Invisible ink used on the script of HS2 justification

It's very strange that a Government which advocates transparency wants to be very, very opaque. Wasn't the argument for transparency that the army of armchair auditors would be able to call their political masters to account and only those who had something to hide should fear transparency? I suppose you can understand the desire for opaqueness when it comes to the Department of Transport who suffered badly when the figures behind the West Coast rail franchise were exposed to scrutiny and unravelled? Understanding isn't the same as justification though.

Transparency delivers other benefits. The armchair auditors can be part of the risk management process providing constructive critique and highlighting risks which might otherwise have been overlooked.  Transparency also wins stakeholder confidence and helps with change management. Those benefits can't be realised if you opt for secrecy. Yet, in an age of Wikileaks and Edward Snowden does anyone seriously believe the Report will remain concealed?

However, the latest act in the HS2 farce is the decision yesterday, not to publish a report of the Major Projects Authority by invoking a bizarre workaround of the Freedom of Information Act. Withholding the report only feeds the beast of cynicism and further undermines confidence in the project. Not only that but it forgoes the benefits of transparency and makes it more difficult to argue that others should provide visibility of their decisions.

Bitcoin for procurement

Bitcoin seem to be getting quite a bit of airtime at the minute but little discussion on how they will fit within commercial procurement.

Visualise the scenario: you have one contractor who has a unique set of expertise you want to procure as they will really deliver your organisation an unassailable competitive advantage. The problem is that the supplier does not like the idea of paying wads of cash over to the taxman and says they will only help you if you pay in Bitcoins - what do you do?

For those of you who have never heard of Bitcoins, they are a virtual cash, a digital currency which really doesn't exist, but can be exchanged into cash. Over the last five years they have been used in the seedy world of drug dealing and on-line pornography. Those who trade in bitcoins are anonymous. They are beyond either the taxman or the law - so there may be some questions of ethics. But Bitcoins are now being used legitimately for some consumer purchases and recognised in some countries as legal tender. They do away with all those expensive credit card charges. There are about 12 million Bitcoins in existence and there is an understanding that there will never be more than 21m.

If you wanted to trade in Bitcoins you'd need to take the risk of wide fluctuations in the exchange rate (foe example from £175 to £50 to £105 within six hours, and separately between £800 to £550 in one day) and even went into freefall on 18 December when the Chinese government placed a restriction on their use - but maybe that doesn't matter if you really need something and you find a means of hedging.

You'd need to think how you were going to enforce a contract, but that may not be hard if you are paying for personal services and after they have been delivered.

So, i ask you again: you have one contractor who has a unique set of expertise you want to procure as they will really deliver your organisation an unassailable competitive advantage. The problem is that the supplier does not like the idea of paying wads of cash over to the taxman and says they will only help you if you pay in Bitcoins - what do you do?


This was initially posted as a guest blog on 8 January on Spendmatters

The Queen, Dredging, Potholes and short-term procurement

The news over the last week has highlighted some of the false economies of short-termism in procurement decision making,

The residents of Somerset Levels claim that the recent flooding could have been avoided if there had not been a cut in river dredging operations. They have good cause to be angry as no doubt their property investments have become almost valueless (would you buy their property?). If you follow the trail of cause and effect from the alleged short-term decision to cut dredging,  then that contributed to the flooding, which in turn led to damaged property and farm crops, which in turn leads to loss of access to insurance, increased fresh produce prices, potentially farmers exiting from their businesses, which in turn leads to the to claim benefits. Then if people move from the area there will be a depopulation and questions as to the sustainability of local schools and remaining local businesses! Do you honestly believe those who suffer the impacts, and their families, will not blame their politicians, through the ballot box, for many years.

Separately consider the problems with potholes.

When obfuscation meets incisive questioning on collaborative procurement

On the 22 June the NI Assembly Public Accounts Committee published its report on collaborative procurement in Northern Ireland - far from a glowing endorsement for those leading on collaborative procurement.

However, as some of you will recognise I am intrigued by some of the oral evidence sessions at public procurement inquires. The Report includes the witness evidence given by key players in civil service procurement in Northern Ireland to the Committee on 5 June 2013. On this occasion those asking the questions were remarkably well informed on public procurement and their expectations. Unlike so many of the Inquiries I have discussed previously (for example, the recent CLG Committee Inquiry), the MLAs were not prepared to be distracted but asked probing and detailed questions - to me they were exemplary in their scrutiny.

So what do I mean by probing and not being distracted? Let's look at the questioning regarding the CPD (Central Procurement Directorate), a hybrid organisation who, according to the evidence do not procure anything (#4 and #138) but provide guidance. The CPD was set up in 2002 and in their evidence said "we have been making procurement processes more efficient over a longer period than some other jurisdictions" (#18) - by other jurisdictions you can take it they include England, Scotland and Wales. Let's remember that Northern Ireland is quite small and is really about the size of one of the bigger counties in England, so perhaps when comparing progress towards collaborative procurement a better comparison may have been with the Yorkshire Purchasing Organisation (YPO) or Central Buying Consortium (CBC).

pCard and corporate credit card procurement

Today's Times included a throwaway comment that "there were signs that restrictions on corporate credit cards had started to loosen". Given that the article was generally referring to bankers, perhaps we should not draw conclusions that this is indicative of a general trend.

Of course we also need to be cautious in reading too much into what is meant by 'the restrictions' - for example, does it mean higher thresholds, wider categories of spend allowed or wider access to corporate credit cards?

Either way, organisations need to remember that corporate credit cards are not a perk or an opportunity for extravagance at the organisations expense. They should fit within the Finance and Procurement Policies and Strategies as a way of reducing transaction costs, and managing Low Value Orders. They also need to be supported by protocols, controls and guidance otherwise you may as well just hand over a wad of cash and tell the profligate to go and enjoy themselves.

Piano lessons for procurement

I have often been surprised at how some struggle with stating exactly what they want to buy, and whether or not they can move from inputs and outputs to outcomes in specifying. I frequently meet people, who knowing I am a strong advocate of stating outcomes, somehow believe that specifying outcomes means forgetting about the need to state inputs and outputs too - it is not just outcomes which are specified.

However, let me illustrate by way of procuring piano lessons - I am not being frivolous, part of this saga actually resulted in a court case, where I live, in Lisburn.

When the decision is made to send a child to piano lessons, is it to learn to play the piano or something else?  First, let's consider piano lessons for the completely unmusical child - the piano lessons will be inputs and paid for, let's say for each one hour lesson. The best piano teacher in the world may never be able to help someone who completely lacks an aptitude, has no sense of rhythm and is tone deaf. Paying by the inputs of lessons given is probably quite a reasonable approach. Indeed there is probably an implied contract of paying for 10 lessons in advance.

But can only those who have had formal training teach someone how to play a piano? Are the teacher's personal musical qualifications (Grade certificates) an input to the specification or a part of the selection criteria of the teacher (supplier). Before you rush to a conclusion, what about all those who teach kids how to play the guitar -  few will be qualified 'on paper' but they may be actually very good at teaching someone else how to play.

Then let's think about the outputs of the piano lessons.

New procurement rules - is that it?

I haven't actually had the opportunity to have a look at the revisions to the EU public procurement rules but base this comment on the article by two lawyers which appeared in The Guardian's Policy Hub. Two lawyers are probably a much more reliable source than me anyway.

However, assuming Formosa and Weller's interpretation is right, I have to say 'so what?'

The idea that new Directive justifies saying that Public Procurement is the next weapon in combatting climate change is just complete and utter nonsense. If the new Directive encourages looking beyond lowest price, then what was the previous option of Most Economically Advantageous Tender about - are the new Directives acknowledging that a culture of 'lowest price wins' is still prevalent?

If however, the new Directive allows consideration of 'lifecycle costs (including greenhouse gas emissions) as opposed to total aquistion costs (including running costs such as energy consumption), then that is something quite radical and new. But how would buyers know how to evaluate greenhouse gas emissions? It seems to me the obvious and most logical way would be to specify using an Eco-Label, but then that's nothing new and was an option 20 years ago.

If the new Directive allows buyers to split contracts, how is that different from the previous option of using 'lots'?

Actually, if Formosa and Weller's analysis sets out the major changes in public procurement I despair, those organisations which were really committed to sustainable procurement were applying these strategies years ago within the former Directives. After the hullabaloo about the UK going to bring about radical changes to the procurement rules surely their must be more - looks as if I will have to wait until the Directive is transposed into revised UK Regulations before I'll be able to detect the changes.

But hold on a second, will it really make much of a difference what the changes in the Regulations say, assuming they are not more restrictive? No, to me the Regulations haven't been the obstacle to sustainable procurement, it's been CPOs lack of enthusiasm, short-term emphasis on cutting costs as opposed to Most Economically solution, and inability to bring about change - I'm afraid the Regulations just can't change those weaknesses.

Scepticism, the pursuit of happiness and procurement

I remember, around 20 years ago, insisting I signed-off a consultant's report before it was presented to the major decision-making body for approval. The budget holder was aghast and saw me as being awkward. Then we discovered the consultant's recommendations were flawed and, had their recommendation gone through, the wrong choice would have been made. Sometimes the CPO shouldn't be too deferential.

There was a terrific example of the little guy being proved right in last week's Guardian. A leading academic in the field of mathematics of happiness, had the smile taken off her face when a Master's student exposed a flaw in her argument. Now the text books need to be rewritten.

This isn't the first time Goliath's of academia have been laid low by a sceptical David. You may recall a not dissimilar case last year when the highly influential, Reinhart and Rogoff, who had supposedly cracked austerity had flaws in their analysis exposed by a postgrad student.

The next time you encounter someone presenting a strong argument for some procurement decision which you don't feel quite comfortable with, I suggest you remember, Brown and Walker - the two Giant slayers of academics - and recognise that even those who expect deference can be wrong and if they are right, surely testing the robustness of the argument is something the CPO should do anyway.

Planning for uncertainty

We've previously highlighted the problems encountered when a procurement takes place on the assumption that planning permission will be granted and then the approval isn't received. Money is wasted as a result of a poor risk management.

Given that history, I would have hoped that there would be a wariness of being too presumptuous of the planning approval process.

So, if you were going to take over one landmark, listed, art deco building which has survived the worse of the Belfast blitz and the bombing campaign of 'The Troubles', you may be cautious of assuming a clean run in the planning approval process. Yet, in Belfast, it is alleged Tesco have started to demolish internal walls of such a building prior to receiving planning approval. I may be risk averse, but to me that is a risk too far unless there is a real business case which demonstrates the expected benefits of earlier completion outweigh the potential costs which will be incurred if approval isn't received.

Tesco are so often held up as exemplary yet they also seem to have a remarkably high percentage of procurements which have not been exemplar.  Is it that they are prepared to sail very close to the wind or are they just caviller?

Suggestions from China on combating construction fraud

It's not often I refer to Chinese authors, indeed I think this is a first. Deng, Wang, Zhang, Huang and Cui have published an interesting paper in the latest issue of Public Money and Management which discusses fraud risk in public construction projects in China.

You may not think that recommendations from China are transferable, yet I have been asked about how to combat construction fraud in a number of countries which really struggle with corruption and fraud in construction procurement - amazingly those asking the questions seem to ask the question in private and expect a one-line, off the cuff answer. The recommendations of the authors may help those facing that challenge so I thought they were worth sharing:

Can CIPS licence learn from Labour's Licence to Teach

The Shadow Education Secretary has an aspiration for the introduction of a 'licence to practice' for all
teachers. The idea is that teachers would have their lessons peers-assessed and have to demonstrate they are up to date with the latest material. The peer assessment would then lead to licensing which in turn would require re-licencing every five years.

It would be the responsibility of the employers (schools) to provide the training but for teachers to make use of it. Fail to gain the licence and the teacher is 'struck-off' and banned from teaching - perhaps a bit strange in those situations where there is a shortage of teachers anyway. There are no suggestions as to what would happen if so many teachers are 'struck-off' that schools can no longer provide education, equally no suggestions as to how JobCentres would handle 'struck-off' teachers. There is some suggestion that the unions aren't happy with the proposals which may itself lead CIPS (our union, I suppose) to ask why?

I'm sure many see the advocating of a Licence to Teach as justification for the introduction of the proposed CIPS licence which I have previously discussed. Perhaps CIPS may even be considering this a part of their recommendations for the next government.

However, it is worth considering some aspects of the proposed Licence to Teach:

Horsemeat scandal: a healthy outcome for procurement

I have discussed the horsemeat scandal  on many, many, many occasions but today's 'I' carries a interesting report of calls for a Food Crime Unit as a response to scandal.

Professor Elliot also advocated that food fraud needed to become an item on company risk registers. His view is that:

Any particular incidents of suspected food fraud that are happening should be reported to the board. What we don't want are chief executives saying "I knew nothing about this". 

The call for a Food Crime Unit is interesting but surely inconsistent with traditional Conservative philosophy of interference with markets. But wouldn't a Crime Unit be responding after crimes had been committed, wouldn't it make much more sense to improve the robustness of food quality assurance and supply chain management? Is it really likely that the current coalition would invest in the setting up of such a Unit?

However, Professor Elliot is right about the need for food fraud to be included on company risk registers, but not just when a fraud is suspected but as a risk which has the potential to materialise in the future, is regularly monitored and reported on.

CEO's need to be reassured that effective risk management systems are in place for all procurements and managed at the appropriate level.

If the risk registers of any of the major food retailers had not identified food fraud as a risk prior to 'Horsegate' then there have to be questions asked about competence and negligence. But if food fraud was not on the risk registers, what else has been missed, for example, what about the health and safety of clothing manufacturers?

But having said that, what about the other procurement story today on the MoD's decision invite bids from only two suppliers for Logistics Commodities Service Transformation, it would be fascinating to the mitigation plans on that risk register particularly in the light of the lessons learnt from the failed GOCO procurement.

One thing that Horesegate has highlighted is that food procurement risk management systems failed. The real questions we need answers to are why it failed and what steps are being taken to correct those failures - if it is a basic as including food fraud on risk registers then shame on the industry and we shouldn't be remotely surprised when Horsegate2 arrives. 

Whistleblowing for procurement

I think we all recognise the benefits that whistleblowing can bring. We've seen it lead to the
exposure of NHS failures, police manipulation of figures, and exposure of public sector contract failures. If I am correct, whistle-blowing polices are being presented as one of the key strategies in the fight against fraud, bribery and corruption, but they are also largely inward focusing and fall short of boundary spanning buyer/seller issues.http://www.actionfraud.police.uk/node/262

But when serious questions are, in parallel, being asked about the role major contractors to the public sector is it time to come up with something more substantial?

I would like to see contractual obligations which put in place a mechanism for contractors to provide a 'whistle-blower' line to the buyer's head of risk management for any contractor staff to whistle-blow on contract abuse or procurement fraud and corruption.

Of course such an approach may be cumbersome on a contract by contract basis and may only be justified for the biggest contracts. However, many are familiar with the work of Crimestoppers, a charity which enables anonymous reporting of crime. Perhaps what we need is a Crimestoppers type service for procurement, it could be jointly funded by the CBI and the Government and be a national service.

Having said that, we do have Action Fraud but when I look at the procurement fraud section I struggle to see how it ties in with the types of procurement fraud we are most familiar with. Let's be honest, if you were aware of a fraud would you think of Action Fraud? I doubt it.

No, I think we need to recognise fraud is unlikely to pass us by, improve Action Fraud to make it more procurement specific, and, embed in contracts an obligation for contractors to raise awareness of procurement fraud and widely raise awareness of that procurement fraud should be reported and how.

Bad Pharma, data manipulation & procurement inquiries

Richard Bacon MP, a member of the Public Accounts Committee, gave a very good interview on the Today programme this morning. I have listened to Bacon during various PAC procurement related inquiries and have always been impressed - to me he grasps key procurement issues very quickly and provides excellent scrutiny and probing. 

Although he did make reference to the NHS being a monopoly buyer, his interview wasn't about procurement but the publication of clinical research, or more specifically, the problems of drug companies withholding information which doesn't suit their vested commercial interests. I discussed some of these issues in my review of Ben Goldacre's Bad Pharma. 

However, he made a number of comments which are particularly relevant to procurement, for example, stating that "The whole point of scientific research is that you take all the data ..." because cherry-picking and just using research which suits your vested interests distorts the truth and leads to false impressions. 

I would like PAC to reflect on that when they consider procurement evidence too.

What do you do in a lawyers' market?

I have often said that Procurement's biggest risk is that no one wants to supply. Now MoJ are faced with a variation of that very problem as barristers opt not to provide services under the new legal aid arrangements - quite simply barristers are saying, "at that rate, no thanks". This isn't remotely new, indeed I predicted as much last July.

There is little point in assuming, as a buyer, that rates are too high and that you are no longer going to pay, if you haven't ensured someone will supply, at what you to consider to be, a more reasonable rate. It appears as if the negotiating power isn't with MoJ at the moment but with the legal profession. So who will climb down?

The costs incurred through not being able to ensure a fair trial due to lack of legal representation will have an impact on the justice system, the costs of delayed court cases will have to be borne somewhere in the system, and then there's the question of whether or not the government have the courage to take on the legal profession claiming they are acting as a cartel?

The stand-off with the barristers can't be seen in isolation though; couldn't the medical profession try a variation of the same ploy in negotiating their contracts?

The big question is 'can the buyers break the market' or reconstruct it in their favour, say, for example, contracting with advocates from other EU countries, or does the English legal system prohibit such freedom of movement to English courts?

This is more than a test of wills, it strikes at the very core of austerity and the notion of being a preferred customer. When suppliers have a choice of who to sell to, who would expect them to opt for contracts which just don't suit them.