Tag Archives: public sector procurement

What To Do When Stakeholder Management Gets Tough

Everyone has encountered difficult customers or stakeholders when running a procurement exercise. It’s how we choose to deal with them that can define success or failure for our tenders.

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Recently I’ve been running a recruitment process at work, using the oft-derided and disliked ‘competency-based’ questions as part of the interviews. One question in particular got me thinking about my own experiences in procurement. That of dealing with a difficult stakeholder or customer relationship.

We’ve all had them, even if they didn’t necessarily feel like that at the time. Whether it’s the end user who keeps changing their mind about what they want, or the stakeholder who believes their opinion is more important than everyone else’s. And then there’s the supplier who believes they know better than you, that your process is flawed or you’re asking the wrong questions, and that they have the key to fixing it.

These aren’t necessarily difficult or challenging relationships all the time. Good stakeholder management encourages input from all sides, but there are times that opinions are unhelpful, unwelcome or downright wrong. And when this is the case, but the stakeholder remains convinced that they are correct, the relationship can prove to be make or break for the success of the exercise.

Path of Least Resistance

This brings me back to the original question that got me thinking in the first place. The question continues by looking for more detail on how the relationship was dealt with and what the outcome was. The aim of the question is to dig a little deeper into the competency of ‘influence’ and establish how the candidate managed the situation to a successful conclusion.

But as anyone who has encountered this issue in the past knows, success isn’t always a guarantee (more on this shortly). A good outcome may not necessarily be a bell-ringing, trumpeter-blowing success for the tender. Sometimes the best outcome is no outcome at all, a compromise, or a solution that follows the path of least resistance in order to preserve a much-needed relationship for the future.

And that is the tale that I want to tell now. Instead of focusing on the theory, I wanted to share a story from my own procurement experience where hard lessons were learned and gaining the realisation that not all relationships are destined to be easy.

Introducing: The Engineer

DISCLAIMER: The people in this story ARE actually real and any resemblance to anyone you know is because you have probably met someone just like this! I have, however, changed names and kept details deliberately vague to protect identities.

Picture this. A young graduate procurement trainee, a bit green, a bit wet behind the ears. New job, new suit, new city. Yes, you’ve guessed it – it’s me! If you’re picturing something similar to a parent’s photo of their children on their first day of school, that’s probably what I looked like to tell the truth.

I hadn’t been in procurement very long at all, having fallen into the profession while looking for graduate roles around the UK. It was all a bit new to me, but I’d delivered a couple of projects and was getting the hang of what was required. I’d started to build up a good foundation of knowledge and some solid, supportive relationships across the business.

That was until I met The Engineer. The Engineer had a reputation that preceded him – hard to pin down, hard to please, just generally hard to work with.

Colleagues more experienced than I (this is where the warning signs should have come in that I was getting the dubious please of this particular contract!) told stories of a nice guy, but someone with very little time for procurement and procurement/tender activities. The department was a roadblock, the processes too cumbersome. He knew plenty of guys who could provide the goods quicker and cheaper. That was, after all, “what we’ve always done around here”.

A Challenging Time

My experience wasn’t any different to what I expected after these friendly warnings. Meetings came and meetings went and the only thing that changed was the date on the calendar. The Engineer was respectful and professional at all times in his demeanour towards me, but he seemed determined to shred the procurement process.

Specifications were blocked as too vague, or not meeting the needs of the department. There were complaints about opening this up to suppliers who had been used in the past as it was felt their products were inferior. In hindsight there are plenty things I could have done differently – brought in more senior team members (I didn’t want to compound my newness by seeming like I couldn’t handle this), or change tact to put it on him to drive it forward. But, as they say, hindsight is always 20:20.

Eventually we reached an unspoken agreement and understanding that gave us a resolution of sorts. We both realised that nothing was going to change, either in the product demands or the procurement process. The contract was eventually put in place with a good supplier and the goods were delivered in good time. It wasn’t the utopic procurement outcome I had envisioned, but it wasn’t too bad. And boy, did I learn a lot!

An Interview-Worthy Response?

No matter what you do or where you go, you’ll find relationships like this to deal with. It’s ultimately how you deal with them that you need to decide on. Each relationship will be different and your response to them will differ in line with this. It’s important to remember that no matter how hard the relationship, it still needs to be worked at, possibly even harder for the particularly challenging ones.

They may not provide you with a gold-plated, interview-worthy example, but these interactions can help you further down the line and it all helps with your personal development. Just remember, no matter how hard it is, don’t burn those bridges. They may be the ones you need to cross in the future.

I’d love to hear your thoughts on this article and the series of articles on the challenges facing public sector procurement in 2019. Leave your comments below, or get in touch directly, I’m always happy to chat!

How Public Sector Procurement Can Have Social Value

With public sector organisations becoming increasingly aware that their procurement decisions have an impact on local communities, some are rethinking how they award contracts.

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Both private and public sector entities are becoming more interested in how their organisations impact society. Whether it’s in contributing to the community or managing the impact on the environment, organisations recognise they can change their local communities through who they pick to deliver goods or services.

Traditionally, it had been assumed that choosing a supplier that added social value may mean compromising for a sub-standard quality product or service, but views are slowly starting to change.

“They recognise the benefits of working with social enterprises, but are ruled by the need to mitigate risk and deliver efficient and economic services,” says Beth Pilgrim, co-founder of Supply Change.

“Often companies will just go to suppliers they know. What we are trying to explain to the public sector is that adding social value into your supply chain doesn’t have to be difficult or require extra work.”

Ms Pilgrim established Supply Change in 2018 with colleagues Aoise Keogan-Nooshabadi and Verena Wimmer after the trio conducted a series of research studies on the public sector procurement process. They found that while public sector bodies were keen to award contracts to social enterprises, they struggled to do so.

“One of the key themes that came out of our research was that social enterprises struggle to navigate public sector procurement processes,” Ms Pilgrim says. “The existing portals are not really tailored towards them, so they don’t get good visibility.”

In 2013, the UK government’s Social Value Act came into force, obligating public sector bodies to look at the social and environmental benefits of awarding a contract to a supplier, as well as the economic ones.

Heralded as a game-changer by the then-government, the Act has nudged public bodies to look more closely at the attributes of companies bidding to win work.

Despite this, some experts say that the legislation doesn’t go far enough, with a company’s social and environmental points score only accounting for a very small percentage of the overall total, and the outcome weighted towards other factors such as quality and cost.

“A number of leading authorities have recognised this and increased the social value element of their contracts,” says Ed Cross, executive director at procurement advisory group Odesma.

Mr Cross says that upping consideration of social value attributes could be good news for smaller businesses competing for contracts, but adds that the public sector still has some way to go.

“There seems to be a lack of trust in smaller enterprises, particularly social enterprises, from the public sector,” he explains.

“Part of this is down to the false assumption that social enterprises working with volunteers or part-time employees aren’t as reliable as larger organisations with full-time, paid employees.”

Mr Cross’s sentiments are shared by many, who feel that smaller enterprises can often face a real battle just to get an initial foot in the door.

“One of the biggest challenges smaller businesses face when it comes to gaining access to contracts that offer social benefits is the tick-box process of tenders for contracts, as well as how public sector guidelines are inflexible,” says Craig Knowles, marketing manager at procurement software group Market Dojo.

“The tick-box approach often means small businesses that might not fit specific criteria are left at the door before they’ve even been given the chance to prove themselves.

“There needs to be a change in attitude on taking “risks” on small business as many, often wrongly, believe they don’t have resources to work through big tenders when in reality this couldn’t be further from the truth.”

Despite widespread concerns that social enterprises and small and medium-sized enterprises (SMEs) are still missing out on contacts from the public sector, there is evidence of innovation.

Supply Change’s Ms Pilgrim says initiatives at some local authorities show how awarding contracts to smaller, local businesses can be transformative for the local community. She cites Preston in Lancashire as an example.

In 2013, the council brought in external consultants to evaluate whether it would be possible to redirect some of its annual contract-award budget to local businesses which had clear social impact objectives. Since doing so it has stimulated the local economy, putting money into local firms and increasing employment.

“We have seen how that can be a real success story,” says Ms Pilgrim. “Preston has a strategy of spending money within their local economy to build up SMEs, social enterprises and the voluntary sector as much as possible. It has resulted in a turnaround in the local economy.”

Similar projects are now underway across the UK, with Manchester City Council and Birmingham City Council among the larger authorities to consider how they can alter their approaches.

For SMEs and social enterprises looking to get a piece of the action, Malcolm Harrison, group chief executive of the Chartered Institute of Procurement & Supply, says small firms should play to their strengths.

“SMEs and social enterprises need to work hard to showcase the flexibility, innovation and financial rigour they can provide,” he says.

“To help SMEs, government should do more. Simpler language, less jargon and the chance for an open dialogue all help SMEs to compete with large companies. SMEs can themselves take charge and become more visible to potential contractors, and websites such as Contracts Finder and Compete For can be a great way of finding opportunities.”

One of the biggest challenges smaller businesses face is the tick-box process of tenders for contracts, as well as how public sector guidelines are inflexible.

This article, edited by Peter Archer, was taken from the Raconteur Future of Procurement report, as featured in The Times. 

Time to Tune into the Real Social Network

Procurement has not only great power, but also great responsibility to help drive social change. And embedding social value in tenders is only the start.

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“No fundamental social change occurs merely because government acts. It’s because civil society, the conscience of a country, begins to rise up and demand – demand – demand change.”

Former Democratic Vice-President Joe Biden

Where does the real value of a contract lie for public sector organisations? Is it in achieving a low price for goods, services or works? Or in savings in the ongoing management of a contract? Could it be in maintaining critical services for vulnerable people? Perhaps in creating innovative solutions to issues that improve the lives of all citizens in a Local Authority, or wider, area?

The truth is that it is all of these things and more. Fundamentally, the delivery of services are the lifeblood of public sector organisations and the contracts, be they for goods, services or works, are the foundation of this. But where, in the past, there may have only been a focus on cost and quality, the expectations on and in procurement have changed markedly.

The change is shown in how procurement approach the nature of the total value of the contract. Not just the cost and quality, but what it actually delivers for wider society beyond the scope of requirements. Call it social value, call it social benefits, procurement are front and centre for organisations looking to embed this wider value into their contracts.

Fair Work and Community Benefits

The Public Services (Social Value) Act 2012 was introduced in order to ensure that public bodies consider how the services they commission and procure might improve the economic, social and environmental well-being of their local area. However, it won’t be until later this year that contracts placed by central Government in the UK will have a mandatory requirement for social value considerations.

And this is where part of the issue lies in putting social value considerations into procurement processes. This regulation was only suggested and introduced in response to the collapse of Carillion, with the aim of “restoring trust between government, industry and the public”. Up until this point, any social value considerations had only been a consideration, rather than a mandatory evaluation criteria.

All this means that there are a considerable number of procurement professionals in the UK who have never put social value into their tenders or contracts. Any new measure, as with anything else, will require extensive training for buyers at a time where resources are stretched thin and training budgets are nigh-on non-existent in many cases.

However, there are a number of public bodies, particularly north of the border, who are already doing this. In 2015, the Scottish Government unveiled new guidance on making Fair Work Practices in public procurement. This included considerations on the Real Living Wage and made it a requirement for procurement to consider this as an evaluation criteria for each tender they undertook.

Now, nearly all Scottish Local Authorities have Fair Work Practices as an evaluation criteria in all procurement exercises. At Glasgow City Council, for example, Fair Work Practices has a defined weighting of 5 per cent, alongside Community Benefits as either as an evaluated (weighted at 10 per cent) or non-evaluated criterion.

Benefits for ALL to See

For procurement, Community Benefits and Social Value come in two main guises – what we expect from our suppliers; and what we expect from our purchasing. If procurement truly wants its suppliers to get tuned into this social network, then they need to be leading from the front. This means not only mandating it in contracts, but also engaging with Social Enterprises and running social projects of our own.

Investment in Social Enterprise will help to grow an already thriving sector which employs around 5 per cent of the UK workforce and is worth £60 billion towards UK GDP. The Big Issue, The Co-Op, Jamie Oliver’s ‘15’ restaurant are among the most well-known of these organisations.

(On a personal recommendation, try ‘Street and Arrow’ in Glasgow or ‘Streat’ in Melbourne and you’ll be doing your bit to support social enterprise!)

Beyond this, there are great examples of how large organisations are taking steps further to support social enterprise and add social value to contract. Liverpool Victoria is building extensive work with social enterprise into all of its procurement processes and is encouraging its own suppliers to get involved too.

Time to Grow your Network

Now it’s time for you to get involved and to make sure that you join your fellow procurement professionals in changing the world, one tender at a time. There are a couple of easy steps you can take and you don’t need to start big to get things up and running.

First, search out all the information and guidance you can find on social value, social enterprises and embedding this in procurement processes. Then find out whether or not your organisation is evaluating Community Benefits or Fair Work Practices as part of their tenders. Is it a mandatory criterion? Do your stakeholders even know about it?! Look to see if there is scope to add this, even starting with it as part of a wider question.

Finally (for now at least) you can start to look at contracts that could be performed by a social enterprise. Common ones include office supplies, coffee and catering, but the full list is much longer than that. There’s even provisions in the Public Contracts Regulations (2015) for run tenders for supported businesses only, which could put you well on your way to making a real difference in procurement.

After all, it’s what we’re here to do!

I’d love to hear your thoughts on this article and the series of articles on the challenges facing public sector procurement in 2019. Leave your comments below, or get in touch directly, I’m always happy to chat!


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New Zealand Government Procurement – A Temperature Check

A lot has been going on in New Zealand Government procurement, compounding one after the other. Where to start?

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When you’re in the thick of something it’s harder to take the moment to carve out enough perspective to say something meaningful. A lot has been going on in New Zealand Government procurement, compounding one after the other. Where to start?

The Ardern effect

The Ardern effect started long before our Prime Minister was elected, it was coined during her election campaign as a way to explain (or criticise, depending on what side of the fence you are on) the undeniable, charismatic ability she has to lead and relate to people. Jacinda Ardern has gained a lot of notoriety for all of her firsts: youngest Prime Minister, first woman to be pregnant during her elected term, her partner is the primary carer – shock horror, they are unmarried to, although recently announced their engagement.

The Ardern effect has continued to follow her and is not just isolated to her election campaign as they are values that are inherent to her as a person, she does not switch them on and off. She is a leader that feels, this is perhaps the rarest thing about her. Perhaps this is the real “first”.

A leader with feels headlining at the UN

Ardern took these values and headlined them in her statement to the United Nations in September 2018 where she called out politicians and governments to respond to the “… growing sense of isolation, dislocation and a sense of insecurity and the erosion of hope.” New Zealand is a country where the Prime Minister’s response to this was to publically declare that we as a county are pursuing kindness.

The Ardern effect is a bow wave waiting to hit

I had never really seen values, emotions or concepts of a collective “betterness” be voiced in this way by a leader of our country in the theatre of politics, let alone on an international stage. I have watched with active interest how this would play out and trickle down into my day job – this vehement passion is bound to impact.

Positive warning shots

  1. Broader Outcomes

The New Zealand Government Procurement website states that government procurement can and should be used to support wider social, economic and environmental outcomes that go beyond the immediate purchase of goods and services. The Government agreed on 23 October 2018 to a set of priority outcomes for agencies to leverage from their procurement activities and identified specific contracts or sectors for initial focus.

Although the broader outcomes initiative is targeted to four priority areas, it sets the tone and the expectation that this the lens in which all government spending should be filtered through.

2. Wellbeing budget hype

The much anticipated, much talked about Wellbeing budget did not under deliver on its promise. New Zealand is the first western country to design its entire budget based on wellbeing priorities and instruct its ministries to design policies to improve wellbeing.

It’s not like Social Procurement hasn’t been done before, it’s happening in many areas, many businesses and many government agencies but what is different is the government which is leading, the context of what has happened in New Zealand recently and how you cannot move without being hit by social responsibility.

Added context

New Zealand has had a big year, here are some snippets that add to the contextual tapestry of our country:

  • The “I am hope” grass roots campaign by Mike King, New Zealander of the Year ignited the fight against mental health issues in NZ. Mental health continues to be a hot topic in our country and politics.
  • The Rainbow flag that symbolises diversity and inclusion was painted at the Airport of our capital city, welcoming people for the International Lesbian, Gay, Bisexual, Trans and Intersex Association (ILGA) showing that we accept and support everyone.
  • The horrific terror attacks and our response as a country to love more.
  • The first country in the world to bring in a Domestic Violence – Victims’ Protection Act that brings in new rights for employees affected by domestic violence. It gives them the right to take paid leave and to have flexible working arrangements to support them during this time.
  • NZ Government Procurement ranks number one in the world! Following research conducted by Oxford University

Poised

With our strong values based leader that is internationally recognised, our standing within the international procurement sector, the focus on broader outcomes and wellbeing for our citizens in NZ. It’s no wonder the trickle down effects are starting to make themselves known. It’s an exciting time for those of us that are passionate about social values.

Nine years of a government focused on infrastructure has been reflected in the hotness of infrastructure as a cool kid procurement job. It’s not too far off for the social warriors to get their turn to roar, conscious buying within the framework of government seems like an exciting challenge to me.

Who is ready to step up to the challenge?


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The Time Paradox of Contract Management

When you’re busy it’s easy to let things slide and ignore contract management in the procurement process. But the idea that you’re saving yourself time by doing so is a paradox we would be well-served dismissing.

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You’ve taken your time meticulously following the procurement process from inception of the idea through to contract award. You’ve spent all the time you needed getting your ESPD right and crafting some good contract documents to get the necessary competition and achieve best value. Your contract award reports have been signed off and you’ve even managed to fit in time for a lessons learned document.

But you’ve got another tender sitting waiting to be evaluated. And another that needs sign off from the stakeholders before you can publish. Not to mention that phone call you’ve just taken or email you’ve read assigning you a new project or asking for your input.

So you think to yourself, “It’s ok, I’ll arrange the mobilisation meeting and then the Operations side of the business can take it from there. After all, it’s an easy contract – it’ll take care of itself…”.

Stop. No really, stop. Why, after putting all the hard yards in to begin with, would you then choose to step back at such a critical juncture? Are you sure that without your input, all those savings and benefits you agreed with the supplier will be delivered? And can you prove you are getting what you asked for?

Out of Sight, Out of Mind

Let’s take a step back from this and stop blaming ourselves as individuals. Time is not on procurement’s side (as I have said in the past) and there’s not always time to perform all the necessary tasks as part of the procurement process. When push comes to shove and there are tenders to be published, one of the first things to get dropped, alongside training and development, is frequently contract management.

Why? That’s a hard one to answer. In many public sector organisations, the issue comes down to an unholy trinity of reasons.

  1. A lack of resources in procurement departments, be that head count, budget, or similar;
  2. A lack of time, which has been covered extensively in the past; and
  3. A high churn of tenders, meaning that getting the contract signed has become the priority.

Unfortunately, the reality is that the public sector is falling victim to the paradox of contract management. It might be felt that there isn’t sufficient time to manage contracts effectively, but without a procurement focus, how are organisations going to realise savings offered by and agreed with suppliers.

In some cases, from personal experience, procurement isn’t even charged with the on-going contract management. In many organisations, both in the public and the private sectors, once procurement has put the contract in place, it’s passed to contract managers or end users for its duration.

Not Rising to the Challenge

Look for the importance of contract management and you don’t have to go far to see why and where it drives success. In the past 12 months there have been stark examples of where contract management has fallen down to disastrous and altogether spectacular effect.

The collapse of Carillion and the endless budget overruns of HS2 are just two examples. A bit further in the past, the National Programme for IT for the NHS, which cost £6 billion more than it should have and has, to date, only delivered a third of the predicted benefits, is another.

However, on the flip side of that there are examples of where good contract management has made a tangible (and quantifiable) difference in public sector projects. The new Queensferry Crossing over the Firth of Forth actually came in £100 million cheaper than initial estimates suggested, with credit being given to the overall management of the project.

The NHS Wales Informatics Service project has set up digital systems to aid patients with prescriptions and staff with communication, aimed at creating greater efficiencies across the strained health sector.

And if you’re unsure about procurement’s involvement in these projects, both have been nominated as regional winners for national awards at the GO Awards, which recognises best practice in public sector procurement across the UK.

Getting Mavericks Out of the Danger Zone

Let me start this section by contradicting much of what I have written before. Procurement needs to actively take on contract management, irrespective of the time commitment. And not only this, but it needs to be a priority on the same level as market analysis and tendering. As has been shown with the example above, good contract management can deliver savings and value, but it also extends beyond this too.

Improved compliance, standardising processes and procedures, spend and performance analysis and spend visibility are all key benefits. On top of this, it can help reduce maverick spend (a procurement favourite!) by taking away a route to using a non-contract supplier, or non-contract items.

And, as a final benefit, it’ll help you save time when it comes to retendering, extending or renewing contracts for existing services, as you’ll know far enough in advance to do the full procurement process properly. Not so much spend (money) to save (money), but more spend (time) to save (time). And maybe we can clear up a couple of paradoxes on the way!

I’d love to hear your thoughts on this article and the series of articles on the challenges facing public sector procurement in 2019. Leave your comments below, or get in touch directly, I’m always happy to chat!

Supplier Failure – Are You as Protected as You Think?

Supplier failure and collapse on a massive scale – it’ll never happen to you, right? How do you really think you’re doing to help protect your organisation from the fallout?

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London, July 2017. Despite an “encouraging start to the year”, the warnings are coming thick and fast on Carillion. By November 2017, the company has issued its third profit warning in five months and things are looking bleak. And in mid-January 2018, despite the deferral of two financial covenants, the company collapses into liquidation.

In the days that follow, the investigations and enquiries begin. How did a company so integral to so many high value and high profile UK Government projects get into such trouble? Where and how did billions of pounds worth of contracts become over £1.5 billion worth of debt?

And, perhaps most importantly of all, how did numerous civil servants, Government contract specialists and expert financial consultants not see it coming?

2018 – The Year of Demises

The demise of a construction giant will go on to leave an enormous hole for the UK Government to fill in order to continue providing key services across the country such as school meals and hospital and prison cleaning, and ensuring that the 19,500 employees delivering public services are able to be paid.

The final cost to the UK taxpayer is estimated to be more than £148 million, but the knock-on effects will be felt for some time to come. Late last year it was reported that there had been a 20 per cent rise in insolvencies in the construction industry as sub-contractors and small businesses struggled following Carillion’s collapse.

But 2018 wasn’t finished there. Fast-forward a little more than ten months and the unthinkable happened again. Twice. First, one of Carillion’s key competitors, Interserve, issued a warning on the state of its finances and increasing debt predictions to between £625 million and £675 million in 2018.

Then just before Christmas, Healthcare Environmental Services (HES), a key provider in the disposal of medical and clinical waste, closed its doors with the loss of nearly 200 jobs and leaving the NHS and Local Authorities scrambling to ensure that services could be delivered by another organisation.

Where did it go wrong?

If your procurement department was anything like mine, then all three situations dominated conversations for weeks after these public announcements. Beyond the usual, “well, I’m glad that wasn’t us”, and the frantic checking to understand exposure, questions were starting to be asked.

Give a procurement professional long enough and they’ll be able to pick through the wreckage of a broken contract and understand roughly where things went wrong. And frequently, lines are drawn back to the contract or contracts put in place and the overall management of this.

But in these cases, and particularly in the case of Carillion, there was a general disbelief that something like this could have been allowed to happen. After all, how was the overall performance of the supplier missed? And just why, even though it was clear that there were serious financial difficulties, was Carillion awarded more contracts to help bolster its financial position?

Like me, maybe you thought, “I’d like to have seen the procurement process for that one.” Or maybe you wouldn’t…

And probably just as likely, even though you tell yourself that it would never happen on one of your contracts, you go back to check. You know, just to be 100 per cent sure that all your checks and balances are in place.

Checks and Balances

What has subsequently been reported is that Carillion, in conjunction with its appointed internal auditor Deloitte, had been, “”unable or unwilling” to identify failings in financial controls, or “too readily ignored them””. This is where there may be some explanation or sympathy for the procurement process.

In the public sector, as in the private sector, procurement will work in tandem with other departments in its organisation to ensure the robustness of the contract and the suitability of the supplier. As part of public tendering exercises, there are a two stages in which this can happen for Economic and Financial standing assessment.

The first comes as part of the European Single Procurement Document (ESPD). Buyers will outline the minimum financial requirements for the contract, usually linked to contract value, complexity, volume and length, as part of their Contract Notice and ESPD. This can be, for example, a positive outcome for pre-tax profits for the previous 3 years, and/or certain outcomes linked to financial accounting ratios.

Suppliers will confirm that they comply with this and at this stage may provide evidence for this. This is backed up by the second stage for financial checks, the Request for Documentation (RfD). The RfD allows for this evidence to be requested by procurement of successful suppliers as a final check before contract award. These checks then provide the comfort that the supplier has a firm financial footing to undertake the contract.

The key issue here, and in the case of Carillion, is that the assessments are only as good as the information that is filed and provided.

Procurement’s Role and Remit

As with many of the challenges in the public sector, we’re left asking the question of what is procurement’s role and remit in this situation. There needs to be an understanding that procurement can only do so much. However, what they do have the responsibility to do needs to be done correctly.

In the Carillion example, procurement may asked all the right questions, but if the evidence provided isn’t accurate, it still wouldn’t have made any difference. Procurement can put in the ground work up front, before they even get to the stage of requesting responses to ESPDs and the like.

When looking at your next contracts, make sure that you have the following:

  • An accurate specification – this will fully outline the scope of requirements and the supplier’s responsibilities;
  • Estimated project volumes – based on historical usage data where applicable, otherwise linked to the specification requirements;
  • Market analysis – who are the suppliers that are likely to bid for this work? What is the overall market spend like with the top suppliers?; and
  • Understanding of current contracts – which suppliers have won the most business from you recently? Is anyone looking like they may have capacity issues?

Working with key stakeholders across the organisation is critical. Not only will this improve the accuracy of the data that is issued with the contract, but it will also mean that there’s an overall understanding of who is actually best placed to cope with the new package of work. Particularly if one supplier seems like they are overstretching themselves.

Then it’s back to a footing of openness and honesty with suppliers so that any potential issues with financial performance are flagged up well ahead of time. Build that relationship with your suppliers and you may help to head off a situation where it’s your contract on the front page of the newspaper next time.

I’d love to hear your thoughts on this article and the series of articles on the challenges facing public sector procurement in 2019. Leave your comments below, or get in touch directly, I’m always happy to chat!

Delays and Overspend – Do Your Contracts Have Your Back?

If the pot of gold at a contract’s end is realised savings, why do so few contracts provide adequate cover for completion delays and overspend? It’s time for the public sector to get serious about damages.

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In procurement we are no strangers to contracts overrunning or budgets being exceeded. As hard as procurement professionals try, sometimes it’s just not possible to get a contract placed in time, have works completed to schedule, or stay within the original budget.

In the public sector, the negative outcomes associated with these contracts are magnified. After all, they are usually delivering public services or infrastructure, and spending public money. The root cause for delays and overspend this can frequently be tracked to poor contract or relationship management, scope creep or unrealistic cost or project estimates at the outset.

While many of the issues can be attributed to internal process, with the public sector very much its own worst enemy, sometimes external suppliers and contractors are at fault. However, in many cases, the contracts that have been agreed and signed lack the clauses that would help protect procurement and the wider organisations against the costs associated with the delays.

As the challenge of delivering projects on time and in budget increases, we have to asked the question – why is public sector procurement so bad at using liquidated damage or penalty clauses in contracts?

High Profile Failures

Before taking a closer look at the clauses that could assist the public sector in their contracts, let’s have a look at some of the most high profile examples of projects that have suffered colossal overruns or budgetary overspends.

It won’t take you very long to find some examples in the media of these projects. What these 4 have in common is that even though some of the fault lay or lies with contractors, the public sector (and therefore the taxpayer) was and are the one to shoulder the burden of additional costs.

In 1997, a plan was put in place to build a new home for the recently re-established Scottish Executive (to become the Scottish Government). Initial estimates for the project were a total budget of £10-40m and an opening date of January 2004. By the time the building opened in October 2004, the total cost had risen to £414.1m (a figure confirmed in 2007).

Despite an enquiry stating that the wrong type of construction contracts had been used at the outset, and claims of contractors overcharging, no legal action was taken against contractors to recoup any costs.

  • London Olympics and Paralympics

Although the Games frequently have Olympic-sized budgetary overruns, the London Olympics and Paralympics in 2012 took the gold medal for the most expensive summer games ever. When London won the right to host in 2005, the budget was estimated at £2.4 billion. By the time the games were completed, the total cost ran to over £8.7 billion.

The London Organising Committee of the Olympic Games (Locog), essentially a private company, were criticised for the contracts it put in place, particularly for security for the Games. However, in the end, the UK taxpayer ended up footing the bill for the new budget.

Another project that looked to re-introduce a service that had been lost to the City of Edinburgh, the trams were originally budgeted at £545 million and be completed by 2011. In the end, the network delivered was only a third of what was originally planned, cost £776 million and didn’t start operating until 2014.

Again the finger was pointed at the contracts being used and courts found against Transport Initiatives Edinburgh (TIE), the public company responsible for project delivery, on a number of dispute with the main contractor. However, there was never any money recovered from contractors, leaving the taxpayer out of pocket again.

  • Crossrail

The most recent and still incomplete example of the group. At the time of writing, the project is already 9 months delayed to start operating, received 3 bailouts in 2018 totalling over £2 billion, and is already £600 million over budget. Even these estimates may prove to be lower than the actual final cost, and currently there is no agreement on who will shoulder this burden.

It’s all very well saying that contracts were at fault for these delays and budget issues, but the specifics of this are rarely highlighted. For example, were clauses put in place in the contract to help return money to the Local Authority or Government where delays occurred? This brings us round to our focus – Liquidated Damages.

Your Contract Shield

Liquidated Damages – A fixed or determined sum agreed by the parties to a contract to be payable on breach by one of the parties.

Before we do anything else, let’s caveat that in the examples above, and in many other cases, the fault may lie with the contracting authority in part or wholly. In this case, Liquidated Damages would be as much use as a chocolate fireguard. But where it can be proven that the contractor is at fault, then we’re in business.

The important part of the definition above is that the damages are a fixed sum, agreed by both parties up front. Damages which aren’t agreed in advance and have no set value are classed as penalty clauses, and are unenforceable in most contracts.

The key is for work to be done up front on this between the contracting parties. This means that levels of damages are agreed and aren’t subject to challenge further down the line. The damages also have to be realistic in line with estimates of the costs of a breach of contract, including delays to completion or commissioning.

For example, if you have a construction project, you might look at the day rate being charged by the contractor and agreed that this will be the rate used for damages per day in the event of delays. For the most part, Liquidated Damages will likely be capped at a certain value (say 20 per cent of the total contract value), providing a level of fairness for both sides.

Setting Up Your Clauses

Clearly, given the intricacies of the laws surrounding contracts, this isn’t something that procurement should be approaching in isolation. If you do feel that your contract would benefit from a Liquidated Damages clause, then you should engage at the earliest opportunity with your Legal department.

Make sure the clauses are set up correctly and called out clearly in the contract. Once you have awarded your tender, you should take time to speak to the successful supplier. This will ensure that the clause is agreed to and everyone is aware of the full implications of it.

No-one wants to use these clauses in contracts – it suggests that something has gone wrong in the contract management, plus the damages aren’t going to cover the full extent of the costs too. But by having them in place to begin with, procurement can help to limit the possible damage to their organisation in the event that budgets or schedules go awry.

I’d love to hear your thoughts on this article and the series of articles on the challenges facing public sector procurement in 2019. Leave your comments below, or get in touch directly, I’m always happy to chat!

Dynamic Purchasing Systems – The New Normal?

The framework is dead – long live the framework? As the public sector moves to make collaborative procurement easier, the Dynamic Purchasing System may be the key to long-term planning.

By Andrey Yurlov/ Shutterstock

So you know all about collaborative procurement frameworks in the public sector? Are you planning on using them in the short-term to kick start your year? You might want to hold on a second as there’s something that you might want to try out.

We have touched on collaborative frameworks that are available to public sector organisations in a previous article. Continuing the theme of the difficulties of collaboration, we come to a relatively new beast in the procurement jungle. This is the Dynamic Purchasing System (DPS).

Speaking from experience, it’s one of the hardest exercises I’ve done in my procurement career to date. Not only do you need to have all your stakeholders and requirements lined up before you even start (more on that shortly), but the complexity of the set-up has the ability to leave you scratching your head in utter confusion.

As hard a beast as it is to tame, once it’s in place it has the potential to solve a number of woes commonly associated with frameworks.

Let’s Get Dynamic

There are an increasing number of public sector organisations beginning to use a DPS as an alternative that still bears more than a passing resemblance to traditional frameworks. Buyers still have a list of pre-qualified suppliers who can compete in subsequent tenders, while suppliers can widen their chances by applying for as many Lots as they feel are relevant to their operations.

The key difference is that at the conclusion of the first stage, any suppliers who have been unsuccessful in their application for one or more Lots may reapply. They’ll then be re-evaluated and informed if they have been successful. A kind of ‘wash, rinse, repeat’ situation.

There are standard timelines involved both the first and second stages (see more here) and, unfortunately, it’s not a fast process. If you have never used a DPS, then you might wonder what actually makes it different from your standard frameworks. We’ll cover some Pros and Cons shortly, but in essence there are two key differences.

  1. The length of the DPS – Where a framework may be limited to 3-4 years, there is no upper time limit on a DPS. The buyer would make a decision on an appropriate length, taking into consideration the goods or services being procured, the market and any anticipated changes in scope or market conditions.
  • The ‘open’ application – The DPS is more dynamic than a framework (it’s in the name really!). Suppliers can apply to join at any time during the life of the DPS and are then on it for its duration. This is particularly good if there are new suppliers in the market, but also that unsuccessful suppliers don’t miss out on the chance of business for a number of years.

The Pros – Buyers and Suppliers

Beyond the longer length of the DPS and the fact that suppliers can be added at any time, there are a number of other benefits on both sides of the fence.

  • Reduced Timescales – see, I said we’d get back here! The length of time tenders are out in the market for can be as little as 10 days. This is a major reduction based on the minimum of 25 days for most Restricted procedures. And there’s more…
  • One Notice, No Standstill – Once the first Contract Notice has been sent out, there’s no requirement to do an individual one for each tender. And Award Notices can be grouped over a longer period to be issued in one go. AND there’s no requirement for a 10 day Standstill period on awards. All this means less time and valuable resources being spent on administration.
  • Access for SMEs – the DPS naturally sets up a greater number of smaller Lots and work packages, meaning that it’s much more attractive for SMEs to get involved. It maximises their involvement and means that they are competing on a level playing field with larger organisations.
  • Fully Electronic – further to this, all documentation has to be available in electronic format within the DPS, for its full duration. This means a level playing field again for any suppliers joining later in the process.

The Cons – Is it really for you?

Before we get carried away thinking a DPS is the panacea we’ve all been waiting for, there are a couple of caveats. Some are obvious, others come only with the painful experience of setting one up.

  • No Direct Awards, No Call Offs – unlike a traditional framework, there’s no scope of Direct Award or Call Offs from a DPS. Any procurement projects put through it need to have a full set of tender documents.
  • Set Up Isn’t Easy – as you might expect for something this size, scale and value, the early stages need some hard graft and infinite patience. You’re going to need to have outline specifications, tender documents and T&Cs, as well as a firm idea of what is going through each Lot. Set up alone could take a number of months.
  • No Guarantees – as we found, much to our chagrin, there are no guarantees that the suppliers you want will join. You can lead a horse (or supplier) to water with the notices, emails and follow ups, but they may choose not to drink. After all, from their point of view, they still have significant competition to go through to get any business.
  • It’s not for everything – there are categories and commodities for which a DPS will be brilliant. Markets where there is a fast pace of change or large number of new entrants are good. Commodities with a high volume of transactions, or less complex scope, can greatly benefit. But if you have a highly complex good or service and low number of contracts in your category or commodity, it may not be for you.

The New Normal?

It’s unlikely that Dynamic Purchasing Systems will completely replace traditional frameworks in the future. However, it does provide a powerful and useful tool for buyers both in getting tenders to market and ensuring a good level of on-going competition. Suppliers will benefit from reduced administration too, as they only need to pre-qualify once, but may be put off by the sheer size and scale of the DPS if you have a large number of Lots.

It’s definitely worth looking in more detail at the available information to see if a DPS is for you, and how you would set it up. Make sure you communicate with the market to see if it’s applicable (also good as a heads up that it’s coming) and how the Lots might be split down. Internally, gear everyone up and get everything in place. Once you explain the benefits, people are likely to get on board quickly!

Ultimately, don’t be put off by it. Yes, it’s something completely different that you may never have done before. But then, when’s that ever stopped procurement before?!

I’d love to hear your thoughts on this article and the series of articles on the challenges facing public sector procurement in 2019. Leave your comments below, or get in touch directly, I’m always happy to chat!

Weaning Stakeholders off the Procurement Welfare Programme

Where does procurement’s remit start and end? As these lines get more and more blurred, it might be time for procurement to take charge and start the painful weaning process.

By RGallianos/ Shutterstock

Time and again the procurement profession has asked for a “seat at the table” and the opportunity to be seen as a strategic business partner. In some cases, requests have been accepted and change has been forthcoming. In other cases, change is proving more difficult to put in place.

However, in this ever-shifting landscape of change and, perhaps in its eagerness to be accepted, procurement may have stepped outside of its remit. That’s not to say that this is a bad thing, but there is strong argument to suggest that what procurement has done is create a rod for its own back.

Public procurement, and procurement as a whole, already has its hands full with the myriad tasks it takes to get a good tender out to the market. Research and analysis, supplier engagement and internal stakeholder management all take time. And that’s not to mention the contract management that should be carried out post-award too.

But there’s a sneaking feeling that the lines around procurement’s remit are becoming a little too blurred, and that stakeholders are getting a little too used to the procurement ‘welfare programme’. And it’s perhaps time to start the painful weaning process.

The Welfare Programme

It’s worth examining in a bit more detail what we mean when we call it a ‘welfare programme’. Traditionally, procurement has been viewed as a transactional function, responsible for the preparation, issue, evaluation and award of tenders. It was a process-driven role with little or no strategic responsibility.

More recently procurement has been moving to become more of a strategic business partner, with objectives aligned with organisational strategy. More importantly, the function also has a role in setting these overall strategic objectives. However, this is where the issue lies.

As procurement has stepped up and been involved in strategy, its remit and responsibility has spread in line with this. And unfortunately, this has led to situations where professionals are undertaking tasks that have never resided in the procurement sphere.

Procurement should absolutely be getting involved with the writing of specifications, ensuring they are fit for purpose and allow for openness and transparency in the process. But the role should be one of challenging specifications, not actively writing the whole document. The same goes for short-notice or last minute tenders. Why take on all the time pressure ourselves when we’re presented with a requirement that we know, from the start, cannot be completed in the appropriate timescales?

The Budget Burden

From a personal point of view, this issue has been keenly felt in the public sector. Budgetary issues should come as a surprise to no-one (have you been living in a cave?!) and have pretty much been talked to death. The issue doesn’t just lie within procurement, but across the whole organisation. With resources stretched, departments will look to manage their workloads and focus on the most important and strategic tasks.

This means, inevitably, that certain tasks get passed around like hot potatoes and other tasks get left until the last minute.

Procurement, keen to be involved and to remove the (most would say ridiculous) notion of being a roadblock, has become like the school kid desperately trying to get in with the ‘cool kids’. For assignments, lunch money and extra credit read short-notice tenders, reining in non-contract spend and writing specifications. In the willingness to be a partner, the profession has lost its ability to push back on these tasks.

The question is, how does public sector procurement start the difficult process of weaning its stakeholders off this support programme?

Weaning your Stakeholders

The answer isn’t an easy one, but it does actually have a positive outcome all round. It stems from being able to push back, but in a positive way. For example, for specifications, rather than an outright no, ask what help your stakeholders need, whilst making it clear that the responsibility is still on them to write the document.

To assist with resourcing, put monthly (or more regular if required) meetings in the diary to discuss upcoming requirements. Procurement will be able to bring information to the table in the shape of work coming up for retender, plus what procurement resources are likely to be available.

For the most part, it’s about helping strategically define the best route for the organisation to get what it needs. There are stakeholders who still aren’t fully au-fait with the available procurement routes and how they can potentially save time. Not every procurement exercise needs to go through a full tender, taking the 6-9 months it can do to deliver an outcome. The public sector has the ability to use things like Prior Information Notices (PIN), Contract Notices and frameworks to help reduce timelines AND still deliver a good procurement outcome.

It’s neither rocket science nor a quick fix, but it’s vital to get it right and strike the right balance between helpful and put upon. Procurement may have a seat at the table now, but it’s now up to us to earn the respect we deserve for sitting there.

I’d love to hear your thoughts on this article and the upcoming series of articles on the challenges facing public sector procurement in 2019. Leave your comments below, or get in touch directly, I’m always happy to chat!

Better Procurement – Learning from the Private Sector

Who does procurement better – the public or private sector? Is there any reason we all can’t do better together through sharing knowledge and experience? Much depends on the professionals involved.

You could argue that an uneasy relationship exists between procurement in the public and private sectors. On one side, there is full accountability and audit trails, scrutiny over every penny/cent spent and the need for what is, from the outside at least, an almost impenetrable set of regulations and documents that have to be completed.

On the other side, it’s just as accountable and auditable, but there’s more freedom in the process, things happen quicker and there’s more time for the good stuff like contract management. I think it’s fairly obvious which is which…

Accept What We Cannot Change

To stop this becoming a lengthy piece on which is ‘better’, public or private sector procurement, it’s important to separate what could be done better from what we cannot change.

  • Regulation and Legislation

Yes, the public sector is highly constrained by regulations, leaving it more inflexible and giving less freedom in the process to procurement professionals. But beyond getting better at working within the regulations, there’s not much to be done about it. Even post-Brexit, there will still be substantial regulation governing procurement and procurement process, even if it looks slightly different to what it is now.

  • Budgets

Yes, budgets in the public sector are being squeezed. Hard. But no, this is not going to change any time soon. What both the public and private sectors need to do is be savvier with how the available money is spent and how they can maximise what they get from a contract with less money to spend.

  • Transparency

Let’s knock this one on the head straight away. Public sector procurement receives the level of scrutiny it does as it is spending the general public’s money. To ensure everything is above board and audited this needs to continue. And the private sector will only face increased scrutiny in the coming years, so there’s no escaping on either side of the fence.

Lend a Helping Hand

However, there’s nothing to say that the public-private relationship can’t be better. Both sides could teach each other a thing or two about the procurement process and how to make it better or more efficient. After all, at a time of squeezed budgets and regulatory pressure (not to mention Brexit and trade wars), why wouldn’t we all want to work together to make our lives and jobs easier?!

In this article, we’ll be looking at three key areas in which the private sector can help the public sector and at some point in the near future, we’ll look at this from the other side.

Some of this is based on what has been written about both sectors in the press and in thought leadership papers. The rest of my advice, to paraphrase Mary Schmich and Baz Luhrmann, has no basis more reliable than my own meandering experience. I will dispense this advice now…

  • Negotiation

In the private sector, procurement professionals have the opportunity to negotiate at any stage in the process. Indeed, they may even choose to negotiate at multiple stages in order to get the best deal. Opportunities are more limited in the public sector, meaning more contracts are awarded without negotiation, or negotiation at a stage where the deal is almost done.

However, even these could be maximised to produce a better deal and this is where private sector professionals could help. Who better to assist with a negotiation than someone who is practised, skilled and used to carrying out the process? Swapping notes on good negotiation techniques and where savings have been found in contracts for similar goods or services could provide some much needed wins.

  • Longer Contracts and Relationship Management

You know the score – you spend months painstakingly putting a contract together and awarding it, only to come back to the same contract 18 months later to tender again. The limiting factor here is the length of public sector contracts in many cases, but could this be a valuable knowledge sharing opportunity?

Crafting long-term contracts, aimed at longer than 5 years (for the right goods, services or works), is a skill. Maintaining the right balance between getting a good deal on both sides, opening up avenues for innovation, while at the same time knowing that come year 5 any prices are still competitive, is something that the private sector has greater experience with. By putting heads together, this could also be passed into the public sector.

  • A Strategic, Value-Adding Profession

Are you in a senior management or executive level role in procurement? What do you think your organisation views procurement as – a tender machine for purchasing or a strategic partner for adding value? Some argue that in the public sector, the former is much more common. When there are savings to be made, procurement is the one tasked with delivering, but is left out of the loop when it comes to bringing the value to the top line.

Leaders can help drive a change in this view. If private sector procurement leaders have been able to make this leap already, then using a tried and tested approach may help gain the necessary traction in the public sector.

Share Your Thoughts

These are my thoughts on what the private sector has to offer the public sector in the overall procurement process. None of them represents a quick fix in terms of greater efficiency or costs savings, but done properly, could provide these benefits in the long run.

It would be interesting to hear from professionals on both sides of the fence on this too. Would you be willing to work closely with the public/private sector? How would you facilitate this? Are there other areas you think you could help with, or have greater priority? Let’s get the conversation started – you never know where it’s going to take you and the profession.