Procurement of taxis - get me out of here

What's the best way to procure a taxi service?

I suspect the custodians of the BBC are asking that question at the present. £10m a year spent on 350,000 journeys needs some sort of strategic approach. But users of the Beeb's Gateway Booking system seem to think the centralised purchasing system isn't delivering the best price. The examples cited suggest that buying locally, 'maverick buying', is approximately 50% cheaper.

Justifications used by the procurement department include: "we have to ensure that the companies used are both legally compliant and vetted, and this is done as part of the managed service provision ... we also require a 24/7 service which ensures broadcast criticality, full transaction reporting covering all journeys, ensuring we are compliant and can report our [tax reporting] obligations".

Virtually every organisation uses taxis and there are legal requirements for any taxi provider. It would be quite difficult in almost any part of the world I have been in not to find a 24/7 taxi service. I can understand that in certain situations there will need to be special provision for vulnerable passengers but why pay over the odds for all the other journeys?

There is always a dilemma when you try to take away flexibility and freedoms from staff, for example, their ability to hail a cab as an impulse buy or just when you need it as other options just won't work, so you can expect the odd example to be cited as part of the resistance to change, but why not just use corporate credit cards, claims expenses and, if it is abused, remove the freedom or tighten the controls.

I think there also needs to be some serious benchmarking discussions taking place with the providers. Something does not look right and the profession can avoid 'amateurs buy best' perceptions.

Testing mini-break shopping and considering the options

The wonders of the web and absentmindedness of those who provide visibility of pricing on it never cease to amaze me.

I wanted to have a quick break linked with returning my son to his student flat in Edinburgh. A quick search found very attractive accommodation which suited us very well on Visit Scotland's website. Visit Scotland revealed a price of £x for four nights in a family room with our 16 year old daughter. However, trying to book I was redirected from Visit Scotland to the accommodation provider's own site. Unfortunately, that booking portal had the inconsistency of a maximum age of 15 for a child. Nevertheless, the websites both yielded the same price. I despatched a quick email to the accommodation to confirm availability but was offered a rate 24% higher than both Visit Scotland and the provider's own site.

Naturally, when I asked them to check their figures against both their own and Visit Scotland's website, the price was reduced.

There was always a slim chance I would be able to beat the web price through the email but why on earth would they price dearer?

Nevertheless, we had a great break but, much as I have a fondness for Scotland and my assumed historical roots, by way of price comparison, is there not something wrong when I can book a mini-break in Berlin, flying from Dublin and staying in a really good hotel, significantly cheaper than a car-ferry from Northern Ireland to a guest house in Scotland?

'Free' in schools shouldn't be free of controls

A few weeks ago I discussed the allegations made in the press about al-Madinah free school - I questioned whether some of the allegations were justified. The allegations included conflicts of interest and lack of processes.

Then this week I discussed the increases in fraud and particularly in procurement. Tonight, we see a convergence of free schools and fraud. Fabricated invoices and money spent without supporting documentation. The latest allegations date back two years (apparently suppressed).

To me these problems all relate to Start-up and possibly naivety. There needs to be more attention given to getting procurement policies, processes and procedures in place together with the appropriate controls at Start-up. But perhaps it is unreasonable to assume that those who are setting up free schools will have the clarity of vision and even know-how to develop and put in place appropriate procurement policies, processes and procedures - that's why we seem to hear of problems after the event.

Now having said that, while Free Schools are the focus at the present, the same problems are surely just around the corner with Clinical Commissioning Groups.

Part of the solution lies in providing a really good start-up toolkit, training and support. Correct me if I'm wrong, but it doesn't look as if that support has/is being provided - if that's the case, it is a false economy and poor risk management.

Freedom may be a good thing but there needs to be protection against chaos. Sometimes even the free need to be protected from the pitfalls.

Reflections on eWorld Purchasing & Supply

Today I attended the eWorld Purchasing & Supply event. You wouldn't be surprised if I said a free conference was good value - well, to me there's no such thing as a free conference as there is always the opportunity cost of how you could have otherwise have spent your time. There's also the reality, that now, in many organisations, even justifying the costs of attending an event in London is a battle some feel just isn't worth fighting. But to me this was well worth attending and actually staying the whole day. (As an aside, it never ceases to amaze me that so few delegates have the good manners and ethics to stay the whole day!)

Having said all that, I found almost all of the sessions I attended of excellent quality and a really good opportunity to learn. So in a nutshell some interesting learning:

1. Eva Wimmers from Deutshe Telecom, in an excellent keynote, reflected on the reality that a short-term focus on paying less is probably detrimental to the procurement 'brand' and improved strategic contribution, particularly in an environment of decreasing volumes. Procurement needs to reposition itself and lead on demand shaping and spend management - what she referred to as moving beyond procurement.
2. Eva also told us there's a word in Germany for saving money but hurting the business. Don't ask me what the word is but I think there's a real problem that procurement people sometimes are their own worst enemies in doing just that, regardless of what the word is.
3. Another of Eva's gems was that "procurement is only as strong as the relationships with functional colleagues". I think that's very true but there's a real problem with procurement suffering from poor stakeholder engagement and management - the focus on technical know-how, to me, is distracts from the increasingly required soft skills.
4. There was a recurring theme from many of the speakers of splitting strategic procurement from operational buying. Their message about devolving to the right level or even outsourcing, effective use of P2P systems and pCards - in theory, that is all very simple but few really spoke of how they'd managed to get operational ownership. There is of course an interesting lesson here for those in the public sector who have been very cynical about the benefits of pCards!

An alternative option for school uniform procurement

First thing I heard on 'the box' today were the Lib Dems plans to break the self-inflicted monopoly power of single-source school uniform suppliers over schools. The power is derived from the schools over-specfiying on the uniform and enabling the supplier to charge excessive prices ('rents'). New guidance is proposed.  But is there a better way? I think there is.

The easy answer is to use public procurement collaborative buying and provide access to the contracts for all parents. You can still have schools differentiating on the choice of uniform, if they want but first industrialise through simplifying the uniforms, standardising, and then sharing the contracting. Those letting the contracts could view this as a social benefit. You could also look at more functional uniforms taking into consideration running costs (wear and tear, washing, etc.) and durability and refreshing.

Of course you could always use the purchase of school uniforms as part of the school curriculum. If schools want to opt out of using existing collaborative buying organisations, they could have support from local CPOs volunteering their time to support the procurement. Business Studies and Economics classes could work out which schools or public bodies it would be most advantageous to collaborate with in procurement (say, all those who want green blazers); Art and Technology classes design the uniforms. Let's face it, at the present time we have pupils leaving school who understand what marketing is about but have no grasp of procurement.

Even more radical, would it be at all possible, given the changes in child benefit, for school uniforms to be provided by the state. That would cut the nonsense of 'elitist uniform snobbery', place the uniform in the context of education budgets (after all one of their most passionate advocates in the Education Secretary) and the cost would be borne by those who insist they are necessary as opposed to locking parents into bad deals which they have no choice but to pay for.

To me the Lib Dems have missed the more innovative way of solving the problem.

Be wary of price comparison sites

"I'm very wary of the comparison sites because they are all gamed .."

It will hardly surprise you that those are not the words of a furry meerkat or the lyrics bellowed by some torturous moustachioed 'tenner'. However, I suspect it may well surprise you that they were the 'off-the-cuff' remarks of the Chief Executive of the Financial Conduct Authority to parliament yesterday. It will also hardly surprise you that the FCA quickly tried to distance this 'personal view' from that of the organisation.

Off-the-cuff remarks have made the news quite a bit recently and you may question how much credence should be given to them. Yet it strikes me that this particular remark, unlike a sanitised press statement, is probably closer to what the FCA Chief Executive actually believes and practices, than the more diplomatic rhetoric. So if the CX is wary of 'comparing the market' perhaps there is really some cause for concern.

In my private life I honestly haven't used the sites but I do carry out my own market research online and value the ease of access to information from the internet - yes, that approach helps me beat the price comparison sits in achieving the best deal for me.

But let's think about the mantra that greater transparency of actual spend data improves public sector efficiency as a result of 'empowering the armchair auditors'. As someone who has tried to interrogate some publicly available public spend data, I don't believe for one minute those publishing the data pay any more than lip-service to primary objective. I view it as the victim of obfuscation, protectionism and defensiveness. Think 'turkeys and Christmas'. Yet the aspirational transparency brings a cost paid for by  the very armchair auditors who don't appear to be using it in droves. Therefore,  I would really like to see the evidence that the desired outcomes of the 'transparency' have been achieved.

However, as a procurement practitioner I am also wary of the procurement version of price comparison sites.

Protecting against when the gamekeeper turns poacher

Oxfam and Lloyds Banks don't immediately register as having much in common, particularly for those of us who have an interest in procurement. The link is fraud, or, more specifically, when the gamekeeper turns poacher.

Last September, Lloyds former head of fraud and security pleaded guilty and was sentenced to five years in prison for theft  of £2.4m. She had submitted 93 false invoices between 2007 and 2011. Yes, this was the person the bank had charged with protecting them from fraud.

In an echo of Lloyd's, on 18th June, Oxfam's former chief of counter fraud was accused of stealing £62k and a laptop. Let's be clear though, he is accused but the court have yet to make a judgement.

It would have been expected both the anti-fraud gurus would have been carefully vetted and 'above suspicion'. They would also, however, have been in the ideal position to identify the weaknesses in the system and the scope for avoiding detection. Yet, in both cases, it is alleged, they 'broke the system' and no doubt there are plenty of examples of more successful adept anti-fraud gurus who have so far escaped detection. The lesson must therefore be that there is a need for some form of independent testing of the anti-fraud system, but that seems rarely evident. Another lesson must be to put in place the system which also 'polices the police'.

I have long lost count of the number of risk managers, who, when I interviewed them about procurement risk, had not given any meaningful consideration to procurement fraud, therefore they lacked appropriate protections. Yet it has been estimated that procurement fraud cost the UK public sector alone somewhere in the region of £2.3bn – closing that down would make a painless but worthwhile contribution to the UK economic recovery.

In the procurement world, who better to know how to break the system, with minimal chance of detection, than those who understand procurement - systems are required to reduce that risk. But just as important a question is, 'are the processes in place to protect the CPO against mischievous allegations of procurement fraud?'

Sadly, I see a lack of robust anti-procurement fraud systems - have you got one in place? Such a system  needs to be proportionate, pragmatic, risk based, comprehensive, tested and regularly reviewed. Without such a system how will you be able to prove 'not guilty'?

First published as a guest blog on Spendmatters, 26 June 2013

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?

National GO Awards

I'm delighted to have been invited to be a judge for this year's National GO Awards.

I've been involved with the awards in a variety of guises over the years.   When working on the National Programme for Third Sector Commissioning the awards really helped collect and celebrate the success of innovative approaches to procurement which I don't think would have otherwise been brought to light.  Prior to that I recall two of my teams being shortlisted and hoping for the winners podium - I'm sorry to say we were never first but getting that far was an enoromus help in selling procurement internally. 

Now I look forward to learning from the entries.  I hope I don't let the practitioner community down!    

Freedom to enter bad contracts

What would you do if a supplier gave you an invoice for a sum which you knew was clearly far from value for money; say £242 to change a padlock on a garden gate?  Well, you could do a comparative price comparison to establish a reasonable rate, ask for a breakdown of the costs, challenge the amount, say that's not a reasonable rate but I will pay you £242-x, ... there are many options.
But what if the supplier said you'd contracted on the basis of that fee, namely, a very bad value for money rate.

Contract law isn't based on good value, it's based on an assumption that the parties have the intention, competence and free will for one party to make an offer and the other to accept, it's based on agreement to pay a sum in return for the delivery but not that the sum be reasonable.  There is no assumed professional competence, just legal competence - the two are entirely different.  In fact we seem to have seen many examples legal competence partnered with questionable professional competence.

So before you give the

The vaccine purchasing strategy

Today's Times carries a fascinating claim from a potential provider to the NHS that "The NHS would save £100m per year" if vaccines used elsewhere in the world and also in UK private clinics were also used by the NHS.  The potential provider is in a position to be listened to as they currently provide half the worlds vaccines by volume. The example is provided that the potential seller would sell measles vaccines at 12p per dose while the same vaccine in the UK costs £10.  Of course it doesn't necessarily follow that all the providers various vaccines are required in the UK but the claim does justify further investigation.
  
There appear to be two barriers was to why the UK can't access the £100m per year saving.  The first is that although the vaccines are approved by WHO, Unicef and 130 governments, they are not licensed in the USA, UK or any other EU country.  The second is that existing providers' pricing strategies are based on "according to the countries' income and ability to pay, as well as by the volumes of vaccine purchased" - apparently a pricing strategy adopted in the 1980s and applied ever since!

In defence the UK DH spokesman said the UK observed stringent rules on purchasing vaccines "the UK buys vaccines through open competition, ... vaccines must be licensed through either the European Medicines Agency or the Medicines and Healthcare products Regulatory Agency.  There is nothing stopping any company bidding for any of our contracts as long as their products meet our requirements."

Well there something very obviously stopping companies bidding; a clear barrier to entry stopping the potential £100m saving - it's 'the NHS standard'!

Last week we heard so much rhetoric on revolutionising public purchasing, a shift to commissioning (which wrongly defined commissioning as solely) speaking to the market pre-procurement, and even a crusade by the Cabinet Office Minister to the EU to sort out all our procurement woes.  (see previous blog).    

It strikes me there is comparatively low hanging fruit here which should be explored quickly.

So what should happen?

1. The focus on outcomes in procurement should be extended to outcomes and risk management in pharmaceutical accreditation. 
2. Category management in pharmaceutical purchasing, particularly market shaping, needs to be critiqued.
3. Steps should be taken to proactively identify barriers to entry into the pharmaceutical supply chain and a strategy put in place to accelerate the accreditation process, especially when WHO and Unicef approvals have already been gained. 
4. The NAO should investigate the claims and report on the VfM of the existing purchasing strategy to the PAC.
5. Assuming that when the Cabinet Office say they are in dialogue with the UK's largest suppliers they are in discussion with the pharmaceutical companies concerned, they should ask for and critically appraise a comprehensive breakdown of the pricing structure and a comparison of prices charged in other countries.
6. The OFT should investigate the claims that existing suppliers are adopting a differential pricing strategy which disadvantages the UK NHS.

Source: Pagnamenta, R. (2011) 'NHS 'wasting millions' in deals with drug giants', The TImes (Business), 28 November, p.35.