Brexit preparedness and armoured vehicles - what's so hard about that for procurement?

Just in case you wondered why I hadn't blogged recently, it is quite straight-forward, I've been very busy on my day job and haven't found much to say or add to the current procurement debates. I've also been really frustrated with obvious lack of preparedness to the Brexit vote - I wrote an article in Public Money and Management in March 2015 which warned:

... there is growing discomfort in many countries with their membership of the EU.  Those working in public procurement policy and practice would do well to consider the 'what if' scenario if the threatened exits from the EU materialize as there would be significant repercussions. (PMM, Vol 35, #2,  March 2015, p.95).

Well the news this week certainly suggests my warnings should have been heeded more widely across the UK public sector.

However, excuse that bit of "I told you so" - what do you make of the story in today's Times: 'MOD accused of sham contest for armoured vehicles contract'?  The gist of the story is that there are insinuations that the MOD is engaging in a procurement process while already having made up its mind what the outcome will be.  Apparently, the "preliminary market engagement" has been worded in such a way as to reduce the options to one, even though, functionally, it would appear there are significantly lower priced alternatives available!  The process is underway at the present and this stage closes on Tuesday coming.

I wonder how the MOD assessed the risk of this procurement exercise? What will happen in the rest of the procurement process?

If it turns out the potential alternative providers chose not to bid, then the media and those bidders will say it was a fix and the tax payer may have lost out - we would never know.  If the competing products don't match the needs of those on the frontline but because of media attention is awarded anyway, the frontline users suffer and also the best provider misses out on their competitive advantage. If the alternative providers do submit the required responses and then subsequently aren't shortlisted, it will be perceived as a fix and a very costly fools errant for the bidders.  If the alleged preferred supplier wins, at what is considered to be an inflated price, there will be questions, perhaps even allegations of corruption.  If the process is scrapped ... I could go on but you get the gist.

This procurement has all the hallmarks of not being a CV enhancer - why on earth can we not think procurement risk and manage it?

CIPS Cyber Security for Procurement Professionals - a useful eLearning tool.

I have just become aware that CIPS released a free eLearning course 'Cyber Security for Procurement Professionals'  which was developed with the UK Government.

There are six modules and it is available free of charge regardless of whether or not you are a CIPS member.  The suggested time for completing the eLearning is 75' but you will need longer if you follow the various links.

To me the real value is in Module 3; the others are pretty generic cyber security awareness raising, while Model 3 provides really useful specific advice on what the procurement professional should do, for example, including the need for certifications in bids.  I think it also implies the need to give some thought to the implications of cyber security within S2P processes.

On the downside, there is some infuriating background music - turn it off. The 'Knowledge Check' questions are the end of each module are so basic they are of questionable value. Disappointingly, I found when I followed some of the early document links I ended up having to completely restart the tool as opposed to picking up where I left off.

Nevertheless, I think this is a useful CIPS offer and would recommend it be included as a 'must do annually'.  I wonder why it is not behind CIPS member only firewall?

Is it good enough to rely on mistakes to detect a fraud?

There was a remarkable story in yesterday's Times about a "Don [who] faked academic projects to steal £223,000". 

I don't find it that strange that someone, even a Cambridge Don, tried to fraudulently obtain £223k forging paperwork and invoices, but I do find it interesting that at least three mistakes were involved: one which led to the exposing of the fraud, one which enabled him to carry out the fraud, and the other meant a convicted criminal was able to avoid declaring his convictions and thereby obtain an opportunity to commit the fraud.

Firstly, the fraud only came to light as a result of a letter being sent to the wrong address - in other words the systems were not in place to protect against the fraud and to a certain extent it was a fluke he was caught.

The second mistake was that the Heritage Lottery Fund didn't actually check the references provided - had they done that they would have identified the references were bogus.

But the fraud was only able to be perpetrated as a result of an earlier mistake, namely, not sticking to a robust protocol for recruitment. That meant, Dr Barrowclough didn't complete the standard application form which would have required a declaration of his previous conviction for stealing clients fees which led to four years in jail and being struck off as a solicitor, but instead had his application considered on the strength of a CV and covering letter!

There is are clear message here for procurement. It isn't good enough to rely on mistakes to detect fraud but don't be surprised when you discover those who use 'workarounds' turn out to be up to no good, so design a robust process and stick to it.

Feel free to read my white paper on Procurement Fraud.

Wobbles on HS2 business case

It is expected that tomorrow George Osborne will embark on a

different journey planner to justify HS2. The core business justification is expected to shift from reduced travel time to capacity and regeneration.

Set this against the backdrop of MPs recent confidence of having their collective voices heard over military intervention in Syria and you may say this shift of emphasis is very brave - it could actually be stoking the fire for those against the whole project.

I have discussed HS2 many times but it has struck me, from early on, that there is a need to get the basics right in communicating HS2 benefits. I'm not so sure that a good communications strategy for a procurement of this size is to be unclear what the key benefits are.

From a procurement perspective, the key question around HS2, and any other major spend, should be 'what is the problem we are trying to solve?' The answer to that question should then lead to options being generated to solve the problem. Only then can the options be appraised. If the problem to be solved is capacity and regeneration it is highly likely that you would generate different solutions than if the problem to be solved is shifting people and things faster throughout the country.

If HS2 is to get on the right track, my suggestion is that we need to build consensus on what is the problem which needs to be solved - it is a mistake to start from the position of saying "HS2 is the solution, now what is the problem?".

Intriguing procurement: BGT, Twitter-gate and PRISM

What have the Britain's Got Talent egg-thrower, Twitter-gate and PRISM got in common? Well the answer is they are all had contractors who behaved inappropriately, and brought embarrassment and loss to their client.

Last week I posted a blog on Dark Procurement which was previously a guest post on Spendmatters - it was fascinating to read some of the comments on the Spendmatters' post. I think it is fair to paraphrase the comments as saying, 'CPO's should act in line with their personal beliefs and conscience even if those personal beliefs are in conflict with those of their employer.

In BGT, Twitter-gate and PRISM we see examples of the contractor acting on their judgement/conscience as opposed to the clients - I'd really like to hear from CPOs who believe that's acceptable performance of a contract? But isn't the argument that CPO's should act on their conscience something similar?

What these examples highlight is moral hazard. When you're dealing with individuals who provide some form of personal service you face the risk of 'will they do what they're supposed to', which isn't easy to protect against. So we have Simon Cowell with egg on his shirt; Newsnight resignations; loss of Booz Allen Hamiton's share value;  NSA, GCHQ and the Foreign Secretary all being diverted from what they should be doing and paying a high cost due to a maverick contractor.

It really doesn't matter whether or not you believe the maverick was 'doing the right thing' if you were the CPOs who bought them but it does matter if the CPO didn't demonstrate due diligence.

Degrees of rotteness

How can you interpret what is the right thing or reinterpret doing the wrong thing? Whether or not Patrick Mercer MP has done the right thing remains for others to judge but what I can't get my head round are some of the crazy statements which seem to imply there is some honour in doing the wrong thing. Take for example these two statements:

If Mr Mercer has done something wrong he would act totally honourably.

Patrick Mercer has done the right thing in referring himself to the Parliamentary Commissioner for Standards and resigning the whip. 

It is a strange world we live in where corporate tax avoidance is considered morally wrong even though it may be complying with the law. Yet someone perceived to be unduly influencing the legislative machinery of the land, breaking rules of the organisation is spun as doing the right thing if they resign when caught.

How big a shift is that from a child murder, who, when there is compelling evidence presented which places them beyond reasonable doubt as the killer, decides to change to a plea of guilty?

Or what about the public sector procurement manager; are they doing the right thing awarding contracts to 'mates', until their malfeasance is exposed?

Is it any wonder confidence in the democratic system is waning when you can make up definitions of what is right as you go along, or rather, when you are exposed!

Let me tell you a story on robust supplier appraisal

On Tuesday we learnt that some of our education policy thinking appears to be shaped by what looks like unreliable evidence - the sort of approach which looks selective as opposed to robust. It is ironic that we want more useful research as an outcome of universities yet in trying to achieve that outcome we are using, what some might refer to as 'Mr Men evidence'. The sad thing is that whether or not you agree with the Education Secretary's views, his credibility has now been weakened, whereas a more robust approach would have strengthened his case.

Gove has also weakened his argument for education reform and could be perceived as hypocritical when he discusses critical analysis. We need to have an education system which encourages more critical analysis, particularly for the next generation of procurement practitioners. We need practitioners who can look at comparative research and evidence, identify weaknesses and then take an informed view - we need procurement practitioners skilled in critical analysis, particularly in the area of supplier appraisal.

Let me give you an example. I recently had sight of a supplier appraisal which considered suppliers past performance. References were requested. Assuming the supplier was able to provide three reference sites of delivering similar work, they passed!  No effort seemed to be expended in validating the references. Reliable and robust evidence?

While I used to think asking a supplier for three references sites was a nonsense, based on the assumption that no one would be daft enough to provide a bad reference site. That was until I came across a supplier who did just that and was surprised when in the debriefing I fed back the bad reference. But how can we be sure a past customer doesn't bare some sort of grudge and disproportionately reflects the poor elements of what the supplier thought was an excellent service. Reliable and robust?

My view is that we need to ask for a comprehensive list of all the similar contracts provided, over say  three years, including their values.  Then, subject to the risk associated with the procurement, select a  random sample and interview those who can speak with authority on the past performance. It may not be completely robust but it is significantly better than the 'Mr Men' approach some practice.

Of course one of the easiest ways of improving supplier appraisal is having good historical records of the quality of service your own organisation has received in the past. Time and time again i have seen poor past performance being overlooked and only 'remembered' when Tender responses are received. Organisational memory has a role here as has easily accessible and reliable records. Here too we find a bizarre example from the Education Secretary, who, in his evidence to Wednesday's Common's Education Committee, advocated a radical new approach to ''O' levels' which replaces the existing A, B, C, etc. grades with a numerical system. An 'A* grade' would therefore be spilt to become 'Grades 1 and 2, 'A grade' would be spilt to become 3 and 4, etc.  We would also see greater focus on end of course exams and the demise of coursework. By gove, isn't that the system under which my own 'O levels' operated in 1973? If only we had really good history lessons things may be improved - no, I don't mean in the education system, I mean in supplier appraisal.

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

Learning from India's $750m helicopter procurement

It is sometimes useful to learn from international public procurement. We've looked at the Indian procurement of fighter jets in the past, but today provides another interesting opportunity. An opportunity for one simple lesson and something which may be transferable to the horsemeat saga. What also makes this story interesting is the sheer scale, $750m and the involvement of three countries, India, Italy and UK.

I'm not going to bore you with all the details as the key facts are easily found on the web, namely, big contract, suggestions of corruption in the award of the contract, and contract put on hold.

No, to me, what is much more interesting and provides the key lesson relates to the specification. If the informative Flightglobal is correct, the procurement process started in 2002. At that time the specification requirement for the helicopters to fly at 6,000m could only be met by one bidder. The Indian MOD however had the good sense to stop the procurement process and change the specification so that the operable height requirement was only 4,500m. This in turn meant others could bid.

I have long lost count of how many times I have seen specifications written in such a way that there is only one potential bidder. But I would not need very many fingers to count the occasions I have seen steps taken to establish if that single bid represented value for money - in other words ensuring that 'price is right' and forensically probing the justification for such a proprietary item. I can only assume the Indian MOD, in response to the first procurement round asked something to the effect of:

"Let's revisit this, on how many occasions would we require a helicopter to fly at 6,000m, do we need all the helicopters to fly at that height or just some, how much money could be saved and functional capability compromised if we reduced the flying height?"

That strikes me as a fairly reasonable set of questions to ask. Hold on though, why weren't those questions asked prior to going to the market the first time?

However, there is another piece for us to get our teeth into from the subsequent procurement process (the one currently on hold) and think review in the context of the horse meat fiasco which is currently seizing the UK.

The new helicopter procurement included an interesting integrity commitment to:

"take all measures necessary to prevent corrupt practices, unfair means and illegal activities during any stage of the bid or during any stage of the bid or during any pre-contract or post-contract stage."

Now, if such a clause had been inserted in all the food chain contracts which have been the discussion on horse meat, would we be faced with the current problem? I don't know but it is interesting to speculate.

P.S. 20 February 2013: All flight tests were held in the UK, in violation of all norms of the Defence Procurement Procedure (DPP) that makes it mandatory for all trials to be held in India.

Trouble with Edinburgh procurement visibility

I'm sure you recognise that there's a responsibility on those looking after the public purse to demonstrate good stewardship. Does that apply with all money spent though?

I have come across a peculiarity when it comes to public bodies spending money which can be recharged back to individuals.

To help you grasp what may appear complex at first, some context is required. I apologise this may be a bit geeky, but try to bear with me. Just as important it may help you learn from the lessons of Edinburgh.

A council can serve a statutory improvement notice on a property owner and subsequently recharge the owner for any repairs carried out as a result of the owner's failure to carry out the repairs. Of course the owner can opt to carry out the work themselves, but sometimes the owner cannot be found in sufficient time and the council, therefore take on the role of agent, getting the work done and then pursuing the owner for the costs.

There are two potentially opposing pressures on the agent. One the need to get the work done as soon as possible to protect the property or neighbouring properties. The other the need to ensure that, acting on behalf of the owner (who may not be traceable), the 'price is right'. 

One way of trying to achieve those twin objectives is to put in place a framework agreement which can be drawn upon - not always as easy as it sounds. Of course not every council recognises the need to save the owner money or, if that money is not recovered, it is a cost incurred by the council and, as those un-recoupoed aggregated costs can up to a lot of dosh (in Edinburgh's case (£27m).   

I hope that sets some context. And so to the suggestions regarding Edinburgh reported today.

Procurement due diligence

We have discussed the problem of 'fake experts' before. We have also questioned the value of professional qualifications when non-procurement staff are appointed to CPO positions. Indeed, only yesterday we raised concerns as to whether we can rely on the robust checking of qualifications and experience by headhunters and interim placement organisations. So readers of this blog should recognise the need for healthy scepticism.

You may therefore be astounded that, yet again, professional credibility has raised its head. Unbelievably, we have just learnt that the inquest into the death of singer Amy Winehouse has now had to be set aside and started from scratch again - you've probably guessed what's coming - yes, because the Coroner was not appropriately qualified. The coroner did not match the criteria of either five years as a qualified medical practitioner, or five years experience with the Law Society. To add to the bizarreness of the situation, the unqualified Coroner was appointed by her husband, who has now resigned as a result of not 'thoroughly checking' that his wife met the basic criteria. Those words 'thoroughly checking' straddle the procurement world too.

I will not revisit my earlier blogs. However, I will share some of my experiences of procurement 'thoroughly checking' credentials.

I once completed a supplier evaluation which included the rejection of one supplier. My report went to a meeting of the Board but at that meeting, which I wasn't attending, one of the Directors stepped in and said he had now received additional information which justified over-turning my recommendation and reinstating the supplier on the Shortlist. A subsequent costly challenge, inquiry which ruled against us, and allegations of corruption taught us a clear lesson - make sure you thoroughly check the claimed facts, even if they appear to come from a reputable source!

I have also completed third party Due Diligence on a number of proposed contract awards - surprise, surprise, when thoroughly checked there were flaws, with those included on shortlists who should not have been, and those not included, who should have been.

I have also seen, time and again, taking answers on PQQs at face value, including amazingly the acceptance of cited reference sites without even bothering to check (NB not 'thoroughly') with the referee!

It would be possible for me to also highlight the need for due diligence of the process itself. However, I do not think that is necessary as Peter Smith has provided the useful lessons of the West Coast Rail Franchise which I would encourage you to read.

Is there an aversion to due diligence in procurement? How good is the profession at 'thoroughly checking'.

Sometimes procurement has a lot more in common with unqualified appointments and Coroners than we would have expected!

Apple in the PRM blender yet again

Regular readers will recognise that I have been following a Supply Risk Management train of thought for some weeks. Linked with that is a forthcoming debate piece in Public Money and Management - I hope you will find that interesting, particularly those in the public sector.

However, you will also recall that I have been considering the SRM implications for Apple and specifically the iPhone 5 (you can pick you the blog trail here and here). The SRM issues for Apple just don't seem to be going away - today we learn that the Chairman of Foxconn, a strategic supplier, has announced:

"We can't really fulfil Apple's requests. Our shipments are insufficient ... given the huge market demand"

 Shares in Apple have, not surprisingly, fallen!

Meanwhile what will happen with the supply chains and shares of Sony and Nokia?  Have they alternative sources of supply? Who, in the customer pecking order, will Foxconn favour in terms of customer preference?  How will the various buyers, who compete in the marketplace and supply chain, have positioned themselves as preferred customer?  Which of the competitors has best positioned themselves in terms of SRM? While some believe that Foxconn has excess capacity elsewhere, what due diligence was completed on the basis of potential aggregated demand?

This is a fascinating saga which has implications right throughout the mobile technology world, but the lessons learnt should ring out for all CPOs.

Procurement sums up at the House of European History

The EU's House of European History will double its estimated £58m cost to £112m, while its annual running costs are estimated to soar by 80% to £12m per year. Part of the cost increase is said to be the finding of an underground river; were there no historical records of the river? When the underground river was located, were the additional costs fully understood and the business case reviewed prior to continuing to pour money into the project?  These are fairly obvious questions.

However, I think the real scrutiny should be on the calculation of running costs. The previous example of the Scottish Parliament construction suggested that the recurring costs of window cleaning had been unnecessarily increased through a poor design of windows.  But why have the running costs of the House of European History increased so dramatically?  Were they miscalculated at the start?  How many years have they been based on?  What was previously not included that now needs to be included?  An 80% increase on running costs suggests something was seriously wrong, a lack of due diligence, and a lack of scrutiny! We know that good procurement should be concerned with Whole Life Costs, and that capital costs frequently are far exceeded by ongoing revenue costs.  In fact there are plenty of examples of ongoing revenue costs leading to decisions being made that some investments can no longer be sustained.

Either way this is another example of poor cost estimates and/or poor procurement. But it also strikes me as weak project management and risk management. It begs the questions: 'Where will the line be drawn in cost overruns? and 'Who will be accountable for the additional costs?'  It can be assumed that European citizens will pick up the tab for something which the vast majority will never set foot in. Surely, when reviewing EU procurement there has to be scope for exploring a shift of responsibility from the  client having to pick up the tab when their advisers get it wrong. (I have previously discussed the deference given to experts.) 

I think there also needs to be some form of policy shift, particularly when citizens are being faced with austerity and asked to live within their means. Why can't tolerances be set within which projects have to be delivered; if those tolerances are exceeded then there needs to be serious and meaningful expert or political accountability?  Had such a tolerance been set perhaps this history lesson would have stopped once the underground river was located and the burden of an additional 80% of annual running costs laid at the feet of those who got it wrong, as opposed to being passed to the innocent European citizen.