This year has seen a plethora of ministers and politicians espousing their opinions on procurement-related matters, without, in many instances, any clear understanding of what the implications of their pontificating might be.

 Back in February 2011, David Cameron announced his plans for the Big Society, stating that: “We’re sweeping away ridiculous rules and bureaucracy and seeking to eliminate, for smaller contracts, assessment hurdles at the beginning of the process”, but forgot to confirm that the EU and UK procurement rules would still apply across the board. He further declared: “We need to make the system much more open, competitive and transparent”, forgetting to add that this is exactly what the EU Treaty principles require it to be, before continuing, “wherever possible, we’re going to break up large contracts into smaller elements, so that SMEs can make a bid and get involved”, so long as we aren’t looking at breaching the EU disaggregation laws along the way, one presumes.

 Meanwhile, Cabinet Office Minister Francis Maude initiated an, on the face of it, laudable renegotiation process with major suppliers to central government, pushing for price reductions in contracts. However, did anyone consider that this could be tantamount to Material Contract Variation and in clear breach of the Remedies Directive?

 Come June, we had multiple politicos frothing at the mouth, complaining about Siemens (a German company) stealing British jobs from Bombardier (a Canadian company, incidentally) and promising that it would never happen again, we would be protecting jobs in the UK, etc. Yet again, there appears to be a clear breakdown in their understanding of the EU Treaty, which enshrines the Freedoms; of Establishment; to Provide Services; of Movement of People; and of Movement of Goods; and which provides us with a market which constitutes 40% of our exports. Any form of protectionism would automatically lead to action by the European Commission and a date to visit the Court of Justice of the European Union (CJEU). Indeed, come July we even had a Commons debate where suggestions were made that the National Audit Office should look closely at the procurement exercise, criticism was heaped on the Department for Transport and accusations of parochialism were raised against other EU countries.

 On to September and it was the turn of Labour leader Ed Milliband to suggest that the public sector should look at distinguishing between ethical and non-ethical companies. While the idea of ethical procurement is one to be applauded, the unfortunate reality is that there is a real chance of breaching the EU principles when trying to determine how to procure ethically sourced products and services. Indeed, we have been there already with the well-meaning but flawed ‘Food Miles’ programme. The simple truth is that ethical procurement, without sound policy and detail, can be discriminatory in the extreme.

 And so to October and the latest political foray into the procurement arena, as the Minister of State for Universities and Science, David Willetts, suggested that there is a benefit to be derived by universities when government funding is effectively reduced with additional income now to be derived from student tuition fees. Mr Willetts intimated that, when their direct funding from government is cut to 40%, universities will be exempt from EU procurement rules, since these have a public funding test of 50%.and above. Unfortunately, no consideration seems to have been given to all the other sources of public funding that universities currently receive, such European Regional Development Fund (ERDF) grants, research grants and so forth. Add these back into the equation and suddenly the funding percentage could well rise back over 50%.

 The reality is that, when politicians make pronouncements on procurement issues, their views, although well meaning, can often present a real risk to the public sector and land public procurement with the impossible task of trying to satisfy political aspirations, while remaining compliant with both the European and UK procurement rules.

The Lord Davis report, Women on Boards, made recommendations that the FTSE100 should challenge themselves to increase the proportion of female directors on their boards to 25% by 2015.

The Times recently released its Top 50 Employers for Women which included six public sector employers: the Home Office, Humberside Fire & Rescue Service, Leicestershire Constabulary, Genesis Housing Association, Olympic Delivery Authority and West Midlands Police.

The public sector is learning that diversity is the way forward. In tight financial times such as these it pays to embrace a wide skill-set – the whole really is greater than merely the sum of its parts!

Public sector procurement is setting a good example with female public sector procurement leaders like Karen Bowman, the Director of Procurement and Printing Services for Edinburgh University and Alison Thomas, the Head of Procurement for the Olympic Delivery Authority.

Across all areas of the public sector in the UK, women such Louise Tulett, HM Treasury’s Group Director of Finance, Procurement and Operations and Sheena Evans, Head of Procurement at Thames Valley Police, are operating at the top levels of the procurement industry.

The wider public sector is aware that it cannot rest on its laurels. For instance, in May, the civil service published the senior management diversity targets it aims to reach by 2013. By this date 39% of senior civil service posts – the highest tiers of Whitehall positions – should be held by women  (up from 35.6% in September 2010) with a target of 34% of top management posts to be held by women.

One of the key factors associated with the success of women in business, whether in the public or private sector, is their ability to network.

As social media and more competitive face-to-face conferences become the norm, being able to make a connection and keep asking the right questions is hugely valuable.

The old boys club is outdated, stale and increasingly irrelevant in a modern business world. Women are bringing a fresh perspective to the board.

McKinsey’s global survey, Moving Women to the Top, suggests that women are more likely to show leadership styles that improve organisational performance and address challenging issues.  It also indicated that having three or more women in top management made businesses more organised and more likely to benefit from improved innovation, values and work environment. I can’t imagine a company which wouldn’t profit from being better organised!

However, women often suffer from the ‘double burden’ when it comes to their careers, juggling the roles of primary domestic caregiver and worker.

When Brent Council won the Opportunity Now award for the public sector, they attributed their achievements to their work-life balance initiative. Flexible working gave women a greater chance to contribute and stay in work.

The joy of a model which balances work and home is that it can be open to both men and women, everyone can benefit from it – which is where working smarter not harder pays dividends.

Juggling home and career responsibilities is just one among a number of reasons why there are so many ‘lost women’ who disappear from the workplace after graduate and junior levels. Women often undervalue their skills and are not always as comfortable with self promotion as men.

However, the barriers to women’s advancement in the workplace can be reduced by changing the way we look at mentoring, development, skills and work patterns.

The need for more women to join the higher echelons of the private sector is echoed across Europe where gender quotas loom large over big business. Women resist these (and rightly so) as quotas undermine their success and talents.

Female faces are appearing in the top talent strata of private sector procurement, such as Grace Puma who is Senior Vice President and Chief Procurement Officer at PepsiCo – the largest public company in North America. Barbara Kux holds a similar position at European company Siemens, (also Julia Brown at Kraft Foods, Jean Badershneider at Exxon Mobil or Heather Rodgers at Centrica…) but until seeing women in such prominent roles stops being ‘an unusual case’ and starts being simply the way business is, there is much work to do.

One method that the Government has chosen to achieve this transparency is the publication of every item of local and central government expenditure over £500. By its very nature, government spending will include tenders and contracts as well as actual payments and inter-government transfers of funds. The Government also committed to publishing certain information on salaries and contracts by January 2011.

However, now that this information has begun to be released, transparency is being blemished by one innocuous word – ‘redacted’. Redacted: the polite way of saying “We’re not saying”.

In fact, when you look across all published government spending and total-up the money spent where the information about what has been purchased or the identity of the supplier is redacted, the results are startling. Spend data held by public procurement experts BiP Solutions reveals that a jaw-dropping £593,842,742 has been redacted since 2008 and that £381,285,866 was redacted in 2010 alone – hardly a drop in the ocean. So why are there so many redactions when it comes to what central and local government is buying and from whom?

There are limited circumstances that result in legitimate redactions. Councils and government are prohibited from publishing data that conflicts with the Freedom of Information Act, the Data Protection Act and the Environmental Information Regulations. So redactions can be legitimate if they are used to avoid the disclosure of personal information; to withhold information for security reasons or for criminal investigations and; to avoid revealing third party confidential information, such as contracts with foster carers and child minders.

Commercially sensitive information falls under qualified exemptions and may or may not be redacted depending on whether it is in the public interest to publish the data. However, it is also stated by the Local Government Group, which published the Local transparency guidelines that councils follow regarding transparency, that in most cases it is in the public interest to make such information available.

So, even taking all of this into consideration, surely these rules can’t account for nearly £600 million worth of redactions, can they? Who exactly is this money being given to and what is it being spent on? Why aren’t we being told?

Councils make their own case-by-case assessments on redactions, looking at whether their contracts are either exempt from publication or require certain redactions, based on the criteria set out in the aforementioned guidelines. These specifically state that it is essential that councils assess the need for redactions on a case-by-case basis since each case is unique. A ‘one-size-fits all’ approach should not be adopted. Could it be that this rule has fallen by the wayside or is there something more sinister going on?

Also, Regulation 43 of the Public Contracts Regulations 2006 prohibits contracting authorities from disclosing information it has been forwarded by an economic operator (eg a company) when the economic operator has designated this information as confidential. So does that leave us with a scenario where somebody in the process can designate information as confidential and therefore to be redacted when it is in actual fact in the public interest? In any case, supplier names do not fall under any exemptions as they refer to a company and not an individual, so assuming the £600 million is not going entirely to individuals, why are company names being redacted?

With nearly £600 million spent where all information about the purpose and recipient of the spending has been redacted, it appears there are flaws and inconsistencies in the redaction process that severely undermine transparency. These flaws must be fixed soon because it is in the public’s interest to know where such a large sum is going. Somehow, being the most opaque government in the world doesn’t have the same ring as being the most transparent.

Firstly, it appears that there were few or no measurable Key Performance Indicators in place to ensure that acceptable levels of care were being delivered to the residents, which would lead one to conclude that there were no proper Contract Management processes in place.

Whether the service was tendered for, commissioned or just grant-funded, the responsibility of care still remains firmly with the public bodies placing vulnerable people into residential care, which is why they are regulated by the Care Quality Commission (CQC). CQC regulation should safeguard residents, even when other processes fail.

The chance of such levels of abuse happening in a care home where proper escalation procedures had been implemented to allow the residents (end-users) to raise problems immediately they occurred, aligned to proper Supplier and Service Level Management processes, would have been greatly reduced as such processes would have identified problems far earlier than occurred at Winterbourne View.

Good Contract Management involves building a good working relationship between customer and provider and managing proactively throughout the life of the contract to anticipate future needs. By properly managing service delivery, contracting authorities have the ability to measure the level of service quality being delivered and where issues are identified, to seek rectification of any breaches.

Had such processes been in place at Winterbourne View, this would have allowed the quality of service to be assessed regularly, even in areas where it is hard to quantify, and would ideally have sounded alarm bells long before they rang in this case.

Unfortunately, this is unlikely to be an isolated incident and one fears that more examples will arise in the future, which leads us to the second major issue that this exposé has revealed.
The CQC licences providers of care services in England and many NHS and local government bodies stipulate that providers must be licensed by CQC. However, as this case appears to highlight, those public organisations may have little justification in accepting such a licence as proof of suitable quality.

The public sector cannot contract out its responsibilities for delivering services to the public. Placing such emphasis on what is, at best, currently a questionable qualification criterion, could lead to questions about whether proper verification had taken place when contracting for care services.

If it was challenged, could any public body justify the acceptance of a CQC licence, following the BBC’s exposé, as a key reason to contract with an organisation?

In my opinion, the most logical process for any public body, at the current time, would be to undertake a mix of site visits and resident interviews (where feasible), to support their acceptance of CQC licences and therefore show that due diligence had been undertaken.

Failure to do so could ultimately lead to an expensive legal challenge.

The ways in which this is achieved – both at local and national level – are obvious: cut jobs, share services and so on. However, with around 310,000 jobs being lost and services shared between various different departments or councils, it is still expected that the services provided by all areas be up to a high standard. And with £243 billion of the £696.8 billion spent by Government in 2010-11 being on procurement, it is clear that this is an area that’s going to take a large hit.

So how will they make up this deficit? It has been suggested that one way to make services up to the standard the public expect is to outsource them to private companies, something that has worked well in other areas such as gyms and schools.

Innovation, Innovation, Innovation
However, The Work Foundation has suggested that the private sector taking over some areas is not enough. In their report Making the most of the public, they suggest that the Government should take a few lessons from private companies: innovation, best practice and fostering partnerships.

They say that the Government needs to know how to invest in innovation to manage intangible assets such as software and research and development and how to create arrangements that will lead to the co-development of innovative new products and services.

Basically, as far as The Work Foundation is concerned, the word of the day is innovation.

But what exactly do they class as innovation? According to the report: “Innovation represents the creation and application of new knowledge. In the private sector this can be easily understood as the commercialisation of a new product or services to meet a market demand, or the creation and implementation of processes which improve the productivity of existing activities. In this way innovation represents more than invention or discovery. It is a much broader concept which depends on the ability to derive value from an invention.”

What should the Government change… and can they change it?
It seems that the Government does spend a lot on intangible assets, including multiple research projects about all different areas encircling the public and private sectors. They also sell some of their knowledge, such as the electoral roll – surely that is being innovative?

Not innovative enough, apparently. It has been suggested that Public Private Partnerships, devolving powers and using IT for both front and back-end office operations are all ways in which the Government should improve.

Devolve power? Well, the new Scottish Government will be happy at least! But Public Private Partnerships have been in place since the days of John Major, and the Government has begun to work more and more on its IT systems lately, with the Ministry of Justice signing a £14 million cloud contract in March and the Scottish Government spending £270 million on a pan-public sector IT service framework contract. There you have it. Procurement on IT services – ticking the innovation and ‘using IT’ boxes nicely.

While spending on IT to improve communications and increase the innovation in the Government is all fine and dandy, it has to be remembered that cuts are to be made. At the Westminster eForum, it was suggested that it is not the IT that should be focused on, but using the IT efficiently. One suggested way was to work with network suppliers to develop common codes – an innovative process which can take up to four years.

What is the Government doing?
According to a report released on May 25 by the Lords Select Committee, the Government are to look for other changes which will lead to innovative procurement, economic growth and the translation of scientific research into innovative goods and services.

Lord Krebs, the Committee Chairman, said: “Too often, the public sector falls back on tried and tested solutions and new ideas are stifled by a culture of risk-aversion and overly burdensome procurement processes. We have uncovered a number of barriers to innovative thinking and we call on the Government to use their expertise to resolve them without delay.

“We look forward to hearing the Government’s ideas about how they can solve some of these problems and what methods have been put into place to embed innovation as a fundamental component in the procurement process. We will carry out a follow up inquiry in 12-18 months.”

Will this lead to a progressive change for the Government and the way they procure items? We’ll find out in 12 to 18 months…

A Google search of the phrase ‘green procurement’ brings up over 9.5 million results. These seem to be the buzzwords of the day, and it seems that being good to the environment is good for business.

Green procurement is all about minimising environmental impact by using less natural resources, hazardous materials and energy. The products will have a long lifecycle and/or be recyclable and produce less waste.

In January 2011, the EU published a consultation on the way in which public procurement was handled and one of the items discussed was the social and environmental policies of the product and the company providing it. There had been previous targets in place that 50% of all procurement should be green by 2010, and Portugal issued a law on this. While having full green procurement in place is not mandatory at the moment, it is very possible that it could be in a few years, and it’s much better for companies to get ready now as opposed to having to adapt at short notice.

In an article dated May 19, Construction Minister Mark Prisk stated that the Government should act on the recommendations on the Innovation and Growth Team’s Low Carbon Construction report. This includes 65 recommendations for changes to the industry.

Greener on the other side?

Why should a company make their procurement as green as possible? Surely it would cost them more in having to find a way to switch to this in the first place? Well, that may be true in the short term (although a company having no green regulations in place is quite surprising) but in the long term there are plenty of benefits:

Economic benefits: lower costs from waste/buying hazardous material, buying less fuel, increased shareholder value.

A survey by Avery showed that 47% of offices are becoming greener because of the economic situation.

Improved public image: better for reputation, improved brand of being ‘good for environment’, reduced risk of accidents and therefore reduced liability.

In May 2011 the British Council of Offices stated that job applicants are more likely to go for a job in a company which shows green considerations.

So, it has been established that as well as making the company look good, there is also the opportunity to save money. But how much of a benefit can there be to using a green procurement technique as opposed to a regular technique when it comes to achieving contracts?

Apparently, a large one. A March 2009 Dynamic Markets survey of 100 UK construction firms with an annual turnover of over £10 million found that companies with green procurement were 95% more likely to be chosen by contractors.

Short of spending vast amounts of money, it’s not possible for a small business to constantly monitor the information produced by around 40,000 public sector bodies in the UK and distil the information most relevant to them.

Transparency is one of the main principles of the UK and Scottish Public Contracts Regulations 2006, which establish the legal framework within which most public sector procurement occurs. Publicly advertising contract opportunities and contract award notices usually provides sufficient transparency to enable the market to be opened up to competition, which is the ultimate aim of the Regulations. So what, then, is the benefit of releasing vast quantities of information that is difficult and costly to interrogate?

Within the procurement process, if public bodies are not forthcoming with information then, as long as it’s not for commercial advantage, suppliers can use the Freedom of Information Act to leverage information. After the procurement process is complete the auditing bodies responsible for reviewing procurement exercises, such as the National Audit Office, don’t often seem to pull their punches when it comes to criticising public bodies that get things wrong.

So how is it possible to derive intelligence from all of this disparate and unsorted data and, importantly in these difficult economic times, what is the cost of collecting, publishing, interrogating and using this information?

Graham Chapman, deputy leader of Nottingham City Council, has responded to criticism over the council’s refusal to publish details of its spending above £500, and has questioned the legitimacy of the request. I agree with him and, until the Government is able to justify why Nottingham should spend money on this policy while the public sector is being forced to cut services, I support the Council’s actions.

The Government’s answer to publishing and accessing public sector data is their Combined Online Information System (COINS). COINS contains a huge amount of raw data, currently extending to over 5,400 datasets which contain millions of rows of data.

On the COINS website the assumption is made that “Technical users will be able to create useful applications out of the raw data files, which can then be used by everyone.” This assumption that the private sector will create order from chaos may possibly be true, but they won’t necessarily create free applications or even ones that provide the information outcome that you, as a supplier, are looking for.

It would be interesting to debate whether this policy is deliberate obfuscation…or just a well-meaning but flawed attempt to increase transparency. Even if greater transparency is achieved, is this necessarily a good thing?

As often happens, this rapid change in policy had some unintended consequences, one of which was that there were often very few people – or no one at all – in-house with knowledge of this new material. It was during that time that I had the privilege of spending a day at a uPVC window manufacturer and was able to witness the diverse approach adopted by some local authorities.

At one end of the scale a local authority simply incorporated the designs and even the identical ironmongery that had been used for their timber window specifications. The specification was detailed on eight pages and even included the instructions for galvanising the ironmongery. The consequence of this approach was a poorly performing window which looked dreadful and, due to the non-standard ironmongery attached, was very expensive. The manufacturer’s Technical Director quite rightly stopped its production on the grounds that the reputation of his business would be damaged once it was released into the public domain. In this case the old adage of ‘giving the customer what the customer wants’ would only have damaged the business.

At the other end of the scale another local authority had obviously investigated the uPVC industry standards and simply adopted them into their specification. The specification was on a single page and included the provision that the high-performance hinges which were designed to fit into the profile of the window should be supplied.  These windows were also double glazed and, as a result of utilising the expertise of the uPVC industry, this local authority was buying a superior product at a price considerably lower than the single-glazed version bought by the other authority.

Similarly, when visiting the Nissan factory at Sunderland, I discovered that the specification for vehicle lighting is covered within two paragraphs. Nissan’s explanation for this is that their expertise is in designing, assembling and selling motor vehicles. They are not in the business of designing and manufacturing vehicle lighting.

So I have to ask, why are specifications still being sent to suppliers who are experts in their field telling them how to manufacture products? Suppliers will always quote for what you have specified in a tender but I have always believed that you will get a better deal simply by explaining to the supplier what it is you want to achieve. That way you will tap into the latest technology, encourage innovation and maximise economies of scale. Result – a better product at lower cost.

As the pressure to get more for your money intensifies, perhaps now is a good time to revisit some of your old specifications and ask yourselves if you couldn’t achieve better outcomes by ditching many of your input specifications and tapping into the products, services and industry expertise available to you.                  

A possible reason why this term was introduced could be that there was a perception across the public sector that purchasing was simply an administrative process. Unfortunately, doing anything based on ignorance always has unintended consequences. For example, the term Best Value had to be invented as not many understood the concept of economies of scale.  Similarly, a more recent trend is the term Commissioning which has been adopted (particularly in the NHS) to represent a superior form of procurement as it involves wider involvement with stakeholders.

No such problems existed in the motor industry. If you were involved in purchasing (or buying) you could be involved in all aspects of the supply chain from research and development, design and quality through to production and contract management.  This involved not only negotiating contracts but contributing to costs savings in design and production. It was a wonderful environment in which to learn commercial skills and the reduction of costs without sacrificing quality.  It was not uncommon for the heads of most of the major vehicle manufacturers to have learnt their trade through purchasing. Purchasing therefore stood up in its own right and didn’t need a new word to explain it.

The defence sector is one exception to this. The term “materiel” has been used by the MOD for over 100 years. Why? No one seems to know, but if they are the only organisation using it why wasn’t material (with the “a”) acceptable?  No doubt someone will provide a logical explanation for this.

Similarly, anyone with the title Vendor Manager is making a statement about their organisation. Why?  Do they think there is something undervalued about being a Sales Manager?

By all means separate admin from purchasing (placing OJEU Notices is not after all purchasing but an admin function) and sell the fact that this honourable profession does include strategic commercial decision making.  I also salute the Chartered Institute of Purchasing and Supply for sticking to its guns and not changing its name to keep up with trendy and irrelevant words.  After all who would want to belong to an organisation calling itself the Institute of Materiel and Commissioning?

The problem, as has been said before, is that the public sector now has contractors, who are working in such an unsustainable manner that, if they lose one or two contracts, they may have no option but to pull down the shutters.

The issue is that while some areas of the public sector continue to be willing to trust in outdated annual accounts as verification of financial sustainability, this problem is unlikely to go away.

Just recently, I was asked by a local government body whether it would be okay for them to move to the tender stage of a procurement process nine months after they had undertaken and evaluated the prequalification stage.

While there is no written rule as to how long the gap should be between these stages, it would have been foolhardy – to say the least – to take organisations through to tender based on financial information that was so out of date, including some latest accounts that were over two years old.

There was a further complication. One of the parties who got through PQQ had subsequently been wound up, so the authority assumed that the simple solution would be to invite the next ranked to participate, without any form of re-evaluation.

A little further digging revealed that the authority had made no provision to undertake any form of due diligence prior to contract award, therefore they faced the possibility of awarding a contract to an insolvent company.

While I’m on the subject of financials, can we also get realistic when it comes to annual turnover against annual contract value?

I repeatedly encounter contractors who misguidedly believe that some mysterious ‘rule of thumb’ exists in the public sector and that they cannot tender for contracts if the annual value of the contract is greater than 15%, 20%, 25% or whatever of their annual turnover.

No such rule exists. However, some public bodies seem to perpetuate this myth by seeking companies with turnovers umpteen times the value of the contract and openly advising in the contract advertisement that parties below certain levels shouldn’t even bother applying for the PQQ.

This only serves to alienate SMEs and it is also important to remember that a high turnover does not a successful business make.

It’s time for the public sector to get a whole lot smarter about how it runs financial assessment.