a cloak of generalised trustworthiness that extends well beyond their industry or expertise. Celebrities are in turn perceived to have greater credibility than their non-celebrity counterparts, such as doctors, despite having less medical knowledge and experience.  

I don't see the problem of celebrity advice being isolated to the medical world. I also feel that 'celebrity status' can be more widely defined - isn't it something about putting someone on a pedestal. I have frequently observed the advice of procurement specialists being swallowed up in the aura of 'celebrity' status.

Evaluation drama for 'the Queen'

Back in August I discussed the Foster's Comedy Awards and their approach to evaluation. Now I turn to the drama of the theatre, rewriting the script and a novel approach to declaring best Actress Award at the Evening Standard Awards. Pantomime may just be seasonal.

In this real-life drama we learn of a secret ballot between five judges which ended in a dead heat. In a very bizarre piece of casting, the two actresses, who could have been equal winners, found themselves relegated to joint second position as they were overtaken by a new winner, Helen Mirren for her role as the Queen in 'The Audience'.

While a secret ballot took place to determine Best Actress, the results were seen by two of judges, who were employed by the sponsor (The Evening Standard). The two judges saw the results of the ballot, then altered their votes and the completely new winner emerged.

One of those who changed their vote did so by eliminating one of the contenders for the starring role by creating a new category, Best Musical Performance. Whether or not that particular actress was given the choice or asked their preference between the existing and the new award, we don't know.

There was no attempt made to reach an agreement with the other judges, but three of the judges have now resigned. Wouldn't it have been interesting if the culprits had watched Twelve Angry Men and learnt from that instead.

For the winner some of the shine has been removed from what could have been a well-earned accolade. For those shortlisted who lost there will remain the doubt of whether or not they should in a just award been the shared winner. For the judges there will remain the lingering doubt that they were just pawns. Who can have pride in such a piece of shoddy workmanship. Who would want to be associated with such a pantomime.

Next year there won't be judges, just an advisory panel. I'd expect the new advisory panel to ask for some terms of reference before participating to satisfy themselves they've more than walk-on parts in a granted play.

Could you just imagine the outcry if, in a tender award, you couldn't work out which of two bidders is the winner and arrived at solution by deciding 'let's give the award to someone both beat and create an additional award to take the bad look of it' - I'm sure that would never, ever happen.

CLG Committee procurement inquiry: What are the 10 characteristics of good local government procurement?

Regular readers will recognise that I have been following the CLG Inquiry into local government procurement and have not found the approach to taking evidence robust. Nevertheless, we live in hope, while, the Committee persist in asking witnesses, who probably have really good evidence to give, questions which are beyond their ken and fail to ask 'How could this witness possibly know?'.

And so arrive at the sixth oral evidence session when the Committee should have been able to ask a senior manager from the Audit Commission Information and Analysis Group, the Head of Counter-Fraud at the Audit Commission, and the Director of Cabinet Office and Cross Government Studies at the National Audit, 'What they knew?'.

Now, I think these three witnesses should have been in a position to talk about research method, so it was reassuring to hear, buried within the Chair's opening airing of opinion, the following:

How do we get a real feel about whether local authorities in general are using best practice in the area of procurement?   

Neither of the three witnesses recommended a research approach to the Committee but instead said they were not in a position to answer whether or not local government is adopting best practice. I'm sure you have recognised the difference: the witnesses were being asked about method, which should have been their area of expertise, but answered an entirely different question. We know the Audit Commission's role has changed (previous witnesses have reminded the Committee of that too, and we know NAO has a focus on central government, but that's not what the Committee asked about! Sadly the Committee allowed themselves to be distracted and didn't return to the witnesses specialism, evidence gathering.

Retail buyers need to think about reducing the impact of factory fires

Only a few months ago I cautioned against retail buyers relaxing their guard due to the proposed agreement on minimum safety workers for Bangladesh factory workers.

Now we learn that factory fires are a weekly occurrence and there appears to be a culture among those responsible for the factories  'comes with the territory'. Would it be acceptable if 800 garment workers in the UK were dying as a result of factory fires.

Don't get me wrong, I am not the enemy of retail buyers but I really think they are in a position to make a difference through their procurement approach. My question is 'Are retail buyers including in their contracts and obligation to provide adequate fire escapes, fire alarms, first aid, fire fighting training and evacuation training?' if they are not they can't claim they are taking commitments to sustainable procurement as seriously as they could. If they are, what are their processes to ensure those commitments are honoured? 

Even if they buying firms don't view fire safety of their supply chain workers are their concern, perhaps they need to reflect on reputational risk and adverse impact on supply chain flows. 

Now let's accept that there are always a range of alternative ways of solving a problem, and the problem is that factory owners want to reduce their costs as opposed to investing in the 'option' of worker safety, equally they don't want to make investments which place their own factory at a disadvantage. That being the case why don't the UK retail buyers combine their influencing power and insist that those in government improve worker safety through stronger health and safety regulation and building regulations, and the effectiveness of the inspection regime? 

Nelson Mandela's memorial lesson for procurement

With the focus of the world's media on Nelson Mandela's memorial, it would have been assumed, not only that the security for the world leaders was going to be exceptionally tight, but also that those delivering any 'front-of-house services' would have a gone through a rigorous assessment to demonstrate their capability. Yet, somehow, the platform party included an impostor, a fake sign language translator.

This is the stuff you just couldn't make up, not only was there a serious breach of security (the fake was standing beside Obama behind the security screen) but, if there was some sort of procurement exercise to provide translation services, it broke down completely. Mind you, there was also an official translator on stage although no-one seems to have questioned what was going on.

So we have the procurement of security which seriously failed. It failed not only in that the fake was on stage, but also it appears no-one has the faintest notion who this person is. That's pretty damming stuff.

But to make matters worse, the fake was only waving his arms about and no-one in the 'signing' world has been able to read a word of which he signed. Serious as this saga is, the clip is worth watching as it is very entertaining:

12 Dec: PS so now it has emerged this was a procurement failure - a company with a poor history of performance and no evidence of checking qualifications.

The adverse impact of cost reduction strategy

I'm sure many of you will have come across one of the 750,000 who suffered embarrassment or frustration as a result of the RBS system failures on Monday, 2nd December. Customer perception of RBS took a nosedive. While it didn't appear clear what was the specific cause of the failure, the chief executive was clear that the route cause was a flawed cost reduction strategy and lack of investment in IT.

I've been thinking about this for a few days. The CPO should be concerned with future costs and whole life costs in particular. The CIO and CFO should be concerned with the IT investment strategy. But should the CPO have a role in raising the risk of a lack of forward investment, its impact on customer and shareholder value, and its impact on future costs? Its very similar to the procurement option appraisal of planned/preventative maintenance as opposed to reactive maintenance. I really can't make up my mind on this one and its not something I have ever personally been involved in.

What's your experience?  What do you think?

Strangers on a Train - Procurement Theatre review

Yesterday, I took on the role of procurement theatre reviewer with 'Twelve Angry Man'. Unfortunately, it's not a role I envisage being able to do often and I am unlikely to be able to justify giving up the day job, not least as I am so rarely in London now. 

However, I recently also had the good fortune to see 'Strangers on a Train' - £11.50 for a £63 ticket seemed a remarkably good start to the night. The joys of buying a cheap deal and receiving an upgrade.

As with 'Twelve Angry Men' I could see procurement lessons. 

The story is that of a causal encounter on a train journey. Two strangers fall into conversation. One of the strangers falls into the trap of saying more than he should to his fellow traveller, who of course entrapped him and he never thought he would see again. In a bizarre twist he then finds himself blackmailed and obliged to act in a way which would have previously have been inconceivable. 

The play is set in the days before mobile phones and those 'private and commercially sensitive' telephone calls which are effectively 'broadcast' in train carriages and executive lounges all over the world. The procurement message is that 'careless words can cost dearly' so be cautious what you say and of your boasts, but equally, be wary of entrapment.

While not as good as 'Twelve Angry Men' I did find myself gripped by the play and drawn in to the extent I actually jumped at one stage. An excellent thriller. While I felt Laurence Fox was really good I just couldn't get past Lewis' sidekicks accent; to me, it was Jack Huston who really shone - an excellent performance. Sadly the benefit of a great set was sometimes detracted from by some of the action being  blocked by the ceiling of the rear stalls.    

Twelve Angry Men - Procurement Theatre review

The film version of 'Twelve Angry Men' was released the month I was born, yet I have never seen it. Yes, I am of the vintage which remember Robert Vaughan when he was 'The Man from U.N.C.L.E.' and Martin Shaw as one of The Professionals. Perhaps that was why I couldn't resist the opportunity to see the stage version at The Garrick tonight.

The high-level story is a comparatively well known court drama played out in the Jury Room. One Juror isn't prepared to go with the pack and eventually the pack go with the original solitary Juror. It is brilliantly played out at the Garrick by Shaw, Vaughan, et. al., and I couldn't recommend it highly enough.

But it struck me that the procurement lessons didn't just lie in getting a good deal from Lastminute.com but in the play itself.

The Jurors each bring their own personal judgements to the Jury Room. Some were formed by the appearance and pedigree of the defendant. Some were based on racial prejudice. Some were influenced by the urgency of prior commitments and a preference to be somewhere else. Some too strongly influenced by others 'opinions'. Some even viewed changing their initial impressions as something to be defended, as if in a competition. Having said that, this is a play which will have you laughing out loud - it actually makes use of some brilliant irony and comedy.

It stuck me how effective questioning led to a better decision as the lack of robust evidence was highlighted.

However, it also struck me that this was a bit like some of bid evaluations I have witnessed. The need for a quick decision and pre-conceived ideas led to a poor decision, if not, wrong decision. The dominant voice for a strong individual subtly, and sometimes not so subtly, bullying others into a decision. I could go on with the parallels. But, if, instead of a Jury Room drama, this was recast as a Tender Evaluation Panel, I wonder which character would represent the CPO?

Twelve Angry Men may be a great play, but I think a DVD of the film would be a useful procurement training resource the next time a complex contract award is being approached. Come to think of it, it would be a very useful procurement training resource (full stop).

CLG Procurement Inquiry could ask 'why bother?'

I have been discussing the oral evidence sessions at the CLG Committee Procurement Inquiry. I assume those of you following my observations can sense my frustration that this excellent opportunity appears to be slipping away. I'm sorry to say the second panel session of the fifth evidence saw some of the same methodological flaws being repeated.

The opening question of this session asked witnesses from the Federation of Small Businesses, Market Dojo, and Bangor University:

Could I just begin with a subject where we have perhaps had slightly different points of view expressed by yourselves and your organisations? It is about trying to achieve greater opportunities for SMEs and micro-businesses to obtain contracts, and the extent to which there is a potential conflict between that and the council getting the best value for money from its contracts.  

So, ask yourself, if that was the exam question, what would the correct answer look like? Set aside that 'best value for money' is frequently 'in the eye of the beholder'. Were the Committee asking: 'Is the objective of achieving greater opportunities for SMEs and micro-businesses incompatible with the objective of achieving best value for money?'

If that was what the Committee were trying to establish, quite simply, they didn't hear. They heard about a new term for me, 'stickability' (that's the amount of contract value which stays in the local community). They heard that local sourcing can lead to better social cohesion. They heard that local businesses employ a range of employees. They heard that there could be growth in the local economy. They heard that local government procurement processes can act as a barrier to SMEs. They heard that "SMEs are the reason why a lot of large companies fail and yet local government procurement does not take account of this very well in the process" (What on earth is that about?). They heard that councils could not take account of innovation in the award process. But did they hear if the objective of achieving greater opportunities for SMEs and micro-businesses is incompatible with the objective of achieving best value for money?' - in a word, 'No'!

To me this is a serious weakness of the oral evidence sessions - poorly focused questions are being asked and the Committee just aren't extracting what they need to know. There are also opinions being expressed which appear to lack any foundation yet are not tested and lack of clarity of definitions which  mean answers are given but there is no shared understanding.

Social Value Act, social benefit clauses & SRO at CLG Committee Inquiry on procurement

And so to the fifth evidence session of the CLG Committee Inquiry into procurement. The first panel representing the Centre for Local Economic Strategies, National Council for Voluntary Organisations, and The Joseph Rowntree Foundation - all organisations which have previously helped move the procurement improvement debate forward.

To set the witnesses off to a good start and feel relaxed, the Chair started with one of those classic sextuple questions witnesses must, by now, be starting to expect:

One of the things we will be looking at is how procurement might be used for a number of objectives. We will begin by looking at how it might be used by local councils to tackle social disadvantage and poverty. Do you think councils are actually doing this effectively? Are they getting it right, or is there more they could be doing? Who would like to start?

Would anyone seriously have expected the witnesses to answer: "Actually, I think councils are really doing the absolute maximum that could be done". 

That reply wasn't heard but instead we heard that making an impact was down to the culture of officers and how procurement and economic development work together. I agree that there needs to be effective linkage between economic development and procurement but there's a flaw in the answers as they suggest officer driven policy and strategy and made no reference to political leadership. To me, in local government, elected members need to drive and lead the initiative - it is elected members who have to decide on competing priorities and then officers implement and are performance managed. If officers lead, to me, there is a high risk that their own personal agenda are pursued contrary to those of the democratically accountable leadership.

Now, let's reflect on that a bit further, three witnesses and not one of them initially mentions political leadership, yet, in the follow-up question, when political leadership is mentioned by the questioner, surprise, surprise, suddenly: "Political leadership is key, because it tells officers this is a high priority on the long agenda of things they have to deal with..." - call me a cynic, but had the questioner not mentioned political leadership would that key ingredient have been identified?

Procurement of taxis - get me out of here

What's the best way to procure a taxi service?

I suspect the custodians of the BBC are asking that question at the present. £10m a year spent on 350,000 journeys needs some sort of strategic approach. But users of the Beeb's Gateway Booking system seem to think the centralised purchasing system isn't delivering the best price. The examples cited suggest that buying locally, 'maverick buying', is approximately 50% cheaper.

Justifications used by the procurement department include: "we have to ensure that the companies used are both legally compliant and vetted, and this is done as part of the managed service provision ... we also require a 24/7 service which ensures broadcast criticality, full transaction reporting covering all journeys, ensuring we are compliant and can report our [tax reporting] obligations".

Virtually every organisation uses taxis and there are legal requirements for any taxi provider. It would be quite difficult in almost any part of the world I have been in not to find a 24/7 taxi service. I can understand that in certain situations there will need to be special provision for vulnerable passengers but why pay over the odds for all the other journeys?

There is always a dilemma when you try to take away flexibility and freedoms from staff, for example, their ability to hail a cab as an impulse buy or just when you need it as other options just won't work, so you can expect the odd example to be cited as part of the resistance to change, but why not just use corporate credit cards, claims expenses and, if it is abused, remove the freedom or tighten the controls.

I think there also needs to be some serious benchmarking discussions taking place with the providers. Something does not look right and the profession can avoid 'amateurs buy best' perceptions.

A tale of two sides of the same coin for the CLG procurement inquiry

On Tuesday I discussed the first of the two CLG local government procurement inquiry evidence sessions at Sheffield held on 18 November. I have been following the oral evidence sessions but the Committee will also take into consideration the written evidence submitted.

The earlier session on the 18 November appeared, to me, to be riddled with anecdotal evidence and unreliable answers to poorly framed questions. Nevertheless, it did suggest that there is an issue with stakeholders perception of what happens in local government procurement. It also suggested that the 8 Principles of Good Commissioning and the Compact are Whitehall theory as opposed to what the market appears to experience in Yorkshire and Humberside. Surprisingly the Committee don't probe these areas.

The second session provided an opportunity to hear from the other side of the coin, two councillors from Sheffield, Sheffield's Director of Commercial Services (also the regional lead on procurement) and  two representatives from YPO.

This session was unusual in that the evidence of councillors was taken. However, we only heard from two cabinet members and there weren't even any questions on how Overview & Scrutiny members might be engaged in strategic procurement.

We learnt that Sheffield, thankfully have moved from a position of building cost inflators into contracts. I have to say I have never before come across a system where contractors are guaranteed annual price increases.

A tale of two cities for CLG procurement inquiry: Sheffield & Sheffield

The CLG Inquiry into procurement rolled into Sheffield on the 18 November. This initially impressed me as it provided an opportunity to get out and feel the pulse on the ground. I say initially, as it transpired during the evidence that the Committee had pre-purchased tickets for the 3.47 train back to London and therefore couldn’t hear evidence after 3.25. Was such a guillotine a demonstration of good value for money?

Anyway, I would love to have shared the carriage with the Committee as they returned to London, and waited for the “What are we to make of all that?”

The objective of the sortie to Sheffield was “about trying to find out what is really happening on the ground, ..., what is going right, and what is going wrong”. What they heard were mixed messages about procurement in Sheffield; not local government in general, and not local government procurement in Sheffield but a ‘come all ye’ of anecdotes from questionable sources. For example:

• Single sourcing is leading to an item which would otherwise have cost £10 costing £20, yet no evidence to substantiate that claim was provided;
•  EU procurement rules require contracts over £250k to be advertised, yet my understanding is that the threshold for councils is actually £173,934;
•  Contracts under £20k can be awarded on the basis of three phone calls;
• “people, companies and organisations from outside the area seem to have a better opportunity of obtaining procurement contracts, mainly because they do not have any conflicts of interest or for some other reason.”

My suggestion to the Committee is, if you hear such heresy and factually flawed evidence, treat the informants other evidence with a large pinch of salt.

But the Committee are not blameless in this evidence session,

Good news for buyers and workers on Bangladesh factory safety?

Last week I discussed the ongoing problems in Bangladesh clothing manufacturing and the reluctance to pay the agreed minimum wage - thankfully that moved on and agreement was reached. Although I can't help but feel that spirit of responsible manufacturing was somewhat lacking, after all the Prime Minister had to intervene.

Today we have learnt that three stakeholder groups are close to agreement on minimum safety standards (Accord on Fire and Safety in Bangladesh, Alliance for Bangladesh Worker Safety, and National Tripartite Action Plan). This is potentially a good result for the European retailers involved but is it good enough?

The new standards will simplify inspections and therefore reduce costs to the buying organisations. They will also reduce inspection costs and disruption in the factories. Likewise the legally binding commitment of some of the buyers to maintain orders levels for the next two years and to share the cost of factory upgrades are positive steps for the workers.

However, if I was on the Board of one of the buying firms would I be relaxing? No, I don't think so. Consciences may be salved. New standards are good but can Board members of buying firms be sure they will be implemented, and that the standards are of sufficient level that the Board member would feel safe working with those as the minimum standard for the corporate HQ? No, this tentative agreement between such a varied group of stakeholders is likely to reflect consensus on the lowest common denominator as opposed to the best optimum solution for workers and buyers  - it is a step in the right direction but not the end of the journey,

CPOs have no cause to relax, they need to complete a risk assessment of the new regime and they need to made sure they are not abdicating responsibility. If the standards aren't high enough and there is another disaster, it won't be good enough the blame the standards - caveat emptor!

Negotiation for Purchasing Professionals - Book review

It's over 20 years since I l bought Steele, Murphy and Russill's handbook on negotiation, 'It's a Deal'. I found that book really helpful and practical. 20 years is a long time, so I didn't think I was being too extravagant investing in Jonathan O'Brien's 'Negotiation for Purchasing Professionals'. To be honest I needed no persuasion given that O'Brien's previous book, 'Category Management in Purchasing' is the definitive text on the subject.

'Negotiation for Purchasing Professionals' does not disappoint. What we have is a toolkit ready for use. The book effectively outlines the 'Red Sheet' method, complete with all the templates. Don't get me wrong though, this is not one of those clumsy, disjointed clutter of diagrams and models; no it is comprehensive and yet easy to read.

Working in a multi-cutural organisation I found the chapter on 'Negotiating across cultures' particularly good. While not the focus of the chapter, in many of today's businesses, with cross-functional teams drawn together across the globe, who have to negotiate as one-team, I thought the chapter made a useful contribution to effective team working.

I thought O'Brien was also excellent on 'power' and 'game theory'. While these chapters are written in the context of negotiation, I think they are useful reading, regardless of whether or not negotiation is in your mind. I suppose the same could be said for the chapter on body language which could provide many hours of enjoyment in 'people-watching' but just as easily a complex. O'Brien has a real skill in making concepts and theories pragmatic. Having said that, O'Brien has also creating a step-by-step guide to stacking the odds in your favour, right down to meeting and greeting!

Without doubt this is a book for every procurement practitioner.
   
Now just in case you want to get a copy of the book for yourself, at a decent price, order direct from Kogan using the code NPP and you'll save 25%!

Testing mini-break shopping and considering the options

The wonders of the web and absentmindedness of those who provide visibility of pricing on it never cease to amaze me.

I wanted to have a quick break linked with returning my son to his student flat in Edinburgh. A quick search found very attractive accommodation which suited us very well on Visit Scotland's website. Visit Scotland revealed a price of £x for four nights in a family room with our 16 year old daughter. However, trying to book I was redirected from Visit Scotland to the accommodation provider's own site. Unfortunately, that booking portal had the inconsistency of a maximum age of 15 for a child. Nevertheless, the websites both yielded the same price. I despatched a quick email to the accommodation to confirm availability but was offered a rate 24% higher than both Visit Scotland and the provider's own site.

Naturally, when I asked them to check their figures against both their own and Visit Scotland's website, the price was reduced.

There was always a slim chance I would be able to beat the web price through the email but why on earth would they price dearer?

Nevertheless, we had a great break but, much as I have a fondness for Scotland and my assumed historical roots, by way of price comparison, is there not something wrong when I can book a mini-break in Berlin, flying from Dublin and staying in a really good hotel, significantly cheaper than a car-ferry from Northern Ireland to a guest house in Scotland?

What will CLG Committee recommend on tackling fraud and corruption?

Last month we discussed the perceived rise in procurement fraud and corruption. On 11 November the Communities and Local Government Procurement Inquiry took evidence on tackling fraud and corruption. This was the third of oral evidence sessions, two of which I have already discussed. I expected the evidence to go some way to answering the following questions:

1. Is fraud in local government procurement increasing or decreasing?
2. Is corruption in local government procurement increasing or decreasing?
3. How does UK local government procurement compare with the world best in tacking fraud and corruption? 
4. What would an effective strategy for tackling fraud and corruption strategy in local government procurement look like?
5. In what ways are councillors part of the problem and the solution?

Unfortunately those questions weren't asked. Why?

Do the incumbents of government contracts have an advantage?

On Tuesday I discussed the NAO Memorandum to Parliament on the management of strategic suppliers. I now turn to the parallel Memorandum on the role of major contractors in the delivery of public services. This is slightly different though in that it aims to stimulate public debate.

As usual, an excellent report from the NAO with plenty of useful insights for procurement practitioners.

I have little to contribute to that debate, however, I do think paragraph 1.9 in the report is worth discussion:

Incumbents can be seen by procurement and policy officials as he easier and softer option. Across the 15 applicable services we looked at as case studies for this memorandum , seven had been retendered at least once, with four of the most recent competitions being won by new providers.

I don't agree that procurement and policy officials would have a preference to the incumbent, and I doubt if the success in retendering demonstrates they do.

Incumbents have many first mover advantages and would be expected to do well in a retender as they should be able to identify scope for inefficiencies and have a greater understanding, possibly than the client, of the client's needs. The incumbent will also know where the emphasis can be placed in pricing strategy and where demand is lowest.

Retail clothing buyers to make a difference through contracts?

I think we all felt the stain of shame with the deaths of so many low paid garment factory workers in Dhaka some months ago. Even Michael Fallon, a government minister, summoned the great and the good of retail procurement to take corrective action.

It's not remotely clear what actually changed but here's a suggestion.

Given the UK debate on the cost of living and whether the living wage should be mandated in government contracts, that the average wage of a garment factory worker in Bangladesh (making UK High Street brands) is only $39 per month, that police have just used rubber bullets and teargas to quash a protest of 400,000 garment workers seeking a monthly wage of $100 (£62) which led to production stoppages in 200 factories, that the Garment Manufacturers and Exporters Association have just rejected the recommendation of the Bangladesh Minimum Wage Board to pay a rate of $67 per month, why don't UK High Street retailers collectively place a contractual obligation on their suppliers to pay the minimum wage agreed by the Bangladesh Minimum Wage Board, backdated to its date of recommendation? Is that too much to demand? Too much of a Christmas present? Too reasonable? Too responsible?

P.S. 14 November 2013 following the intervention of the Bangladesh Prime Minister the Garment Manufacturers and Exporter Association have accepted the Board's recommendation. UK buyers should still enforce adherence through contracts though otherwise there's a risk that implementation will not take place. 

Strategic supplier management in UK government

On Sunday I discussed Premier Foods novel approach to strategic suppliers. Yesterday, the National Audit Office published a Memorandum to Parliament on Managing Government Suppliers - an interesting publication for anyone concerned with strategic procurement approaches, regardless of the sector you work in.

Margaret Hodge, Chair of the Public Accounts Committee, is clearly not happy with what the Memorandum has highlighted, nor that of its sister report on the role of major contractors. Both would have been of particular interest had their conclusions been fed into the PASC Inquiry on public procurement so it will be interesting to see 'what happens next?'

40 contractors have been identified as 'strategic' and collectively they consume 25% of the government's total spend. The suppliers are identified as strategic on the basis of extent and profile across central government and potential added value, but not necessarily spend or risk.

There still appears to be confusion on roles, responsibilities and accountabilities between spending departments and the Cabinet Office. That strikes me as something which needs to be addressed urgently as it could lead to suppliers playing one off against the other and causing gaps in strategic supplier management. At the present spending departments are the contracting bodies, yet both the departments and suppliers are subjected to Cabinet Office interference without accountability. Of course there's nothing unique about this and it's not a problem unique to the public sector either.

But then we also have the potential for dysfunctionalism with the Cabinet Office's focus on short-term savings while departments can be expected to have a wider view.

Premier Foods redefine strategic suppliers

How would you define a strategic supplier? To me it's a supplier who is core to business success, and one you really need to keep working with. You would also embed them in your procurement risk management and have effective contract management in place. You may not want the supplier to know they're strategic as that places them in a greater position of bargaining power.

That said, today's Mail on Sunday suggests that Premier Foods, the UK's largest food manufacturer, is adopting a more strategic approach to its suppliers. There will be a reduction in suppliers of approximately 50%. Surprisingly they have written to suppliers and given them the option of becoming a strategic supplier - very odd. This new approach to dealing with the market will introduce a formal supplier appraisal process. I don't know whether or not that means Premier Foods didn't previously have a supplier appraisal process in place but it's scary, given the attention to food supply chain failures over the last year, if this is a first for Premier Foods.

Anyway, introducing this supplier appraisal process will incur costs - strange that it won't lead to cost reductions - and to cover those costs suppliers are being asked to fork out £5,000 plus VAT.

It would be interesting to learn of Premier Foods procurement strategy:

1. What will they do if some, or all, of the real strategic suppliers decide that they do not want to pay?
2. How do they know that the supply base of 3,299 is too large and 1,650 is just right?
3. Is this really the first time Premier Foods have introduced a supplier appraisal process?
4. Have the profiled the supply risk?
5. Does payment of £5,000 by a supplier mean they successfully navigate the supplier appraisal process, and, if they don't, will the supplier receive a refund?
6. Will other forms of accreditation be acceptable to Premier Foods?
7. What will the selection criteria be for 'preferred supplier' (Premier Foods strategic supplier) status? 
8. If Premier Foods didn't have a supplier appraisal process in place previously, did they have contract and procurement risk management processes in place?
9. Is the strategy to designate all suppliers as strategic?
10. What do Premier Foods plan to do if their strategic suppliers start to expect faster payment terms or even payment on delivery?
11. What is Premier Foods policy if their own customers impose an obligation to pay for supplier appraisal - will Premier Foods pay? 

In an environment where others are adopting supply chain financing this is certainly a novel strategy but is it a clever strategy?

The offence of Treating

Prior to hearing that the police are investigating a councillor who, 11 days before an election, bought tea and cake for residents of a care home, I hadn't heard of the offence, within electoral law, of 'Treating'.

 "A person is guilty of treating if either before, during or after an election they directly or indirectly give or provide any food, drink, entertainment or provision to corruptly influence any voter to vote or refrain from voting. Treating requires a corrupt intent – it does not apply to ordinary hospitality."

Of course, what we can't tell is whether or not there was realistically any chance of the 'treating' having an impact, for example, if the councillor knew no postal votes were requested by the residents, whether postal votes had already been cast, whether the residents had access to transport to the Polling Station, or indeed whether they were even registered to vote? It is also interesting to note that it is not the residents who are deemed guilty of receiving tea and cake which could have 'corrupted' but the potential candidate who bought the cake.

But visualise if the 'other advantage' under the Bribery Act  was also deemed to include 'treating' to food, drink and entertainment within a certain period of a contract award? Of course it would have to exclude 'ordinary hospitality' too, but then who's to say what constitutes 'ordinary hospitality'.

As we start to approach the season of 'one-way giving', I wonder how much takes place without gaining some 'influence' over future procurement decisions, only if it is to ensure an RFP is received at some stage which wouldn't otherwise have been. Aren't 'treats' for procurement all really just 'tricks'?

Thus spake PAC on Universal chaos and waste

"...the Department lacked an overarching business transformation strategy, and focused its effort on the programme's IT aspects. The failure to develop a comprehensive plan which will deliver these important changes has led to substantial nugatory expenditure which has yet to be finally determined and extensive delays in the implementation of the programme. 

 The Department accepts that timescales have slipped and that value has not been secured from the X million[s] invested so far. There has been a shocking absence of financial and other internal controls and we are not yet convinced that the Department has robust plans to overcome the problems that have impeded progress. Our recommendations are designed to help get the programme back on track. In particular the Department needs a robust plan on how to transform its business and what is required from the new IT systems it intends to use to support the transformation. If the Department is to secure the benefits it seeks, the new IT capabilities must enable more online operations, must address fraud risks, and result in a system capable of handling the real-world complexities of [key users] circumstances. The Department must be realistic and transparent about its expected costs and timescales, and the milestones against which we can hold it to account. We believe strongly that meeting any specific timetable from now on is less important than delivering the programme successfully."

It's highly likely that a high proportion of the millions invested will have to be written off. Without even getting beyond the summary, it isn't hard to ask "aren't these the basics of PRINCE2 and MSP?"  However, how many other projects could the same narrative apply to with a little 'cut and paste'?

But just in case you thought this was all the fault of IT strategists and policy wonks;  procurement were also named and shamed:

Constructive comments when CLG Inquiry focus on construction procurement

After three sessions which left me quite despondent, the CLG Inquiry then focused on Construction. I have to say that the witnesses from Civil Engineering Contractors Association, KeepMoat, and Federation of Master Builders were quite impressive, constructive and, to me unbiased.

Sadly, there was a view that while there is some best practice, there is also some practice which is 20 years out of date. Now that should give both LGA and CIPS something to think about!

I also found it disappointing that the witnesses weren't probed on the lessons which could be learnt from the former Local Government Taskforce and Constructing Excellence initiatives - is it a sign of my age that I can recall the investment which was made in those improvement programmes? Anyway, unless we can learn from what worked and what didn't in the past, we are not only doing the previous investments a disservice but also at risk of trying to reinvent the wheel - the Committee really need to start probing these lessons.

So what did I think was helpful in their evidence?

1. There needs to be an improvement in the writing of Briefs - that's a foundation for success;
2. If councils provide better visibility and certainty of what is required then councils can expect better prices;
3. The skills deficit could overcome if a  peripetic 'flying squad' were set up which travelled from project to project - I think this was envisaged as a more 'hands on' service than the type formerly provided by the 4Ps;
4. PQQs were not seen as a 'bad thing' but there could be standardisation.

Then we had what has become a common question (so a warning for all those yet to give evidence): "Do you favor central government mandating greater centralistion of procurement in local authorities?" , my view was that the witnesses were not in favor, however, constructively, they felt there could be:

• a mandate to provide a procurement pipeline;
• a standardised PQQ;
• a consistency in approach and standard models.

As I say I felt this was the best session so far.

Collaboration just doesn't sit well with strategic procurement functions in local government?

On the Monday the CLG Committee Inquiry into procurement shifted its focus to collaboration. Yet again the Committee struggled to prise information from the witnesses, for example, a simple and predictable question kicked it off "What proportion of councils are up to speed with best practice and, if not [up to speed], what are the barriers?" Correct me if I'm wrong, but I don't think Messrs Taylor, Walsh or Robinson actually provided an answer!

However, we did learn from one of the witnesses a useful nugget "... the last national procurement strategy gave rise to a proliferation of a number of strategic procurement functions, so most councils have got a strategic function". Now that struck me as quite a good thing until Ed Walsh continued: "as a consequence they don't think with any form of collective mentality very easily, so looking at efficiencies and the benefits of economies of scale isn't something that comes easy to local authorities". Sorry, I just don't get that. I don't get it because councils have been collaborating on purchasing for over 50 years; I don't get it because organisations like NEPO and YPO and ESPO and Pro5 all exist. I don't get it because that same national procurement strategy which is praised, or was it criticised, for leading to the introduction of strategic procurement functions in councils, also had a complete section on collaboration!

Then we heard there's the potential for billions of pounds worth of savings in councils - I wonder what the LGA will make of that and what will be the strategy for achieving those savings if, on the strength of that evidence, the Committee advocated further cuts of billions of pounds to council budgets? But then again the Committee were told of evidence that suggests SCAPE in 1,200 local government procurement projects have delivered average savings of 14%.

Now that last savings claim gave Ian Taylor some cause for concern and he cited his own viewed, based on spend analysis, of the potential scope for collaboration, namely, 10-15% of spend was suitable for national buying, +/- 25% suitable for regional buying, and +/- 50% required local buying. I don't know how accurate those figures are but they do strike me as quite reasonable.

So what's the solution? Well the Committee could take on board one of the witnesses suggestions and put in place a centralised national buying organisation, or perhaps a regional structure - hold on though wasn't that what the RIEPs tried to do in partnership with Pro5? Or, as another of the witnesses suggested, the Committee could sort out the fear of failure which is pervasive in local government as a result of potential EU challenges.

My own suggestion is that the Committee will have enough on its plate trying to reconcile the first two days of oral evidence and how to stop local government procurement witnesses undermining anymore the good work of the sector.

I suspect I may return with more comments on the oral evidence but that seems like enough to think on for the time being.

NHS getting ready for another procurement scrub

I found the news in today's Financial Times that the NHS is in talks regarding the future of Commissioning Support Units an interesting brain teaser - what would I do?

The 19 CSUs were set up last year to support the Clinical Commissioning Groups (CSGs) in designing health services, providing back office computer services, payroll and procurement services. Now NHS England is considering the options for their future. Yet, it appears it's the CSUs who have to decide on their own future - how will that work and what freedom will they have to plough their own furrow?

Anyway, it does seem strange that there wasn't a clear strategy when CSUs were set up as opposed to 19 CSUs starting to deliver services and then debating their future so soon.

The usual outsourcing organisations could bid for all or part if the services, but is the current environment (e.g SFO now probing tagging contract) likely to be conducive to productive discussions when the government seem to lack confidence in so many of the providers and also the ability to successfully contract manage?

Alternatively, could the CSU services be provided through the contract let recently for government shared services? That may be difficult since it didn't appear to be in scope. One could of course ask why it hadn't been included in the scope?

Could the Crown Commercial Service provide the procurement aspects? It seems odd that the CCS would allow independence of such a vast amount of spend so early in its life, but then again why haven't they been providing the procurement services up until now, and if they have, have they failed to win over hearts and minds?

Should the NHS aim to let one job-lot contract for the whole of the 19 CSUs and, if so, how will they shape the contract? If NHS England went down that route, how would they avoid being held hostage to the provider? How would they gain the ownership of the CCGs?

Could each of the CSUs become a centre of excellence and each deliver a specialist shared service to the others, say one CSU leading on payroll and another on procurement?

If theoretically it was possible for CSUs to become centres of excellence, with the sole aim of supporting CCGs, why couldn't the CCGs 'cut out the middle men' and just agree among themselves which of the CCGs would become centres of excellence?

Would my position be different depending who I was advising? Well, I think to be honest, if I were in a CSU or one of CCGs, my inclination may well be to let all the others sign-up to a central deal and then use that as the starting position to get better deals from those who were unsuccessful in winning the main contract. When you compare the classic Prisoner's Dilemma scenario doesn't it sometimes make sense to actually avoid collaboration and standalone in procurement?

Well, it gave me something to muse on during this morning's flight in the absence of the facts - what would you recommend?

The UNISON v NOA bout at CLG Committee Inquiry on procurement

On Friday I discussed the evidence of the local government panel witnesses to the Communities and Local Government Committee Inquiry into procurement. My main issue was the reliance was the absence historical evidence which should have been easy for LGA to access. My second criticism was the danger of hubris, ripping up the rule book and believing you alone have discovered the Holy Grail - passion in your work is great but it will not count for much when hindsight is what judges you, if not the legal profession.

So that was the first witness panel's evidence, the second panel gave evidence from UNISON and the National Outsourcing Association - as you would expect these two opponents traded unhelpful blows with each other on outsourcing.  It did strike me as strange though that the earlier session hadn't sought answers from the local government witnesses on outsourcing. Equally, why didn't the Committee follow through with UNISON and NOA on the local government witnesses evidence on social value - absolutely no triangulation of the evidence!

I cringed when the UNISON spokesperson referred to the DeAnne Julius report as "outdated and largely based on CCT" - now let me think, wasn't CCT led to rest nearly ten years prior to the report?

What drives local government procurement improvement?

I'm sure many of you have been eagerly awaiting the evidence sessions on local government procurement to the Communities and Local Government Select Committee. On Monday the Committee  had its first session of oral evidence which is now published.

I had previously highlighted what I felt may be worth exploring, but it doesn't really look as if either the  Committee or LGA have spent anytime learning from history and would rather listen to some suspect assertions.

A good starting point was the Committee trying to establish what drives procurement improvement? Sadly, the LGA spokesperson had to have that question broken down into bite-sized chunks before the Committee came to his rescue. Then we heard, what I consider to be absolute nonsense, that the electorate are driving change through the ballot box. Thankfully the Committee had enough sense to question that assertion too. Having interviewed hundreds of local government procurement stakeholders this was the first time I have ever heard anyone suggest there is something in a manifesto about local government procurement. It's all about campaigns and the X factor in one council it seems.

We heard that the LGA have been working on a national procurement strategy since 2006 - why so little progress? Well perhaps, and I quote, "I am not sure a national framework is terribly helpful". We may be in a better position to judge whether a national procurement strategy would be helpful if they considered the evidence of the impact of the first NPS - there were annual impact assessments completed, why weren't they drawn upon? There were also some academic papers and from memory a ODPM financed impact assessment.

Relationships First: The new relationship paradigm in contracting - Book review/critique

This a very strange book or is it a manifesto? It argues that something new has been developed and applied, yet I see little new from what was discussed in the mid-1990s. Does it justify the subtitle 'The New Relationship Paradigm in Contracting'? Sorry, it doesn't.

It is printed double-spaced, why? The appearance creates the assumption that this was a MBA project re-shaped as a self-published book. If it is a repackaged MBA project the potential reader should have been warned prior to purchase.

Five chapters of the author talking about his experience before you get to an explanation of what the 'new' model is about - actually I can't see what the new model is.

Business school models are drawn on, for example, 5 Forces and 7 S's. Yes, this definitely has the feel of an MBA project. Now why was Peter Kraljic's seminal 1983 paper was missed - didn't it have the same message that strategic contracts need to focus on relationships?

FoI for public sector contractors?

I have to say I was surprised today to hear of proposals that the Freedom of Information Act could be extended to embrace public sector contractors (quite possibility driven by a recommendation from the Social Enterprise UK ) .

I don't actually believe the rhetoric that such a move will force firms to compromise commercial secrets as, it strikes me, Section 43 of the Act already provides that protection. However, I do question how well thought through this potential policy is and what is likely to be the outcome?

Common sense suggests that since the Freedom of Information Act is now well embedded in the public sector it shouldn't be too hard to establish the potential value which would be delivered through the increased scope. For example, it would be useful to know how much cost has been added to the average public sector organisation answering FoI requests? It would also be comparatively easy to carry out some research with those who have made FoI requests to establish the real benefit gained? I have never actually made a FoI request but have had experience in responding. Responding to FoI requests consumes an enormous amount of time and there is a game of sanitisation taking place - a cottage industry has been created for bureaucrats. But equally many requests are just lazy, disguised market research at the expense of the public sector, it's information which isn't in the public interest but the costs are being shifted from the private sector to the public sector. Labour could place a FoI to get that information before pursuing the policy.

If the legislation is extended there will be an additional cost to private and third sector organisations just because they happen to be public sector contractors. There will then have to be some disaggregation of those organisation's work which is covered by FoI requests and which isn't. Those organisations being asked to respond to potential FoI requests will have to allow for that cost in their bids and that in turn will be passed to the public purse - those advocating the policy will need to budget for those costs. It may also be worth considering what the likely impact will be on mirco, small and medium enterprises?

However, if the issue is that the public sector isn't really on top of its contractors, then changes to specifications and contract  management may be more cost effective options.

Some months ago I discussed another Labour proposal, that of obliging all public sector contractors to pay the Living Wage. It strikes me that Labour can see public procurement is a useful political tool but I think it may be better to sit down with some sympathetic businesses and work out the most effective means as opposed to kite-flying.

'Free' in schools shouldn't be free of controls

A few weeks ago I discussed the allegations made in the press about al-Madinah free school - I questioned whether some of the allegations were justified. The allegations included conflicts of interest and lack of processes.

Then this week I discussed the increases in fraud and particularly in procurement. Tonight, we see a convergence of free schools and fraud. Fabricated invoices and money spent without supporting documentation. The latest allegations date back two years (apparently suppressed).

To me these problems all relate to Start-up and possibly naivety. There needs to be more attention given to getting procurement policies, processes and procedures in place together with the appropriate controls at Start-up. But perhaps it is unreasonable to assume that those who are setting up free schools will have the clarity of vision and even know-how to develop and put in place appropriate procurement policies, processes and procedures - that's why we seem to hear of problems after the event.

Now having said that, while Free Schools are the focus at the present, the same problems are surely just around the corner with Clinical Commissioning Groups.

Part of the solution lies in providing a really good start-up toolkit, training and support. Correct me if I'm wrong, but it doesn't look as if that support has/is being provided - if that's the case, it is a false economy and poor risk management.

Freedom may be a good thing but there needs to be protection against chaos. Sometimes even the free need to be protected from the pitfalls.

Procurement reflections on Grangemouth negotiations

I'm sure, like me, you felt for the workers of Grangemouth who heard yesterday they were going to loose their jobs. Seemingly uncontrollable cost of living increases, Scottish winter fuel costs and Christmas only add to the real issue of whether or not there is any hope of future employment.

But what we are seeing is also high stakes negotiation. At face value we have the following buyers and sellers:

1. Shareholders, who are indirectly buying workers;
2. The workers, who bought union membership;
3. The union, who sell union membership;
4. The union, sell (broker) on behalf of their members;
5. The workers, who sell their skills to the employer;
6. Buyers throughout the country, who purchase fuel and plastics, used, for example, in the manufacture of cars and packaging;
7. The UK government, who will incur additional financial and political costs if the workforce are unemployed or there are industry security of supply impacts.

However, what happened?

Procurement fraud is growing

Kroll's 2013/14 Global Fraud Report has just been published and it comes as no surprise that the greatest increase is in the world of procurement and conflicts of interest. 71% of companies in Europe have been affected by fraud. 19% have suffered vendor, supplier or procurement fraud - an increase of 7% from last year. We're talking about 1.4% of revenue slipping out of organisations.

Areas of interest to us also include outsourcing and offshoring which have increased the risk of fraud for 28% of respondents, and joint ventures and partnerships which have increased the risk of fraud for 20%.

It's only a few days ago Peter Smith drew our attention to Transparency International's report on UK Corruption in Local Government which also highlighted that procurement needs to be particularly vigilant throughout the procurement cycle given the dismantling of some of the former protection systems.

So what should you do?

1. Recognise that your organisation is unlikely to be immune;
2. Introduce a whistleblower culture (The TI report claimed whistleblowing had been more effective than audit, internal monitoring, or police investigations);
3. Train staff and encourage them to ask questions;
4. Put in place a strong governance system;
5. Ensure no-one is outside the 'scope';
6. Embed within procurement risk management;
7. Ensure the correct polices, procedures, processes and controls are in place;
8. Make use of eProcurement solutions;
9. Apply due diligence to all aspects of the procurement cycle, particularly in selection of new partners and outsourcing;
10. Create a cycle of learning from others and from past fraud attempts.