Tuesday, 12 November 2013

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.

As an outsider, I'm confused about the whole governance structure. There is clarity about what the impressive Commercial Relationships Board (CRB) aims to do, but they appear to be chaired by the CPO as opposed to calling him to account. Who is actually accountable for the results, or failures; is it the spending department?

The CRB use strategic supplier performance management ranking suppliers against operational delivery, savings made, and level of engagement with government's wider commercial agenda (e.g SME engagement). Suppliers are ranked, but surprisingly only become aware of the ranking if they are 'high risk' - I find it very strange that a strategic supplier management system doesn't have transparency of vendor rating? But yet, that's not as strange as the suggestion that there are variations on the ranking methodology across departments. Equally, strategic supplier performance management seems to be dependent on information provided by the suppliers as opposed to the departments - isn't it odd that on the one hand the integrity of some data provided by strategic suppliers has been publicly questioned and indeed subject to a SFO investigation, while on the other, supplier provided data drives a performance management system?

It is suggested that the performance management system is working and 73% rate 'green'. It would really help if we understood what's happening with the other 27% and the effectiveness of the strategies pursued? Perhaps the NAO will take a retrospective view in a later report, letting us know the lessons learnt and how effective the system has been in reducing contract failures?

In today's environment with greater use of Big Data as a tool for prediction, why is 'rear view mirror' information used as opposed to forward looking?

Speaking of an information deficit, the NAO only appear to have been able to access information on 60% of these strategic suppliers and some basic record keeping seems weak, for example, minutes of meetings. It's not as if we're discussing 400 strategic suppliers, no, only 40! Then we've the problem of information security - yes, there have been breaches.

I'm left puzzled on the approach to contract management - is that solely the responsibility of the spending department, or is the CPO accountable?

Perhaps the biggest question remaining in my mind is why the NAO asked suppliers to just rank the Cabinet Office's commercial capability - why did they not ask the departments to rank the Cabinet Office, and why did they not ask the suppliers to rank their client departments commercial capability?

Having said all that, I do think the Memorandum is a valuable contribution and look forward to 'what happens next?'

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