Tag Archives: public sector procurement

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.

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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.

Making the Case for ‘Libertarian’ Procurement

Can we start taking an approach to spend management and compliance that nods to the free will of buyers?  Kelly Barner discusses Libertarian procurement. 

Public sector procurement has always gotten a unique kind of attention. Not only is it the sector of our field most likely to get general media coverage, when it does, it is almost always spectacularly bad news. Trying to regulate procurement may be well-intentioned, but things have a way of going awry when buyer free will is denied.

Here’s a perfect example:

In 2013, the Massachusetts State Lottery Commission awarded a $5 Million contract for advertising services. They required that a portion of the work be sub-contracted out to a minority or woman-owned supplier. All proposals were evaluated on cost and presentation as well as the diversity requirement.

The contract was awarded to a firm that did not earn the highest score for cost or presentation but did commit to sub-contract $12,000 (0.24%) of the work to a woman-owned supplier. As a result, another firm involved in the bid, sued the lottery commission. Not only had they earned the highest score for cost and presentation, they were a certified woman-owned business. Had they been awarded the contract, 100% of the $5 Million would have been awarded to a diversity supplier and the state would have gotten better results for less money. They did not receive the award because they did not submit a plan to subcontract the work, believing their own status covered the intent (if not the letter) of the requirement.

Talk about missing the forest for the trees.

Public sector procurement may take the majority of the heat, but private sector procurement is just as guilty of using rules rather than sound judgement to drive desired results. Onerous governance and harsh mandates can have the opposite effect of what we intend with ‘strategic’ processes such as sourcing and supplier performance management.

Technology and consumer expectations have advanced to the point where we can consider the possibilities of ‘Libertarian’ procurement, an approach to spend management and compliance that nods to the free will of buyers whenever possible, even if it means giving up some of the ‘control’ traditionally associated with spend management. Libertarian procurement might include:

  • Allowing distributed buyers with strategic experience and category expertise to run their own sourcing projects.
  • Evaluating the suitability of a full sourcing project on a case by case basis (I.e. sometimes when a buyer requests to contract with a specific supplier, they have already done their homework and procurement should just support them).
  • Balancing supplier performance metrics with qualitative approaches to recognizing their total value contribution.

Sometimes internal colleagues want to work around procurement’s processes because they find them too slow or frustrating and just plan to push on principle. Other times, they really know what the right path forward is and can’t get started a minute too soon. The challenge is for procurement to tell the difference between the two. Understanding the motivations of stakeholders who want to exercise their free will is what separates spending mischief from spending vision. Procurement should be willing to take a chance when the conditions seem right, allowing vision to thrive even if the occasional mischief slips through.

Combining responsible spending principles with an increased level of trust for internal buyers will create challenges for procurement teams, but it will also create new opportunities and increased ownership on the part of internal stakeholders. Not being open to such change may actually be a risky move for procurement. After all, the more rigid and codified our role is, the more likely we are to be the target of automation initiatives. Any procurement team with their own healthy dose of free will should want to prevent that.

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.