The impact of belief in value for money

Today's Times includes an interesting report on how perception of a more expensive product influences outcome. The report is based on research published in the American Journal 'Neurology'. In an experiment a group of twelve Parkinson's disease sufferers were given two placebos and told one was more expensive - they were told one cost $110 and the other $1,500. Remarkably those given the perceived to be more expensive placebo actually had a 28% improvement in motor skills compared with those on the same placebo yet perceived to be less expensive!

The researchers think the 'expectation of reward response' may have had an impact on the outcome - interestingly eight of the twelve particiants said that they had greater expectations from the more expensive (placebo) drug.

How often do we hear specifiers refer to evidence of better performance from in a procurement process - could that evidence be based on 'expectation of reward response' or rose tinted spectacles?

t would be interesting to know the impact on an evaluation if evaluation panels were given pricing information which implied higher quality?

Of course it would be unethical and unacheivavble within the Regulations, but what would be the perception of users if they were told a public sector organisation had opted to provide a more expensive solution based on citizen preferences?

is procurement a better route to peace than sanctions

Like so many I am appauled by the deaths of those on flight MH17 who just happened to be
passengers in a plane, in the wrong place at the wrong time - it would be difficult to see any justification for this slaughter of innocents.

Yet the West's response is based on a single tool philosophy, namely, apply sanuctions on Russia, even in the absence of robust evidence that Russia is directly responsible. There appears to be absolutely no evidence that sanctions against Russia work and to a certain extent the West could be both 'cutting of its nose to spite its face' or perhaps in the longer term demonstrating a lack of ability to make any meaningful impact on Russia. Is the objective to penalise or prevent perceived bad state behaviour in the future?

It is also clear that sanctions could backfire and perhaps inflict pain on the 'sanctionor' just as much, if not more, than on the 'sanctionee'.  Perhaps it is therefore time to consider other alternatives.

For centuries the tool of trying to bring about world security and avoid conflict was marriages between the Royals of potential enemy states. The days when that strategy was effective have long gone. I wonder if an alternative would be, rather than impose sanctions, to develop stronger procurement interdependence between states, for example, contracts which create greater reliance on 'buy' from other inter-dependent states who have competitive advantage rather than 'make' within a protectionist independent strategy. Surely in such a strategy state inter-dependence would increase the stakes of conflict, and the greater the inter-dependence on strategic contracts, the higher the stakes. Such a radical idealist approach to the aspiration of 'world peace' would shift from reducing inter-regional trade barriers, like those the the EU to reducing barriers across separate economic trade regions, for example between Russia and the EU, and the EU and Latin American countries.

As I watch the daily news I feel as if we are sitting on the edge of a precipice with potential lethal alliances appearing all over the world. Sanctions have had little impact on so many of the major areas of conflict and are unlikely to have a major impact in the future. We need to consider alternatives beyond the existing toolbox, perhaps procurement and contractual inter-dependence is a tool worth considering.  

Hodge should demand even deeper transparency on public procurement decision making

I am a great admirer of Margaret Hodge's forensic examination of public procurement - she seems to have honed the skill of extracting the information others don't seem able to. So I read with interest today's the report in the Guardian which claims she has suggested the DWP may be on the verge of meltdown major contracts and has called for greater transparency.

The article is definitely worth a read, particularly if you are a public sector procurement practitioner who "simply have to up their game and get a grip" - a sentiment which Francis Maude seemed to agree with in his parallel interview on Radio 4's Today programme (start to listen around 2:21).

Hodge appears to be calling for greater transparency on contract management, particularly with major contracts. Personally I think that falls short of what is needed. I think, for major contracts, we should see greater transparency on the pre-award decision making and options appraisal. Let me explain.

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.

CLG Committee procurement inquiry: What are the 10 characteristics of good local government procurement?

Regular readers will recognise that I have been following the CLG Inquiry into local government procurement and have not found the approach to taking evidence robust. Nevertheless, we live in hope, while, the Committee persist in asking witnesses, who probably have really good evidence to give, questions which are beyond their ken and fail to ask 'How could this witness possibly know?'.

And so arrive at the sixth oral evidence session when the Committee should have been able to ask a senior manager from the Audit Commission Information and Analysis Group, the Head of Counter-Fraud at the Audit Commission, and the Director of Cabinet Office and Cross Government Studies at the National Audit, 'What they knew?'.

Now, I think these three witnesses should have been in a position to talk about research method, so it was reassuring to hear, buried within the Chair's opening airing of opinion, the following:

How do we get a real feel about whether local authorities in general are using best practice in the area of procurement?   

Neither of the three witnesses recommended a research approach to the Committee but instead said they were not in a position to answer whether or not local government is adopting best practice. I'm sure you have recognised the difference: the witnesses were being asked about method, which should have been their area of expertise, but answered an entirely different question. We know the Audit Commission's role has changed (previous witnesses have reminded the Committee of that too, and we know NAO has a focus on central government, but that's not what the Committee asked about! Sadly the Committee allowed themselves to be distracted and didn't return to the witnesses specialism, evidence gathering.

Do the incumbents of government contracts have an advantage?

On Tuesday I discussed the NAO Memorandum to Parliament on the management of strategic suppliers. I now turn to the parallel Memorandum on the role of major contractors in the delivery of public services. This is slightly different though in that it aims to stimulate public debate.

As usual, an excellent report from the NAO with plenty of useful insights for procurement practitioners.

I have little to contribute to that debate, however, I do think paragraph 1.9 in the report is worth discussion:

Incumbents can be seen by procurement and policy officials as he easier and softer option. Across the 15 applicable services we looked at as case studies for this memorandum , seven had been retendered at least once, with four of the most recent competitions being won by new providers.

I don't agree that procurement and policy officials would have a preference to the incumbent, and I doubt if the success in retendering demonstrates they do.

Incumbents have many first mover advantages and would be expected to do well in a retender as they should be able to identify scope for inefficiencies and have a greater understanding, possibly than the client, of the client's needs. The incumbent will also know where the emphasis can be placed in pricing strategy and where demand is lowest.

FoI for public sector contractors?

I have to say I was surprised today to hear of proposals that the Freedom of Information Act could be extended to embrace public sector contractors (quite possibility driven by a recommendation from the Social Enterprise UK ) .

I don't actually believe the rhetoric that such a move will force firms to compromise commercial secrets as, it strikes me, Section 43 of the Act already provides that protection. However, I do question how well thought through this potential policy is and what is likely to be the outcome?

Common sense suggests that since the Freedom of Information Act is now well embedded in the public sector it shouldn't be too hard to establish the potential value which would be delivered through the increased scope. For example, it would be useful to know how much cost has been added to the average public sector organisation answering FoI requests? It would also be comparatively easy to carry out some research with those who have made FoI requests to establish the real benefit gained? I have never actually made a FoI request but have had experience in responding. Responding to FoI requests consumes an enormous amount of time and there is a game of sanitisation taking place - a cottage industry has been created for bureaucrats. But equally many requests are just lazy, disguised market research at the expense of the public sector, it's information which isn't in the public interest but the costs are being shifted from the private sector to the public sector. Labour could place a FoI to get that information before pursuing the policy.

If the legislation is extended there will be an additional cost to private and third sector organisations just because they happen to be public sector contractors. There will then have to be some disaggregation of those organisation's work which is covered by FoI requests and which isn't. Those organisations being asked to respond to potential FoI requests will have to allow for that cost in their bids and that in turn will be passed to the public purse - those advocating the policy will need to budget for those costs. It may also be worth considering what the likely impact will be on mirco, small and medium enterprises?

However, if the issue is that the public sector isn't really on top of its contractors, then changes to specifications and contract  management may be more cost effective options.

Some months ago I discussed another Labour proposal, that of obliging all public sector contractors to pay the Living Wage. It strikes me that Labour can see public procurement is a useful political tool but I think it may be better to sit down with some sympathetic businesses and work out the most effective means as opposed to kite-flying.

Disruptive procurement - lessons from Azerbaijan election

I don't think I've never discussed Azerbaijan before and certainly never their Presidential election. Today justifies a change as there are lessons for procurement from the announcement of the re-election of Ilham Aliyev as President.

Firstly, we have the announcement of the results a day before the actual voting took place. Secondly, we had the allegation that fake candidates were included so as to confuse the electorate.

I'm sure you've had similar experiences to me: someone makes the grand statement that no one else can provide what they need or that no one else can beat that price. Effectively they've announced the result before the competition has even started - they've 'done an Azerbaijan! The funny thing is that whenever you disrupt their thinking, and introduce other potential providers, there seems to be a lack of loyalty to the earlier preference - does the specifier feel betrayed by the earlier preference? I think physiologists refer to that as cognitive dissonance. Regardless, to me, one of the key roles of CPOs is to get in and disrupt the 'foregone conclusion' - we need disruptive procurement.

Then we have the lesson of the fake candidates. Yes, we've all come across a list of potential alternative providers, some of whom haven't the capacity to take on the work, others don't have the capability and some are known to be significantly more expensive. This creates a veneer of going to the market when in reality it is nothing more than a sham - they've dome an Azerbaijan! Some years ago I introduced a system which enabled me to open the door to potential new suppliers by insisting that every time a new RFP was sought, a new supplier had also to be invited. The result was an opening of the market and better deals. To me that's another form of disruptive procurement.

Yesterday, I discuss the absence of challenge in business cases. That provides another example of where disruptive procurement could be effective. Had Procurement been involved earlier, 'disturbing the waters', so much reputational damage could have been avoided and money more effectively spent.

To be disruptive does not mean being aggressive. It requires winning 'hearts and minds' - it requires influencing skills not policeman skills. It also requires being involved right throughout the procurement cycle, from defining the problem which has to be solved.

Not taking note-taking seriously in procurement

I find the John McCririck case most bizarre - a man who appeared to take great satisfaction at being offensive, wondering why he may no longer be an acceptable payroll cost for Channel 4. Anyway that's not the point and has only marginal relevance to procurement. No, the interesting lesson is how Ms Jay Hunt, who was seeking to defend McCririck's sacking, has found herself criticised for note-taking, or should I say, not taking note-taking seriously.

Here's what the QC said to Hunt:

There are two possibilities. Either you are displaying breathtaking arrogance by thinking that you didn't have to have a written record of the decision regarding Mr McCririck, or you are seeking to provide reasons to this tribunal that were not before you at the time.

You could certainly recast that statement into many procurement decisions. Indeed, it was only a few weeks ago we discussed the Serious Fraud Office's inadequate minutes.

I personally find trying to take notes a terrible distraction from absorbing what is actually being said, so a minute taker is very useful. It is also important to make notes immediately after a meeting and ensure some sort of validation takes place. Clearly, in the McCririck case, Ms Hunt, didn't make adequate notes and the implication was that she was revising her account. It has the ring of those great statements by US officials, trying to emulate Houdini, uttering, "I have no recollection".

Reflections on eWorld Purchasing & Supply

Today I attended the eWorld Purchasing & Supply event. You wouldn't be surprised if I said a free conference was good value - well, to me there's no such thing as a free conference as there is always the opportunity cost of how you could have otherwise have spent your time. There's also the reality, that now, in many organisations, even justifying the costs of attending an event in London is a battle some feel just isn't worth fighting. But to me this was well worth attending and actually staying the whole day. (As an aside, it never ceases to amaze me that so few delegates have the good manners and ethics to stay the whole day!)

Having said all that, I found almost all of the sessions I attended of excellent quality and a really good opportunity to learn. So in a nutshell some interesting learning:

1. Eva Wimmers from Deutshe Telecom, in an excellent keynote, reflected on the reality that a short-term focus on paying less is probably detrimental to the procurement 'brand' and improved strategic contribution, particularly in an environment of decreasing volumes. Procurement needs to reposition itself and lead on demand shaping and spend management - what she referred to as moving beyond procurement.
2. Eva also told us there's a word in Germany for saving money but hurting the business. Don't ask me what the word is but I think there's a real problem that procurement people sometimes are their own worst enemies in doing just that, regardless of what the word is.
3. Another of Eva's gems was that "procurement is only as strong as the relationships with functional colleagues". I think that's very true but there's a real problem with procurement suffering from poor stakeholder engagement and management - the focus on technical know-how, to me, is distracts from the increasingly required soft skills.
4. There was a recurring theme from many of the speakers of splitting strategic procurement from operational buying. Their message about devolving to the right level or even outsourcing, effective use of P2P systems and pCards - in theory, that is all very simple but few really spoke of how they'd managed to get operational ownership. There is of course an interesting lesson here for those in the public sector who have been very cynical about the benefits of pCards!

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.

Lean or anorexic procurement

If you cast your mind back to 1993 you may recall the seminal book by Richard Lamming on Lean Supply. It wasn't actually called Lean Supply but 'Beyond Partnership'.  That was closely followed by Peter Hines' 'Creating World Class Suppliers'. Many other discussions at the time were indicative of a paradigm shift in procurement thinking. These were more than conceptual ideas, they were based on the hard evidence of what worked. The key change was a recognition that 'adversarial' relationships were not always appropriate, that while there was plenty of talk of partnership, there was a need to go 'beyond partnership' and adopt 'lean'. You may well ask which procurements would be most appropriate for 'a lean strategy' - well, in general terms, those procurements which are strategic.

Fast forward 20 years and we hear the rhetoric of 'lean sourcing' within UK government as the panacea to all woes. Yet have they really understood what 'lean' means. Lean is more than taking costs out of the system and drawing closer so that innovation can flourish. It also requires an entirely different approach to buyer/supplier relationships and contract management.

We have the theory and gospel of 'lean' in government procurement and we can set that alongside the practice, for example, the transporting of prisoners and tagging services. Let's consider Serco, who would have been assumed were a strategic partner of the government but now appear to have fallen from favour on both those contracts - the MoJ have called in the police to investigate claims of fraud in prisoner escorting and there are parallel claims of overcharging for tagging 

This does not exemplify lean on either side of the dyadic. The notion of calling in the police to investigate fraud, claims of overcharging and even allegations of some questionable contract management are an anathema to lean.

It would be possible just to throw stones at Serco. It would also be possible to throw stones at MoJ. Both those approaches may bring short-term solace for one party but wouldn't really help public procurement as we approach the economic recovery. However, we could consider this an opportunity to adopt a more strategic approach and find out what went wrong in melting pot of the theory and rhetoric of lean, the current cost reduction focus and the day-to-day breakdown of contract confidence. Either way we need to revisit the implementation of lean within the UK public sector during a time of 'bust' as opposed to a time of plenty. 

Make 'em laugh 'cause shortlisting is no joke

Saturday will see the announcement of who wins the Foster's Comedy Awards. Thursday's Times carried a brief story on the shortlisting for Foster's Comedy Awards which I'm sure brings a smile to the faces of many in the procurement world - the shortlist is normally restricted to five or six, but this year the judges ended up with seven. The judges had two rounds of voting and six hours of arguing before deciding the shortlist should be longer.

Like all good procurement evaluations the method was set out in advance and communicated but it does not appear to be as robust as you would expect in a procurement. How do they protect against claims that someone is dropped in the early stages just to make it easy for a judge's personal interest in another competing joker and giving them a clearer run? Of course comedy is in the ear of the beholder - some of those shortlisted would not bring much of a smile to my face. So it must be very hard to bring some sort of objectivity to the gruelling task of listening to non-stop funnies for three weeks.

I don't get the impression there was any form of weighting and scoring. Nor does there appear to be any numerical restriction on the number who make the shortlist. Convention and tradition restrict the shortlist to five or six, but this year that was increased to seven. Is that a good thing? Well in the Comedy Awards, I suspect just being shortlisted brings dividends and increased business. In procurement, increasing those on the shortlist brings additional costs to both sides.

On the plus side of the Comedy Awards, every eligible contender is guaranteed their day in the footlights with at least one of the judges evaluating their performance - that's a lot better than some procurement shortlisting I have been aware of where submissions have been dismissed without even being read.

When the winner is duly announced there may well be some critique in the culture world, but it is unlikely to end up in a costly court case. However, the judges clearly didn't find shortlisting as easy as they would have hoped. Six hours of arguing - can you honestly recall that level of debate in any procurement shortlisting discussion?

It's hard shortlisting potential service providers, as the Foster's judges will have discovered. It does strike me that procurement professionals need to consider how others, beyond the profession, manage shortlisting and evaluation - I'm not joking, we may pick up something useful.

Should labour adopt a policy of the living wage for public sector contracts?

Ed Miliband is proposing the adoption of the Living Wage in all public procurement contracts, while the CBI’s Director General, John Cridland, views the mandating of the living wage as a threat to small businesses. In the UK we already have the minimum wage of £6.19 (for London) but if the Living Wage were used instead that would mean all employees in London would receive a minimum of £8.55 per hour.

Would the adoption of the Living Wage be a threat to small businesses? Is it even right to use public procurement as a policy tool in this way? It’s for politicians to decide but we need to be reassured they have thought it through.

Could such a condition in public sector contracts lead to a two-tier workforce with those working on public sector contracts within the same firm, paid a different rate than those working on private or third sector contracts? How easy would it be to cope with those who work on more than more than one sector’s contracts?

Given that the additional cost of the living wage will have to be passed through the contract price to the public sector, will the additional costs not merely be transferred to the public purse? Will the Treasury accept such an additional cost? What will be the implications to wider budgets and will some public services be cut to balance the books?

Then we have to ask will this mean different pricing strategies are required for public and non-public sector contracts?  Surely it would be counter-productive to have non-public sector contracts priced on a minimum wage while public sector contracts are bid on the higher living wage?  If such an approach were adopted it would make a mockery of any comparative benchmarking between private sector prices and those of the public sector.

Where do you draw the line on a public sector contract? For example, what about the supplier who has a low value order for say, Lego blocks, how far down the supply chain would the impact of the living wage be passed? Would a threshold have to be adopted for the application of the living wage in contracts? If that were the case would we see disaggregation of contracts to avoid the higher costs?

But would the wider public sector be ready to pay the additional costs? When you think of it, this would really be a public sector purchase tax borne by the buying organisation. How would it be viewed by local government who have already wrestled to make significant cuts?

If the policy were introduced how much would it cost to handle the administration and even the policing of its application? Just as interesting would be to understand how the policy could be exited?

Then we have to ask the more fundamental questions: are there more effective ways of achieving the same outcome, and should public procurement be used as an alternative to low pay benefits?

I can’t see this idea as a risk to small businesses but I do think there’s a need for a more thorough analysis of the risks and alternatives

NB First published as a guest post on Procurement Insights and  Procurement Insights EU edition

Should we cheer or castigate the BBC's dreaming

Just over a month ago the BBC was heavily criticised over its failed Digital Media Initiative. Today 'auntie' is in the firing line over abandoning 3-DTV "as another costly failure". Do you think the criticism is right?

£100m was spent on the digital media initiative before failure was admitted, we don't know how much the 3-D dream has cost. I don't really think you can blame the BBC for the reality that so few of us have bought 3-D televisions - the analogue switch-off forced many to replace TVs which really had nothing wrong with them and the economy meant that replacement of TVs was not something necessarily welcomed - why would anyone upgrade again to 3-D so soon?

But if the UK really wants to feature in the new digital age, is it not appropriate that state funded organisations, such as the BBC, should be encouraged to innovate and lead the way in thinking and experimentation. If the Digital Library and 3-D had turned out to be massive successes would the government not have wanted to use those as exemplars?

I think we should cheer the BBC for its dreaming and trying, and I sincerely hope these recent failures will not stop the dreaming and trying. However, we need to learn the lessons of failure. We need to learn how to be faster at spotting the failures and put in the checks and balances to protect the innovators from themselves without stymying their vision. Our industrial strategy needs to reflect this too.  The UK lacks dreamers and visionaries but we also tend to deify them and reward with a seat in 'the Lords'.

Procurement needs to work out ways which can help costly innovation mistakes going too far. Gateway reviews should help but clearly haven't. We need more prototyping. We need to also be part of the innovation team.

Procurement has another role, not just in stimulating the market to innovate but also being more innovative in procurement practice. Do you not find it strange that the global financial crisis has not led to any paradigm shift in procurement thinking? Where is the zeitgeist? Have we not just dis-proved, that in procurement terms, 'necessity is the mother of invention'?

If we want to move forward we have to accept sometimes the stat-nav just doesn't work and we have to go back to the drawing board. Sadly, the BBC appear to have let two projects go too far, but that doesn't mean we can't learn constructively and help successfully turn more dreams into reality.

Category management flushed out

They've delivered public service since 1852, yet Sunday, Monday, and now Tuesday publicly owned toilets have managed to feature in national newspapers - yes, I have blogged the toliets. Today it was the turn of Billericay Town Council (covered in The Times hard copy) which it has been claimed at £20k a year, is "the most expensive toilet in the country". Other Billericay numbers are 20p charge for users for a visit, a 15 year lease and a £125k contract break charge. 

Now the claim of being "the most expensive toilet in the country" would surely be very easy to verify and in the process could potentially demonstrate vfm and a collaborative approach by councils to benchmarking, collaborative negotiating, and collaborative buying.

So what I suggest is something very simple, a national audit of the nations contracts for 'superloos'. Include: the core details of the service provided, date started, length of contract, options for renewal, expiry date, break clauses and penalties for early termination, cost of consumables and charge to users. Such a simple audit would provide a really simple tool for introducing a category management approach to 'superloos'. Let some CX make a name for themselves as 'superloo procurement lead'. Let them baseline the costs and introduce a category management approach. Leading negotiations with the comparatively small number of providers shouldn't bring a flush.

Let's face it, if the LGA can't get a handle on this, are their aspirations for a new national procurement strategy with category leads really achievable?  Roll up, roll up, the cost of spending a penny could drop!

Reinvigorating room service

A few days ago I discussed the lack of clarity in ordering Breakfast in Bed in Hotels. If we are to believe the reports in the press though, room service may well be on the way out due to a fall in popularity and also it not being cost effective for hotels.

 But if you think of the cost you pay to have a takeaway meal delivered to your house by car (in my case it seems to be £2 within a three mile radius), and in parallel the cost of various breakfast inputs at your local shop, how on earth is breakfast in bed so expensive, or put another way how on earth does it not pay? For a start, breakfast still has to be cooked regardless of whether it is delivered to the room. Equally, room service is based on 'cook to order' when the supplier knows hours in advance of the orders which have to be satisfied within specific windows of demand, whereas without room service they have little certainty of quantities to be provided or even when demand will be placed.

If room service isn't paying, is it due to lack of demand? Rather than cut room service, why not cut the price and see if there is a significant increase in demand, the fixed cost has to be the same regardless of whether it is served in the restaurant or in the room.

Another option is to question the recovery cost of the tray charge. One way of looking at that cost is the amount of unproductive time, standing around waiting for the orders. You need some staff to be on standby even to satisfy just one room service request. Again increase the demand and there will be less non-productive time. But here's an idea, why not take some unemployed people and offer them the option of piece-meal work, paying them on the basis of trays delivered and incentivise them to deliver a really great quality service and also proactively promote room service? Why not use this as a route to work?

Then we have the uncertainty associated with 'turn up when you want' breakfasts. Compared to room service you need additional seating and tables. You also need additional staff and have less predictability in demand flows. Am I missing something, or should the strategy for hotels not be to move more to room service as opposed to restaurant service?

The more I think of it, if you want to make room service work, the answer is in reducing the selling price and providing jobs for unemployed low-skilled workers. Make restaurant dining the second choice as opposed to first choice, with the opting out of breakfast in bed.

Oh and while you're at it, think of the difference in the price of my restaurant steak, I could work on the basis that the money saved through ordering of the room service menu at the restaurant, means that for the business customer, buy eight and the saving will nearly cover the price of one night's hotel accommodation - I'm sure buying steak compares favourably with reward points. Strange times!

Taxpayers Alliance procurement assertions are flawed

Today's Times makes great play of The Taxpayers' Alliance, Bumper Book of Government Waste. Not only does public procurement get a bashing on page 4, but also in an Opinion piece from Matthew Sinclair (Chief Executive of the Taxpayer's Alliance) on page 26.

When I read that £15bn a year could be saved through better public procurement naturally I looked for the evidence. That led me to the source being cited as the Institute of Directors. But the Institute of Directors hadn't identified £15bn could be saved, their source was Colin Cram's report, Towards Tesco.

Now I have deliberately stayed clear of the procurement family spat on Towards Tesco, not least because I like and have great respect for those presenting the opposing arguments. However, we have to remember that the Towards Tesco was based on big assumptions too - it also stated there was an absence of reliable data.

I have serious concerns about the pragmatism of the centralisation argument and I'm not even sure if Colin's argument has been correctly interpreted. But we have reached a dangerous stage when a hypothesis presented by Colin, who is clearly committed to public procurement, is being misinterpreted and used by the Taxpayers' Alliance. We need to end the rhetoric and move to robust peer reviewed evidence to get to the most likely outcome. In the meantime, perhaps we should take all the other Taxpayers' Alliance assertions with a pinch of salt.

T&Cs for Breakfast in Bed

Last week I carried out a very brief comparison of the price of a sirloin steak in a hotel restaurant and also as part of room service - insofar as I could see the only difference was that a 10oz steak was available in the restaurant while only an 8 oz through room service. The price difference was £17.50 as opposed £28 - saving the additional £10.50 at the loss of 2 oz of steak, I asked for the room service steak in the restaurant, but avoided the tray charge.

I then decided to carry out a quick comparison of the price of breakfast in bed in two hotels. By way of context both hotels were household name brands, in the same city, of the same star and giving me the same corporate rate - yes, theoretically they should be same. I can honestly say I have never ordered breakfast in bed with either of the hotels, but this week I noted the prices.

I have always assumed it was quite clear how much Breakfast in Bed would cost. However, for all you procurement legal illegals, can you make a judgment and tell me how much Breakfast in Bed at Hotel A should cost? By way of context, I was on a Bed and Breakfast rate, and prior to reading the T&Cs on the foot of the Order Placing Door Hanger, the headline prices are £10.95 for a Continental Breakfast and £14.95 while a cooked breakfast is £14.95. The T&Cs state:

A £5.00 charge will be applicable to all orders. For guests who have paid for a room package including breakfast, there will be a charge of £6 per room, for room service.... All prices include VAT.

So how what is the extra amount of money I should expect to be billed if I order a cooked breakfast?  Would it be £6, £11, £14.95, £19.95, £20.95, £25.95, or what?

Shopping Bag hypotheses

Over the last week I had cause to think about the buying bags.

One of my daughters asked me to price a bag for her, let's call the brand, 'Longshot'. Well, I spotted the bag in a department store for £45 and decided to compare the price in the almost adjacent 'Longshot' shop, £48.

Hypothesis 1: The 'manufacturer's' price isn't necessarily best.

Nevertheless, I informed my daughter of the bag price, and that there was a 'look-alike' bag available at almost half the price. She wasn't interested in the 'look-alike' alternative as a member of the Royal Family had the 'Longshot' bag.

Hypothesis 2: Perceived celebrity endorsement can increase perceived value. Hypothesis 3: Paying for a branded bag, with no discernible difference in specification, can be twice the price or an equivalent.

Thankfully, she decided to delay the purchase until I was next in the Duty Free at Heathrow.

The next day, Friday, I was at the Chelsea Flower Show. As you arrive, it is worth noting there is a bag search - most people are carrying a bag. After entering the Show you can easily get a free bag from the main sponsor - and this year you may also have received a free poncho. Those bags are both functional and weather proof but do not have the year of the Show printed on them. You see many people carrying those bags at the Show. But there is also another bag, which appears, much more sought after, namely, the 'The Daily Telegraph' bag. It's cotton, printed with the year of the Show and quite a nice graphic. The Daily Telegraph bag, naturally enough, contains a copy of the Daily Telegraph. The bag is not weather proofed. The strange thing is that those bags are like gold dust - you see many people with more than one but, like some black art, you have no idea where they come from. This year I found out. For a brief moment a 'bag carrier' arrives, word goes out via the Bush Telegraph, a 'mob' gathers round and, for probably no more than two minutes, bags are dispensed free of charge. It's not the content of the bag they want, the newspaper, no, it's the bag itself! So you can expect to see bag devotees wander round the Show laden with free bags, carrying little in the bags ironically, other than bags. Then there's another bag the 'official RHS Chelsea Flower Show bag' - this year you could buy one for £12 and, low and behold, rather than use it to carry stuff in, protect it by placing it in one of the sponsors free bags! You may be asking 'why the bag search at the entrance?', well clearly those attending the Chelsea Flower Show bring a bag with them.

Hypothesis 4: Performance and functionality do not correspond to value. Hypothesis 5: Perceived value is related to scarcity. Hypothesis 6: Value is perceived in different ways, for example, the bag had more perceived value than its content. Hypothesis 7: People 'procure' even when there is no need.