Wednesday, 11 September 2013

Be wary of price comparison sites

"I'm very wary of the comparison sites because they are all gamed .."
It will hardly surprise you that those are not the words of a furry meerkat or the lyrics bellowed by some torturous moustachioed 'tenner'. However, I suspect it may well surprise you that they were the 'off-the-cuff' remarks of the Chief Executive of the Financial Conduct Authority to parliament yesterday. It will also hardly surprise you that the FCA quickly tried to distance this 'personal view' from that of the organisation.

Off-the-cuff remarks have made the news quite a bit recently and you may question how much credence should be given to them. Yet it strikes me that this particular remark, unlike a sanitised press statement, is probably closer to what the FCA Chief Executive actually believes and practices, than the more diplomatic rhetoric. So if the CX is wary of 'comparing the market' perhaps there is really some cause for concern.

In my private life I honestly haven't used the sites but I do carry out my own market research online and value the ease of access to information from the internet - yes, that approach helps me beat the price comparison sits in achieving the best deal for me.

But let's think about the mantra that greater transparency of actual spend data improves public sector efficiency as a result of 'empowering the armchair auditors'. As someone who has tried to interrogate some publicly available public spend data, I don't believe for one minute those publishing the data pay any more than lip-service to primary objective. I view it as the victim of obfuscation, protectionism and defensiveness. Think 'turkeys and Christmas'. Yet the aspirational transparency brings a cost paid for by  the very armchair auditors who don't appear to be using it in droves. Therefore,  I would really like to see the evidence that the desired outcomes of the 'transparency' have been achieved.

However, as a procurement practitioner I am also wary of the procurement version of price comparison sites.
By their very nature the value of the sites will always be limited through those who willingly publish or have agreed to have their prices published. So a marketplace may well shine a light on a good price but there can also be lower prices remaining in the shadows available from those not participating in the marketplace, or indeed those willing to discount against the 'published list'.

This is one of the reasons I am wary of the expectations of the Crown Commercial Service. I have absolutely no doubt that the service will be able to deliver good deals. However, I am also absolutely clear that the prices obtained will always be comparatively easily to beat and will not be the best deals, for example, the agreed deal sets the benchmark which losers have to match if they want to gain any business and survive until the next round of frameworks is established. It's all very well screaming that contracts will be mandated, but the evidence demonstrates that's an aspirational strategy as opposed to one which has a reasonable probability of being a realised strategy.

So, if it is price you are driven by, price comparison sites provide myopic transparency and you need to be wary. Given that's the case you have to consider the costs associated with finding the deal in the shadows. The problem for the CCS, and indeed all the price comparison sites, is to better communicate the efficiency benefits rather than the price benefits - they won't be the best deal but the most efficient deal. Equally, there needs to be greater encouragement of mavericks to share the prices they have achieved 'off-site' - with that information you can adopt a more dynamic approach aiming for continuous improvement through effective contract management and negotiation.

In conclusion be wary of meerkats, price comparison sites and centralised deals.

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