A family affair or a weak procurement strategy?

Sadly the Queen's 90th birthday party has needlessly got off to a bad start. Not only is there criticism about the plan to charge £150 to attend the picnic, but there are also questions about the procurement of the event organisation. The problem isn't that the event is being organised by the Queen's grandson, but that her grandson's company are charging a fee for organising the event.  

Why on earth have those representing the Queen's interests not warned about the probability of a perceived conflict of interest and sought to avoid that criticism. Transparency of a competitive procurement would have helped. Alternatively her Grandson could have acted as a specialist advisor to a different provider free of charge.

It makes little difference to the perceived conflict of interest that the event will be run on a not-for-profit basis since there is no means of demonstrating that the costs are reasonable.

But there's another procurement angle; whoever delivers this once-in-a-lifetime event will gain unrivalled commercial gain from the ability to sell services to future clients on the strength of the demonstrable experience gained.  Given that value to potential providers, those procuring the event could have asked, "Is it really necessary to pay someone to organise this at all, would good providers see it as having such long-term value they'd have done it for nothing or even paid for the privilege?"

It never ceases to amaze me how often perceived conflicts of interest in procurement make the headlines when they could so easily be predicted and prevented. It never ceases to amaze me that there's an assumption you always have to pay?

PS. 10 February 2016: Queen's grandson quits birthday charity due to conflict of interest!!!!

How to minimise the risks of Conflicts of Interests in Clinical Commissioning Groups

It was really only a matter of time until we had some significant exposé on the Clinical Commissioning Groups and Conflicts of Interest. Indeed it is no surprise, since we discussed this very risk many months ago.  Today The Times and BMJ informed us that GPs have awarded at least £2.4bn to their own companies.

I don't think there is much to be gained from revisiting the previous discussion but I think the Department of Health may want to consider their response to The Times and BMJ findings.

There is little mileage in asking for evidence that there was a conflict of interest in the award of the contracts - let's just start with a presumption that there will be. But isn't the real test to be found in whether or not subsequent value for money is delivered? Therefore I would suggest the Department of Health adopt three policies:

1. Create a benchmarking service which publicly shows the table of rates paid across the various CCGs;
2. Place an obligation on providers to demonstrate how they provide on-going value for money, not unlike the previous local government Best Value for Money obligations;
3. Place an obligation on CCGs to publish how they are performance managing their contracts to ensure the required quality of service is maintained, if not improved.

Not rocket science but may help overcome the downsides of Conflict of Interests.

3 simple lessons when relying on reports

The Kids Co demise has been well documented and some of the lessons for procurement have already been drawn out by Peter Smith, for example, the need for contract management and sufficient reserves. However, today we have learnt that two separate  'independent' reports were cited as evidence of the good work of Kids Co which we can also learn from.

The reports were cited by Kids Co and probably swayed some funders decision making. I would suggest that perhaps funders may well have been naive and that those who based decisions on 'evaluations' need to look much more deeply before being influenced.

The first question worth asking was 'who funded the report'? Well one of the reports was funded by Kids Co and the other appears to have had Kids Co covering the costs. It's not unreasonable to see the potential conflict of interests.

Next, 'what was the purpose of the report'? Neither of these reports appear to have been outcome evaluation reports or indeed value for money reports. One was written by a Professor and leading psychologist who benefited from studying "the language of love". The second focused on the children who used the services of Kids Co.  The reports may well have been fit for purpose but that purpose was not one of commercial due diligence.

Thirdly, 'what was the approach to ensuring rigour'? I could be wrong, but neither of these reports seem to have been subjected to peer review which would have considered the research approach, reliability and validity.

Those three simple tests may have shone the spotlight on the weaknesses of relying on the reports. While it is easy to see the weaknesses we also need to reflect on those same points within a procurement environment, for example, when commissioning reports, when drawing on reports as part of a bid evaluation process, when taking the advice of 'independent' experts particularly in preparation of specifications. Caveat emptor as they say.

FIFA corruption and bribery tells us warning shots just aren't enough

How on earth could the gift of a watch valued at £15,000 be viewed  as 'symbolic or trivial value'?  Of course, what value is considered 'trivial'? Well, thanks to another exposé in today's Sunday Times we now know that all but three of FIFA's leadership are so out of touch with reality, greedy and/or so immune to probity that they seem to think acceptance of such gifts within 'goody bags' is fine. We don't know what else was in the 'goody bags' perhaps a pencil, a memory stick which set out FIFA's ethics policy and a eraser?

FIFA had previously become completely discredited after the farce of the Quarter World Cup award, so you may have assumed they'd have been wary of a further scandal, but that just doesn't seem to have registered with them.

It's strange but 'goody bags' seem to be expected - should event organisers now state they are no longer to be issued or should the contents of the bags be published on event websites? Should all 'goody bags' include a declaration relating to potential conflict of interests? Let's face it those who sponsor the items in 'goody bags' would not do so if they had not first of all established the business benefit anticipated.

Yet, we see similar attitudes in the world of procurement. Stand outside any procurement conference and observe the 'goody bags' walking away!

But like FIFA, I have seen organisations where there had been corrupt behaviour in procurement, yet they believed they have 'lanced the boil' and all is now well. FIFA's greed reminds us of the need that such complacency is unfounded. We just can't assume all will be well. We just can't assume it won't happen again. We just can't assume our organisation will be immune. I just wonder how often we highlight the need for vigilance and caution.

Kiss and tell procurement codes

There was a lot of coverage in Wednesday's press on Ipswich Borough Council's new Code of Conduct, for example, in The Independent and The Times. The Council's new Code, we are led to believe states:

Employees must declare any close personal relationship with another employee of the council where the relationship could cause, or be perceived to cause a conflict of interest, for example, where there's a risk of the requirement for the separation of duties in connection of the with the award of contracts or funding, or a risk of conflicts arising in the employment relationship between such employees. In such instances there may be a need to consider alternative employment for one of the employees concerned. 

Long and short-term relationships between members of staff, with councillors or with outside contractors and suppliers, must be declared.

I have searched high and low on the internet to see an actual copy of the Code but have been unable to access it, so I will have to take the various reports at face value.

Anyway, while the popular press are picking up on the legality of the need to declare staff relationships, we need to reflect on the relationships between members of council staff and suppliers.

Given the rise of internet dating, for example, and, I am told, the number of 'one night stands' what would constitute a relationship which has to be declared? Would some even recognise a 'relationship'? What about someone who wasn't actually told the truth about the name and role - do they now have to keep a log book and check ID? What about if you were jilted? Will the next iteration be a need to declare connections through membership of a social network?

Without doubt I see the value of declaring potential or perceived conflicts of interest in procurement but I think to make a Code work it has to be pragmatic. If the Code isn't pragmatic breaches will take place and gradually it will lose its teeth.

I'd be interested to hear if any readers have experience of 'kiss and tell' procurement Codes and how they were implemented? I'd also be interested in learning more on Ipswich experience of policing the Code?

Allegations of procurement fraud at Police Federation have lessons for all

Confidence in the police is probably at an all time low as a result of Plebgate, behaviour of undercover officers, hidden union bank accounts, Hillsborough, 'stop and search', and the failure to get any form of closure for the Lawrence family. The last thing the 'Peeler's Union' want is more damage to its reputation through a scandal of questionable procurement practices. Yet, 'Fraud squad investigates police union boss over charity deal' screamed out of today's Sunday Times.

Those implicated claim to be innocent yet they will now be paying a high personal price, whether or not the allegations are proved.

There is little doubt there was a lack of good judgement by those concerned. I don't think that lack of good judgement is solely with the specific individuals under investigation, I think a lack of good judgement was exhibited by all those concerned with the oversight of the Federation. They could have stopped the 'questionable' procurement - isn't that what oversight is supposed to include? It is my interpretation of the Bribery Act that they also failed to put in place processes to prevent bribery in procurement - had they done so, there wouldn't have been the opportunity to engage in the 'questionable' activities.

A QC representing the individual under the spotlight, acknowledges that appropriate procedures hadn't been followed. Contracts were rushed through in the absence of competition and awarded to friends who appear to have charged excessive fees. Advice from the charity's lawyer and auditor was ignored. There was also an absence of due diligence in the award.

This is a complete and utter mess yet I think it is far from unique. I believe too many organisations needlessly leave themselves and their staff open to allegations of impropriety, partly believing it will never happen to them, partly through complacency, partly through naivety.

How vulnerable is your organisation? How vulnerable are you?

The wonders of consumer credit ratings

Most mornings I listen to SkyNews punctuated with advertisements which generally go in one ear and out the other. Then today the Experian Credit Expert advertisement caused me to think.

I've been paying a trivial monthly fee for years to Exeprian so that I can access my credit rating.

It all dated back to a problem with Santander whose Direct Debit system couldn't cope with the additional public holiday for Willy and Kate's Wedding. Santander said I had missed a payment on a loan even though I knew their system had failed to take the money out of the account. Customer focussed Santander, despite their assurances not to, and unknown to me, bizarrely gave me a 'black mark' on the Exeprian Credit Rating system.  Then, when I wanted to get a mobile phone from Vodafone I was embarrassed to learn they couldn't supply and I needed to pay a subscription to Experian to find out why. I therefore started the Experian subscription to establish how I had a 'black mark'. I established it was due to Santander's mistake, but had to contact Santander to get the 'black mark' removed.

So, Experian, accumulate information, regardless of how unjustified it is, and use that to give me a credit rating. Those who feed the information to Experian, no doubt pay for the service of also extracting information from Experian. I have to pay to access the information. And now, if today's advertisement is correct, Experian will now provide me with a service, to tell me how to reduce the credit rating they have given me. Isn't that one fantastic business model. Does the payment of the fee for the service de facto mean I'm paying Experian to get their information right?

Procurement fraud is growing

Kroll's 2013/14 Global Fraud Report has just been published and it comes as no surprise that the greatest increase is in the world of procurement and conflicts of interest. 71% of companies in Europe have been affected by fraud. 19% have suffered vendor, supplier or procurement fraud - an increase of 7% from last year. We're talking about 1.4% of revenue slipping out of organisations.

Areas of interest to us also include outsourcing and offshoring which have increased the risk of fraud for 28% of respondents, and joint ventures and partnerships which have increased the risk of fraud for 20%.

It's only a few days ago Peter Smith drew our attention to Transparency International's report on UK Corruption in Local Government which also highlighted that procurement needs to be particularly vigilant throughout the procurement cycle given the dismantling of some of the former protection systems.

So what should you do?

1. Recognise that your organisation is unlikely to be immune;
2. Introduce a whistleblower culture (The TI report claimed whistleblowing had been more effective than audit, internal monitoring, or police investigations);
3. Train staff and encourage them to ask questions;
4. Put in place a strong governance system;
5. Ensure no-one is outside the 'scope';
6. Embed within procurement risk management;
7. Ensure the correct polices, procedures, processes and controls are in place;
8. Make use of eProcurement solutions;
9. Apply due diligence to all aspects of the procurement cycle, particularly in selection of new partners and outsourcing;
10. Create a cycle of learning from others and from past fraud attempts.

Putting out the fires of Conflicts of Interests myopia

Conflicts of Interest have become almost a weekly news story. It is an easy allegation to make and it appears that those most vulnerable to the allegation, both organisations and individuals, seem naive to its risks. The latest story is no different than so many, someone with a responsibility for buying had an interest in selling something similar - now why wasn't a perceived conflict of interests expected?

So while Peter Smith yesterday referred to big threats against 'useless public procurement people in Northern Ireland' there was a parallel story unfolding in the NI Fire Service where someone with responsibility for buying uniforms also had a business, surprise, surprise, selling uniforms.

It is not difficult to protect against claims of conflicts of interest and CPOs need to ensure that the appropriate protections and processes are in place. Perhaps the issue is naivety? If that's the case CPOs need to take on the role of a vigilante and also include conflicts of interest awareness raising within their communications strategy.  

Can there be smoke without a fire in procurement?

al-Madinah, the UK's first Muslim free school, has been under scrutiny quite a bit this week and today the spotlight is being shone on its procurement. Now there are quite a few things about al-Madinah I would fundamentally disagree with but that shouldn't mean I swiftly place them on the 'naughty seat'. However, when I see headlines in the Sunday Times of "Gove inquiry queries ... school's tendering" I'm interested in finding out more.

Duplicate payments are not something which only al-Madinah have suffered from. Sometimes duplicate payments are made due to system failures. However, good controls and processes should be in place to manage this risk. Were the controls in place? Was this a deliberate fraudulent act which found a way of circumnavigating the controls? Sadly, we're not told so this may be smoke without a procurement fire.

Perceived conflicts of interest are also something we have discussed, particularly in the context of the new Clinical Commissioning Groups. When new structures are established sometimes the well-intentioned need to be protected from their ignorance of how things might look. It appears that al-Madinah did give some thought to potential conflicts of interest and those who had the links were excluded from the contract awards. As I have said before, undue influence over contract awards can be exercised in more discrete ways that merely contract awards, but in this particular news story there is no evidence of undue influence. This may be smoke without a procurement fire.

Finally, we learn that one of al-Madinah's committee chairs is also the director of a firm which supplies services to the school. Yet, we are led to believe that contract was awarded prior to his appointment as a governor. I personally can't see any reason why someone could see that is being suspect. Volunteering as a school governor is surely something to be encourages not a cause for suspicion. This too may be smoke without a fire in procurement.

So what is the story all about? Is there smoke without a fire in al-Madinah's procurement? Actually I think it is perfectly acceptable to query a school's tendering but that doesn't mean there is something wrong. However, why on earth has The Sunday Times chosen to give a headline which leads you to think there is something untoward with a school's procurement without any substantive evidence to back it up? Have I missed something?

There are clear lessons though in this 'story'. Firstly, the need to put in place proper processes and controls which reduce the risk of duplicate payments. Secondly, the need to be conscious of the potential claims of conflicts of interest and to not only be clean, but to be seen to be beyond any doubt.