"Purchasing: Can we bridge the gap between strategy and daily reality?"

A new academic paper is in press at the moment for publication in Business Horizons: 'Purchasing: Can we bridge the gap between strategy and daily reality' by Knoppen and Saenz which I think is worth a read. The paper is based on the survey findings of the International Purchasing Survey - over 600 usable responses from North American and European purchasing professionals - and a few anonymised case studies.

At first I wondered why the paper wasn't published in one of the mainstream procurement journals, then I decided it may be the reported findings quite possibly jar against the message their editors generally want to accept.

Nevertheless the findings are important and certainly merit further debate and validation.

I am not going to steal the paper's thunder, but the key messages include that 47% of the respondents believe Purchasing (I take that also to cover the Procurement function) is not included in the strategic planning process, and 56% the purchasing are not focussed on long-term issues that involve risk and uncertainty. Furthermore that organisational structure tends to be either centralised or decentralised with little development of hybrid models.

Those findings certainly act as a reality check on the rhetoric but, I have to say find some resonance with what I have all too often seen in big household name companies. If the findings are reliable we need to stop the bluff and really get down to asking the serious question of why is Procurement still suffering from an identity crisis, despite almost 30 years of procurement's potential contribution having been identified, the financial crisis, and even the recent spate of procurement related supply chain risks manifesting themselves? Why are simplistic structural models still prevalent despite the benefits of hybrids? Is the problem that with the profession of those who look at the profession?

However, leaving solving the world's problems for another day, and getting back to the paper. In answering the core question the authors pose: Can we bridge the gap between strategy and daily reality? The authors use the case studies to demonstrate the answer is 'yes',  and identify key pitfalls in bridging the gap, namely:

1. No time for reflection;
2. Lack of scale;
3. Lack of scope;
4. Unaligned incentives. 

While I may question some of the content and approach, and feel there may be an over-simplification of the discussion and recommendations,  I encourage you to give some thought to the findings.

NHS Procurement Tsar meets the Fat Controllers.

The NHS' new procurement tsar looks as if they may have an interesting first challenge - working out
a procurement strategy for 'fat clubs'. The National Institute of Health and Care Excellence (NICE) has endorsed three providers who can deliver, what appears to be, NHS funded places at 'fat clubs'.

The challenge now is how the Tsar will approach the procurement of 'fat clubs' to maximise the purchasing power of the NHS.

With only three providers operating through a network of local clubs we should see some interesting procurement questions answered.

1. Are the local providers endorsed by NICE?
2. Who would be the contracting bodies - the national or local providers?
3. Will payment by results be used?
4. Will the providers collude and carve delivery?
5. How will alternative providers respond to potentially be excluded from delivering the service as they don't have NICE endorsement?
6. How will the EU procurement rule be complied with?
7. Somewhat tongue in cheek, will we see a lean approach pursued?
8. What evaluation weighting will be used?
9. Will the Tsar be able to shape up?

The craziness of legislating the use of central purchasing bodies

Peter Smith highlighted that consultation is taking place on a potential strategy of the Cabinet Office to use the implementation of the  new EU Procurement Directives to mandate the use of central purchasing bodies. Clearly there is a desperation to make centralisation work. That desperation seems to be blinding eyes of the believers and closing their ears to the whole 'nudge unit's' approach of making it easier to default in a desired direction.

My own opinion is that centralisation of purchasing is a philosophical position as opposed to pragmatic or evidence based. The aspiration of centralisation is believed to be the answer when decentralisation dominates, and decentralisation is the answer when centralisation dominates. Of course that's an over-simplification but the grass is always greener on the other side. Then again the tried and tested route-map to the 'other side' of central body purchasing has not yet been found.

We know that centralising Fire & Rescue purchasing through Firebuy just didn't work. We also know of the perennial problems of trying to get the 43 police authorities to standardise on something as simple as white shirts has proved too difficult to master. Yet, in the absence of understanding what will make a difference, mandating through legislation is being contemplated.

Since 1786, through the HMSO, central government have been trying to make centralisation work; where is the evidence to suggest they will be able to make it happen this time? Is it more than propaganda? Is there even the evidence that if it were to work, there won't be a cry for decentralisation in the near future?

Wouldn't it make more sense to create an appetite for centralisation before creating legislation. But then, you don't need legislation anyway to enable centralisation - you need a compelling argument and an attractive proposition. However, if you create bad legislation and the legislation fails, then will the courts be used? How will foot that bill?

The whole notion of using the stick of legislation seems absolutely crazy to me.

When obfuscation meets incisive questioning on collaborative procurement

On the 22 June the NI Assembly Public Accounts Committee published its report on collaborative procurement in Northern Ireland - far from a glowing endorsement for those leading on collaborative procurement.

However, as some of you will recognise I am intrigued by some of the oral evidence sessions at public procurement inquires. The Report includes the witness evidence given by key players in civil service procurement in Northern Ireland to the Committee on 5 June 2013. On this occasion those asking the questions were remarkably well informed on public procurement and their expectations. Unlike so many of the Inquiries I have discussed previously (for example, the recent CLG Committee Inquiry), the MLAs were not prepared to be distracted but asked probing and detailed questions - to me they were exemplary in their scrutiny.

So what do I mean by probing and not being distracted? Let's look at the questioning regarding the CPD (Central Procurement Directorate), a hybrid organisation who, according to the evidence do not procure anything (#4 and #138) but provide guidance. The CPD was set up in 2002 and in their evidence said "we have been making procurement processes more efficient over a longer period than some other jurisdictions" (#18) - by other jurisdictions you can take it they include England, Scotland and Wales. Let's remember that Northern Ireland is quite small and is really about the size of one of the bigger counties in England, so perhaps when comparing progress towards collaborative procurement a better comparison may have been with the Yorkshire Purchasing Organisation (YPO) or Central Buying Consortium (CBC).

Is putting on the Ritz compatible with centralised purchasing change management

Some of the greatest challenges which face procurement have been how to put in place collaborative purchasing arrangements, avoid maverick buying and ensuring adherence to  corporate framework agreements. We heard yesterday that the Crown Commercial Services are making use of outside support and one of the areas of help is centralised buying. We're also familiar the preciousness of identity, for example, the difficulties of getting England's 43 police forces to agree on a common specification for white shirts - a problem which the Gershon Review highlighted a decade ago, yet still persists.

Part of the problem is that individuals like to suggest they are in such a position of power and in that position they have the the freedom to exercise choice by opting to step outside what is okay for others - what is good for the goose isn't always perceived as good for the gander. The problem is also actually about change management - you need a compelling justification for the 'corporate deal', you need to have brought key stakeholders with you and won their heads, if not their hearts, and you need clear and consistent leadership by example. If you can get the Chairman and CEO to use the corporate deal, for example, for travel policy, you're well on the way - if you can't get them to adhere, then all sorts of excuses, justifications and exceptions start to materialise.

So given that CCS hope to get greater adherence for their bulk purchasing better buys, today's revelations in the Times that the Chancellor has opted out of lower cost (free) accommodation at 'The Ambassador's' and instead chosen to stay in private hotels (£289.97/night) is either a a threat or an opportunity for their strategy.

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:

Procurement of taxis - get me out of here

What's the best way to procure a taxi service?

I suspect the custodians of the BBC are asking that question at the present. £10m a year spent on 350,000 journeys needs some sort of strategic approach. But users of the Beeb's Gateway Booking system seem to think the centralised purchasing system isn't delivering the best price. The examples cited suggest that buying locally, 'maverick buying', is approximately 50% cheaper.

Justifications used by the procurement department include: "we have to ensure that the companies used are both legally compliant and vetted, and this is done as part of the managed service provision ... we also require a 24/7 service which ensures broadcast criticality, full transaction reporting covering all journeys, ensuring we are compliant and can report our [tax reporting] obligations".

Virtually every organisation uses taxis and there are legal requirements for any taxi provider. It would be quite difficult in almost any part of the world I have been in not to find a 24/7 taxi service. I can understand that in certain situations there will need to be special provision for vulnerable passengers but why pay over the odds for all the other journeys?

There is always a dilemma when you try to take away flexibility and freedoms from staff, for example, their ability to hail a cab as an impulse buy or just when you need it as other options just won't work, so you can expect the odd example to be cited as part of the resistance to change, but why not just use corporate credit cards, claims expenses and, if it is abused, remove the freedom or tighten the controls.

I think there also needs to be some serious benchmarking discussions taking place with the providers. Something does not look right and the profession can avoid 'amateurs buy best' perceptions.

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.

The greener grass of the Crown Commercial Service

We know two things: firstly, that the grass is always greener on the other side, and secondly, a bad workman always blames his tools. That's how I see the announcement of the Crown Commercial Service (CCS) - it is not the panacea to public procurement problems in the UK but a convenient placebo to buy time. It looks like a good idea but when we eventually get there, where we came from can be expected to look greener than where we have arrived.

There is no perfect organisational structure for procurement, just the most appropriate set of trade-offs for a given time. I have absolutely no doubt that if we had a centralised procurement structure at the present time, we would have just heard an announcement that decentralisation was the answer. Quite simply the grass will always be greener on the other side and the tools of the 'existing structure' are easy to blame for current failures (in this case the structure).

But more fundamentally, what is the problem we are trying to solve at the present time?

Are we seeing the green shoots of a recovery or looking at a deteriorating economy? Let's give the economy the benefit of the doubt and say we're looking at recovery - I don't think centralising will accelerate the recovery and remotely help small businesses or investment. We don't have enough organisations who are likely, at the present time, to satisfy the qualifying criteria for the 'bigger is better' contracts we can expect from the CCS.

But then think of the policy objectives the CCS will be asked to deliver - it does not strike me we have  a consensus view of of what procurement aims to achieve at the present time. For example, is it cost reduction or wider social objectives? Without that clarity what are the outcomes CCS should be measured against? Even if there were that clarity at the present time, by the time CCS hits the road we will be starting to see the warm-up routines for the next election - should the objectives be set for the recovery and can they be flexible enough to reflect a new government's manifesto?

Is there a readiness to change? How on earth could any causal observer of public procurement believe there is a readiness to change to the CCS at the minute. We continue on the hamster's wheel of making little progress on winning hearts and minds towards more collaborative procurement. Until the stakeholders hearts and minds are won, all we can expect are 'work arounds'.

Have we the skills? Well we know there are issues with contract management, but that could be solved without CCS. Would it not be better to get on top of contract management before you make the contracts bugger? Even if we got on top of contract management, we have almost no evidence of effective risk management and performance management - getting bigger is unlikely to cure that, on the contrary just magnify the detrimental impact.

I could go on but that doesn't strike me as useful, really what I'm trying to say is that we can make any structure work but we need to recognise there is no perfect structure. We can make any structure work but to do that we need a clear vision and leadership, and clarity of the outcomes to be achieved. We can make any structure work but to do that we need the right culture and skills. We can make any structure work but we need a readiness to change, excellent stakeholder engagement, change management, risk and performance management. Yes, we could make CCS work but at the present time the key ingredients just aren't in place nor are they likely to be within the envisioned timescale. We could make CCS work but history suggests it won't unless we get the foundations in place - but then if we got the foundations in place would we even need the cost of changing to CCS?

A spending review anomaly for procurement policy

The Spending Review provides an opportunity to gain some insights into public procurement policy, so it is worth looking slightly deeper than the common headlines of cuts, cuts, cuts.

The nugget which I want to highlight is the freedom gained by Arts Council England and the national museums to opt out of government procurement procedures. 

First it is worth reflecting on what I think was the last relevant report on DCMS procurement by the National Audit Office - at that time, (admittedly November 2005) the view was:

"Procurement is an area where the Culture, Media and Sport sector can achieve significant savings and improvements. Whilst the sector has made some progress in improving its procurement capabilities and practices, a great deal more can be done. A greater level of commitment from organisations to adopting good practice, as well as addressing specific issues such as greater collaboration between organisations when buying common goods and services, will result in greater value for money." (Sir John Bourne, 30 November, 2005).

Is the new freedom to opt out of government procurement procedures an acknowledgement that DCMS has so significantly improved procurement that they should be cut loose from the constraints applicable elsewhere in the sector? If that is the case, which I doubt, it would be useful to understand how they have brought about greater collaboration, which just has not been achieved elsewhere in the public sector, for example, the police?

Is the freedom an acknowledgement that existing government procurement procedures are inappropriate? If so, why release one part of the sector rather sort out the procedures for all departments?

Did Arts Council England and the national museums actually ask for this freedom, if so what was the business justification? What precedent has been set and how will it be applied to the next petition for 'opting out'?

What particular areas of government procurement procedures will Arts Council England and the national museums be released from and have those relaxations been risk assessed? Are major construction projects, grants, and commodity goods and services included? Have new procedures been drafted, if so, can we hear what the proposed new procedures are? Will those procedures be 'leaner'?

Assuming government procurement procedures exist to provide value for money, achieve public policy and provide a shield to protect those involved in public procurement from criticism; how will those objectives now been satisfied?

On the heels of so much debate on greater use of 'centralised' contracts, has the so called 'mandating' just been set aside?

Will the independence bring with it reduced costs for what is procured? If yes, then some serious questions need to be asked about the 'centralisation agenda'? If costs increase, how will that be justified? Will a baseline for future comparison even be established and published?

To be truthful, I just can't understand the freedom as it seems to go against the tide - I'd like to have heard the view of Francis Maude, Margaret Hodge and Bernard Jenkin?

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.

Police procurement on the line

There's something very odd about a room where the most common item of clothing worn appears to be a white shirt and the main subject of discussion is how difficult it is to buy white shirts.

Yes, that's what the House of Commons Public Accounts Committee seemed to focus on at its meeting on 5 June when the subject was really Police Procurement.

However, this evidence session should, in my mind, be included within the Public Administration Select Committee's Inquiry into Public Procurement. The evidence had a much more realistic assessment of the difficulties associated with centralisation.

The Committee started with a reality check: why, when Gershon, in 2004, highlighted the need for a 'uniform' approach to buying white shirts for the 43 police forces,  has such a seemingly simple aspiration proved so difficult to implement? Yet, that's the question which needs an unequivocal answer to, and plan to address, before 'the grand collaborative public procurement vision' should be embarked upon.

Theoretically, the silver bullet has been found for the police in the form of the Procurement Hub. It appears the aspiration was that there would have been 100% sign-up to the Hub last year, yet so far only 2%, yes, TWO PERCENT has been reached. The new aspiration is that 80% will be achieved by the end of the current parliament. Asked, what milestone has been set for 12 months time on the journey from 2% to 80%, there was a sense of embarrassment - that question seemed to take the Permanent Secretary by surprise! It does make you question if there is the least likelihood of the 'stretch target' being achieved.


What are the problems with bringing about increased ownership of the Procurement Hub? Answer:

• Cultural issues;
• Changes in processes; and
• Resistance to change.

But hold on a second, the Procurement Hub will not standardise on one uniform white shirt, or one supplier, it's a collaborative 'framework'. Sounds a bit like legalising 'pick 'n' mix' as opposed to Gershon's vision.

Lessons in centralising spend: NAO Report 'Improving government procurement''

The NAO has now published their report on 'Improving government procurement' - perhaps the title is a bit misleading as it is really about the effectiveness of the latest iteration of 'ye olde Buying Agency', the GPS. In many respects it is a recycling of old messages. Nevertheless, 'what goes around, comes around' and I am sure it is no coincidence we have also have the PASC Inquiry into procurement.

Some paraphrased thoughts before you knuckle down for a riveting read of the report though:

1. In our world it's always good to understand who is the buyer and who is the supplier. The buyers, in this example, are decentralised budget holding departments and one of the potential suppliers is GPS;
2. Buyers expect to set the terms for suppliers - they like caveat emptor;
3. If the supplier's Chairman of the Board (Cabinet Office Minister) and Head of Marketing (CPO) say "I'm going to be your monopoly supplier which you must use", that doesn't mean the buyers will necessarily see that as a good thing. Nor does it mean that the alternative suppliers see it as a good thing; 
4. There's a clear incentive for the buyers and the former suppliers to see the new monopoly as a threat to their freedom, bringing with it the additional risk (barrier to change) of perceived poor quality service, worse prices and complacency. So expect resistance to change, if for no other reason, buyers like buying - visualise images of old ladies fending of those trying to steal their purse; 
5. Equally, if the buyers see this as just the latest iteration of what has gone before (say, ye olde Buying Agency, PSA, BuyingSolutions, etc.) and they were able to stick to their old ways successfully in the past, don't be surprised if they use that strategy again;
6. Assuming you are going to encounter resistance to change, it is a good idea to 'sell' rather than 'tell' - 'telling' just encourages resistance to change to your monopoly. 'Selling' involves listening to the customer and setting out compelling, irresistible and realisable benefits which win the buyer hearts and minds over their perceived costs;
7. You sell buy 'winning hearts and minds' - if you don't win their hearts they will hanker after what suits them best and try to brazen it out. If enough brazen it out, then they will retain the old way;
8. There are practicalities involved in migrating from buyers old contracts to the sellers new contracts - think about contract end dates;
9. If you say "you must use my monopoly or else", you better be sure what "or else" means because if you have no 'stick' they can just say "sticks and stones may break my bones but words will never hurt me, ...";