Weathering the storm of justifying the need to buy at all

We are told the BBC are progressing through a tender process which means they will break their 93 year relationship with the Met Office since the Met Office haven't got through to the final stages. Already the advocates of a continuing BBC/Met relationship have started to cry this is bad value - the UK weather just can't be understood by 'foreign forecasters'!

It seems strange that critics of the likley procurement outcome refuse to recognise that if weather forecasting is a science, then suitably qualified forecasters, regardless of their origin, should be able to predict objectively.

I can only assume that the BBC have been following a robust, transparent and objective process. Have the Met Office been complacent in their bidding or are there genuinely better qualified competitors? If they want to throw stones at the BBC's procurement process would the critics not have been better to have criticised the selection process prior to its commencement. Perhaps the BBC should have carried out some stakeholder engagement in the process earlier and brought the advocates to the status quo with them.

Having said that, it seems logical that the Met Office would want the freedom to compete to deliver weather forecasts to other boardcasters too, without being subjected to nationalistic loyalty.  Why can't the defenders of the status quo recognise that for the Met Office to do that there has to be open competition.

However, my question is not about whether or not the weather forecast should be provided by the Met Office or not. Nor is my question about the selection and award criteria. or indeed its robustness.

To me there is a much more basic question, specifically the need for the BBC to spend money on providing a weather forecast at all. A lot has changed in 93 years. There are now so many sources of weather forecast open to the public, for example, apps on a smart phone tailored to specific locations. Just because there has been a 93 year history of the BBC providing weather forecasts doesn't justify a further 93 years of need to for the BBC to provide weather forecasts! But isn't that a common problem is procurement; a contract is due to expire so we need to relet. Wouldn't procurement improve its contribution and value by asking the much more relevant question: "Do we need to buy this at all?"

3 simple lessons when relying on reports

The Kids Co demise has been well documented and some of the lessons for procurement have already been drawn out by Peter Smith, for example, the need for contract management and sufficient reserves. However, today we have learnt that two separate  'independent' reports were cited as evidence of the good work of Kids Co which we can also learn from.

The reports were cited by Kids Co and probably swayed some funders decision making. I would suggest that perhaps funders may well have been naive and that those who based decisions on 'evaluations' need to look much more deeply before being influenced.

The first question worth asking was 'who funded the report'? Well one of the reports was funded by Kids Co and the other appears to have had Kids Co covering the costs. It's not unreasonable to see the potential conflict of interests.

Next, 'what was the purpose of the report'? Neither of these reports appear to have been outcome evaluation reports or indeed value for money reports. One was written by a Professor and leading psychologist who benefited from studying "the language of love". The second focused on the children who used the services of Kids Co.  The reports may well have been fit for purpose but that purpose was not one of commercial due diligence.

Thirdly, 'what was the approach to ensuring rigour'? I could be wrong, but neither of these reports seem to have been subjected to peer review which would have considered the research approach, reliability and validity.

Those three simple tests may have shone the spotlight on the weaknesses of relying on the reports. While it is easy to see the weaknesses we also need to reflect on those same points within a procurement environment, for example, when commissioning reports, when drawing on reports as part of a bid evaluation process, when taking the advice of 'independent' experts particularly in preparation of specifications. Caveat emptor as they say.

Child labour and talk are too cheap - meaningful action is what counts.

David Cameron is using a platform in Vietnam today to announce the UK's initiative to stamp out child labour in supply chains. Don't get me wrong, I find child labour absolutely abhorrent and really do believe in the power of responsible procurement. However, I doubt Cameron's initiative to stamp out child labour, based on all companies with a turnover of over £36m publishing an annual slavery and human trafficking statement, will have any significant impact.

Does David Cameron actually believe that companies have that sort of supply chain visibility or even the skills? Does the public sector have that sort of visibility and skills?

The initiative will require companies to declare what checks they have in place. What would be considered acceptable robust checks? Will Cameron's minister who leads on public procurement be in a position to be accountable to parliament and the electorate for the steps public procurement have taken - if not it is a bit hypocritical to not to lead by example. Perhaps Cameron should add this to his wish-list of EU reforms - that will be popular but then isn't cutting red tape a big issue too!

How is the initiative going to be communicated to UK companies? August is unlikely to be the best time to raise awareness.

In companies which do become aware of the initiative who will have ownership and be accountable? Will it be allocated to the Health & Safety Officer like so much of environmental purchasing, the CFO as part of their accounting statements, the CPO who control so little of the budget decisions, marketing who will want to put a good gloss on whatever the reality is, or the risk manager who is often a voice crying in the wilderness? Whoever holds responsibility will be a good indicator of how seriously the initiative is taken - why doesn't Cameron insist there's a named responsible owner?

I assume the statement will need to be audited in some form, who will do that?

What if the companies don't comply? It appears the sanction is criticism! Is that supposed to be a serious sanction? I have previously discussed reputational risk linked with supply chain abuses and how it really doesn't seem to manifest itself  in the market. I have also questioned the conviction of politicians to see some of these great ideas through to the end rather than just looking for something to say in a speech.

So, do I expect to see some discernible change in five years against today's benchmark? Actually is there a benchmark against which progress will be measured?

PS 31 July 2015 - here's a link to the relevant section of the Modern Slavery Act 2015 

When news of procurement doom and gloom is a good thing

News that one in four government projects is in danger of failing may surprise you as something I view as worth celebrating.

It is a good thing that if it represents an honesty in project management status. It is a good thing if represents a true assessment of risk. It is a good thing if it avoids throwing further good money after bad. It is a good thing if it leads to corrective action being taken. It is a good thing if lessons are learnt and shared.

It is a good thing if other organisations learn that honesty in project management risk is something to be valued.

However, should the projects continue 'As Is' it represents a terrible waste of opportunity and a sad inditment on strategic procurement and project management.

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.

Are agencies the baddies of NHS procurement

My ears pricked up this morning when I heard the NHS CX, Simon Stevens, explain to Andrew Marr that they were "going to clamp down on some of the staffing agencies ripping off the NHS".  Is this some sort of role reversal taking place - the Conservatives are in power but the market are the baddies!

In the past many public sector organisations believed that their traditional approach of having a 'bank' which they managed and could call on was flawed - outsourcing was the new best practice. Exploring the option of outsourcing did make sense but in parallel there needed to be a proactive approach to managing both the agencies and the internal demand. I observed agencies providing an easier option than the hurdles of sourcing internally through HR. Justifying the need for 'temps' was relaxed and while staff previously covered for short-term absences, that became the exception. The agencies made it easy to just pick up the phone and have a temp sitting at a desk two hours later. Then, months later, like a version of Parkinson's Law, the temp had become indispensable and the temp had become a necessity.

To me what went wrong was that public sector bodies relaxed their control mechanisms - they devolved control. Worse they gave it away. The agencies weren't the baddies, they were 'partners'. But as the clients raised their expectations of demand there was a parallel need to manage risks through prices by the agencies.

Now "some" of the agencies are perceived to be "ripping off the NHS". What happened to the 'intelligent client'? What happened to the belief in competition? What happened to managing contract prices?

Those who believe the market is ripping the NHS off would do well to review the robustness of their demand management. Agencies provide a solution which the public sector has come to rely on. Power has perhaps shifted to the market as opposed to the client. Before assuming the NHS is being ripped off why not consider a ,make/buy options appraisal. Before clamping down they better have a risk management strategy which addresses how they will respond if some of the critical providers just  say "okay, we'll not bid anymore!"

Is Procurement reputational risk mis-sold?

For many years I have heard about the risk of poor procurement performance damaging reputation - I'm sure you have too, I'm also sure you would have heard it from me too.

Have you ever thought though how adverse impact would be manifested?

The assumption on impact may well have been a share price decline  - bad media coverage about a procurement issue correlating with a decline in share price. At first glance that sounds logical enough but there's a major problem if the firm or organisation in question does not have shares publicly quoted. For example, public sector organisations, third sector organisations and private companies would not be quoted on the stock exchange!

Okay, so setting that aside, and only considering the share price performance of organisations like, Tesco, Premier Foods, Primark, and H&M - yes all these have had adverse national media coverage linked to procurement - could we see adverse impact on share price linked with the horsemeat scandal, wrong use of the Red Tractor QA logo, supplier late payments and profit mis-statement, supplier coercion (e.g. pay-to-stay), the Rana Plaza disaster, poor SCM conditions?

I looked at the quoted share prices, the day before the news story broke, the day after, two weeks before and two weeks after, and even considered the trends over a longer period of two years.

Now what do you think I found? Well it appears to me, without an major statistical analysis, that where you could see an adverse impact, it was short-lived (a blip) and the firm in question was already in a long-term state of a declining share price anyway - the procurement issue is unlikely to have helped but was probably indicative of wider strategic management weakness anyway.

Then bizarrely, in a few of the situations the share price increased. Yes, major adverse press coverage of a procurement related issue and the share price rose and continued to rise - the firm was on a steady long-term upwards trajectory of its share price and the adverse media coverage of the procurement issue appeared to have no detrimental long-term impact whatsoever - perhaps it was how the firm was perceived to have responded to the issue?

Also interesting was when I considered firms which were perceived to have come out well in media coverage, for example, those food retailers who were praised at the time of the horsemen scandal. I couldn't find a tracker which demonstrated a benefit - they were not publicly quoted on the stock market!

What does this tell us? Well the whole threat of potential repetitional damage used in selling procurement strategy may well be mis-selling. Perhaps procurement issues are not as big an issue as we see them? Perhaps nobody really cares? Perhaps the whole notion of measuring adverse impact through share price is flawed?

What do you think?

First published on 28 April 2015 as a Spendmatters guest post