Invisible ink used on the script of HS2 justification

It's very strange that a Government which advocates transparency wants to be very, very opaque. Wasn't the argument for transparency that the army of armchair auditors would be able to call their political masters to account and only those who had something to hide should fear transparency? I suppose you can understand the desire for opaqueness when it comes to the Department of Transport who suffered badly when the figures behind the West Coast rail franchise were exposed to scrutiny and unravelled? Understanding isn't the same as justification though.

Transparency delivers other benefits. The armchair auditors can be part of the risk management process providing constructive critique and highlighting risks which might otherwise have been overlooked.  Transparency also wins stakeholder confidence and helps with change management. Those benefits can't be realised if you opt for secrecy. Yet, in an age of Wikileaks and Edward Snowden does anyone seriously believe the Report will remain concealed?

However, the latest act in the HS2 farce is the decision yesterday, not to publish a report of the Major Projects Authority by invoking a bizarre workaround of the Freedom of Information Act. Withholding the report only feeds the beast of cynicism and further undermines confidence in the project. Not only that but it forgoes the benefits of transparency and makes it more difficult to argue that others should provide visibility of their decisions.

HS2 Contingencies

It's six months since I first highlighted concerns with HS2.

In the latest twist it has been announced HS2 may cost £42.6bn as opposed to the original £33bn - let's remember that we're still in the early stages of this project.

But what struck me as strange was George Osborne's interesting explanation of the £14.6bn contingency sum on Sky News:

"... one of the reasons why the cost has gone up is we're actually building in more contingency to make sure that we don't actually overrun. We've got a proper budget from the start that way we know we can afford" (27 June 2013).

If the chancellor is correct and we had a proper budget from the start (or is this the start?), what was the original £33bn?

Is the contingency a slush fund or a contingency fund? A contingency is to cover costs which could not reasonably been foreseen. It isn't intended to cover increases due to changes in specifications, clients intentions, costs of materials, contract omissions, or new regulations.

It would be really useful to understand what this 'contingency' of £14bn is allowed to cover and what it won't? It will also be interesting to understand how it will be managed? Can we now assume the Treasury have said, "the absolute maximum HS2 will cost is £42.6bn"? If that's the case, who will be held accountable for overruns? I suppose another way of looking at it would be, who involved in making these commitments will be around in 2032?

Missing the point on HS2

If you turned on any of the TV or radio news programmes, picked up a newspaper or scanned Twitter this morning, it is almost impossible that you missed the NAO's anticipated shortfall on the proposed HS2 train link. It is not surprising that the business case doesn't stack up - even I have been questioning some of the more basic assumptions which were in the public domain. However, for the public procurement community there are more significant issues:

1. Why, after the rail franchise fiasco and the subsequent route and branch review of evaluation methodologies, were there errors in the calculations which had not been identified through internal QA?
2. In the current environment of government 'transparency' in 'all things procurement' why was the business justification not more clearly set out?
3. Why did a gateway review not pick-up and lead to the resolution of the issues identified by the NAO?

Make or buy train sets

There was a time when every boy (or perhaps his father) wanted his own train set. I had one but it was a torture putting it up, trying to get it to work and then putting it away. I never really found  enjoyment watching a train going round and around and around in circles.

Perhaps the joy was in gaining ownership or putting things together which worked. But imagine the joy which must come if you're a train enthusiast and able to tinker with a real train, not just any train, but the 'big daddy' of them all, 'The Flying Scotsman'.

Perhaps the opportunity to own and tinker with the real 'Flying Scotsman' was just too much a temptation for the National Railway Museum.

Anyway, in 2004 the museum bought the real thing for £2.3m. Then, in 2005 they recognised the need for repairs, which they estimated would take one year and cost £250k. Now, in 2013, the repair work has cost, not £250k but £2.89m. That, in turn, has diverted funds from other areas, and indeed from the wider public purse. The hope is that the 'Flying Scotsman' will be operational in 2015 - that's quite a delay for what was a record breaking locomotive. As part of that journey it is now thought a decision will be taken on whether or not to 'buy' the remaining repair work.

Recently I applauded Liverpool on its decision to call a halt to a procurement which wasn't going to be delivered on time or budget. While I congratulate the National Railway Museum in questioning whether they should outsource the repair work, answers should be sought why a red line hadn't been drawn earlier, why the total costs of repair hadn't been better estimated in 2004, and why a robust 'make/buy' options appraisal wasn't carried out in 2005 regarding the repairs? It would also be useful to make sure that the current make/buy appraisal is robust and risk assessed. Have wider social objectives also been considered, for example, using the repair work as a training scheme or even using volunteer enthusiasts as potential repairers?

But I wonder when make/buy decisions are made, if there is a wider issue - could there be innate bias within our DNA which leads a buyer towards 'buy' and a techie towards 'make'?

Setting that aside, ironically, the 'Flying Scotsman' saga has some resonance with yesterday's blog on Glasgow's George Square revamp. There too a timely options appraisal was absent.

Perhaps there's an even bigger issue though, namely, are procurement specialists even involved in these decisions early enough to make a difference or at all?

Grease was the word, now it's 'procurement'

Once upon a time, if you said you worked in procurement, no one really had a clue what that meant.  All that has changed: the Prime Minister, at the height of the political conference season, finds himself compelled to discuss procurement. Even the Undercover Economist has started to discuss bid evaluation.  I am not going to add to the rail franchise debacle debate, save my previous blog.  My concern with the franchise is not that mistakes were made but that reassurances were wrongly given to ministers that the procurement process was 'robust'  when it was not - that is inexcusable and, to me, does more damage to the profession than the making of the actual mistakes.  Of course this isn't an isolated mess, it comes hot on the heels of the Olympic security fiasco.

However, rather than let public sector procurement take all the flack, private sector procurement has thankfully shared the load and also managed to grab the headlines.  Once again Apple's iPhone 5 sole supplier is in the news.  I recently discussed the issue of supply chain risk and the dependency which Apple had on one supplier for the new iPhone.  In that blog I referred to riots which had taken place at the Foxconn factory and how that may have adversely impacted on share price and customer experience.  Today we learn that there are more problems at the factory - this time specification quality standards are at issue: fights between workers and quality controllers, contributed to a strike yesterday.  While Apple is a household name, synonymous with quality, their supply chain dependency is becoming a regular news item.  The behind the procurement story is one of the relative power the key supplier's workforce over the delivery of iPhones, and the negative impact on share price and customer experience. Supply chain risk management must now be a boardroom topic.

It is often said that there is 'no such thing as bad publicity'.  In spite of the negative headlines of the last few weeks, I believe some good may come out of this.  For too long there has been insufficient boardroom discussion on procurement strategy, insufficient robust challenge of award recommendations, and a lack of concern with supply chain risk management - expect that to change.  There has also been a tendency for procurement staff to be appointed in the absence of real scrutiny - expect that to change too.

For good or bad, the next time someone asks what you do for a living, and you reply, "procurement", expect an informed discussion as opposed to a blank stare.

Rail questions

We have now learnt that Virgin have lost the West Cost rail franchise to FirstGroup.  This raises some interesting procurement questions which are worth further discussion.

I have been using both the West Coast and the Great Western for 12 years.  If I was completely ignorant of who runs each of the current franchises and they were both using the same livery, I would have no problem comparing and rating service.  In fact I would say there was no comparison.  Then we have the facts:

Virgin is clearly ahead on past customer service. Yet it seems only a few weeks since we heard that the Government will have a blacklist of poor performing suppliers.  How much emphasis should be given to the evidence of past supplier performance or as the Minister ironically called it 'track record'? How much emphasis was given to it on this occasion?  If you were leading the evaluation, how much emphasis would you have given?  In your domestic shopping how much emphasis do you give? In your professional position how much emphasis do you give?