For want of an archaeologist ...

I love it when I find a new example of a Bottleneck item - those purchases which are often comparatively low price but of critical importance.  Today's Times yielded one such example which I'm not sure many would have thought of: archaeologists!

UK politicians have made a lot of noise about the need for more housebuilding. In parallel, the HS2 is quite possibly the biggest, and most politically sensitive infrastructure project for some time, for example, it's 350 miles long - you can read more of my observations on its procurement here. The financial cost of each of these initiatives is enormous and logically delays will add to cost and have a negative impact on delivery of the business case.  Politicians accountable for delivery will understandably be a bit sensitive too.

However, before work can actually commence on site there is a requirement in the UK for an archaeological investigation.  The estimated demand for archaeologists means that an additional 25% of these 'Indiana Jones' types are required.

I'm sure you can see where this is going - what's the lead-time to get an archaeologist with the necessary skills trained, was the supply pipeline of archaeologists created in sufficient time, has enough attention been given to attract students to pursue archaeology, how much had been budgeted for the premium costs which may now need to be paid for this scarce resource, has the Home Office thought through the potential visa implications for non-EU citizens who may be required? You get the feel for the procurement, project and programme management risks?

Somebody tell me that this has all been previously risk assessed and mitigated. Do I sense an 'In The Thick of It' moment?  Perhaps. as they used to say of procurement, this is Archaeology's opportunity - but hopefully not at Procurement's expense.

Is it good enough to rely on mistakes to detect a fraud?

There was a remarkable story in yesterday's Times about a "Don [who] faked academic projects to steal £223,000". 

I don't find it that strange that someone, even a Cambridge Don, tried to fraudulently obtain £223k forging paperwork and invoices, but I do find it interesting that at least three mistakes were involved: one which led to the exposing of the fraud, one which enabled him to carry out the fraud, and the other meant a convicted criminal was able to avoid declaring his convictions and thereby obtain an opportunity to commit the fraud.

Firstly, the fraud only came to light as a result of a letter being sent to the wrong address - in other words the systems were not in place to protect against the fraud and to a certain extent it was a fluke he was caught.

The second mistake was that the Heritage Lottery Fund didn't actually check the references provided - had they done that they would have identified the references were bogus.

But the fraud was only able to be perpetrated as a result of an earlier mistake, namely, not sticking to a robust protocol for recruitment. That meant, Dr Barrowclough didn't complete the standard application form which would have required a declaration of his previous conviction for stealing clients fees which led to four years in jail and being struck off as a solicitor, but instead had his application considered on the strength of a CV and covering letter!

There is are clear message here for procurement. It isn't good enough to rely on mistakes to detect fraud but don't be surprised when you discover those who use 'workarounds' turn out to be up to no good, so design a robust process and stick to it.

Feel free to read my white paper on Procurement Fraud.

Bovaird on 30 yrs of outsourcing & free access to this important paper.

It was with enthusiasm I approached this paper: Tony Bovaird has been someone I've know for quite a few years; the introduction of CCT was one of the key milestones in shaping my career as it elevated procurement to a strategic role, albeit with the objective of retaining contracts 'in-house'; and, the make/buy decision remains a big question I am faced with when discussing Target Operating Models.

Bovaird's paper can be expected to become a core reference paper but it should also be of interest to practitioners, public and private sector - particularly those in the NHS concerned with the debate on Agencies 'Ripping-Off' the NHS - who have to complete an options appraisal on which procurement approach is most appropriate.  Remember, an options appraisal, as Bovaird points out, is not a once and for all event but something which has to be regularly reviewed. 

Bovaird provides a review of the various strategic procurement options from the introduction of CCT (Compulsory Competitive Tendering) through partnership working, strategic commissioning, prime contracting, and then insourcing.  He clearly articulates the comparative benefits of the purchaser/provider split - the make/buy decision. He also highlights questions over the effectiveness of joint-commissioning although he does not expand that to discuss the role of consortia buying. 

One line which Bovaird uses is particularly worth wider reflection: " the age- old lesson that the search for certainty and tidiness in policy is likely to come at the expense of inappropriate decisions". At a time when there is frequent discussion on the role of procurement in innovation, we have to be prepared for managed risk which will in turn sometimes mean, with the benefit of hindsight, that wrong choices have been embarked upon - that's not a word of caution but instead a call for recognising that the appetite for innovation must be matched with a similar appetite to risk.

In concluding the paper we are presented with 10 lessons learnt from 30 years of outsourcing - if you feel you haven't time to read the paper why not take the time to read the lessons learnt.

Public Money & Mangement, in view of its potential impact have taken the unusual step of providing advance free access to Tony's paper which can be accessed here.

A Tale of Two Council scams

Last month I saluted the vigilance of Conwy County Borough Council who were able avoid falling victim of a £2.6m scam.  The scam, which has been doing the rounds of councils for three years, involves a villain identifying a construction contractor where stage payments are likely to be made, masquerading as the contractor, contacting the council and informing the council that there is a change of the contractors account details. Then the council make the changes for the next payment and off into the horizon walks a better off villain. A Conwy spokesperson said it was a

well-documented style of fraud which the council is used to spotting.

Somehow Belfast City Council have fallen victim of the very same scam to the tune of £400k.

I wonder what precautions your organisation are putting in place to avoid falling victim of the same scam? You have been warned.

Procurement responsibility, accountability and L'Aquila

I do not intend to address the procurement weaknesses associated with the 2009 earthquake which led to 308 dying. However, for those unaware of ongoing story, I want to touch on the consequential sentencing yesterday of six scientists and a senior government official.  They were members of Italy's 'Great Risks Commission' and they've now been sentenced to six years imprisonment.  The seven plan to appeal but, nevertheless, two judges decided the experts had downplayed the risks of a massive earthquake.  I have no way of knowing if that was a reasonable judgement, or whether the penalty is proportionate.

Please, please don't get me wrong, I am not trivialising the L'Aquila tragedy. However, in the procurement world we have many academics, advisors and practitioners who are asked to future-gaze and make recommendations on what should be expected or providing reassurance. Sometimes the recommendations are implied predictions of savings to be achieved, sometimes of predictions of impact, sometimes predictions supply risk.  What would happen if, as procurement predictors, we were held more accountable for our predictions.  Personally, I would welcome this.  It would lead to more robust research, less over-selling, and greater focus on outcomes. It could weed out the snake oil salesmen and charlatans.

But it may also drive a better ownership of supply risk management - ownership which is clearly lacking, if we can accept KPMG's recent benchmarking report which implies that only 18% of organisations have risk management integrated into procurement for direct spend (8% for indirect spend).

Are we ready for greater accountability, or is that just one risk we are not prepared to accept?

PRM, supply resilience and the exponential Prisoner's Dilemma

Recently we've discussed supply risk management (SRM) and some of the issues which may be keeping Apple leadership awake at night. But SRM, or perhaps the lack of it, is becoming a fairly regular news item and even the once exemplars of procurement are not immune.  For example, there was a time when the procurement world looked to the automotive industry in awe - that was the model to be copied; the exemplar. A lot has changed. We now hear that the woes of Lotus cars could be added to, yes, by SRM or the lack of it!

The Lotus scenario is one of a 'multiple whammy': a number of the firms suppliers claim they are owed a total of £23m and are threatening legal action. The question of 'too big to fail' has re-emerged, with HMRC being asked to show some tolerance towards Lotus so that Lotus can maintain its cashflow. That's an interesting twist in itself - should HMRC agree in the hope of helping Lotus survive and look forward to a future revenue stream, or should HMRC demand their pound of flesh and risk being the straw which breaks the camel's back?

Anyway, £23m appears to be owed to suppliers at 90 days overdue, with a further £7m at 30-90 days.  If one or more of those suppliers feel they have no alternative but to sue the whole edifice could crumble - it's an exponential Prisoners Dilemma:

• HMRC have a payment risk; 
• Lotus are at risk from HMRC saying 'pay up now';
• Lotus' suppliers are at risk from the decision HMRC make;
• Lotus are at risk from one of their suppliers (as are HMRC);
• All Lotus' suppliers are at risk from the potential actions of one their peers.

Needless to say car production is suffering too!

SRM was once little more than a potential exam question; a hypothetical - that's no longer the case. If anything the Global Financial Crisis, has increased the likelihood of catastrophic impacts throughout supply chains.  I am now coming to the conclusion that SRM or supply resilience will replace cost reduction as the #1 priority for CPO's - is it your's?  

Grease was the word, now it's 'procurement'

Once upon a time, if you said you worked in procurement, no one really had a clue what that meant.  All that has changed: the Prime Minister, at the height of the political conference season, finds himself compelled to discuss procurement. Even the Undercover Economist has started to discuss bid evaluation.  I am not going to add to the rail franchise debacle debate, save my previous blog.  My concern with the franchise is not that mistakes were made but that reassurances were wrongly given to ministers that the procurement process was 'robust'  when it was not - that is inexcusable and, to me, does more damage to the profession than the making of the actual mistakes.  Of course this isn't an isolated mess, it comes hot on the heels of the Olympic security fiasco.

However, rather than let public sector procurement take all the flack, private sector procurement has thankfully shared the load and also managed to grab the headlines.  Once again Apple's iPhone 5 sole supplier is in the news.  I recently discussed the issue of supply chain risk and the dependency which Apple had on one supplier for the new iPhone.  In that blog I referred to riots which had taken place at the Foxconn factory and how that may have adversely impacted on share price and customer experience.  Today we learn that there are more problems at the factory - this time specification quality standards are at issue: fights between workers and quality controllers, contributed to a strike yesterday.  While Apple is a household name, synonymous with quality, their supply chain dependency is becoming a regular news item.  The behind the procurement story is one of the relative power the key supplier's workforce over the delivery of iPhones, and the negative impact on share price and customer experience. Supply chain risk management must now be a boardroom topic.

It is often said that there is 'no such thing as bad publicity'.  In spite of the negative headlines of the last few weeks, I believe some good may come out of this.  For too long there has been insufficient boardroom discussion on procurement strategy, insufficient robust challenge of award recommendations, and a lack of concern with supply chain risk management - expect that to change.  There has also been a tendency for procurement staff to be appointed in the absence of real scrutiny - expect that to change too.

For good or bad, the next time someone asks what you do for a living, and you reply, "procurement", expect an informed discussion as opposed to a blank stare.

Third sector health warning for addicts

There’s a touch of irony in today’s reports that Cabinet Office enforcers will punish mandarins who opt not to implement government policy, while on the same day we learn that third sector organisations, providing specialist support to NHS patients addicted to prescription drugs, believe they are the victim of a badly designed procurement process that could force them to close.  What happened to Third Sector Commissioning and the Big Society?  This is one example of policy failing to be implemented in  the procurement practice.

To cut a long story short, it appears a new tender approach is underway that requires a comprehensive service in which only bidders which provide support to alcoholics and those addicted to illegal drugs, AND those addicted to legal drugs are eligible to compete.

While I am an advocate of category management, category management needs to be pragmatic.  It has to include understanding the market and how the market works.  It also has to ensure that any bidding which takes place does not stand in the way of making the market work.

However, the approach strategic commissioning is even more baffling. Government and NHS approach to commissioning is to include dialogue with both users and the market as early as possible in order to shape the service.  Third sector criticism of this tender would suggest that dialogue did not take place – can we also assume that specifying outcomes may also have been set aside?

Bizarrely the change in tender approach is being blamed on NHS cuts, yet,

"The costs of possible failure were always greater than the benefits of possible success"

I was surprised to read Matthew Parris' opinion piece in today's Times 'Hurray. But it wasn't worth the colossal risk'. Parris' acknowledges that the Games have been a success but speculates, sceptically, that a future cost benefit analysis of 'The Games' will seek to argue that we've all benefited as a result of the 'happiness and feel-good legacy ', yet miss the fact that it could all of gone so terribly wrong: "The costs of possible failure were always greater than the benefits of possible success" - we escaped by the skin of our teeth as some of the potential risks just didn't materialise. Parris' view is that we couldn't afford The Games and we couldn't afford the debt which will be the additional cost on society.

I'm afraid he forgets that the Olympics delivered an unintended consequence of providing the construction sector with something to do when we hit the global financial crisis five years ago.  'Things happen' - we hadn't planned the crisis but the Olympics provided an initial buffer.  When something unintended happens you have to respond - our failure was in not recognising that breathing space, excuse the pun, constructively.

But let's not forget that the Olympics have provided us all with some useful procurement disasters. We escaped by the skin of our teeth some of the risks which didn't materialise, but we also escaped by the skin of our teeth some of the risks which DID materialise! Just have a trawl through my blog for a plethora of useful procurement mishaps or even recall the outcry over the logo procurement.  Why do I say 'useful'?  Well quite simply we need to learn and step away from what I feel is wrongly celebrated as a virtue of 'Keep Calm and Carry On'; muddling through by any other name.  That's not in the Olympic spirit, it's folly and complacency.  The Olympic spirit is the success derived from constant learning, improving and refining.

Veering towards procurement bravery or stupid sourcing?

On 9 May, despite others criticising the government's U-turn on fighter jets, I tweeted that the U-turn was worthy of praise.  It took bravery to recognise a wrong procurement decision had been made and then change direction rather than 'keep calm and carry on'.

Today we saw another potential act of procurement bravery.  This time it was the decision to place in custody the outsourcing of £1.5bn of police services.

Regardless of whether or not these were initially examples of stupid sourcing, to me there's a need to acknowledge that stupid can become brave and clever procurement.  Revisiting and changing procurement decisions before it's too late has to be one of the key benefits of Gateway Reviews. It also requires bravery. (Although somehow I doubt that a gateway review prompted the revisiting of the above two examples). Why do we so rarely hear of procurements being aborted or changed as a result of Gateway Reviews - surely that is a cause for celebration that the risk management processes worked!

Having said that,

On bankers' bonuses, MP expenses and GPS.

Few of us will have missed the furore over Hester’s bonus. He is well paid and recognised by some as doing a good job.  Some of the outrage seems to be driven by the morality of rewarding a banker while SMEs struggle to gain banks favour and access credit.  Nevertheless he decided to forgo his bonus.  There appeared to have been some stirring of his moral compass– his GPS.

Some of the pressure on Hester came from politicians.  To some politicians it was immoral to accept such a bonus while many are suffering as a result of the global financial crisis.  It was also viewed as particularly immoral since RBS is one of the banks indebted to the government for its survival. To some politicians it appeared

Who identifies when only transnational legislation will do?

When inviting bids it's normal (I hope) that buyers carry out a risk assessment, identify who is best placed to manage those risks and stipulate the insurance cover which the successful provider will have to put in place during delivery of the contract.

The insurance cover aims to protect the buyer and others who may suffer during the supplier's delivery of the contract.  On one hand the buyer is being protected through the insurance in the event of supplier failing to deliver or causing damage.  On the other hand

To buy or not to buy? Caveat emptor!

A few days ago I wrote a very tongue in cheek blog: Minister admits Public Procurement Litigation Agency overspend.  While much of that blog was inspired by the media attention given to the overspend on settling NHS claims compensation, I could perceive a threat of a new business opportunity exploiting poor public procurement practice.

Today I was startled to find a new twist  in the NHS story as it was revealed

Reducing prison inmate numbers and cleaning up crime

At a simplistic level there are some obvious ways of reducing the prison population, including:

1. Turning a blind eye to crime,
2. Reducing the number of custodial sentences,
3. Reducing reoffending, and
4. Making it easier for the prison population to escape.

It is with that in mind I was interested to learn that the Justice Secretary is outsourcing £2bn of prison service management.  Will that lead to a reduction in reoffending or an increase in escapes?

The short-listed bidders include some firms who lack any experience

Minister admits Public Procurement Litigation Agency overspend

Today the new Secretary of State responsible for procurement was questioned by the influential Public Administration Committee on why there had been a five fold increase in the costs associated with running the Public Procurement Litigation Agency.  She explained that a new industry had grown up on the back of the The Public Contracts (Amendment) Regulations 2009.  The Regs were introduced to implement the Remedies Directive (2007/66/EC) and according to the SoS have changed the dynamics within the public procurement market.  The Regs were the first justification for the overspend.

The SOS then reminded PAC that a former Cabinet Minister had publicly admitted a bias amongst the public procurement community against UK suppliers.  Independent academic research then revealed

Political procurement and boobs: A cautionary tale

Yesterday I asked, through Twitter, if anyone understood the £80m government subsidy which contributed to the successful winning of a contract by Bombardier and how such a subsidy didn't amount to state-aid. I genuinely wanted to know as I have had a longstanding interest in using procurement as a tool for economic development and if some new strategy had been discovered.

Today we've learnt that Justine Greening may have made a boob. The Department for Transport didn't actually play any part in the competition and Bombardier don't know anything about the celebrated subsidy.

Why

Freedom to enter bad contracts

What would you do if a supplier gave you an invoice for a sum which you knew was clearly far from value for money; say £242 to change a padlock on a garden gate?  Well, you could do a comparative price comparison to establish a reasonable rate, ask for a breakdown of the costs, challenge the amount, say that's not a reasonable rate but I will pay you £242-x, ... there are many options.
But what if the supplier said you'd contracted on the basis of that fee, namely, a very bad value for money rate.

Contract law isn't based on good value, it's based on an assumption that the parties have the intention, competence and free will for one party to make an offer and the other to accept, it's based on agreement to pay a sum in return for the delivery but not that the sum be reasonable.  There is no assumed professional competence, just legal competence - the two are entirely different.  In fact we seem to have seen many examples legal competence partnered with questionable professional competence.

So before you give the

A double helping of Christmas cheer and IT procurement woes

This morning I read Peter Smith's exclusive on a previously undisclosed undisclosed procurement capability review.   I gave a cheer for Freedom of Information.

I then picked up my paper at the local shop and read the wonderful headline 'Patients get right to see medical records online' and laughed.  I laughed for three reasons.

Firstly I have spend the best part of a year

Ministry of Justice finds IT Offender for Probation Services

When I last wrote about IT fiascos I referred to the need for political ownership and effective use of gateway reviews.  But IT procurement just seems to keep on giving lessons, if not unwarranted public monies to the IT wizards in the midst of an Austerity Strategy.

The latest debacle is found in the Probation Service's new £250m IT system for the whole of England and Wales.