Friday, 5 May 2017

Trump's Procurement policy dividend?

Trump and Brexit have certainly reinvigorated the old PEST analysis and no doubt are yielding plenty of university assignments at the present. From a procurement perspective there's plenty to think about.

It's a few months since I last discussed Trump's procurement strategy. Whether it is a clever strategy is yet to be judged but today's New York Times carries a report that Indian company Infosys will take on 10,000 US hires to deliver to US clients.  This is directly linked to Trump's Hire American Policy.  It demonstrates the potential power of procurement, but while it may make short term political sense and play to the gallery, does it really make good business sense?

Clearly Infosys have decided it is expedient to be seen to be doing the right thing and making noises about hiring American.

The reality that non-US companies have been winning contracts in the past suggests that they have had a competitive advantage, most likely to be in price (labour being the main cost) or quality.

Assuming that US staff will not be prepared to work on the same rates as their Indian counterparts delivered on, will that not lead to bid and contract prices rising.  In the service economy, will US citizens and organisations be prepared to pay the additional costs?  Could the US start to see double bids from companies, one US labour based with a parallel non-US based labour price?

Are the necessary skills available in the US market and is there sufficient capacity to match the demand. We are led to believe that Indiana has offered Infosys $500,000 in training funds and tax credits for new jobs. Of course that is attractive but the implication of the need for investment in training is that the skills do not at present exist.  There will be a lead time in training.

Let's assume that some US citizen now takes up the training - will they be handcuffed in some way to remaining in the US or will they find their new qualification is there ticket for seeking out pastures new, in which case is that not a loss to the US?

Of course, it may well be that Infosys' announcement is opportunistic and they would have been hiring local staff anyway.  That would make more sense to me - take the grants, make the announcement and do what you would have done anyway!

While I do think this is a useful example of procurement demand driven policy change, which I have long advocated in terms of sustainable procurement policy, I don't see this as being a clever strategy for the US economy.  Equally, for the average US citizen, I don't think it will create any new job opportunities, but increase their costs.

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