Nuclear fallout in procurement award process

Forget the Hinkley Point procurement process for a minute and let's reflect on the procurement process for the £7bn decommissioning of the UK's first generation of nuclear power plants - yes, they got it wrong!  Well at least that was the judgement of Mr Juctice Fraser at the High Court; now the Nuclear Decommissioning Authority "are considering [their] legal options".

So what went wrong?

1. A bidder, which should have been excluded from the process due to omissions in its submission, was allowed to progress to the next stage;
2. Bidders were not treated on equal terms - allegedly one tenderer was disadvantaged in the scoring;
3. "Experts" evaluating the submissions manipulated their calculations to arrive at their preferred outcome; 
4. The wrong consortium were awarded the contract.

All fairly basic breaches of procurement good practice and yet potentially this would have gone unnoticed had one consortium not challenged the award.  

Were no concerns expressed by the evaluation team? Were there no whistle-blowers? Was this just incompetence or perhaps something more sinister? 

Let's remember that the wrongful award appears to have had a significant detrimental impact on the wronged bidder. There will now be compensation costs and possibly significant delays to completion of the work which needed to be completed. And of course, significant reputational damage to the Nuclear Decommissioning Authority and its procurement advisors. Not a good CV entry and not a good look for the profession.

Massive amounts of money being spent are no excuse for not getting the basics right.

Impact of 'no procurement boycotts' Guidance Note?

The UK Government has now published the much anticipated and trumpeted guidance on procurement boycotts. Yes, it's one of those documents all public bodies will now have to risk access.  Time will tell whether it will also be cascaded to those 3rd sector organisations who receive public money, say through Lottery funding?

It's a Policy Guidance Note, so you may well find yourself asking your legal advisors: "what if I decide to ignore the Guidance?" or, getting into the detail, "Does this only apply 'above the threshold'?" - actually I understood that the Principles of the EU applied regardless of the threshold anyway.

Of course all these initiatives are dependent on whether those who view themselves as being 'victims' have the appetite to pursue a case through the courts.  Surely, anyone who has considered themselves wrongfully discriminated against in a procurement process during the boycotts up to now would have already taken a case - nothing has changed as this is only Guidance.

Regardless of all that, it may have been interesting to establish what the actual impact of the boycotts to date have been, for example, has a procurement decision actually been different in terms of its award outcome? If there was no change in a real life procurement decisions, then the boycotts could only have had 'political impact' in raising awareness of the issues - something which the anticipation and implementation of the new Guidance has paradoxically probably been more effective in doing.

Anyway, here's the key statement from the Guidance for anyone who has a interest in political procurement:

Public procurement should never be used as a tool to boycott tenders from suppliers based in other countries, except where formal legal sanctions, embargoes and restrictions have been put in place by the UK Government. There are wider national and international consequences from imposing such local level boycotts. They can damage integration and community cohesion within the United Kingdom, hinder Britain’s export trade, and harm foreign relations to the detriment of Britain’s economic and international security. As highlighted earlier, it can also be unlawful and lead to severe penalties against the contracting authority and the Government. 

I suppose you could also interpret this loosely as: "Public procurement can be used as a tool to boycott tenders from suppliers based in other countries if the UK Government decides it wants to, but that choice cannot be devolved to any lower level of government".  

Does your procurement strategy address Economic Crime?

Thankfully there now appears to be a move to widen the reach of the existing UK Bribery Act to embrace economic crime. My own opinion is that the Bribery Act has not yet had sufficient impact, partly because no prosecutions have taken place, partly because 'bribery' is only part of the problem, partly because of denial, partly as a result of ignorance and partly because of a lack of understanding of the need to take steps to prevent bribery.

Anyway, yesterday we learnt that the journey to an crime of economic crime is underway with cross party agreement. Therefore the election is unlikely to be an impediment but finding time in the parliamentary calender could be an issue. We also learnt that the government plan to publish its first anti-corruption plan - that should be of interest and no doubt procurement will have more than a passing reference.

This is all good news to me and provides an opportunity for CPOs to make use of today's press coverage to place the issue of procurement risk management on the Board's radar - perhaps that's an opportunity worth taking before you become the first case which receives the bite of the current and future legislation.

You may find my related whitepaper of interest

Was there even a contract for the water for Sheffield Half Marathon?

On Sunday I discussed the Sheffield Marathon mess. Today we've seen a new twist with the supplier claiming that they did not make the delivery as the organisers had not fulfilled their part of the deal by paying in advance.

In a statement, the water provider said: 

After amending their requirements a number of times they did indeed place an order on 21 March accepting our offer, the terms of which, as always, clearly state that full payment is required in advance of delivery.

It is that payment that confirms the contract and triggers our process of scheduling the assets for delivery.

In the absence of that payment, despite our reminding them of the need to pay, the scheduling did not occur.

There are a few interesting aspects of this statement:

1. When was the contract established between the buyer and the seller? If the supplier is correct there was no contract at all, but when the supplier says the offer was accepted on 21 March, would that have formed the contract?
2. What happened in previous years? Was there a history of paying in advance or was this a change in the way of doing business?
3. Did the buyer even read the Terms set out in the documentation?
4. Why did the buyer not respond to the reminders for payment from the seller? 
5. Regardless of how weak the procurement may have been, what type of supplier would knowingly put a race in jeopardy and runners health at risk through none supply of water? Not one concerned with reputation and partnership!

This bizarre competition has all the hallmarks of no-winners but certainly we can learn lessons from what the legal eagles decide on formation of a contract and, at the very least, the need to read the small print. 

Seller beware - public procurement challenges can be painful

The name of Jan Fletcher will, I suspect, go down in public procurement history. Not because she was an advisor to Vince Cable, not because she was formerly Yorkshire Business Woman of the Year, not because of her CBE for Services to Industry, not because she was listed as one of the Top 20 Entrepreneurs. No, Ms Fletcher could gain procurement fame as the woman who turned the tide of public procurement challenges.

Ms Fletcher has been ordered to pay Leeds City Council £2m as an interim payment after losing a public procurement challenge. She claimed the Council had deceived her in the procurement process, while back in February a judge concluded the Council has acted with "honesty and integrity".

Is this latest development a good thing? Well there are two sides to the coin. I think this should serve as a warning that public procurement isn't always wrong and will serve as a reminder that court cases can prove very costly. It is a good day for those in public procurement who are professional and perhaps feel they are unfairly criticised. However, apart from being a bad day for Ms Fletcher, it is a sad day if we start to see the David's of the selling world become too fearful of challenging the Goliath's of public procurement.

Solicitors - A cautionary tale (Part 2)

I recently set the scene regarding my introduction to acting as an Executor. One message which came through my induction was that there appeared to be a difference in my understanding of the theory and practice of the legal world. Another message was the need to remember when dealing with a solicitor you are dealing with a seller, who is not necessarily customer focussed. 

I next emailed the solicitor twice. In the first I reiterated I did not want a full service but two comparatively straight forward actions, progressing an Inheritance Tax Return and obtaining of the Grant Probate.

You may well ask why I even felt the need for the solicitor for this? Well the answer is quite straight forward, the obtaining of a Grant of Probate would have required me to be in Belfast on either a Monday, Tuesday, Wednesday or Thursday but I am only in Northern Ireland on Friday, Saturday and Sunday’s.  I had however, drafted the ITR and explained that to the solicitor.

The first email the solicitor stated:

... we feel that the proposed fee is disproportionate to the work required. If you were happy to provide an al la carte scale of charges or a capped rate for ITR and the Grant of Probate we would however be happy to reconsider? We would also be happy to receive your proposed fees for acting as solicitor in the sale of [the property]?  

A week later no reply.

Solicitors - A cautionary tale (Part 1)

Sadly my mother died recently of Alzheimer's. This introduced me to the world of actually fulfilling my role as an Executor. Carrying out the role of Executor isn't some black art and there are many sources of online support which can easily help navigate you through the process. Having said that we have now learnt that the average 'cost of dying' has increased 7.1% over the last year and now amounts to over £7,000.

I may well write a number of posts on my experience of dealing with the legal profession but today I will just deal with a few which address elements that have been at the centre of me purchasing and procurement career since the 70s, namely, Invitations to Treat, Offer and Acceptance, when a contract is in place and value analysis.

I have studied contract law in many forms over the years and thought I had a reasonable grasp of some of the principles, yet I now see the world slightly differently - here's a cautionary tale (Part 1).

My belief was always that there had to be certainty regarding the contract before it is valid. I met with the solicitor, and after that meeting questioned what was actually going to be delivered. I wrote:

Can you help by identifying what all [the firm] plan to do - my brother and I are concerned that this isn't overly complicated given that we're so far below the Inheritance Tax Threshold and we've managed to handle all my mother's affairs up until now. 

I received this response - worth nothing is the lack of clarity on what was to be delivered and how much it may cost:

Procurement gamesmanship for non-public bodies

Thankfully the G8 has helped remind us that Belfast is experiencing a peace which many would have thought unattainable. But all is not well on the procurement pitch. A challenge has now been lodged by a bidding partnership who feel left out of the opportunity to bid for the Gaelic Athletic Association's £70m stadium renovation. As yet the basis of the challenge is unclear but it can be assumed it is based on the fact that while the GAA are not a public body, a significant percentage of the funding is coming from the NI Executive which is a public body.

We will watch closely how this develops but it is important to remember that non-public sector CPOs can be caught by public procurement directives if they are spending money provided by the public sector.

Questions which will be worth hearing the answers to include:

1. The basis of the challenge?
2. What will be the basis of the GAA defence?
3. What were the credentials of those who advised the GAA on the procurement approach?
4. Did the challengers object to the GAA regarding the procurement process? If they did, when did they object and what response did they receive?
5. Was the procurement Regulated?
6. If the procurement was not Regulated, what will the basis of challenge? 
7. Did the GAA recognise the procurement as potentially a Regulated procurement?
8. What is the GAA's approach to procurement in general?
9. Did the GAA adhere to their own procurement rules, regardless of whether or not the Regulations apply? 
10. Did the NI Executive, the funders, make the GAA aware that the Regulations would apply? 
11. Did the NI Executive provide any procurement advice/guidance in the procurement process?
12. Did the NI Executive sign-off the procurement approach? if they did, was it adhered to?
13. Was there a duty on the NI Executive to make the GAA aware that the Regulations would apply?
14. Were the challengers unlawfully disqualified from the competition? If so, in what way?
15. If the court rules the challengers were unlawfully disqualified from the process, will they be reintroduced to the process?
16. If the challengers are reintroduced into the process, and they subsequently are successful in winning the contract, what additional benefits for the public purse will have been gained which would otherwise have been lost?
17. If the court rules in favour of the challengers, will the NI Executive carry out its own inquiry into what has gone wrong?
18. If the court rules in favour of the challengers, what will be the cost of the mistake to the public purse?
19. If the court rules in favour of the challengers, will someone in the NI Executive be held accountable?
20. Did LOCOG's procurement approach to the Regulations provide a relevant precedent?

We live and learn, hopefully.

T&Cs for Breakfast in Bed

Last week I carried out a very brief comparison of the price of a sirloin steak in a hotel restaurant and also as part of room service - insofar as I could see the only difference was that a 10oz steak was available in the restaurant while only an 8 oz through room service. The price difference was £17.50 as opposed £28 - saving the additional £10.50 at the loss of 2 oz of steak, I asked for the room service steak in the restaurant, but avoided the tray charge.

I then decided to carry out a quick comparison of the price of breakfast in bed in two hotels. By way of context both hotels were household name brands, in the same city, of the same star and giving me the same corporate rate - yes, theoretically they should be same. I can honestly say I have never ordered breakfast in bed with either of the hotels, but this week I noted the prices.

I have always assumed it was quite clear how much Breakfast in Bed would cost. However, for all you procurement legal illegals, can you make a judgment and tell me how much Breakfast in Bed at Hotel A should cost? By way of context, I was on a Bed and Breakfast rate, and prior to reading the T&Cs on the foot of the Order Placing Door Hanger, the headline prices are £10.95 for a Continental Breakfast and £14.95 while a cooked breakfast is £14.95. The T&Cs state:

A £5.00 charge will be applicable to all orders. For guests who have paid for a room package including breakfast, there will be a charge of £6 per room, for room service.... All prices include VAT.

So how what is the extra amount of money I should expect to be billed if I order a cooked breakfast?  Would it be £6, £11, £14.95, £19.95, £20.95, £25.95, or what?

You're Procurement, get me out of here

If only procurement professionals had the escapology skills of Harry Houdini. Day by day I see bad contracts entered into and hear the mantra "you're commercial, get me out of here".

Why does it all go so wrong with people entering into contracts they no longer can/want to live with.

To me, it starts to go wrong when procurement people are not engaged early enough in the market dialogue. Technical specialists are problem focussed and want to speak to techies who can talk their language and give them what they want.

Naivety and gullibility play a part. Firms which exist to make a profit and sellers incentivised to make a sale find it easy to smile, say yes, and shape the dialogue to reflect their unique selling proposition. The movement of negotiating power from the buyer to the seller is palpable.

Failure to consider alternative options doesn't help - but why on earth would a techie want to consider alternative options, there's is to get a problem solved. Not taking a wider perspective and seeing the transference of costs to elsewhere within the same system blinkers the cost/benefit analysis.

Pride and face saving make it hard to back track and say, "sorry, that's not a good deal for us".

A sense of urgency doesn't help. The requirement is urgent, so there is reduced time to take corrective action.

All this seem familiar? It certainly appears to be demonstrated through the negotiation of GP contracts in 2004, and the recognition that costs have only been transferred to A&E. It also looks as if we're going the same way with Clinical Commissioning Groups - yes, we think the GP contracts were wrong yet are we making the same mistakes? It also looks as if some high level 'staff exit' packages aren't immune.

Yes, maybe we should ask a procurement person to get us out of here - more often than not that cry is heard too late when what should have been heard, right at the start, was, "I'm going into the jungle, can a procurement person get in here with me, now?"

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

Missing the point in contracts

Imagine your dream job offer comes along and you are offered a £200,000 contract to relocate.  Well that's the amount it should have been but the actual contract had a 'typo' and said £2,000,000 as opposed to £200,000. Anyway, that was the wonderful position which a JP Morgan Chase trader found himself in.

Once an offer is made and accepted a legally binding contract exists - the offer and acceptance represent a 'meeting of the minds' alongside legal capacity and intention to create legal relations (consideration of course, in this case was either £2m or £200k).  We're all familiar with the stories of misprints in advertising when the supplier has to stand over the price for those who accept the offered price before the supplier realises the mistake and rescinds the offer. Well, that's what the professional training says but the High Court judgement in the above case appears to have rewritten that fundamental of contract law.

The case came about as a result of the commodities trader, Kai Herbert, recognising a mistake had been made by JP Morgan Chase, and his decision to accept the contract in the knowledge that a mistake had been made.  He then didn't turn up for work, JP Morgan then rescinded the offer and Herbert took a case against JPMC for loss of earnings.  You couldn't make it up. The court ironically has ruled in favour of JPMC.

We now have potentially interesting implications for procurement.