Procurement risk management & power at Labour Party HQ

You may recall I discussed the UK Government's Guidance Note on Procurement Boycotts some time ago - at that time I was cynical about it's impact. However, Procurement Boycott's hit the news again today - this time the decision of the Labour Party to Boycott that 'procurement old faithful' G4S.

It seems the Labour Party Conference now has a risk of being cancelled as there may not be a contractor in place to provide the required security cover. G4S' contract was cancelled due to their links with Israeli prisons. Attempts at getting others to bid have so far failed.

This is one of those examples which demonstrates so much of procurement risk management. Firstly, it was probably perceived as a Routine contract as opposed to a Bottleneck 'show stopper'. Secondly, it demonstrates the need to recognise power and dependency - Labour probably but wrongly assumed, like so many, that security contractors would love to compete for their work.  Thirdly, it demonstrates that putting in a Procurement Policy without considering its full implications may result in having to rip up the policy.  Finally, it demonstrates the need for supplier engagement when introducing 'new ways of working'.

Procurement Policy may just have moved up the agenda of the Labour Party - it certainly looks as though someone is going to have to shift.

Dominant power & lethal injection procurement

Back in 2013 I discussed the problems Texas was facing with its death penalty regime due to a supplier no longer wanting to supply. Today there are reports that there are no longer any legal supplies of the drugs at all in USA, after Pfzer, the last remaining supplier, decided to cut supply.

This is a remarkable example of how dominant power impacts on procurement.  While few would doubt the USA has massive buyer power collectively over markets, in this case, the USA have discovered that dominant power can also be with the supplier.

Like yesterday's posting, on Archaeologists, this is another clear example of a bottleneck item. It is also an interesting example of the difficulties which can be faced in finding substitutes.

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.

Water: Bottleneck item that stopped the 'official' Sheffield Half Marathon

I've discussed bottleneck items before - remember the lethal injections and laptop hinges. Yes, these are the low value items which frequently end up classified as 'tail spend' which lack glamour but when things go wrong with them, they can have really big negative impacts.

Today, bottleneck items were making the national news in the UK: Sky, ITV and BBC included this procurement story in their headlines. For those of you who missed the headlines Sheffield Half Marathon was cancelled, for the first time in 33 years, owing to the water for runners not being delivered. In a separate twist many runners were unaware of the announced cancellation and continued regardless with the local community standing in where procurement fell down. The chair of the organising committee apologised:

It is with huge disappointment and regret that we were forced to cancel the 2014 half marathon because of a problem with the delivery of water. We apologise to all the runners, their families and friends and anyone who has supported the event. 

Even the Deputy Prime Minister found time to talk about procurement:

I know thousands of people have trained long and hard for this event, with many running for some outstanding local charities and others coming from around the country to take part or watch. I can only imagine how disappointed they must have been when they learned that the race was cancelled as they were on the start line ready to set off. 

Everyone involved deserves a full explanation of how this farcical situation was allowed to happen. Sheffield is an outstanding city of sport. The extraordinary scenes today shouldn't tarnish that reputation.

Is the quest for 'big spend' involvement forever destined to distract from making a real contribution because we don't take seriously enough the risks of Bottleneck items which lie in The Tail? Tonight procurement has taken another step backwards in credibility, not just in Sheffield but nationally. Tonight, one bottleneck item, I suspect, is causing a lack of sleep for some, and a laugh for many; let's hope the rest of us learn from this lesson.

Execution bottlenecks in procurement

I have always been surprised at how difficult it is for workshop delegates to populate the 'Bottleneck' quadrant of a Kraljic matrix - those procurements which although potentially low price have such an strategic impact on the organisation that they can 'stop the line'.

There appears to be something built into the DNA of those who discuss procurement to focus on managing big sums of money as opposed to managing risks - low value is the unglamorous side of procurement. Yet, delivering great procurement is about identifying the right strategy for all sorts of procurements, including those which are low value but high risk.

You may recall my previous post on the strategic significance of a $10 hinge on laptops - that was an example of a 'Bottleneck' item.

Today (2 August 2013) we have learnt of a somewhat dark procurement example, the dilemma facing the state of Texas as it faces a potential shortage of drugs used for lethal injections for those who it seeks to speed on their journey to the next life through execution. Whether or not you think such a shortage is a good thing is not the point - the issue is a change in the external environment which led to a shortage of supply, in this case relocation of a key supplier to a country which does not want to be associated with execution. I feel it would be totally inappropriate for me to suggest alternative options for the state of Texas but they will need to have some solutions before the end of September [2013].

One of the problems with 'bottleneck' items is that because they are low value they are rarely picked up through a spend analysis which is an over simplification of where to focus attention.

So now you have two examples of 'Bottleneck' items but how specific can you be in identifying your own organisation's or is that a risk not yet managed?

PS: 30 April 2014 As if Texas wasn't bad enough, Oklahoma ended up with botched executions and calls to reveal their suppliers of legal injections.

Can a $10 hinge be strategic?

I bet if I asked the average person that question they would look at me blankly. Even if I asked 'where would a hinge be positioned in a Kraljic matrix?', I suspect most would think it was on the lower end of risk.

But what if the hinge is on a laptop?  What if it was going to adversely impact on the new Windows 8?  Today's WSJ has a fascinating article 'Window 8 Success Hinges on $10 Part' which illustrates the importance of laptop hinges.

Strange thing is the number of times procurement people tell me that low value purchases are not where there attention should be focused.  My response could be something about the straw which breaks the camels back; now on reflection I think I will refer to the $10 hinge which moves the laptop's back. Aim for lowest price and a single source supplier and you may just have made a mistake!

Lesson learnt: strategic sourcing is about more than price.