Another misreading of relative power in buyer/supplier negotiations

Once more we learn of what looks like another misreading of relative power in buyer/supplier relationships; this time M&S.

There's no need to retell the whole story which was published in today's Sunday Times, but it appears M&S, by pursing a responsible sourcing strategy, reduced its potential supply base and therefore ease of switching suppliers. Then, in response to the weakening exchange rate following the Brexit vote, refused to work with suppliers in addressing their cost increases, but instead said they were going to consolidate the supply base, therefore exerting power over suppliers yet reducing suppliers long-term 'skin in the game'. Then, facing potential loss of supplies (relative supplier power) have now had to backtrack on their earlier assertion and accept supplier price rises.

Not only has M&S lost face in this foray they have needlessly sacrificed supplier goodwill and trust, and quite possibly lost credibility in their narrow interpretation of responsible sourcing.

I do not understand why procurement strategists appear to spend insufficient time thinking through potential scenarios and likely supplier responses; they would benefit a lot from game theory by considering "how might our suppliers respond". M&S don't seem to have thought through potential outcomes prior to pursuing any of the above approaches.  'Power' appears to be viewed solely as one-way and risks dismissed.

As we start 2017 I doubt this will be the only example of misreading power in buyer/supplier relationships - why is that; why are we so poor at learning lessons for others?

Trump's Twitter procurement strategy?

Donald Trump has redefined how to use Twitter. Still President Elect, as opposed to President, he appears to have adopted a 'shoot from the hip' approach to policy and announcements. In the UK politicians were criticised from making announcements on TV as opposed to Parliament, but this is of a different order.

One of the stories which dominats the US news today is President Elect, Donald Trump's 'Cancel the order' Tweet.  The order being with Chicago-based Boeing for a new version of Air Force One.  The Tweet is effectively saying "I am going to block this contract as I believe it is no longer a good deal". Now, that will send tidal waves through contractors and those in procurement in US public procurement! What will become the new modus operandi?

Needless to say Trump's estimate of the $4bn is challenged by many. Boeing, it appears, haven't even secured the deal!  Then you've got the reality that the plane is unlikely to be delivered during Trump's residence of the Whitehouse anyway - it will be other Presidents' plane as opposed to his. Transition is taking on a new completion now and for his successor.

Anyway, is Trump ushering in a new style of Twitter usage, a new style of public procurement negotiations, or a new style of procurement strategy?  If other political and business leaders chose to follow his style this will create a very real and present danger for procurement professionals. Trump has built a reputation of saying "You're fired" what's that mean for procurement?

Procurement risk management & power at Labour Party HQ

You may recall I discussed the UK Government's Guidance Note on Procurement Boycotts some time ago - at that time I was cynical about it's impact. However, Procurement Boycott's hit the news again today - this time the decision of the Labour Party to Boycott that 'procurement old faithful' G4S.

It seems the Labour Party Conference now has a risk of being cancelled as there may not be a contractor in place to provide the required security cover. G4S' contract was cancelled due to their links with Israeli prisons. Attempts at getting others to bid have so far failed.

This is one of those examples which demonstrates so much of procurement risk management. Firstly, it was probably perceived as a Routine contract as opposed to a Bottleneck 'show stopper'. Secondly, it demonstrates the need to recognise power and dependency - Labour probably but wrongly assumed, like so many, that security contractors would love to compete for their work.  Thirdly, it demonstrates that putting in a Procurement Policy without considering its full implications may result in having to rip up the policy.  Finally, it demonstrates the need for supplier engagement when introducing 'new ways of working'.

Procurement Policy may just have moved up the agenda of the Labour Party - it certainly looks as though someone is going to have to shift.

Poker Playing Procurement

In amongst the debate on bombing Syria, you have missed the news that a requirement from the Prince of Wales for TV channels to sign a 15 page contract in order to have an interview with him has possibly backfired. It has led to one interview being scrapped and some of 'the market' collaborating in a potential refusal to sign. What happens next and who is the loser in this game of poker?

In the long-term it is impossible to believe that neither the media nor Prince Charles would want a stand-off. So will the Royal Household relax the requirement or will the media simply give in? If I were an advisor to the media I would advocate that they stand their ground in the belief that ultimately Prince Charles needs the media more than  the media need him - after all the Royal Household must have a communications strategy and 'closing down' one option is counter-productive for someone with such strong desire to express personal views.

One of the things I have become more conscious of since leaving the practitioner world of public procurement is the amount of investment potential bidders put into qualifying potential bids, in other words, calculating the likelihood of success compared to the cost expended in the bidding process. It is not taken as a given that because a buyer has invited an RFI that a bid should be prepared.

Bidding is always a gamble for the bidder. Having said that, onerous conditions placed by buyers don't make the contract any more attractive, in fact more often than not the opposite. The illustration of Prince Charles pre-contracts serves well to demonstrate that sometimes preferred suppliers may just say 'no thanks' - indeed those suppliers may never know that the buyer had a preference for them.  

Let's remember that when a buyer goes to the market, they generally have a required need and the worst of situations is when the market says 'no thanks'. Yes, you can have a great brand name,  you may even have Chartered status, yes, you can have great structures and policies and procedures, and even a seat at the top table, but if the market opts not to deal with you, you may also be a loser.

The risk of dysfunction Procurement Strategy

The revelation today that changes to Home Office immigration rules will mean the need for many overseas recruited nurses to return home reminds of us the need to have a holistic approach to risk management when developing policy and strategy.  It is only a short time ago that a small fortune, £20.19m,  was invested in overseas recruitment as a means of addressing nursing shortages. Now, having made that investment, the HO changes mean that investment was only a short-term 'band-aid'. It didn't solve the problem. Did the original business case recognise the wider dependencies?

From a procurement perspective, we have to see this pending crisis in parallel with the DH  'clamping down' on Agency spend. I have already questioned that strategy, but that was in the absence of knowing about the HO plan which would generate additional shortages. Did the DH lack awareness too of the HO plans when they announced the 'get tough' on Agencies strategy? Did the HO think through the dependency on overseas workers? Did the HO and DH speak to each other - did they even understand the need to risk access their strategies?

Now the DH go into negotiations with Agencies in an even weaker position. The can't train sufficient nurses within the HO 2017 guillotine and demand will only increase, and they can't make sure that the anticipated nursing shortages can be addressed through Agencies or temporary staff. It will take some very creative thinking to achieve a good outcome.

While it's easy to see the flaws in central government strategy, the lessons to procurement practitioners are clear:  don't embark on a strategy prior to doing your research and understanding what else is being considered in the organisation; have a clear articulation of dependencies; risk assess your strategy; and, avoid placing yourself in a position or weakness in the market.

Is Tesco's procurement strategy always wrong?

Readers of this blog will know I haven't been overly sympathetic of all Tesco's woes, however, today I find myself loosely in agreement with a Tesco approach that is the latest focus of criticism. The Sunday Times reports Tesco threatens new squeeze on suppliers' -  the criticism based on alleged letters send by Tesco to suppliers demanding a price decrease due to the recent fall in commodity prices.


I do not know the precise wording of Tesco's contracts, but if they were on a Rise and Fall basis, and the supplies in question are directly linked to commodity prices, then I would expect to see price decreases flowing through too. Of course, when the commodity prices inevitably rise, it would then also be fair and reasonable for Tesco to accept corresponding price rises.

I have spent years observing buyers accept the price rises, and on many occasions they have been unjustifiably linked to RPI, etc., yet those same buyers rarely chase the linked price decreases - that's just bad price management and bad procurement. That laissez faire approach to procurement costs businesses money and the profession reputation.

Having said that, if Tesco haven't contracted on a R&F basis, then their cavalier attitude to supplier management suggests they haven't learnt anything of late and deserve all the criticism they get. Nevertheless, perhaps, given the recent history, Tesco may have approached this initiative slightly differently and sensitively. 

Procurement Space Chess with Russian music

It matters little which side of the fence you sit on the politics of Crimea but what we are observing is an amazing game of strategy, negotiation and brinkmanship. While the West have huffed and puffed Putin has called checkmate and the threats of the recent past have done little to affect change.

This is clearly a historical event being played out and we can expect strategists to dissect and debate for many years to come. But does anyone seriously believe that Russia will now walk away from the Crimea? Did anyone seriously believe that once the Russian masses assembled for 'military exercises' that Putin didn't mean business?

So we observed, powerless, from the sidelines, as Russian soldiers walked in and redrew the Russian border.

Now we find that NASA employees and CONTRACTORS  have to freeze co-operation with Russia. While the International Space Station is excluded from the break in collaboration, that must only be due to the US deciding that it would be too painful to break off that co-operation. But surely that just signals to Russia how they can inflict pain on the West.

As we know the US has also lost its independence from Russia to even launch people into space - that's been 'outsourced' to Russia. At some stage the US must have decided on a make/buy decision on space launches, now I suspect they are questioning their 'what if' analysis.

Hasn't the space programme always been about economic benefits. Wasn't the reason for co-operation with Russia about economic benefits and gaining economic advantage. We're now seeing the economic advantages being compromised for political rhetoric. But what if Russia decides that co-oepration with the US is no longer advantageous? What if Russia now starts to co-operative with a different partner, one which shares its longer-term view? Wouldn't those scenarios be detrimental to the US?

Twelve Angry Men - Procurement Theatre review

The film version of 'Twelve Angry Men' was released the month I was born, yet I have never seen it. Yes, I am of the vintage which remember Robert Vaughan when he was 'The Man from U.N.C.L.E.' and Martin Shaw as one of The Professionals. Perhaps that was why I couldn't resist the opportunity to see the stage version at The Garrick tonight.

The high-level story is a comparatively well known court drama played out in the Jury Room. One Juror isn't prepared to go with the pack and eventually the pack go with the original solitary Juror. It is brilliantly played out at the Garrick by Shaw, Vaughan, et. al., and I couldn't recommend it highly enough.

But it struck me that the procurement lessons didn't just lie in getting a good deal from Lastminute.com but in the play itself.

The Jurors each bring their own personal judgements to the Jury Room. Some were formed by the appearance and pedigree of the defendant. Some were based on racial prejudice. Some were influenced by the urgency of prior commitments and a preference to be somewhere else. Some too strongly influenced by others 'opinions'. Some even viewed changing their initial impressions as something to be defended, as if in a competition. Having said that, this is a play which will have you laughing out loud - it actually makes use of some brilliant irony and comedy.

It stuck me how effective questioning led to a better decision as the lack of robust evidence was highlighted.

However, it also struck me that this was a bit like some of bid evaluations I have witnessed. The need for a quick decision and pre-conceived ideas led to a poor decision, if not, wrong decision. The dominant voice for a strong individual subtly, and sometimes not so subtly, bullying others into a decision. I could go on with the parallels. But, if, instead of a Jury Room drama, this was recast as a Tender Evaluation Panel, I wonder which character would represent the CPO?

Twelve Angry Men may be a great play, but I think a DVD of the film would be a useful procurement training resource the next time a complex contract award is being approached. Come to think of it, it would be a very useful procurement training resource (full stop).

Negotiation for Purchasing Professionals - Book review

It's over 20 years since I l bought Steele, Murphy and Russill's handbook on negotiation, 'It's a Deal'. I found that book really helpful and practical. 20 years is a long time, so I didn't think I was being too extravagant investing in Jonathan O'Brien's 'Negotiation for Purchasing Professionals'. To be honest I needed no persuasion given that O'Brien's previous book, 'Category Management in Purchasing' is the definitive text on the subject.

'Negotiation for Purchasing Professionals' does not disappoint. What we have is a toolkit ready for use. The book effectively outlines the 'Red Sheet' method, complete with all the templates. Don't get me wrong though, this is not one of those clumsy, disjointed clutter of diagrams and models; no it is comprehensive and yet easy to read.

Working in a multi-cutural organisation I found the chapter on 'Negotiating across cultures' particularly good. While not the focus of the chapter, in many of today's businesses, with cross-functional teams drawn together across the globe, who have to negotiate as one-team, I thought the chapter made a useful contribution to effective team working.

I thought O'Brien was also excellent on 'power' and 'game theory'. While these chapters are written in the context of negotiation, I think they are useful reading, regardless of whether or not negotiation is in your mind. I suppose the same could be said for the chapter on body language which could provide many hours of enjoyment in 'people-watching' but just as easily a complex. O'Brien has a real skill in making concepts and theories pragmatic. Having said that, O'Brien has also creating a step-by-step guide to stacking the odds in your favour, right down to meeting and greeting!

Without doubt this is a book for every procurement practitioner.
   
Now just in case you want to get a copy of the book for yourself, at a decent price, order direct from Kogan using the code NPP and you'll save 25%!

Procurement reflections on Grangemouth negotiations

I'm sure, like me, you felt for the workers of Grangemouth who heard yesterday they were going to loose their jobs. Seemingly uncontrollable cost of living increases, Scottish winter fuel costs and Christmas only add to the real issue of whether or not there is any hope of future employment.

But what we are seeing is also high stakes negotiation. At face value we have the following buyers and sellers:

1. Shareholders, who are indirectly buying workers;
2. The workers, who bought union membership;
3. The union, who sell union membership;
4. The union, sell (broker) on behalf of their members;
5. The workers, who sell their skills to the employer;
6. Buyers throughout the country, who purchase fuel and plastics, used, for example, in the manufacture of cars and packaging;
7. The UK government, who will incur additional financial and political costs if the workforce are unemployed or there are industry security of supply impacts.

However, what happened?

3 SoS, 3 Presidents and 1 PM: A negotiation masterclass

Set aside which side of the fence you sit on regarding intervention in Syria and think are there any lessons which can be transferred across to procurement?

I have already discussed lessons from the House of Commons Syria vote, so let’s ratchet up a gear and consider three Secretaries of State, three Presidents, one Prime Minister, and negotiation.

First a quick paraphrased catch-up. Terrible atrocities taking place in Syria. Almost impossible for the average ‘Man on the Clapham Omnibus’ to understand who are the good guys and the baddies in the Civil War. Evidence of chemical weapons having been used but no clear ownership of the smoking gun. The US President attributed blame to the Syrian President and announces a swift, short, sharp punishment is required to make clear chemical weapons cannot be used. While this was being discussed a team of weapons detectives were on the ground in Syria hoping to find the evidence (their verdict still awaited). US President looks for support in the proposed punishment beating. There is no evidence that that the US have been attacked in anyway, nor any Western country but to take the moral high-ground a missile aimed at the Syrian President’s lawn is deemed appropriate. The Russian President makes his lack of support for US intervention clear. UK decide some sort of Parliamentary Mandate is required but it is not yet gained. UN mandate is not yet received. Some petty point scoring with potential allies. The US President starts to look very lonely and decides he would be better with mandates from Congress and the Senate – not yet received. The US President is backed into a corner, the UK Prime Minister is backed into a corner, the Syrian President waits. In the meantime airmiles are built up holding a G20 summit, bringing some of the world's top politicians and their advisors together, fails to find a way forward.

So the scene is set to learn from the high stakes negotiation, very high stakes negotiation.

First,

A very public negotiation

Last week I suggested we were seeing brinkmanship in the NHS between ministers and GPs. Today, the next hand appears to have been dealt with the announcement that GPs can expect to see an increase in their ranks of 2,000 by 2018.

Needless to say the Royal College of General Practitioners applaud this announcement:

If we have more GPs able to spend longer with patients and communities then we can adapt to meet the needs of the 21st century.

Let's try to deconstruct the Royal College's justification. If GPs are more involved in CCGs how will they be able to spend more time with their patients? Indeed why wasn't this issue raised when CCGs were first grasped with open conflicts of interest? Are the Royal College seriously arguing that GPs are unable to adapt to the 21st century without an increase in numbers? Other public service providers are expected to adapt with lesser numbers and greater use of digital. Indeed is it not the case that there is greater self-diagnosis of potential GP door-steppers using web-based sources. Are the Royal College really justifying the case for GPs, and I assume their own longer-term negotiating power.

On the other hand, will the Department of Health question that rationale and why the Royal College haven't taken responsibility for ensuring GPs have been adapting to the 21st century? Will the DoH ask for evidence of impact? In this game of brinkmanship, surely the DoH should have used those levers earlier in the game?

However, if I was in the Royal College, I'd say thanks and wait for the next offer - DoH want CCGs to succeed and politicians will want a good NHS story as they approach the next election.

Fortunately this negotiation is appears to being played out in the public domain - we can all watch and learn.

Brinkmanship at the NHS

I've been discussing Clinical Commissioning Groups and the various twists and turns for some time - there's no denying they're turning into one of those procurement case studies which just keep on giving.

A very quick summary:

1. In 2004 the government negotiated, what is widely viewed as, a bad deal with GPs. The GPs got more money and were able to opt out of providing an 'out of hours' service.
2. GPs involved with CCGs expressed concern that they lacked the skills to handle the procurement aspects for CCGs.
3. NHS Guidance on procurement appears flawed and has to be rewritten just as it is required.
4. CCGs are identified as having clear conflicts of interest within procurement.
5. Demand on A&Es increases as a result of the systemic displacement from GPs opting out of providing 'out of hours' services.
6. GPs say patient care is suffering through the need to be involved in CCGs.
7. GPs are viewed as 'badies' and ministers hope to renegotiate the 2004 contract.   
8.  GPs trade union are threatening a withdrawal of the NHS' flagship Clinical Commissioning Groups. 

I'm sure there's no suggestion that GPs have less to gain through CCGs since the conflicts of interests were highlighted. Nor, I'm sure, is there any connection between the suggestion that the GPs contracts should be renegotiated by ministers and at the same time CCGs are precious to ministerial aspirations for the reform of the NHS.

You could of course view the whole thing as a shambles. But then again you could say it's just brinkmanship. It does have the appearance that one side is better at negotiation than the other though. 

Lessons from Ecuador

What a complete and utter mess the Julian Assange extradition has got itself into. Yet I think there are lessons which we can apply to procurement.  But before we consider whether or not procurement can learn something from this, let's have a bit of context.

Julian Assange founded Wikileaks and appears to take pride in his orchestrating the publication of what are considered to be inflammatory state secrets. Whether or not that is a crime or a cause for adulation is debatable. To add to that inditement though there are allegations that Assange committed sex crimes in Sweden; those are serious allegations and, if he is guilty, his victims require justice. I can't even remember how Assage ended up in the UK but it predates the Borders Agency debacles.

The UK judicial process deemed that Assange should be extradited to Sweden to assist Wallander's mates with their enquiries. Assange, with his own interpretation of transparency and justice, wasn't just as keen on transparency as we would at first thought. He went to ground claiming this was all an American conspiracy to get him within the reach of the Stars and Stripes where justice would evade him.  The Celebrity Big Brother house wasn't considered a safe haven so he took refuge in the Ecuadorean Embassy.  (Let's not forget that while most could reliably make a stab at locating Sweden on a map, I think it would be an interesting challenge for those who have just received 'A' Level Geography to locate Ecuador on a map.) Assange lost his appeal against extradition to Sweden and now there's a stand off.  One man and one generally unknown country standing in the way of UK, Swedish and US aspirations.  This isn't David and Goliath, this is the equivalent of two hobbits against a gang of Goliath and his buddies tooled up with an arsenal.

dring, dring, 'Hi Di, it's E ..., really great to hear from you .. - let's discuss negotiation'.

On Thursday I was in a key meeting with a new supplier trying to protect buyer interests.  I was absolutely convinced I had turned off my phone, but low and behold my phone went off. I quickly glanced at who the caller was and texted an apology to say I'd get back within the hour.  In those brief few seconds though I felt