Tales of the unexpected, Harmeston & procurement leadership lessons

I do not recall when the professional credibility of a CPO has received as much attention as that of Kath Karmeston (for example,  The Guardian, FT,  and The Times).  Harmeston already had a significant profile, largely through the reputation she gained as Royal Mail's CPO, before moving to the Co-op.  At the Co-op she became responsible for cutting the costs of the >£1bn spent on 'goods not for resale', and The Times claims she was paid £357k a year for that!

However, after a remarkably short stay, say ten weeks, Harmeston and the Co-op parted company. Harmeston decided to pursue a claim of £5.2m for unfair dismissal (I've no idea how that figure was calculated and some would say it was an unachievable negotiating position). Whether intended or not, Harmeston brought the spotlight on herself through the decision to go to the tribunal. You can read the Co-operatives version of the Tribunal here.  Now after almost two months of waiting for an answer, it is reported she has failed in her claim against the Co-op for unfair dismissal.

I am not competent to comment on the legal aspects, and feel a slight discomfort intruding on private grief, but I can have an opinion on some of the alleged practice reported in press - let's remember this blogpost is based on reported evidence and some of the evidence was contested.  Much of evidence struck me as irrelevant to the unfair dismissal case but relevant to the profession and those who would hope to bring about procurement change - it's those areas I discuss below.

We are told Harmeston believed she had uncovered a lack of procurement policy compliance; 70% of the budget. Understanding the extent of non-complaint spend is certainly a good starting position for improvement - understanding 'why' and what to do about it would be an even better position. The CEO though claimed the issues raised by Kath were already known about and Kath had previously been briefed on them. It is always dangerous to claim the glory for uncovering something when others say you didn't - that applies just as much to claiming savings in isolation of the budget-holder's contribution. 

Nevertheless, when the Co-op's head of group risk probed Kath, he concluded that the CPO didn't know the details of the procurement policy. Now given that she was only in post ten weeks, it could be argued that was understandable. What strikes me as unacceptable though was his assertion:

Policy process and governance she defaulted to [her deputy] because she felt it was beneath her. 

Anyway, that was made worse by, Paula Keegan, the former group chief strategy officer's opinion that Harmeston knowingly chose to break the Co-op's procurement policy herself.

I cannot think of any situation when procurement governance should not be a primary concern when seeking to bring about procurement change, indeed even setting the example of compliance.

Perhaps you can already sense the loneliness of the CPO's journey. To me, when you want to bring about procurement change you also need a coalition of allies - the CEO, head of group risk and group chief strategy officer would be useful allies but Kath failed to gain their ownership.

Nevertheless,

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

Taxpayers Alliance procurement assertions are flawed

Today's Times makes great play of The Taxpayers' Alliance, Bumper Book of Government Waste. Not only does public procurement get a bashing on page 4, but also in an Opinion piece from Matthew Sinclair (Chief Executive of the Taxpayer's Alliance) on page 26.

When I read that £15bn a year could be saved through better public procurement naturally I looked for the evidence. That led me to the source being cited as the Institute of Directors. But the Institute of Directors hadn't identified £15bn could be saved, their source was Colin Cram's report, Towards Tesco.

Now I have deliberately stayed clear of the procurement family spat on Towards Tesco, not least because I like and have great respect for those presenting the opposing arguments. However, we have to remember that the Towards Tesco was based on big assumptions too - it also stated there was an absence of reliable data.

I have serious concerns about the pragmatism of the centralisation argument and I'm not even sure if Colin's argument has been correctly interpreted. But we have reached a dangerous stage when a hypothesis presented by Colin, who is clearly committed to public procurement, is being misinterpreted and used by the Taxpayers' Alliance. We need to end the rhetoric and move to robust peer reviewed evidence to get to the most likely outcome. In the meantime, perhaps we should take all the other Taxpayers' Alliance assertions with a pinch of salt.

Saving face, if not money

How do you position exceeding budget as a making saving?

Personally, I think that's a pretty hard call but it seems to be the latest coup pulled off by the London Olympics.

A little background first.  Most would view the London Olympics as public funded. Part of that assumption is based on the fact that the public purse was to initially be lightened by £2.4bn. Nevertheless over the last few years we've had a constant stream of justifications for the escalation of those construction costs.  That has contributed to the budget tripling to £9.3bn.  Given the global financial crisis, some view the Olympics as having had the unintended consequence of cushioning the early impact on the construction sector.  That being the case there may well be an economic justification, and I look forward to seeing the economic impact assessment.

Now we learn that there is an anticipated underspend of £476m from the £2.7bn contingency. So, the first observation is that creating an excessive budget and then not spending it all is one way of being perceived as delivering a saving!