2014 Budget and procurement priorities

All eyes were on the Chancellor's Budget Statement today but not one mention of procurement. Should we read anything read into that? I doubt it.

We also had more views on what are procurement priorities for 2014 - this time from Hackett. I'm unable to access the report but there was enough in the WSJ to give us the core message, namely, cost reduction/avoidance has dropped to 4th place (I'm afraid I don't know what #3 is, but rolling into:

#1 is expanding spend influence, and
#2 is tapping into supplier innovation.

Other key messages from Hackett are the need to focus transformation on rebalancing supply risks, recalibrating procurement technology and tools, and reinventing procurement's value proposition.

Not a great surprise yet the more astute will realise this doesn't say "snap" with the priorities stated at eWorld Purchasing & Supply. There the big concern highlighted by two separate pieces of research appeared to be addressing the deficit - the procurement skills deficit.

Like the Budget Statement, I don't think we need to read anything into this lack of consensus - like most research, and the Crimea and Scottish independence votes, it depends on who were asked, the environment in which they were asked, when they were asked and how the questions were put.  As I have frequently argued, asking CPOs, in isolation, is unlikely to provide the most reliable answer on what organisations need to focus on.

By way of bringing both the Budget Statement and procurement's priorities together, I think this YouTube is relevant and entertaining - the key messages are clear. If you compare the YouTube messages with what many say about procurement priorities there is some similarity. While we frequently chant a single mantra of cost reduction, we shouldn't be shackled to that, the trick is what's important to the key stakeholders, and primarily the CEO, and not what CPO enjoy. Nevertheless, enjoy the YouTube. I'm off to celebrate the GO Awards and the success of some procurement which has made a difference.

Celebrity advice, BMJ and lessons for procurement scrutiny

The latest issue of the British Medical Journal includes an interesting paper on the why the public follow celebrities' medical advice. To me, this paper is particularly relevant to the current CLG Committee Inquiry into local government procurement but is also relevant to procurement decision making, in general, when perceived 'experts' (celebrities) provide advice.

The BMJ paper discusses the positive influence which celebrities can have in highlighting health issues, but cautions against celebrity 'quacks' whose advice is listened to, even when it is dangerous, if adhered to. The question is 'Why do celebrities utterances and endorsements carry so much weight even though they lack any evidence, qualifications and specific experience?' The paper draws on economics, marketing, and psychology literature to provide an answer.

One of the reasons is that the public are bombarded with competing information and in order to make sense of that information:

people naturally look for signals that indicate one source as being more credible and effective than another. Owing to the vaulted status of celebrities in society, their endorsements act as signals of superiority that distinguish the endorsed item from competitors, encouraging people to change their health behaviors accordingly. 

[Celebrity] credibility may stem from the halo effect of celebrities' success, which biases people's judgments of celebrities' other traits and gives them a cloak of generalised trustworthiness that extends well beyond their industry or expertise. Celebrities are in turn perceived to have greater credibility than their non-celebrity counterparts, such as doctors, despite having less medical knowledge and experience.  

I don't see the problem of celebrity advice being isolated to the medical world. I also feel that 'celebrity status' can be more widely defined - isn't it something about putting someone on a pedestal. I have frequently observed the advice of procurement specialists being swallowed up in the aura of 'celebrity' status.

A tale of two sides of the same coin for the CLG procurement inquiry

On Tuesday I discussed the first of the two CLG local government procurement inquiry evidence sessions at Sheffield held on 18 November. I have been following the oral evidence sessions but the Committee will also take into consideration the written evidence submitted.

The earlier session on the 18 November appeared, to me, to be riddled with anecdotal evidence and unreliable answers to poorly framed questions. Nevertheless, it did suggest that there is an issue with stakeholders perception of what happens in local government procurement. It also suggested that the 8 Principles of Good Commissioning and the Compact are Whitehall theory as opposed to what the market appears to experience in Yorkshire and Humberside. Surprisingly the Committee don't probe these areas.

The second session provided an opportunity to hear from the other side of the coin, two councillors from Sheffield, Sheffield's Director of Commercial Services (also the regional lead on procurement) and  two representatives from YPO.

This session was unusual in that the evidence of councillors was taken. However, we only heard from two cabinet members and there weren't even any questions on how Overview & Scrutiny members might be engaged in strategic procurement.

We learnt that Sheffield, thankfully have moved from a position of building cost inflators into contracts. I have to say I have never before come across a system where contractors are guaranteed annual price increases.

Collaboration just doesn't sit well with strategic procurement functions in local government?

On the Monday the CLG Committee Inquiry into procurement shifted its focus to collaboration. Yet again the Committee struggled to prise information from the witnesses, for example, a simple and predictable question kicked it off "What proportion of councils are up to speed with best practice and, if not [up to speed], what are the barriers?" Correct me if I'm wrong, but I don't think Messrs Taylor, Walsh or Robinson actually provided an answer!

However, we did learn from one of the witnesses a useful nugget "... the last national procurement strategy gave rise to a proliferation of a number of strategic procurement functions, so most councils have got a strategic function". Now that struck me as quite a good thing until Ed Walsh continued: "as a consequence they don't think with any form of collective mentality very easily, so looking at efficiencies and the benefits of economies of scale isn't something that comes easy to local authorities". Sorry, I just don't get that. I don't get it because councils have been collaborating on purchasing for over 50 years; I don't get it because organisations like NEPO and YPO and ESPO and Pro5 all exist. I don't get it because that same national procurement strategy which is praised, or was it criticised, for leading to the introduction of strategic procurement functions in councils, also had a complete section on collaboration!

Then we heard there's the potential for billions of pounds worth of savings in councils - I wonder what the LGA will make of that and what will be the strategy for achieving those savings if, on the strength of that evidence, the Committee advocated further cuts of billions of pounds to council budgets? But then again the Committee were told of evidence that suggests SCAPE in 1,200 local government procurement projects have delivered average savings of 14%.

Now that last savings claim gave Ian Taylor some cause for concern and he cited his own viewed, based on spend analysis, of the potential scope for collaboration, namely, 10-15% of spend was suitable for national buying, +/- 25% suitable for regional buying, and +/- 50% required local buying. I don't know how accurate those figures are but they do strike me as quite reasonable.

So what's the solution? Well the Committee could take on board one of the witnesses suggestions and put in place a centralised national buying organisation, or perhaps a regional structure - hold on though wasn't that what the RIEPs tried to do in partnership with Pro5? Or, as another of the witnesses suggested, the Committee could sort out the fear of failure which is pervasive in local government as a result of potential EU challenges.

My own suggestion is that the Committee will have enough on its plate trying to reconcile the first two days of oral evidence and how to stop local government procurement witnesses undermining anymore the good work of the sector.

I suspect I may return with more comments on the oral evidence but that seems like enough to think on for the time being.

Public procurement meets super-hero comics

He spoke but mere mortals couldn't see him. He spoke our language but used new words - he spoke FIST. We could see Bernard Jenkin nervous and deferential, here was a man who talked of toy hovercrafts, the fastest computers, bombers, fighter jets, and nuclear submarines. He took risks but gave examples of delivery at half the cost in half the time. He had the Public Administration Select Committee talking about super-hero comics as a procurement change management tool. It was 18 March 2013. It was the 5th session of the Public Administration Select Committee Inquiry into procurement. This was a new way. This was a new day. It was the day Lt Col Dan Ward USAF came to town - or rather it was the day he gave evidence by video link.

So what is 'FIST'? It is an acronym for "a pattern of thinking": Fast, Inexpensive, Simple, Tiny. It is concerned with reducing complexity in the procurement process and specifications.

Asked why, in his experience, procurements fail he provided three simple answers:

1. Engineering mistakes;
2. Communication failures; and
3. Management failures.

Adopting FIST and breaking bigger projects into much smaller chunks didn't removed the risk of failure, but it means the failures are smaller and identified earlier with less impact.

He provided a wonderful example of a threshold for cancellation being included in a contract, so that once the threshold of 15% was exceeded everyone knew the contract was cancelled - simple but effective.

He also referred to the culture of rewarding success with bigger and bigger budgets with a simple solution, "okay you did really well, now let's see what you can do with half the budget". 

So, how do super-hero comics come into the story? Well Lt. Col. Dan Ward USAF was asked how he managed to get his message across - he adopted change management principles and as part of his communications wrote super-hero comic books. Yes, simple but effective.

This was an impressive evidence session and I think it is a useful education resource. I recommend watching the session as part of your own personal development, and yes, you will be able to watch the Committee reading comic strips too. It's in two parts accessible here and then here.

I am clear that this will not be the last we've heard of FIST and rightly so.

The full transcript of meeting can be accessed here

Sustainable procurement risk

Tell me what would you do if you read this statement in an ITT:

The [organisation] is committed to sustainable procurement and would wish to see tenderers adopt a positive environmental approach.  Information and guidance about how to pursue a more sustainable future is available from [central government portal]1

You could

Did the intervention have the desired impact?

Tucked away in this week's Sunday Times were some notes from an interview with Health Secretary, Andrew Lansley.  In the interview he is reported to have said, "An interesting case in point is knee surgery.  The data has now come back demonstrating half of knee surgery doesn't substantially change the outcome for patients: their mobility isn't improved that much, nor their pain."  In other words someone asked the common sense question: 'did the intervention make, as a minimum, the desired impact; was it value for money?' This should also be at the centre of any outcomes based commissioning and procurement.

I'm sure you have been asking