An Olympian challenge for sustainable procurement and user satisfaction

In a drawer beside me I have a suite of NIAAF medals, yes, surprisingly, some years ago I was an international athlete!  The medals have personal memories attached to them; I can remember something of each one of those races even now, over 20 years later.  The medals are also something of a tangible legacy which I have always viewed as worth passing to my children and grandchildren.  When I received them, even though I wouldn't be able to retain my fitness, I never gave a second thought as to whether or not the medals wouldn't be durable.

I never had any illusion of being able to win an Olympic medal but I'm sure those who have done assumed their medals would last the distance.  Now we learn that somewhere in the region of 7% of the Medals awarded at the Rio Olympics are starting to wane. It is somewhat ironic that the medals were celebrated for their sustainability - materials used included recycled silver and industrial waste.

Olympic medals are unlikely to have been included in the high cost/high risk profile but that doesn't mean they shouldn't have been subject to a risk assessment and evaluated on the basis of fitness for purpose. That fitness for purpose should have included something of the users perspective too.  It can only be assumed that evaluation didn't take place or, if it did, wasn't given a great weight. The Rio Olympics procurement has once again become a talking point for all the wrong reasons.  Wouldn't it have been easier to have got it right and managed the reputational risk!

But the damage through this lackluster procurement also casts a shadow over the approach to sustainable procurement - instead of acting as a role model it now will serve as an impediment. Sustainable procurement doesn't need to compromise fitness for purpose and shouldn't.

Perhaps the lessons from this are:

• Consider the specifications others have used, perhaps through consulting with peers; 
• Place performance and functionality in the perspective of the user;
• Consider the risks to functionality in the specification and award criteria;
• Remember the potential for reputational damage in your risk assessment;
• Test functionality perhaps in the lab;
• Don't compromise performance and functionality for the glister of sustainable procurement PR.

Procurement Fraud on the increase - you are vulnerable too

The 2016/17 Global Fraud and Risk Report by Kroll has just been published and it indicates an increase for 17% to 26% in 'vendor, supplier or procurement fraud'.

We've been discussing procurement fraud for some time and only yesterday Spendmatters' Peter Smith raised the question of why those involved risk their careers and potential jail sentences for such low returns. I think the answer to Peter's question is not only greed but the probability that the perpetrators will not be caught and the easy of completion.

What I have often come across are processes which are so fundamentally weak and lacking in robustness that I remain amazed how organisations are not more aware of the significant risks they face - are they in denial or just unaware?

The reality is that no organisation can have zero risk of supplier, vendor or procurement fraud but all can certainly take steps to reduce vulnerability - you may find my whitepaper of interest.

The publication of Kroll's Report provides an opportunity for those in procurement to highlight this risk, ask how it is being addressed corporately, and take the lead in developing a robust approach. Let's remember that the Bribery Act places a responsibility on organisations to prevent fraud - that's not passive but about being proactive in identifying vulnerabilities and taking steps to reduce the risks.

CIPS warning of a pending supply chain crisis points to a bigger concern

I nearly fell of my seat when I read in the latest issue of Supply Management that CIPS CEO warned of a potential supply chain crisis based on a CIPS survey which "found around 80% of supply chain professionals in the UK cannot guarantee there is no malpractice in their supply chain".

Was this a typographical error, a badly constructed survey or misreporting?

Just pause for a moment, does this mean that CIPS, and the 20% of the 'senior business decision makers and supply chain professionals' who responded to the survey actually believe they can guarantee there is no malpractice in their supply chains?  If that's what they are saying then their understanding of risk in supply chains appears to be flawed - they are either delusional, lying or fooling themselves.

CIPS' concern shouldn't be with the 80% who acknowledge the risk but the 20% who don't!

If someone came to me and said they could provide such a guarantee I think I may pose the following questions:

1. How do you define malpractice in supply chains?
2. How could anyone possibly know there is no malpractice in their supply chain?
3. How can you give such a guarantee?
4. Would you stake your job on that?
5. Are you responsible for supply chain risk management?
6. Could I see the risk register as I think there may be a need for concern?

When CIPS' CEO warned "that British businesses could be "sleepwalking into another supply chain crisis"", I think he linked that with those who couldn't guarantee no malpractice - conversely, I would caution that the crisis is more likely in the organisations which think they can guarantee there is no malpractice.

When the Ministers met the CLG procurement inquiry

At last, I hear you say, we've reached the seventh, and final, oral evidence session of the CLG Committee Inquiry into procurement. The witnesses being Baroness Stowell of Beeston (Parliamentary Under-Secretary at DCLG with responsibility for procurement) and Nick Hurd (Minister at the Cabinet Office). When you recall the central government's CPO reports to the Cabinet Office these witnesses should be in a very strong position to speak with authority on the political objectives of procurement.

The Baroness took an early opportunity to volunteer her view of procurement effectiveness:

They should understand that it is not just about buying the relevant services at the best price possible but that this is also an opportunity to make sure that procurement is a way of getting the best service you can and that it is possible to improve the services that are provided locally. If we start putting a [savings] target on things, the focus then is on that rather than what I would see as the more important outcome, which is a better local service for local people.

It is important to note that this was stated in response to a question on what could be potential savings from procurement as opposed to "what would good look like". The Minister responsible for local government procurement, therefore, sees procurement as not about lowest price but better local services. It is really disappointing that the Committee didn't take the opportunity to compare that view with the Cabinet Office Minister's, as you may recall his boss, Francis Maude, told the Public Administration Select Committee in May of this year: that the "primary objective through procurement is getting the goods and services needed by the citizens at the best price". Is it just me, or are the Cabinet Office and DCLG at odds on what epitomises good procurement?

Then compare, former Local Government Minister Michael Heseltine's view, which has the implied endorsement of the Chancellor:

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

Is there an environment in which procurement fraud is more likely to develop?

If there are reductions in the frequency of exposing purchases to competition through longer-term arrangements, then it is more difficult to demonstrate ‘the price is right’ and suppliers also risk having more at stake from losing business.

If specific individuals have discrete longer-term responsibility for specific purchases in and are perceived to have unique know-how, then visibility of behaviour and critique of strategy is reduced.

If there is a streamlining of processes, which removes what were considered to be ‘non-value added’ checks and balances, then the likelihood of detection is reduced.

If there has been a switch to high-level strategic audit as opposed to random in-depth end-to-end process auditing then the likelihood of fraud being uncovered is reduced.

If there is a feeling of loyalty to the organisation not being reciprocated with loyalty to the individual, then it is more likely that employees will feel a sense of betrayal and anger. 

If there is job uncertainty, doubts about long-term security, a high probability of redundancy, worries about being able to get future employment, pay mortgages and family bills, it is likely that the temptation to engage in procurement fraud will increase.

If there is organisational complacency the procurement fraud only happens in other organisations, then there is a denial of reality.

Is there an environment in which procurement fraud is more likely to develop? Yes, right now.


First published as a guest blog on Procurement Insights, 10 July, 2013

Protecting against when the gamekeeper turns poacher

Oxfam and Lloyds Banks don't immediately register as having much in common, particularly for those of us who have an interest in procurement. The link is fraud, or, more specifically, when the gamekeeper turns poacher.

Last September, Lloyds former head of fraud and security pleaded guilty and was sentenced to five years in prison for theft  of £2.4m. She had submitted 93 false invoices between 2007 and 2011. Yes, this was the person the bank had charged with protecting them from fraud.

In an echo of Lloyd's, on 18th June, Oxfam's former chief of counter fraud was accused of stealing £62k and a laptop. Let's be clear though, he is accused but the court have yet to make a judgement.

It would have been expected both the anti-fraud gurus would have been carefully vetted and 'above suspicion'. They would also, however, have been in the ideal position to identify the weaknesses in the system and the scope for avoiding detection. Yet, in both cases, it is alleged, they 'broke the system' and no doubt there are plenty of examples of more successful adept anti-fraud gurus who have so far escaped detection. The lesson must therefore be that there is a need for some form of independent testing of the anti-fraud system, but that seems rarely evident. Another lesson must be to put in place the system which also 'polices the police'.

I have long lost count of the number of risk managers, who, when I interviewed them about procurement risk, had not given any meaningful consideration to procurement fraud, therefore they lacked appropriate protections. Yet it has been estimated that procurement fraud cost the UK public sector alone somewhere in the region of £2.3bn – closing that down would make a painless but worthwhile contribution to the UK economic recovery.

In the procurement world, who better to know how to break the system, with minimal chance of detection, than those who understand procurement - systems are required to reduce that risk. But just as important a question is, 'are the processes in place to protect the CPO against mischievous allegations of procurement fraud?'

Sadly, I see a lack of robust anti-procurement fraud systems - have you got one in place? Such a system  needs to be proportionate, pragmatic, risk based, comprehensive, tested and regularly reviewed. Without such a system how will you be able to prove 'not guilty'?

First published as a guest blog on Spendmatters, 26 June 2013

The Justice of paying tag in procurement

If yesterday’s Sunday Times is correct it appears G4S will have an up hill struggle in gaining future public sector business -  is that justice and would it stand up under public procurement regulations?

Now don’t get me wrong, I have not been afraid to cast stones at G4S and some aspects of their performance, but is this latest concern about tagging the right one to pick a fight about and would justice be seen to be done? Would the demise of G4S be something any government would want to celebrate?

While it may be fashionable to rake up the past of G4S’ Olympics security debacle, who was actually the client for that contract? I can’t see any connection with the MoJ, nor can I believe that MoJ have had full view of all the relevant facts and agreements. That being the case, is it justice to use that as a basis for withholding other contracts? Equally, why act now, given that there were calls for G4S to be blacklisted at the time?

But let’s consider the specifics of the tagging contract. G4S claim they had previously provided information to MoJ auditors for scrutiny, yet have not received any feedback. Given that there’s always a cost in providing information and no feedback has been received which could have helped G4S address issues - is it fair and reasonable to treat a refusal of G4S to volunteer to submit to a forensic audit? Should the evidence of abuse not be presented by the MoJ?

Procurement of special advisor to ensure electoral success

You are asked to hire someone who can help your sponsor win an election.

Your sponsor has expressed a concern that "political lobbying is the next big scandal waiting to happen" - you may want to include that in your risk assessment.

Your sponsors policies are also linked with reducing long term health costs. They recognise obesity, too much alcohol consumption and tobacco smoking have a detrimental impact on the electorates' health and also on the (excuse the unfortunate choice of words here) the whole life costs of running the health service. Future health costs are one of the dominant causes of politicians insomnia.

The preferred provider has a proven pedigree of being associated with electoral victories, of course that is no indication of 'cause and and effect', nevertheless it is better than always being associated with losers. The provider also has a risk if your sponsor turns out to lose.

Your preferred provider naturally enough is in the business of influencing - the trinity of steering the electorate, steering policy, and in steering big business. That unholy alliance may just have some ever so slight link with lobbying.

Given the health policy and risk of perceived lobbying, it may be clever to ask the potential provider if they have any perceived conflicts of interest. Of course you need to be very sceptical about any answers, after all, the provider's core business is getting people to make the decisions the provider wants them to make and be distracted from any thing which may have not get them to 'yes'.

Given all that due diligence, you appoint the preferred provider (did you really have a choice or was it a forgone conclusion).

This morning you were relaxing over breakfast, watching yet more depressing news coverage of sectarian violence in Belfast (wasn't that all supposed to be sorted by Blair) - having said that, thankfully there's nothing today about public procurement. You glance at The Times: "Heavens to Murgatroyd" your procurement recommendation is all over the front page, the second page, and even the Leading Articles (bizarrely but thnakfully now tucked away on page 24). Turns out there was a perceived conflict of interest - others think there's a connection between your provider, who happens to also be a consultant to the tobacco industry and a U-turn on an initiative to reduce smoking - are they mad, how on earth could anyone draw that conclusion.

Forget cutting the grass, you need to cut the LinkedIn profile and the section which said 'procured special electoral adviser'. You've just fired up your Mac to make that minor deletion, when your landline and mobile phone go simultaneously, one caller is FM and the other GO, as if twins on Big Brother, both say "Wasn't it your job to minimise exposure to risk? Is the provider paid by outcomes? Were you lobbied into making that recommendation?"

After the brief calls, you start to consider this week's shopping and the visit to the local food bank - a Marloboro weekend?

"Generally the MoJ is seen as doing good work in the procurement area"?

I'm going to leave it to others to dissect the G4S and Serco overcharging for tagging the Ministry of Justice. I fully expect a deluge of blogs. Nor do I intend to catalogue the long list of MoJ procurement issues which I have discussed previously.

But I will remind you that last September I highlighted the need to question the value for money of tagging and indeed the need to question the procurement approach including the failure to focus on outcomes.

I also want to remind you that I questioned the value of evidence given to the PASC Procurement Inquiry when one of the 'experts'' stated "Generally the MoJ in seen as doing good work in the procurement area".

The big issue to me is the decision of the Lord Chancellor to launch and internal investigation into contract management based on evidence that MoJ officials knew as far back as 2008 that there were issues with billing. If that proves to be true our profession has been discredited.

I want to learn of the evidence that was uncovered and why that wasn't reported? I want to know how broad, deep and high the awareness went? I want to know whether fraud was involved or corruption? I want to know how much money this has cost the tax payer? I want to know what will happen to tagging if there are only two providers and both are found at fault? I want to understand how these organisations have become so powerful suppliers to the public sector that it appears a blind eye is turned to past misdemeanours? I have long called for personal accountability, will we see that?

Prior to the separation of the MoJ from the Home Office, the then Home Secretary claimed the Home Office "wasn't fit for purpose" - I think we now need to understand what the MoJ Procurement Capability Reviews revealed (written and unwritten - think CQC) and how much of public procurement just isn't fit for purpose?

Corruption is a UK problem too

Transparency International has just published its Global Corruption Barometer, sadly it is not good news for the UK . There is now a perception that the UK political system appears to have lost its puritanical past. That's hardly surprising when you think of the recent boasts of some parliamentarians that they can 'make things happen'.

We may like to believe that the Bribery Act will stop all that nastiness but if we do we fail to recognise basic human nature, temptation, and opportunistic behaviour. We also fail to recognise that those who were subjects of the recent parliamentary 'stings' would also been involved in bringing the Bribery Act into law.

To make matters worse there is a political storm in Northern Ireland, where the traditionalist and protestant fundamentalist Democratic Unionist Party have become embroiled in internal allegations of using party influence to skew public procurement decisions. Even the First Minister, doesn't know who to believe. The claims were made as part of a BBC Spotlight programme and of course the DUP are naturally calling into question the reporting (as an aside you may recall that it was a BBC Spotlight programme which had previously raised public procurement questions regarding Peter Robinson's wife and the awarding of a catering franchise a few years ago). While perverting procurement decisions is bad, the DUP now appear to want to obstruct a fuller debate on the issue. The saga of the actual contracts in question is just so bizarre that a weeks blog posts couldn't bring you up to speed but by way of example it involves a firm who admitted charging for maintenance work on blocks of flats which no longer existed!

My advice to the DUP would be to open this whole saga up to as much scrutiny as possible otherwise it will become a running sore.

But we also need to look wider than the UK for frustration with corruption in public procurement - let's not forget that one of the reasons for the recent protests in Brazil was frustration with corruption.

Those involved in public sector procurement, regardless of whether they are politicians or practitioners need to be perceived to be 'whiter than white', particularly when there are spending cuts and the population are on the receiving end. Yet, in how many public sector organisations do we now see evidence of a robust approach to 'owning' and combating the corruption problem or even personal accountability? I don't view this as something which will just 'go away' unfortunately, given the right conditions, which I think we have, I think it can only get worse.

Political procurement brohaha in Glasgow

Only days after celebrating some of the best in UK public procurement we are brought down to earth
with a jolt, reminding us that all is not as good as it could.

One of the benefits of local government procurement is the centrality of political leadership in the decision-making and councillors personal accountability to the electorate, through the ballot box, for their stewardship of the public purse. But there is a fine and delicate line which delineates when public and councillors should be involved in procurement, and when they shouldn't. Getting it wrong jeopardises public confidence in the system while getting it right enhances public confidence. So councillors and their advisers need to get the balance right.

Of course design contests as part of procurement invariably add an element of subjectivity to the whole process too. It's not easy to prove you've made the right decision.

Then, particularly in an age of austerity, there are questions as to whether spending £15m on a project represents what the public want or when a cheaper option, of say £500k, makes more sense?

With all those ingredients, this Glasgow case is particularly interesting and should provide lessons for all involved in public procurement.

A design contest was held for a £15m  revamp of George Square. Six designs were received along with a public protest to the effect that the work should not go ahead and a cheaper alternative option, at £500k, be pursued instead. A decision was taken to drop the project and pursue the cheaper option. The council Leader was praised for that decision although questions were asked why there hadn't been sufficient public consultation earlier. Then the RIAS complained that the Leader had compromised the process and had showed bias towards a particular design. Now the Leader, Councillor Mattheson is allegedly being investigated by the Police Major Crimes and Public Protection unit. Ironically, the Leader had previously said:  "... I'm sure whichever design team is chosen, Glaswegians will have a George Square to be proud of again".

So, at this stage, what are the lessons:

1. Define clearly the role of the public, councillors and officers in any procurement process;
2. Make effective use of scrutiny and gateway reviews in the process;
3. Carry out an appropriate needs assessment and establish what the public want;
4. Avoid costly procurement exercises for both bidders and buyers until you have completed a full options appraisal process.

N.B I've a paper published on the role of councillors in the Journal of Public Procurement - let me know if you want a copy.

PS on the 27 September George Matheson was cleared of any misconduct

Scepticism is a procurement virtue

We all hold up Harvard, home of the HBR, as having a reliable voice worth listening to. That's where Michael Porter's 5 Forces, value chain and so much of procurement's basic academic theory derives from.  Yet we have now discovered that two of its esteemed professors, who influenced UK austerity strategy, got it wrong in their research. Fortunatelty one of student, Thomas Herndon, a PhD candidate (pictured), had the sense to question their data.

There is a not insignificant problem though in that the Chancellor may relied on Reinhart and Rogoff's flawed evidence which told him what he wanted to hear about austerity strategy, even though it has now been proved wrong.  But Osborne is not alone in being gullible.

We have also learnt that a key influencer in childcare policy was feted yet without much testing of his credentials.

Then we have the health nightmare unfolding in Wales as a result of the nonsense propagated by the now discredited Dr Andrew Wakefield over the dangers of MMR vaccinations. Many of the population, including the Lancet proved gullible.

That's not to mention the £50m spent on fake bomb detectors.

Is there not something which suggests that when you get someone who is coming up with a 'flat earth theory' you maybe should test a bit more, after all is that not what the scientific method is all about. The   student who have the bravery and tenacity to challenge the findings of the two Harvard professors was not welcomed with open arms but has been proved right.

As procurement professionals perhaps we also need to be bravery, more tenacious and sceptical.

Two examples of what I mean in terms of procurement: I recently critiqued a bid and found 25 assumptions stated by the bidder - when the buying organisation were challenged on the assumptions I found that raised a hare in terms of readiness to accept the bid without being contractually open to additional costs and risks. Secondly, some 20 years ago, I was asked to review a recommendation for a tender award a few hours before it was to be recommended to councillors for acceptance. I received many cynical looks when I strayed beyond my 'look at the process' remit and revealed that the 'numbers just didn't add up'. Of course the "specialist consultants couldn't be wrong" - well actually, sorry, they were wrong.

We should use the low risk option of questioning validity in procurement more often - all we need is to be more sceptical and recognise that scepticism can really add value.

So, why is it so difficult to be a sceptic? Isn't scepticism a procurement virtue?  

Defining the scope for conflicts of interest in CCGs

It was only on the 15 March, discussing the potential Clinical Commissioning Groups' conflicts of interest, I said "what we don't know is how big a scandal some of those involved in CCGs could be walking into out of ignorance". Today's Sunday Times, 'naming and shaming' provides some indication that it will be a big scandal.

While "NHS England is creating guidance which outlines how conflicts of interest can be avoided and mitigated in the reformed health service" media attention and public scepticism just won't wait and have already jumped to conclusions.

I suspect a level of naivety in the NHS and CCG on procurement decision making and when those with a potential conflict of interest should absent themselves from the decision making process.

In commissioning the potential to exercise 'undue influence' is long before the decision of who should be awarded the contract and indeed long after. For example, the opportunity to influence for personal gain can be exerted:

1. In completing a strategic needs analysis and identifying which services would help match the needs of the area;
2. In prioritisation of the identified needs;
3. In determining the budget allocated to specific needs;
4. In determining the make/buy decision;
5. In determining the level of competition required;
6. In determining the potential for collaborative commissioning partners;
7. In determining whether the identified needs should be expressed as outcomes or narrowly defined inputs/outputs;
8. In agreeing the risk allocation;
9. In agreeing exit clauses;
10. In agreeing the bundling of contracts;