Tag Archives: public sector

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.

By Everett Collection /Shutterstock

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!

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!

How Can We Achieve Our Smart City Goals?

Lately, the public sector has collaborated with the market to launch smart city solutions. How do we achieve our smart city goals?

This article was written by Hanne Lystad.

Norway’s smart cities include everything from drones to surveillance train-lines, learning apps for kids and the world’s first autonomous cars.

But the next step in facing the huge smart city challenges such as meeting climate change targets is for the public sector to cooperate with procurement.

Lately, the public sector has collaborated with the market to launch smart city solutions, which is great. But how do we achieve our smart city goals?

A key way for the public sector to achieve its goals is by using the market forces via public procurement. In this piece I will point to some front-running Norwegian examples.

I work as lead digital for the National Suppliers Development programme in Norway. The programme has collaborated with public institutions in procuring smart city solutions since 2010.

The programme is a joint collaboration by five partners with unique strengths, networks and focus areas – representing both the public and private sector and the research field.

Programme structure

In Norway, public authorities spend approximately 58 billion euros on procurement each year, which amounts to 14  per cent of the Norwegian GDP and 37 per cent of our government national budget. Public procurement accounts for a significant portion of the overall demand for goods and services and is increasingly seen as an attractive instrument for developing society and nation.

Therefore, a simple public procurement policy – such as opening up for innovation – can make a profound impact on a nation or industry.

How does the process work ?

Innovative procurement process

The “normal” procurement process goes as follow: you think you need something , you put out a tender, you get an offer and you write a contract.  But guess what? When you do it the way you’ve always done it, you are likely to get the same product or service you have had before – not innovations.

You might not get what you actually need, and perhaps the suppliers have developed new and better solutions since the last time you asked for the same product.

Because of this, we discourage requesting pre-defined solutions from the market and rather suggest putting more energy into mapping out and defining needs and creating a dialogue.

Creating an enabling environment where procurement and their suppliers can discuss different options and solutions results in relevant innovations and actual uptake.

The programme I work with has been involved in about 200 solutions targeted for smarter cities. Being open about the public needs has resulted in some amazing solutions such as :

… and many more examples within welfare, tech, digitalisation and sustainability.  Take a look at this film if you’d like more examples.

From pilots to scale

It goes without saying that these new smart city solutions are a great thing, but we have to stop obtaining them one by one, pilot by pilot. At start of our programme, we supported processes where a single public agency was involved. We gained valuable insights and know-how, but saw that the majority of products and services developed ended up as prototypes and pilots.

Today, however, we are focusing on gathering public agencies with a common agenda from the beginning, so that they together will meet relevant suppliers and developers with a shared need.

One example of this is emmission-free construction sites, which initially had one frontrunning public agency supporting the cause. We realised it would make more impact if we gathered a significant number of public builders from all levels: state, regional and local municipalities. In addition we got environmental NGOs on board, research clusters, and public agencies with an interest in meeting a common goal – in this case meeting climate change targets.

After agreeing on a common goal, or “challenge” to the market, relevant suppliers and developers from the entire supply chain were invited. The purpose of this market dialogue was to

1) Talk about the forthcoming requirement to market actors.

2) Get feedback from them on the barriers to such a development and the factors that would make such a development process attractive for them to join.

The key to creating an enabling environment is ensuring the demand and supply side can actually figure out obstacles and possibilities.

This approach has  several advantages for all parties:

  • Firstly, major challenges – such as meeting climate change targets – can be tackled by gathering a significant portion of the demand side and agreeing on a single approach.
  • Secondly, when the market sees a more clear opportunity for serial production, this triggers their contributions and efforts – both through sheer market volume, but also through a predictability in terms of knowing what they need to prepare for.
  • Thirdly, we also see that it is easier to get funding for these broader initiatives than when we support public agencies one-by-one.

The public agencies have also committed through a joint declaration that they will be requiring emission-free technology in their construction sites.

So after reading this, I hope you are left with the following:

If you are from the public sector, tackling smart city challenges in collaboration with similar public agencies is the way to go!

If you’re from the private sector, collaboration is a huge market opportunity.

This article was written by Hanne Lystad. Hanne works as Lead Digital Innovation in the Norwegian national suppliers development programme, which means counselling public and private sectors in how to achieve innovation through  procurement within the digital field.

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.

Outsourcing versus Insourcing – Where to Play When the Music Stops

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

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

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

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

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

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

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

The Strategic Hokey Cokey

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

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

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

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

On the Way Out?

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

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

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

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

Instruct the Experts?

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

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

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

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

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

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

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?

Why Public Sector Procurement Consolidation Won’t Take Forever

Driving change within the public sector takes forever… and ever! Right? Tim Hamper begs to differ as he explains why procurement consolidation will only accelerate in coming years, if not months!

A few weeks ago another UK public sector body, Fastershire (a partnership between Gloucestershire County Council and Herefordshire Council, backed by the Department of Culture, Media and Sport), began implementing a major new combined agreement – this one with Gigaclear, a rural Internet Services Provider. The deal is to roll out “ultrafast” Fibre To The Premise broadband to thousands of some of the hardest to reach homes and businesses across the two counties, at speeds of up to 1000Mbps.

After decades of individual procurement teams in separate organisations diligently applying public procurement rules (often with relatively small spend and time-consuming award processes), it’s now becoming normal to combine with others. The results are often not only larger economies of scale, but also better access to relevant products and services.

Public sector procurement consolidation

Combined (in other words consolidated) public procurements have for some time been delivering in areas where it’s fairly easy to see a commodity – energy, office supplies, facilities. They’ll really take off and show benefit when they fully embrace what used to be called “ICT” – now better labeled Digital. Leaders of public bodies won’t be interested in the details of latest products or software solutions, or even in traditional efficiencies. They’ll be concerned about big outcomes. How to better support local economies and communities? How to join up health and social care? How to keep the trains running?

The facts about consolidation are impressive:

  • Although not everyone is a fan, in 2016/17 Crown Commercial Services, the public sector aggregator, channelled £12.4bn of public sector procurement spend through its commercial arrangements including frameworks – £6bn from central government, £6.4bn from the wider public sector.
  • The National Procurement Strategy for Local Government in England was launched in 2014. By 2016, 53% of single tier/district councils and 48% of district councils said their organisation had made savings or achieved other community benefits by “partnering and collaboration”.
  • Owned by six county and city council authorities, one public sector buying group based in Leicestershire, ESPO, now has over £1.4bn of spend going through its frameworks. The organisation consolidates requirements from over 9,000 education customers across the country.
  • Another buying group, Kent County Council’s Commercial Services, is one of the largest trading organisations of its kind in the UK. As the contracting authority, Kent operates in partnership with 12 district councils and 289 parish/town councils. It recently published details of framework contract awards for water and sewerage services potentially worth up to £208m on behalf of a number of public sector organisations.

The tipping point for consolidation

The often-heard view is that change in the public sector takes forever (one digital industry leader recently claimed this is due to a “lack of vision, entrepreneurial thinking and execution”, another that “the last ten years have seen public sector organisations progress only 20 per cent of the way through the business transformation journey, with the remaining 80 per cent to be delivered over the next ten years.”). But with the focus on outcomes, the necessary speed and type of market engagement will mean the trend for procurement consolidation will only accelerate. The benefits will be big: public sector bosses are already seeing better outcomes and stretched budgets being brought back into balance. In Gloucestershire, County Councillor Lynden Stowe, Cabinet Member for Economy, Skills and Growth says “faster broadband is vital for our communities and businesses to thrive and grow. I’m delighted that the Fastershire project, in partnership with Gigaclear, will be taking faster broadband to even more homes and businesses in some of the most rural areas of the county where larger suppliers were not prepared to go.”

We’re probably already at the tipping point where most public procurements look across organisational boundaries, so the need for separate individual procurements will diminish. A lead or buying group will more and more be seen as the right place for consolidating spend, not just for commodity items but strategic stuff as well.

Suppliers will react quickly to this situation and respond to consolidation opportunities – not least because larger volumes are more attractive, and with fewer organisation touch points, the cost to them of doing business will be significantly reduced.

Dramatic change has already started, though not every public sector management team involved in commercial activity has fully embraced it. They should. Consolidation in public procurement won’t take forever – the focus on outcomes and market speed will ensure that it’s now measured in months, not years. Certainly not in decades.