Tag Archives: public procurement

Outsourcing versus Insourcing – Where to Play When the Music Stops

In the fourth article in a series charting the key issues in public sector procurement, we examine the difficulties for organisations in deciding whether or not to outsource key strategic services and what this may mean for procurement.

I’ve been told in the past that procurement is a cyclical beast – the chances are high that a decision made today will be revisited in 5-7 years’ time and reversed, only for it to cycle round again at the next strategic business assessment.

One common example is centralised versus decentralised services and the level of autonomy business units are given. I’ve had the opportunity to witness this cyclical decision making first hand and have to say that, as much as it sounds fantastical, there’s a ring of truth to it.

I wasn’t long into my role with the organisation in question when the procurement department was pulled into a meeting with the Procurement Director. The purpose, ostensibly, of the meeting was to discuss the strategic direction of the department. However, the experienced members of the team knew exactly what was coming and they were proved to be correct.

The decision had already been made to centralise the procurement activities to one site (ours), with the Director justifying the move with talk of cost efficiencies, economies of scale and better governance over processes. This all sounded very sensible to me, a relatively green procurement professional. After all, the organisation as a whole had cost savings targets and to me it didn’t make sense to have everyone doing their own thing when it came to procurement.

It wasn’t until I sat down with my more experienced (and some might say cynical) colleagues that I fully understood what was going on. This was a strategic decision made by a new Director looking to put their stamp on the department. Not only this, but the department had only gone through an exercise of decentralisation 6 years before, with the move justified by talk of greater efficiency, more autonomy and procurement better able to service the individual site needs.

It became clear during my conversations with other department members that not only did they think this wouldn’t change the way the business worked (wasting time and money in the process), but that it would be reversed by the next Director in a few years’ time. I’d be lying if I said this whole thing didn’t confuse me, but I was to realise that this was more common that you might think as my time in procurement went on.

The Strategic Hokey Cokey

The example above is meant as an illustration of how strategic decisions can be made and justified no matter which side you fall on. It is neither complaint nor criticism, but an observation from someone who, at the time, had next to no experience in procurement. As time went on, I ended up procuring external services as part of a role, as well as managing an in-house manufacturing process for a procurement department.

The decision of whether to outsource strategic services, or keep the work and skills in house, is one that faces many organisations. Taken as part of the decision making cycle, it can begin to feel a bit like the hokey cokey. Insource this, outsource that, in-out, in-out, shake it all about and, frequently, hope for the best when someone comes asking about business costs and value.

But what is the best value approach when it comes to sourcing key strategic services? In the public sector, an argument could be made for outsourcing for budgetary or expertise reasons. However, the counter-argument relates to potential job losses and the erosion of workers’ skills, losing the option to bring them back in-house in the future.

The strategic services most commonly associated with outsourcing would include HR, Marketing, Finance and even Procurement. But in the public sector would there be an appetite for outsourcing procurement? And what could it mean for this and other services in the long run?

On the Way Out?

Fundamentally, it boils down to the question of whether or not the public sector could or should outsource their procurement function, and what the benefits would be were they to choose to do so.

We’ll come back to the first part of that question shortly. Ascertaining the benefits of outsourcing procurement is tricky, as any benefits tend to be subjective and wouldn’t necessarily apply to all organisations. There has been plenty written, too, on both sides of the debate, including a very interesting discussion on Procurious.

From a wealth of articles on the subject, the most commonly mentioned benefits to outsourcing a procurement function include cost reduction (relating to head count, training and access to resources); accessing expertise in a particular area in the market; a way of complementing existing resources; and the access to extensive networks of knowledge through highly-skilled procurement professionals.

However, on the flip side, there are also a number of negatives raised. Organisations can lose control over day-to-day procurement activities, and through this there is increased risk; there is a potential for the quality of the work to adversely effected; and although procurement has been outsourced, there will still be a requirement to purchase these services and manage the subsequent contract, which may not provide all the time-saving benefits first considered.

Instruct the Experts?

There are a number of organisations in the market that offer procurement as an external service – Capita, GEP and Capgemini to name but a few. The similarities between the services? All of these ‘consulting’ organisations highlight cost savings in their literature and focus on areas such as analytics, research and digital procurement (areas where many organisations lack both expertise and time to carry this out) as a core offering.

From this you would think that a consulting-led service would provide a very attractive option for the public sector. After all, it ticks all the right boxes – improved efficiency, reduced costs and expert-led services. Taken from that point of view, why wouldn’t the public sector choose to instruct the experts, use resources elsewhere and watch the savings roll in?

Apart from being a gross over-simplification of the issue, it doesn’t take into account the wider considerations of skills and training. A decision to outsource in the short-term could lead to a skills shortage in the long-term, and the loss of the opportunity to bring these services back in house without having to set up a new function from scratch (with all the associated costs).

For the public sector, there is an additional consideration – perception. Government, Local Government and Local Authorities have to be particularly careful, perhaps more so than private companies, with public perception and what may be printed in the local and national newspapers. A decision like outsourcing a service, which will be paid for with public money, and for which there may be associated job losses, may not meet the relevant criteria even taking cost savings into account.

The reality is that there isn’t really a right answer for this question and no one correct view in the debate. The right decision now may prove to be the wrong one in hindsight, or due to the cyclical nature of procurement and procurement strategy, may be turned a full 180 degrees a few years down the line.

That said, it’s no time for public procurement professionals to rest on their laurels. There’s plenty to learn and plenty to do – it’s just up to us to make ourselves so invaluable an outsourcing decision couldn’t possibly happen.

Late, Late For An Important Date? Why Time Isn’t On Public Procurement’s Side

Time is fleeting and never more so when a contract deadline is looming large. How can public sector procurement professionals use their time more effectively?

In the second in a series of articles on the challenges facing public sector procurement, we examine the issue of time and why it must be managed better.

Before we begin, I have a riddle for you:

This thing all things devours;

Birds, beasts, trees, flowers;

Gnaws iron, bites steel;

Grinds hard stones to meal;

Slays kings, ruins town,

And beats high mountain down

Extract from ‘The Hobbit’ by J.R.R. Tolkien, 1937

Those of you familiar with the great J.R.R. Tolkien will recognise this as one of Gollum’s riddle to Bilbo Baggins in ‘The Hobbit’. The answer? Time, of course.

Time is the one thing none of us can avoid and all wish we had more of. How many times have you wished you had an extra hour before a work deadline? And that’s before we even consider more time at the weekend, or an extra hour in bed!

For public sector procurement professionals, it frequently feels like time is not on our side. An increasing volume of ‘Business as Usual’ work, combined with new ‘one-off’ projects, means it can feel like a juggling act to meet all the relevant deadlines.

In the public sector, these deadlines can sometimes mean the difference between the delivery or not of critical goods or services across a city.

It often feels like we’re like the White Rabbit from Alice in Wonderland, constantly running late for an important date. And the more time pressure builds, the more likely it is that mistakes will be made, costing even more time in the long run.

Typos in letters, ambiguity in specifications and issues with evaluation or award criteria – they all have the power to send us back to the drawing board. Getting it right first time is critical as the more time spent doing tendering, the less time there is to actually manage contracts.

When it comes to creating the value and savings required in the public sector, contract management is key. After all, you can agree savings in a pre-contract phase, but without effective contract management, organisations will typically lose 50 per cent of this value in the first year of the contract.

And that is why we need to manage our time more effectively.

More Haste, Less Speed

Before looking at how time might be managed more effectively, it’s worth examining why procurement in the public sector can be so time consuming.

Public sector procurement is a very bureaucratic, very legalistic, very risky – for both buyers and suppliers – and, ultimately, very slow process.

For procurement exercises above the EU Procurement thresholds, and requiring advertising through OJEU (Official Journal of the European Union), it’s not unusual for the process to take up to nine months (and frequently even longer) from identification of need to the award of a contract.

And while that may seem like a complete anachronism to those of you in the private sector (and believe me, it did when I first started in the public sector), there are good reasons for this. The process is aimed at promoting competition and procedural conformity, not necessarily value for money, though this is what most public procurement professionals are aiming for.

Greater competition allows for more open and transparent tendering and contracts, where SMEs, local suppliers and parties that may not ordinarily have access to these markets can get involved. A wider supply base may lead to new ideas, innovations and process improvements while at the same time potentially being a boon to the local economy.

The bulk of this time is taken creating a set of fully auditable documents for any procurement exercise above these thresholds. This includes a sourcing strategy, outlining key decisions and the reasons for them, detailed tender documents, including specifications, selection and award criteria, and a fully tracked evaluation process.

The type of route to market will, of course, be determined by the product, service or public works being procured. The detail of all of these routes is too much to go into here, but you can find a lot of useful information on ‘The Procurement Journey’, if you want to understand the end-to-end process.

There is limited scope for reducing the time taken to complete these processes, so where can time be saved to allow for more contract management? This is where good planning comes in.

Proactive Procurement

Procurement could be accused of operating in a reactive manner and it’s no different in the public sector. However, this can often be attributed to the nature of procurement’s place in the organisation and the changing nature of how organisations operate and procure goods and services.

The increasing number of ‘one-off’ projects, on top of the ‘Business as Usual’ work, can make even the best procurement functions feel like there is a never-ending volume of tenders to complete (referred to as the “tender sausage machine” where I work).

Moving from a reactive to proactive approach can help in this and crucially buy more time for that all important contract management. There are three suggestions below to help make this work, but it’s important to understand the caveats on these at the same time.

Making this a reality takes not only input from procurement, but from all its stakeholders and end users across the organisation. Procurement needs to be seen as a key strategic function and help mould the strategic direction that underpins procurement requirements.

That said, there’s still plenty scope for procurement to make changes and help things run that bit smoother.

  1. Proper Planning Prevents Poor Performance

This is very simple to say, but very hard to do. Get all your contract details in one place, including the dates of when they need to be retendered or procured and plan accordingly. Have quality project plans available to help understand when the procurement process needs to start and the key dates involved. Most importantly, share these dates with your stakeholders and then stick to them.

  1. Don’t “Boil the Ocean”

Once you know the procurement requirements, assess the market to see if other organisations or Local Authorities are doing the same or have been there before. Ask for documentation – my experience is that people are only too willing to share if they know it will be reciprocated in the future.

Also check out organisations like Scotland Excel, Yorkshire Purchasing Organisation (YPO) and Crown Commercial Services (CCS) for frameworks. If the framework is applicable, that’s half the work done for you and a major time saver.

  1. Kick-off Means Buy In

A kick-off meeting is a good way to get all the appropriate people in the room to discuss the requirements of the contracts and make sure that all the vital details are captured. Getting this done up front not only means you are better prepared, but you also get buy in from stakeholders who feel involved and will be better placed to help push the project along.

These suggestions by no means cover everything that can and probably should be done to make the procurement process more efficient. However, from the point of view of marginal gains, making these adjustments should help increase procurement efficiency and free up time to manage the contracts you’ve put so much effort into creating in the first place.

Public Sector Procurement Talent: Fact V Fiction

The search is on for top talent to fill an increasing number of procurement roles. But is the public sector being beaten to the finish line by its private sector counterparts?

In the first in a series of articles charting the key issues facing public sector procurement, we examine the facts and fictions of the public and private sector battle for talent.

Talent and recruitment – just two of the key issues for CPOs and Heads of Procurement around the world. As the role of procurement expands, managers need to know their teams have the right skills for the job. For many, this means searching for the profession’s top talent, the high achievers. The superstars.

But identification is only half the battle. Actually attracting these stars to your team is another challenge entirely. And this is where many believe that the public sector loses out to its private sector counterpart. But how much truth is there in this?

The Facts

According to the CIPS/Hays Procurement Salary Guide 2017, 70 per cent of managers said they were planning to recruit within the next 12 months. However, 51 per cent also admitted that they faced challenges in finding the right talent in the face of a skills shortage and budget constraints.

Let’s set budgets aside for a moment. There is a distinct set of skills required for success in public sector procurement. Sure basic skills are all transferrable, but public sector professionals need to adapt to a very different, highly political, environment.

Add in the requirement to drive new ideas, use specific IT systems, and operate within the bounds of EU Procurement Regulations and you’re starting to look at quite a bespoke skill set.

Speaking from experience, the majority of these skills can be learned or trained. But with budgets (that word again!) tight and time short, training is becoming an increasingly unaffordable luxury for many in the public sector.

This means public sector hiring managers are chasing the white rabbit – those professionals with all these skills, able to hit the ground running on Day 1.

But in a sellers’ market where there are an increasing number of procurement jobs to be filled, professionals with these skills are in demand. And this comes at a price.

All About the Money, Money?

Money isn’t everything and it can’t buy you happiness (according to Rousseau at least), but it is a key driver for procurement professionals when they look for new roles.

According to the CIPS/Hays Guide, 72 per cent of respondents highlighted salary as the key factor for a new role. This is compared to 41 per cent and 36 per cent for flexible working and non-salary benefits respectively.

The money argument seems to be borne out by the average salaries across the sectors in the UK:

  • Private Sector – £46,825
  • Public Sector – £40,915
  • Charity Sector – £40,379

And the trend continues when the average salaries are broken down by seniority within the public and privates sectors (see below):

The picture doesn’t get any better for the public sector when bonuses are taken into account either. In 2017, an average of 50 per cent of professionals received a bonus in the private sector, versus only 13 per cent in the public sector.

However, the public sector may have the beating of the private sector in one facet – non-financial benefits. Over two-thirds (67 per cent) of public sector professionals have access to flexible working (versus 36 per cent of the private sector), along with greater provision for support for study and career development.

The Permanent vs. Temporary Debate

The other option open to hiring managers is bringing in interim or contract workers. This has proven to be a good way of providing additional resources in a flexible manner for specific projects or time periods. The CIPS/Hays Guide states that 61 per cent of public sector organisations will recruit in this way.

While this suggests that there is an attraction for some professionals in contracting, many looking for new roles want the security and safety of a permanent contract. So how much truth is there in the belief that the public sector isn’t able to offer this type of contract?

While it was certainly more fact than fiction when it came to salaries, there is certainly less evidence for the permanent-temporary contract question. A search across UK job sites for public sector procurement roles shows that actually there are almost twice as many permanent roles advertised as temporary, contractor or interim roles.

So taking this factor out of the equation, what solutions are available to the public sector to meet the recruitment challenge?

Redressing the Balance

Unfortunately, there is no easy answer. Budget restraints make it nearly impossible to compete on salaries, bonuses and other financial benefits. However, it’s not all doom and gloom. There is plenty to offer besides salaries that make jobs attractive.

The CIPS/Hays Guide shows that the majority of public sector organisations are making flexible working available to their employees. Having contracts that are as flexible as possible only increases their attractiveness at a time where people (and many organisations) are looking to step away from the traditional desk-bound, 9-5 roles.

Flexible working hours, flexi-time, working from home and contracts allowing greater work-life balance are just some of the non-financial benefits job seekers will look for.

The second area is the attractiveness of the roles. This might seem like a counter-intuitive argument given what’s been said before, but this doesn’t relate to money, contracts, or working hours.

A common (mis)conception of the public sector is that it isn’t as interesting. The truth is far removed from this. From roles that allow procurement professionals to directly impact their cities for the better, to working on major, one-off projects – think the European Championships in Glasgow in 2018, or the Commonwealth Games in Birmingham in 2022.

And these are just a couple of highlights in the vast array of fascinating projects in the areas of sustainability, technology and services only available in the public sector.

Raising the profile of these roles or projects and their interesting, challenging and diverse nature can only help to attract the superstars.

So here’s my challenge to you in the public sector. What are you going to do to help?

Do You Have Any Idea What Your Consultants Are Doing?

Hand-on-heart: Can you swear that you’ve properly briefed consultants and paid only for what you’ve received?

Buying professional services is often accompanied by a host of reputational risk and budgetary pressures.  However, for the public sector, a new approach to professional services procurement is proving that it doesn’t have to be that way.

Public sector procurement continues to be a highly debated topic in the UK, against a backdrop of reduced budgets and high-profile failures, it seems clear there’s still a need for new and innovative approaches.

What needs to change? Well, traditional purchasing frameworks have long been pegged as a solution to the sector’s buying challenges. They promise fully compliant access to a range of suppliers with all the hard work that comes with the tender process done for you. However, as they often offer a limited pool of suppliers and a notable cooling-off period which can delay a project’s start date, frameworks can be a frustrating route to market for some.

It’s in the procurement of professional services where the frustrations of traditional routes to market are often most keenly felt. There’s often a lot at stake. As budgets shrink and requirements evolve, the need to access expert external advice, often at short notice, is crucial to the success of some projects.

Consultants are often appointed as trouble shooters; to advise and lead on new projects or even spearhead big organisational changes. Using such services can represent a significant investment for public bodies and the failure of high profile projects such as IT infrastructure demonstrates the reputational and budgetary risk that can occur if you don’t get it right. Control is a key success factor.

There’s a need for change and some public sector bodies have already embraced a different approach. It’s an innovation that, unusually, could see the public sector leading the private sector.

The NEPRO neutral vendor solution recognises and responds to these and other short falls of traditional frameworks. It helps procurement professionals gain that control, mitigate reputational risk, deliver on budgets and manage demand. It’s a fast solution for the procurement of professional services that offers a welcome alternative to traditional purchasing routes.

The NEPRO solution is based on outcomes – buyers pay only for results delivered, measured by pre-agreed project milestones. We’ve all heard stories of consultants hired by public sector organisations to work on a specific project for a significant fee, only for the provider to still be there long after the project has finished having been hijacked by another department. This approach puts an end to that, with both the buyer and supplier clear on what is needed, by when and at an agreed fee.

If there’s no robust focus outcomes or deliverables it’s easy to see how contractors can end up staying in departments long after project completion and be paid significantly beyond the original value of the project they were hired to support.

When speed is important, procurement professionals have the opportunity to cut red tape and realise the benefits of consultant-based projects in a third of the time it traditionally takes to procure professional services. While traditional procurement routes can take 100 days from initial request for information through to a consultant starting work on a new project, this approach can see consultants start work in an average of 30 days through direct contract awards and fully compliant mini competitions.

The starting point for any new project is to fully understand what the buyer needs and find the right supplier to fulfil the brief. All the complexities of supplier management are taken care of on behalf of the buyer, providing compliance, control and transparency of expenditure. NEPRO delivery partner Bloom then manages the project and assures delivery.

We’re proud to now be transforming the procurement of professional services across the UK, giving buyers more choice and more business opportunities to suppliers of all sizes. To put that in context, last year, the number of contracting authorities wanting to procure through Bloom almost doubled to 170, suggesting that the public sector is waking up to this faster and more effective way to procure the services of consultants.

By Rob Levene, executive director and co-founder, Bloom.

With its unique neutral vendor solution, Bloom offers buyers access to a vast community of over 4,000 suppliers across 19 categories and 240 sub-categories. This dynamic supplier marketplace drives choice and competition and with over 70% of projects delivered by SMEs, helps drive growth back in the local economy and supports social value agendas.

The Big Squeeze in Public Procurement

As budgets continue to shrink, how can professionals working in public procurement do more with less?

We live in a world of apparent contradictions. The amount of money being spent by global governments is rising year on year. And yet, in the majority of these countries, public sector institutions are seeing budgets shrink at the same time.

Governments are increasing spending in order to continue to provide vital services to the public. In the UK, public spending reached £761.9 billion in 2016. This is forecast to rise again in 2017, with total UK public spending is expected to be £784.1 billion.

However, there are a number of factors that need to be taken into consideration when assessing these figures. The average age of the population is on the rise. Health services are dealing with a rise in chronic diseases as a result of lifestyle choices. Investment is not only being put into social care, but also into improving the lives of the entire population. All this means that any increase in spending is swallowed up as quickly as it is released.

In addition, slow global growth means that Governments have to be aware of future spending too. What this means, ultimately, is that spending at a local level is reduced. So what does this mean for public sector procurement?

More for Less

In Scotland, funding for Councils from the Scottish Government has decreased by an estimated £180 million for 2017-18. Some of this will be offset by rising Council Tax across the country, but many Councils and Local Authorities will still be looking to make major savings.

Maintaining, and improving, public services is only the start. The public sector in a situation where they not only have to achieve more with less, but they also have to invest wisely to help future savings targets.

Technology is just one area where this can be achieved. Many cities are investing heavily in technology that will align with existing infrastructure. Following in the footsteps of pioneering cities like Barcelona and Stockholm, a number of UK cities are moving to become ‘Smart Cities’.

Intelligent Street Lighting, sensors measuring urban data including city centre footfall, air quality, and new applications for refuse collection and public parking, are just a few examples of how technology helps to build a smart city.

These technologies have a dual-benefit for Local Authorities, and other businesses in cities. Data collected can be used to drive savings initiatives, while at the same time helping to improve the quality of life for residents.

Public Procurement’s Three Cs

What does this mean for procurement? The profession will be at the forefront when it comes to savings initiatives, and will play a vital, and ever-increasing, role in these projects. But at the same time, procurement still needs to prove its worth to, and make these savings stick.

If you’re looking for somewhere to get started, or to drive continuous improvement, here are three Cs that are applicable no matter your organisation, industry, or category (or even sector).

  1. Challenge

The best saving procurement can make is by not spending money in the first place. And the best time to do this is at the very beginning of a project. By challenging requests, procurement can begin to weed out wants from needs.

Does the organisation actually need this? Does it really need the 24-carat, diamond encrusted version, when an off-the-shelf one will do just fine? Is there an alternative solution to the question that could cost less while doing the same job?

Get your client, end customer, and specification writers to really think through their requirements. Once you’ve done that, you can move on to the next C.

  1. Collaborate

Collaboration should be both an internal and external activity. Procurement should be involved from the start of the project, and work closely with other departments to get the best for the organisation.

The public sector can also collaborate more too. Instead of all setting up individual projects for the same thing, why not share what’s been done in the past? Frameworks, Dynamic Purchasing Systems, and collaborative purchasing can help save time, resources, and money.

It’s also time to be working more collaboratively with our suppliers. Procurement needs to focus, where appropriate, on building long-term relationships. By building these relationships, suppliers will feel more open to collaboration, and potentially start bringing innovative solutions to the table.

And the other thing collaboration is going to help is with the final C.

  1. Cost

As in total cost, lifecycle cost, or Total Cost of Ownership. It’s critical to long-term savings ambitions that the total cost of goods or services is understood. Depreciation, residual value, maintenance and disposal costs all need to be taken into account before any decisions are made.

Procurement should also be focusing more on the cost element with suppliers too. Profit margin is not necessarily the best place to start looking for savings. Rather than creating the perception of going after profit, switching the focus to cost can provide more opportunities for discussion and even innovation.

Getting Started

While these are very good areas to start in, they are just the start of a larger exercise. However, they will help to provide the foundation for best practice, and to change the way projects are put in place across the organisation.

President Trump and Procurement – The Impact

As the weeks unfold, we begin to get a better understanding of what impact a Trump Presidency will have on procurement.

There is, of course, no need to introduce the events of Tuesday 8th of November 2016 to readers. On that day, Donald Trump won enough Electoral College votes to be elected as the next President of the USA.

The implications for the procurement industry may at times be daunting and hard to anticipate. However this article should shed some broad light on some of the possible implications. Two of the main implications are infrastructure spending and trade deals.

In terms of Trump’s policy platform, detail is so often conspicuous by its absence. In his “Contract with the American Voter” however, he has outlined extensive policy proposals for his first 100 days as President.

Impact on Infrastructure

The first likely impact is infrastructure, which is one key tenet of this “contract”. Despite having far-right positions on many areas, Trump does have more centrist positions on some areas, especially infrastructure investment.

This may well boost the economy, albeit fuelled by debt, unless highly ambitious funding mechanisms come to fruition. He has vowed to spend $1 trillion on infrastructure over ten years. This would of course require huge procurement expertise for large road and bridge building and various other industries. We will have to wait and see what happens with building walls, however!

But the real impact of this expansive infrastructure spending would not be the huge procurement processes required, but more the method through which it may be achieved.

Whilst it is far from certain how the incoming administration could fund such a project, while providing perhaps the biggest ever tax cut, he would also need Congressional approval.

Public-Private Partnership Proposals

The infrastructure is not proposed as fully funded by the federal government, but largely through public-private partnerships (PPPs). If this sets a trend, the implications for funding of public services in the USA and other countries, especially developed market economies such as Western Europe, could be significant.

PPPs such as this have been generally successful in some cases and rampant failures in others. In the UK’s National Health Service for example, they have been a highly controversial mechanism. Many argue PPPs have fostered long-term financing issues, and harmed patient care and outcomes.

Further, many argue that the privatisation that PPPs cause brings about fundamental change to the relationship between the state and citizens. With this, public services are delivered based on promises of profit. For infrastructure investment to go ahead, it has to be based not on the gain for society, economy or environment, but where a surplus can be extracted.

Impact on Global Trade

The second main impact will be Trump’s influence on global trade, which is a driver of prosperity worldwide, alongside his threats of protectionism. Since the global financial crisis, cross-border trade has stagnated. This has been the longest period of stagnation for over 70 years.

Trump has an overtly protectionist stance. He has already threatened to hike tariffs on imports from China and Mexico, as well as pull out of the North American Free Trade Agreement (NAFTA) with Mexico and Canada.

In broad economic terms, this would increase living costs for domestic citizens. It would, without any doubt, be reciprocated by other countries such as China (as early noise coming from Beijing confirms). It would also affect jobs in export industries in the USA and the USA’s economy as a whole.

For public procurement in the USA however, this could also be significant. American public services could be restricted from products they currently source cheaply from abroad.

The increased costs from domestic purchases have to be made up from somewhere, such as savings in other areas, purchasing lower quality goods or increasing costs for users of public services.

The same could be true in Canada and Mexico. If the USA pulls out of NAFTA and applies tariffs on Mexican and Canadian goods, reciprocal protectionism would restrict Canadian and Mexican access to high-quality goods and services sourced from the USA.

Global Impact

Outside North America, the implications could also be significant for procurement professionals around the world. President Obama has been pushing hard to ratify the world’s largest ever free trade agreement – the Transpacific Partnership (TPP).

This opens procurement markets, and removes tariffs, between 12 countries, including Australia, Japan and Vietnam. Trump has confirmed he will cancel this deal on his first day in office. This will deny public procurement across all participating countries the opportunity to increase procurement competitiveness and reduce sourcing costs. It’s also likely to decrease the choice of the goods and services available for purchase.

The same is true with the Transatlantic Trade and Investment Partnership (TTIP). The trading impact of TTIP, between the USA and European Union, would have been huge. Whilst talks reached an impasse in 2016 when negotiating procurement market access, Trump is likely to be the final nail in the coffin.

TTIP again would have been a boon to procurement teams in all countries, with increases in competition and decreases in price for all countries. This would have provided European contracting authorities with tariff-free access to high-quality American goods and services and vice versa.

Despite the threats of uncontrolled climate change and protectionism, the impacts of a Trump presidency are really yet to be known. Yes, Trump may have secured his “contract” with the American voter. But the contract will be re-tendered in under four years. The outcome of that really is unknown.

Creating Community Empowerment With Football

How taking an interest in football can help put community empowerment at the heart of public procurement.

Lots of public bodies at national, regional and local level like to talk about community empowerment don’t they? That’s because promoting community empowerment is perhaps the holy grail of participatory democracy.

Many politicians and policy makers believe that getting communities more involved in what public money should be spent on and, more importantly, why, will lead to improved outcomes for people and their communities. And there’s plenty of evidence to back this up.

For procurement, tasked with delivering more for less, increasing community empowerment could also mean that the ever-decreasing pot of cash available to spend on public services could actually be deployed in a much more effective way.

Empowerment and Football?

So what we can we do in procurement?  How could we promote community empowerment and what benefits could that bring?  When I was searching Google for examples, strange connections started to occur.  Wherever I found a good example of procurement and community engagement, great football, or soccer to those of you on the other side of the pond, was also evident too. You don’t believe me? Well read on…

Let’s start in the home of sexy football, Brazil.  They’ve been doing a thing called Participatory Budgeting there for a number of years, and it’s a great way to do community empowerment at the front end of the procurement process. Participatory Budgeting in Brazil is an approach which gives local people a direct say in how, and where, public funds can be used to address local requirements.

It started in a place called Porto Alegre in southern Brazil over a decade ago. The first phase of participatory budgeting was to get people together to prioritise how money should be spent, and where investment should go. Should it be parks or water supply, or schools or roads? People at the grass roots of the community were asked to come together in neighbourhood assemblies, and make those decisions.

As the process matured people were able to take decisions at an increasing lower level.  From choices between thematic areas, to choices between services within a theme, to choices about what the specification for that service should be.

So people at the front end determining priorities. Something perhaps we already get involved in from a procurement point of view through User Intelligence Groups, particularly when we have service users involved in that process.

Community Empowerment

What they’ve done in Brazil is a start, but how could we shift control even more directly to people’s hands and empower communities through procurement?

To have a look at how this might be done I moved on to another football hotspot – Spain. I zoomed in on a city which features on a daily basis in my house, and probably every household that has football crazy kids in their midst. Now the football club might be having a great season, but the real reason why Barcelona is a great place isn’t the sublime football of Messrs Neymar, Messi and Suarez.

It’s their approach to procurement using open problems that was the real wow factor for me. Instead of coming up with a specification for a service, they’ve specified the problem, and then gone to the market and asked suppliers to solve it.

They asked people from geographic communities, or communities of interest, to identify what needs they have, and then turned it over to the world’s entrepreneurs to solve them.

Barcelona’s approach was successful. They had 50,000 views of their contract notices, and ultimately let six contracts in this way for issues ranging from tackling bike theft, to systems to tackle social isolation, and empowering local retailers using technology. The thing to understand here, is that communities don’t always know the answer to what they need at the outset – they just know they have a problem.

This method of empowering them to say what they want to change and then enabling them to choose what the answer should be from a range of options, some of which they might not even have considered, is very powerful and procurement is right at the heart of it.

Going Remote and Rural

But is it just in big cities and the regions where these community empowerment approaches might work? Could we use them in remote and rural locations?

My final destination is in one of the great footballing heartlands (well we like to think so anyway!) – Scotland, and my own organisation in the Outer Hebrides.

We wanted to improve community empowerment and link it to a procurement process and so we gave a combination of Brazil and Barcelona a try.  We used a bus service contract but flipped the requirement on its head so we went out to the market to seek travel solutions for people without cars – the problem we sought to solve.

We engaged with the community to identify needs, drive specification development and score the tenders. We embedded community engagement the length and breadth of the procurement process.

To make this happen we assembled our squad of players. The Transport Team in defence, yearning to retain the old ways of doing things, community workers in midfield being creative with their consultation techniques, corporate policy playing in goal making sure we didn’t make any strategic blunders, and finally our strike force, the procurement team, taking all the needs, creativity and service requirements, and converting this into the winning goal by putting a great procurement process and contract in place.

With a 5 per cent budget saving delivered over the lifetime of the contract we clinched the trophy with no need for extra time.

Footballing metaphors aside, promoting community empowerment as part of the way we do things gives those of us in public procurement a real opportunity to shine.

It’s a chance to showcase our talent – getting the right people to have the right input into the procurement process at the right time.

It’s a chance for us to stretch ourselves and learn new techniques. To work with different types of people, using different engagement techniques, at different points in the procurement process.

And it’s the chance to deliver more for less, to provide real answers to the challenges of austerity, and to score that winning goal!

Curbing Public Procurement Fraud in Africa

Are we making any progress curbing public procurement fraud in Africa?  The consensus seems to be very little, although there are pockets of not quite excellence, but at least some promise.

The Anti-corruption Agencies

10 years ago the World Bank reviewed the activities of anti-corruption agencies active in Africa and came to the conclusion that they were not particularly effective, despite some significant funding.  They concluded that African governments, in general:

  • lack the know-how or the political will to control corruption and procurement fraud
  • want just to be seen to be taking some action, however ineffectual it is in practice

In reality, if a study was undertaken today, the results would be about the same. This is despite efforts by the Organisation for Economic Cooperation and Development (OECD), Transparency International (TI) and Corruption Watch and others.

TI’s arm in Ghana, GII, says that their “vision is to make Ghana a corruption-free country in all spheres of human endeavour, where people and institutions act with integrity, accountability and transparency”.  Worthy sentiments, but is it just rhetoric?

The OECD tells us that “public procurement remains the government activity most vulnerable to waste, fraud and corruption due to the size of the financial flows involved”.  On average, 12-15 per cent of a country’s GDP is spent on public procurement. Some of this is wasted. However, there are no reliable statistics of how much money is lost to procurement fraud and corruption across Africa, as much of it goes unreported.

Kenya’s Procurement Woes

Despite an active but bureaucratic watchdog in Kenya: The Public Procurement Oversight Authority (PPOA), public procurement fraud and collusion in tenders is alive and well, and some say endemic. Many of the reported high value failures are in transport and logistics including railways and ports, and particularly in education.

PPOA has as its tag line “transforming procurement”. It has a laundry list of tender appeals awaiting attention and looks like it is losing the battle. Ask Haier Electrical or Hewlett Packard who together won a case against the Ministry of Education, Science and Technology in 2014 involving a project of more than US$400 million.

PwC says in a newly published report that one in every three Kenyan business leaders reported procurement-related fraud in the past two years, making it the most common type of economic crime in the country. The report faults Kenya’s procurement processes as not being robust enough to guarantee integrity at all levels.

The Politics of Preference – Women, Youth and Local Sourcing 

There is growing disquiet about preferential procurement rules and guidelines like those legislated in countries such as Nigeria.  The Nigerian government wants to help the local economy by developing emerging businesses, but new legislation on local sourcing may have the opposite effect if it is prescriptive.  Will “Made in Nigeria” allow suppliers to charge more for inferior products and services and will government buyers somehow be tempted to offer guarantees – for a fee or other benefit?

Initiatives being taken to tackle the scourge

The World Bank’s new procurement framework will allow it to better respond to the needs of client countries in Africa, while preserving robust procurement standards throughout Bank-supported projects. Since they have a portfolio of about US$42 billion in over 1,800 projects in 172 countries, this is significant.

There’s also some good news coming out of South Africa.  The Chief Procurement Officer, Kenneth Brown, has kept a low profile. Behind the scenes, his team are quietly reviewing all tenders over R10m for compliance to the rules and are looking for opportunities for cost savings.

On an expenditure of R500 billion annually, its target of savings of R25 billion looks achievable.

The State’s fragmented spending practices are now being centralised to reduce waste and get more leverage through technology. They have set their sights on some key categories: travel at R10 billion per annum, ICT, construction and leases.

The new online eTenders portal launches in April 2016 with a modest maintenance cost of just R16,000 a month. It introduces much needed transparency and will save a staggering R400 million a year that the government spends on advertising the tenders in newspapers.

Big Ideas in UK & Public Procurement

Social value and collaboration – just the tip of the iceberg for the professionals in UK and public procurement.

Ahead of the Big Ideas Summit 2016 this Thursday, we are taking a look at the key issues facing procurement in the coming years. We have asked experts and influencers in our community to share their Big Ideas on the themes we will be discussing on the day.

The concept of social value is one that has gained more traction, driven by public procurement professionals across the world. It also links heavily into the idea that procurement as a whole needs to collaborate and work together, something that we’ll also be discussing at Big Ideas.

We spoke to some of our UK-based professionals in the Procurious community to understand the big ideas in the UK and public procurement.

Helen Mackenzie, Head of Procurement, Scottish Local Government

Power Profiles - Helen MackenzieAs those of us working in or with public bodies across the world move forward through our journey of procurement reform, our challenge is now shifting from one where tackling corruption, compliance and procedures are key to one where we’re must add value whenever we can.

At the front end of the process, there’s been some innovative work looking at commissioning services using open problems. Barcelona and Stockholm have had some great results by shifting from specifying the service they wanted, to specifying the problem they wanted to solve.

Adding social value to public procurement contracts continues to be expected by policy makers. In Scotland, we’re including requirements to ensure fair work practices, including the payment of the living wage, and community benefit clauses, which have been used to create added value. For instance 1,000s of apprenticeships have been created as part of our contracts.

Ensuring our communities are involved at the heart of our procurement processes is perhaps the holy grail of public procurement. It’s something which isn’t easy to do, it’s going to require us to stretch our stakeholder engagement skills. The prize will be contracts which target resources where they are needed, people who feel public spending is actually being targeted at them and outcomes which will deliver real improvements in people’s lives.

If we’re successful in shifting our focus away from what we’ve always bought, to what we need to solve with community engagement and social value at the heart of what we do, we’ll certainly secure great contracts and we’ll make the savings we need to deliver in the process.

Jane Lynch, Lecturer, Cardiff Business School

Jane LynchLeading organisations today redesign processes for improving customer experience. This, they argue, leads to more effective business operations.

However, this may lead to initial process inefficiencies (i.e. higher process costs). Who and what should drive process improvement for our business? Is it the supply chain, the organisation’s strategy or is it all about the customer?

Chris Cliffe, Director, CJC Procurement Ltd

Power Profiles - Chris CliffeBig Ideas and innovation in procurement is certainly needed. However, not at the expense of the basics.

Think of Maslow’s hierarchy of needs and apply it to procurement. As a profession, and as individual professionals, we cannot ‘self-actualise’ until we have satisfied the more fundamental needs of our roles. 

As a professional collective, we need to get a lot better at collaborating as individuals, and as a profession, to ensure that the ‘physiological’ and ‘safety’ needs are met, which in our scenario is the basics such as spend analysis, market knowledge, proficiency at transacting procurement processes (particularly the regulated public sector processes).

With that foundation satisfied, we can move on to the ‘Love & Belonging’ and ‘Esteem’ needs, which for us is where many of us still struggle. Being invited to the top table at our organisations as true business partners remains a consistent challenge. 

At this level, we need to be more proactive in demonstrating and promoting contract management and supplier relationship management achievements, not just (but also) procurement process cost savings and force our way in to the strategic conversations. 

From this point we can dream of ‘self-actualisation’.  All contract spend is compliant and being managed well.  Our deep market knowledge is maintained, valued and collaborated on with peers and suppliers alike.  We are highly valued by our executives, and the ‘go-to’ people for business advice and guidance. 

Many of us can only dream of that utopia, and unless we work together on the basics, it will only remain a dream and no amount of retweets will improve our futures.

There’s still time to register for Big Ideas 2016. Visit www.bigideassummit.com, join our Procurious group, and Tweet your thoughts and Big Ideas to us using #BigIdeas2016.

Don’t miss out on this truly excellent event and the chance to participate in discussions that will shape the future of the procurement profession. Get Involved, register today.

South African Public Procurement – A Work in Progress

Despite some leaps forward in recent years, South African public procurement is still suffering from the same issues.

“Despite the reform processes in public procurement and the employment of Supply Chain Management (SCM) as a strategic tool, there are predicaments in South African public procurement practices”.

This was one of the observations in a report by two leading academics at the University of South Africa in 2012. They noted, “For example, there is non-compliance with procurement and SCM-related legislation and policies as well as tender irregularities.”

You could say that not a lot has changed, South African public procurement still has some predicaments.

The Last Few Years

Since 2012, we have seen the appointment of a Chief Procurement Officer, Kenneth Brown, who is responsible for overseeing the entire SCM operation. His role is to ensure that the procurement of goods, services and construction works is fair, equitable, transparent, competitive and cost effective, and in line with the Constitution and all relevant legislation.

This in itself is a big ask as there are many laws, guidelines and regulations to adhere to. His portfolio includes central and provincial governments, municipalities and state-owned enterprises.

A new initiative is an e-tender portal and the creation of a centralised database of approved suppliers. This is a noble effort to fight corruption and make government procurement more efficient and cost-effective. The system, where all tenders are advertised, is also designed to electronically verify a supplier’s tax and black employment equity status, as well as to uncover any government employee attempting to do business with the state.

In the 2014-2015 tax year, the public sector spent >R500-billion on goods, services and infrastructure. The Government itself has admitted that at least R30-billion of this was lost to corruption. In 2015 the Treasury took a bold step of undertaking a Supply Chain Management Review on the status of SCM in South Africa and found it wanting.  This was the first attempt at assessing the situation since 2004.

The 2015 Supply Chain Management Review

The Treasury should receive kudos for highlighting its own shortcomings and imperfections, and providing some glimmer of hope of improvement.

The Review acknowledged that:

  • SCM across South Africa is highly fragmented. This makes it difficult for government to obtain maximum value from the purchasing of goods and services.
  • It needs to improve skills, processes and systems which are critical for a well-functioning SCM system.
  • It is dogged by “constant allegations of corruption and inefficiency”.
  • Key problems are: inexperienced leaders, high staff turnover rates, confusion about roles and responsibilities, political interference and the red tape for small and medium businesses.

So what is the plan?  

The big plan is to replace all the legacy systems, more than 30, with just one. This will be an integrated financial management system (IFMS) which will include the central supplier database. This will make data mining possible, and will provide more transparency into bid awards, a concept that has not been well understood in government circles up to now.

The intention is to centralise government contracts for categories such as:

  • Banking services;
  • Information Communication Technology (ICT) services;
  • Infrastructure;
  • Consulting services;
  • Security services;
  • Air travel and accommodation;
  • School textbooks and stationery;
  • Healthcare equipment; and
  • Leased buildings.

Technology will take us part of the way

Investment in technology, especially an e-procurement solution, has the potential to improve SCM efficiency and effectiveness considerably. Currently, the different systems result in fragmented and unreliable data, inconsistent processes, varying compliance levels and ineffective results.

It is not straightforward though. South Africa has a complex and unique system of preferential procurement policies to protect and advance previously disadvantaged people. These variables have to be integrated into any decision making software.

The many challenges can be grouped into these categories:

  • managerial, compliance and monitoring issues
  • lack of knowledge, skills and capacity
  • inadequate control systems
  • fraud and corruption
  • fragmented spend and lack of transparency

Comparisons with other countries

South Africa is not alone in its aspirations to do better. The UK has just implemented the Public Contracts Regulations which adds another dimension and complexity to Government procurement in UK, and brings practice into line with European Union regulations. One objective is to make procurement across EU countries easier and increase transparency.

A bill was introduced recently to promote the appointment of a Chief Procurement Officer for the United States. However, it was not passed into law due to the start-up costs, despite projected savings of 10 times the investment. It just goes to show that even developed markets have their problems.