UK Prime Minister David Cameron made his pro-growth speech this morning.  Alongside a lot of good stuff around large-scale investment projects, I thought there might be some mention of how public procurement might help smaller businesses – and there was.  But only just… a blink and you miss it moment.

That means opening up access to finance, creating an attractive environment for venture capital funding, getting banks lending to small businesses again and insisting that a far greater proportion of government procurement budgets are spent with small and medium-sized firms.

So how’s that going to work then?

And in the days and months ahead we will be setting out our plans in all these areas.

Right.  So nothing concrete yet, not even a confirmation of the single portal to advertise all government contract opportunities that has been planned since way back during the last Government’s reign?

And let’s just put down one marker here.  There has been talk about “25% of contracts will be awarded to SMEs” as a Coalition commitment.

Here’s the point to look out for.  Are we talking about 25 % of contracts by volume to be awarded to SMEs or 25% of Government spend to go to SMEs (i.e. by value)?  Because they are very different.  Like most organisations, the profile of spend for every public sector body I’ve worked with shows a very long tail.  There are many small suppliers that account for a large number of contracts, orders and invoices, but often make up a relatively small percentage of total spend.

So I will bet my mortgage on this fact: pretty much every public sector organisation already awards 25% of their contracts by volume (at least) to SMEs.  Many fewer place 25% of their total spend with SMEs, although I know some local authorities do; it is harder for large organisations with a need for national suppliers, such as DWP or MOD, to achieve that.

A commitment to 25% of contracts by volume is therefore meaningless; it happens already, it probably has since the day the public sector was invented.  A commitment to 25% by value would mean something; although there is another whole discussion to be had around how the public sector could make this happen legally within EU procurement regulations.

Anyway, don’t be fooled by the rhetoric, and look out for that distinction when any announcement is made on this topic.

And if I were running the Federation of Small Businesses I would be jumping up and down about this now to get the point across.

We discussed Wayne Rooney’s deal with Manchester United here yesterday, and how the negotiation concept of a BATNA played a key role.   So was he consciously or sub-consciously developing that – his Best Alternative to a Negotiated Agreement – to improve his negotiation position with United?  It certainly looked that way.

For him to get  the best deal, Sir Alex Ferguson (the Man United manager and his negotiation ‘opposition’) had to really believe that Rooney had a strong BATNA.  In this case, that BATNA is very obvious; Sir Alex had to really feel that Rooney was prepared to move, indeed was keen to move, and that other clubs would pay him stupid amounts of money.  Hence the apparent dis-satisfaction with Man United’s ‘ambition’, the stories of Manchester City being prepared to offer £200K a week and so on.  All very cleverly constructed, to the point where the newspapers were saying that ” there is no way Rooney is staying”.

Why then was a settlement suddenly announced? I suspect Rooney and his agent saw that cracks were appearing in their BATNA.  If word got out that his Mother in Law was insisting that he and his wife stayed in the North West of England (as some newspapers have reported), that would weaken his position.  Then the mob who surrounded his house the other night made it very clear how unpleasant his life would be if he joined the other Manchester club.

So suddenly, his BATNA was looking more restricted and therefore much weaker.  And just as importantly, the club might realise that it was weakening.  It is not only how strong your BATNA is; it is how strong your opponent thinks it is.  Imagine how powerful Sir Alex would have felt knowing that a. Rooney had to stay in the area and b. he couldn’t join the only other club with money in the area for fear of his life.

It made perfect sense then for Rooney to decide quickly that he wanted to settle.  And while there are various stories around concerning how good the deal is, it certainly looks like he played his cards well.

What could the club have done better? Their job was to make their own BATNA look as good as possible; that is, to persuade Rooney that it wasn’t that big a deal if he went.  Hence perhaps the reason for dropping him for a couple of games earlier this season.  But that was undermined by United’s poor form, and the lack of any star young players coming through to enable Sir Alex to say (or hint), “we don’t need you Wayne”.  Perhaps the club could have done more on this front; loaning Danny Welbeck to Sunderland, my hometown club, was very kind but perhaps he should have stayed at Old Trafford to be positioned as ‘the new Wayne’.

Anyway, Rooney may not know it, but he demonstrated some key negotiation principles very well indeed!

Rooney is staying at Manchester United – a bit of a shock after all the things he said about ‘lack of ambition’ at the club!

But was this all part of his negotiating strategy; was he merely building his BATNA, or the appearance of his BATNA? The ‘Best Alternative To a Negotiated Agremeent’ was described by Fisher and Ury in their classic negotiation book, “Getting to Yes“, which came out of work done in the Harvard Negotiation Project.  It is still the best non-academic, practical yet thoughtful book on negotiation I have read; it can’t cover every aspect of the topic obviously in one slim book but it is essential reading for anyone in procurement or business more generally.

The point of the BATNA is that it determines how strong your negotiating position is, which obviously in itself plays a big part in determining the likely outcome.  In simple terms it means this; what are you going to do if you can’t get what you want from the other side?  If your answer is ‘I don’t know’ or ‘panic’, then you’re not ready to negotiate; you need to go away and do some work on your BATNA first.

I don’t dismiss all the writing and training courses I see that go on about body language in negotiation, applying emotional intelligence and so on; that all has some importance in some negotiations.  But I would say that having a strong BATNA is far more important than any of the softer aspects in virtually all business negotiations.

We’ll look tomorrow at how Rooney – and perhaps Man United as well – developed their BATNAs during the negotiation process; consciously or unconsciously, that was certainly happening!  And we saw something else this week in Manchester; how your owwn BATNA, however much you try, can be influenced by events outside your control.

A lot of what we have heard about the Spending Review has been around things that aren’t being cut – schools, defence not as much as expected, Crossrail, Social care etc.  So far, the numbers don’t seem to add up.  So I predict a couple of big surprises today – stuff that hasn’t been written about in the papers that will have a big impact on spend.  Public sector salaries or pensions?  I don’t know, but there must be something big I suspect.

Anyway…there is every chance you get quite enough of me writing about public sector procurement here, but if you would like something longer than usual, I’ve written a piece for the CPO Agenda magazine that has recently been published. It is on the website as well here.

I look at how difficult the challenge of reducing spending in the procurement area is going to be for the UK public sector, and compare how the private sector would go about it compared to the public (where there are more constraints.) I also talk about the Canadian government experience of cost reduction.

Then I get into the major procurement initiatives underway here; centralised procurement, transparency and so on.  I finish with a plea for the government to retain someone with an overarching aim of improving public sector procurmeent (now Nigel Smith has gone); here’s my final paragraph.

At a time when procurement performance is critical for the public sector, the danger is that central government will become inwardly focused on its own “commodity” purchasing, while the wider public sector fragments with less focus and a lack of ownership of the goal of improving public procurement. It is early days for the new government, but much is riding on Watmore and his team at the ERG as it considers where public procurement needs to go next.

Dear Mr Blatter

The allegations of bribery around voting for the World Cup are unwelcome and serious.  So it would seem to be an appropriate time to look at how FIFA might apply the principles of good procurement practice to the venue selection process?   Practices used by the public sector are particularly appropriate, although in truth the principles are also applied by the best private sector firms.

Those principles are openness, transparency, honesty and fairness, and they are applied every day by organisations in order to select the best suppliers to provide them with goods and services.

I would suggest that FIFA should introduce a clear and publicly disclosed  selection process, using defined evaluation criteria (which could be weighted and broken down into sub-criteria).  Venues would make their proposals, which could include site visits and so on, and national delegates, who could still be the decision makers, would score bidders in a transparent manner against the criteria.   Scores would need to be justified with as much objective evidence as possible, and a proper audit trail of the decision process maintained.  Scores could be moderated to give a single consensus set of scores; or delegates’ individual scores could simply be aggregated or averaged; both options are workable.

Technology exists to assist the process; there are software and solutions providers (Emptoris, BravoSolution, Intenda, Trade Extensions and others) who have considerable experience of helping Government clients in many countries run complex procurement processes.  Using the appropriate software would help delegates through the evaluation, and enable you to demonstrate the transparency and fairness of the process.

Finally, it is good practice for all staff engaged in major procurement decisions to sign up to a code of behaviour, which forbids gifts, describes what level of hospitality is allowable, and covers conflicts or interests and other issues that may work against fair competition.  That should be applied to your delegates, or whoever forms the selection panel.

This would not be difficult, expensive or time consuming to implement; and it would bring considerable public confidence back to the selection process.  I would be delighted to discuss further at your convenience.

Yours sincerely

Peter Smith

Did you see strictly Come Dancing? (Not that I watch it usually of course, just happened to be passing etc etc…) Do you realise that Felicity Kendall, and I’m being a little ungallant here, is older than Anne Widdecombe!!  Wikipedia her if you want to know the details.  Kendall’s performance would have been impressive in terms of her flexibility for someone literally half her age; and my goodness, she is in great shape…. In fact, here she is… Anyway, I hear you say, what’s that got to do with local sourcing?  Well, Jason at Spend Matters discussed on Friday whether Walmart’s intention to increase the proportion of locally grown produce on sale in their stores was likely to work.  And that reminded me of one of the early episodes of  the BBC comedy series from the late 1970s, The Good Life, where Kendall and Richard Briers played Tom and Barbara Good, a comfortably-off couple who   decide to pack in the day jobs and go self sufficient in their suburban environment. Way ahead of its time actually when you think about it, with its themes of sustainability and localism.

Anyway, in one episode, they took their surplus produce to their local restaurateur.  Yes, he said, those lettuce and carrots look really good.  So £90 for the quantity you have available?  Sounds OK, says Tom.   So that’ll be £90 every month, replies the restaurant guy….

No, says Tom, this is it!  This is our entire surplus for this season! Which obviously is no good for the restaurant that needs regular supply. And that was – and is – the reality of a small supplier, bigger buyer situation in the fresh produce market.  Now these days, they might be able to nip off to a farmer’s market when they had something to sell; but the problems remain for the small grower.  I know this is an extreme example, but it illustrates Jason’s point; it is a worthy initiative by Walmart, but don’t under-estimate how difficult it will be to make it work.

And I’m very much looking forward to seeing Ms Kendall next week…

Look, one more day on the Sir Philip Green report then I promise I’ll shut up.  Unless I do an FOI request to try and get the evidence behind the £73 box of paper…  I’d also point you towards several very pertinent comments we had on an earlier piece on this topic – see the comments here.  Thanks to all of those people.

But just to re-iterate (and this is all covered in my Supply Management piece); there are factual errors in the report and I am very suspicious of some of the benchmarking numbers.  I also find the ‘bigger is better’ thing over-simplifies matters; we need proper category approaches that will differ for different spend areas.  But his “6 clear reasons why Government conducts its business so inefficiently” should be etched into every Permanent Secretary’s forehead; and where more collaboration and centralisation makes sense, in procurement or property, action now needs to be swift.

And on that note, I thought I’d go into one area that was mentioned in some of the discussions although I didn’t see it actually in the final report.  But it is a good illustration of the issues in more detail, and I can perhaps suggest a way forward.  Like many of his recommendations, this one isn’t a new idea: we’ve known for years that Police Forces buy different uniforms.  (I speak as the first, penultimate, and interim director of the National Police Procurement Centre of Excellence in 2005. Yes, uniforms were on our list then…the Centre only lasted 2 years unfortunately).

And it is not as if every Force buys independently; there is pretty good collaboration at regional level in the Police Service, and indeed a reasonable amount nationally.  But there should be a single national uniform, that seems like a no-brainer, and there isn’t at the moment.  Why not?  Because Chief Constables, their senior uniformed officers and Police Authority members have historically wanted to have their own identity, and have different views on the ‘best’ uniform.  Half the forces think pockets in trousers are essential; half think they’re a safety hazard (for example, when you’re climbing over walls chasing a mugger, leaping onto the bonnet of a speeding Cortina, restraining suspects in a Sweeney / the Bill type manner; you know the sort of thing).

So don’t blame procurement people for the lack of standardisation, and I know the NPIA (National Police Improvement Agency) procurement team are onto this category already; but it is like herding cats!  And NPIA is on the list of Quangos that MAY be abolished; so if that happens, who will make the 43 Forces do this, manage the process, pull together specs and drive the whole process?

But anyway, there is only one way to achieve what Sir Philip wants and make this work.  We need to lock the 43 Chief Constables in a hot, small room and not let them out until they sign up to a national uniform, and agree a single set of specifications.  And the same for a national police car fleet; a national set of protective equipment; and probably a few other things while we’re at it.

And do just bear in mind the effect on the market of the sort of approach Green wants to see.  I do think it needs to happen given our economic situation, but there is another side to the argument; just wait for the howls of protest from the uniform suppliers, including no doubt SMEs, who lose out when we do go to national deals.  And where do you think the national police uniform is likely to be manufactured?  Bombay, not Burnley; or Shanghai, not Sunderland!   In any case, we need to develop very robust and effective procurement strategies for those items, and run even more robust procurement processes.  Because you can be very sure that the unsuccessful suppliers, who suddenly see their whole police sector business disappear overnight, are not going to be happy; there will be legal challenges as well as mere complaints. Good news for the procurement lawyers!

* Sorry, couldn’t resist…

You read it here first.  When the first quango closing announcement was made shortly after the UK election, on May 25th, we said this :

“And in the case of Becta  I struggle to see how this will save money in 2010/11; I would be amazed if closure costs (redundancy, leases, contractual exits) do not outweigh the savings in this year”.

This hardly seemed like a piece of stunning analysis or investigative journalism; low level common sense really, and I suppose some experience of working in businesses that weren’t always doing well.  Anyway, some 5 months later, the media have caught up with this; the Guardian reported last week:

“Exclusive: Private papers reveal multi-billion pound bill to close up to 180 quangos – and savings might not be felt for 10 years”

Apparently the Government papers, obtained by the Guardian explain that, “in several cases the liabilities from pensions, redundancies and rental contracts could outweigh any of the savings being claimed for up to 10 years“.

And Steve Richards in the Independent yesterday said, referring to Ministers,

To their horror, they find that reforms require additional investment, at least in the short term.

Well, knock me down with a damp copy of Hansard.  There’s a surprise.

The pension issue is interesting; many ‘quangos’ have their own corporate pension schemes rather than being part of the general public sector schemes (funded from current taxes), so they have to be run pretty much as if they were private company schemes. Therefore closing the organisation could I believe, in many cases, crystallise the under-funding issues which many of them suffer from, and could require huge cash injections from the Government.

So did the politicians and their advisers realise this (the lack of year 1 savings) from the start but feel closures were  the right step for longer term reasons?  That is not an unreasonable strategy, by the way.  Or did they really not spot this?  That would be concerning, and would show a worrying commercial naivety.

I wrote a rapid blog for Supply Management yesterday on the publication of the Green report; and that wasn’t the end of the excitement…

As regular readers may remember, last time I told you I was going to be on the radio, I had the embarrassment of being cut from the programme at the last minute!

But last night I survived and featured on the World Tonight on Radio 4 – although what was broadcast was somewhat cut and edited from the original.  I was called around teatime after someone at the BBC saw one of my blogs.  The ‘radio car’ – a very nifty transit van with lots of stuff in the back  (that’s a technical term we experienced broadcasters use – you know, headphones and microphones and…stuff…)  turned up outside the house at 9pm and 75 minutes later my interview was broadcast.

Ritula Shah (who has a lovely voice) interviewed me from the studios through the headphones and it all went fine except when I said ‘NDPB’ rather than non-departmental public body and got stopped for using jargon.  They edited it, so  in a couple of cases it now sounds like I didn’t really answer her question; and they cut one or two of my less positive comments on the report actually (which is probably a good thing,) but if you want to listen, it is here after 18.20 minutes of the programme.

And if you’re ever in the same position, I can thoroughly recommend  a glass and a half of the Majestic Bernard Series South African Viognier (special offer, £7.49 if you buy two bottles) to steady the interview nerves…

Tanzania hosts East Africa Procurement Forum

Dar es Salaam was the venue last week for this event, attended by 200 plus delegates from Kenya, Uganda, Rwanda, Burundi, Tanzania and beyond.  The PPRA site has a good summary here of some of the speeches; interesting to see that issues such as outcome-based procurement, better use of technology, accountability and transparency are global concerns for public procurement.  I was particularly struck by retired high court Judge, Honourable Justice Thomas Mihayo, who said that he considered 100% of the country’s budget to be procurement because, “Salaries are paid after a payee renders a service to a client, and therefore to me that is procurement”. An interesting thought….we may come back to that.

Jingle Bells, Jingle Bells

Yes, we are just – oh, I don’t know, lets say about 60 shopping days from Christmas.  Deep joy, as they say (sorry, I am somewhat of the Scrooge school of thought where Christmas is concerned).  And Portsmouth City Council have issued an OJEU notice inviting bids for,

“Installation, maintenance, removal and storage of Christmas illuminations.”

So if there are any teams of elves out there, with the appropriate health and safety accreditation of course, then get your expressions of interest in now!  Given the lead times actually, I suspect this is for 2011 onwards; or it might start with removal of the decorations this Christmas.  Anyway, Merry Christmas from Portsmouth!

Trinidad procurement policies and Balfour Beatty…

The Trinidad Express reports that;

“Works Minister Jack Warner revealed yesterday the People’s National Movement (PNM) government paid $21 million to international firm Parsons Brinckerhoff for a transport study and no study was done.”

These accusations against the previous Government seem to be in response to more allegations of dodgy procurement levelled at the current incumbents – including the award in one day of a $47m contract for upgrading the lights at Piarco airport…

Anyway, Mr Warner let loose a wonderful diatribe.  The previous Government had promised to bring in procurement policies for years but failed to do so; the new Government is now trying to clamp down on corrupt public procurement practices.  But interesting that a firm well known in the US and Europe may be mixed up in this local Trinidadian political fighting; Parsons was acquired by Balfour Beatty last year.  I’ve seen no response from them or Balfour on this.