You couldn’t make it up.  The latest expose in various papers today was the use of the GPC (Government Procurement Card).  Here is the Daily Mail;

More than 140,000 senior public sector workers used government-issue cards to spend a fortune, some of it on fine dining, wine and £100 taxi rides. In 2009 alone they spent almost £1billion, four times as much as in 2002 and enough to pay the salaries of 50,000 nurses. Since 2002, the total has reached £5billion.

Examples include Trevor Phillips of the Equality and Human Rights Commission spending £94 on a bottle of wine at the Cinammon CLub (the most overpriced restaurant in Westminster) .  And, of course as the Mail reported

Stephen Macvicar, a procurement manager at the Department of Culture, Media and Sport, faced a probe last year for allegedly ‘misusing’ his GPC to fund his passion for musical theatre. The 41-year-old was sued by his former bosses for £58,000 after it was claimed he used the card to stage amateur dramatics productions- including one in which he played the greedy Mr Bumble in Oliver!

Much of that was spent on theatrical props to support his AmDram habit. As a former stalwart of the Windsor Theatre Guild I can sympathise*.

But of course the reporting suggests that all this is ‘fat cat’ type spend, when actually procurement cards are a very useful process tool that avoid the need for millions of low value, inefficient transactions across the public sector (and the private sector).  They undoubtedly save the taxpayer money.

Any ‘tool’ or process is only as good as the controls around it, and certainly every GPC transaction should be authorised, and every user must understand the parameters for use.  I personally think the £94 bottle of wine is appalling and pretty unforgivable ; does that organisation have no T&E type policy in place?

And once the post election squeeze starts biting in the public sector, we’re going to find the media, the opposition and the public very interested in this sort of thing.  So get your house in order; if you use GPC, make sure your policy, guidance, audit and controls are watertight before you find yourself on the front page of the Mail!

* I left the Guild in 1986 due to artistic differences; I thought I could act and they didn’t……!!

I’ve written another post for Spend Matters, building on some of the stories I’ve posted here around ethics and corruption in procurement.  I’ve added a few interesting examples of things I’ve experienced in my own career; which has led me to the conclusion that if your systems and processes leave the door open for corruption  in your procurement and supply chain activities, then it is almost certainly happening.  Anyway, more here.

Corruption has been in the news this week as Supply Management reported;

“Three UK directors of French transport and infrastructure company Alstom were arrested in England yesterday on suspicion of using bribes to win business abroad. It follows an investigation by the Serious Fraud Office (SFO) – codenamed Operation Ruthenium – into the suspected bribe payments and money laundering by companies within the Alstom group in the UK to win contracts overseas.”

And the African Development Indicators report, based on World bank research,  and also featured in SM, says that many southern African companies “expect” to pay bribes to government officials to win contracts.

It is easy to be cynical and accepting and get sucked into thinking this sort of thing just goes on in certain countries, and is inevitable; and that companies have to play the game – what’s a few bribes just to oil the wheels anyway?  But we mustn’t stop being shocked and angry about this.

I’ve done a little work in the past with an excellent organisation called Transparency International (TI).  They campaign globally for ethical government and against corruption. In some parts of the world, their staff are in physical danger; in others, it is all about influencing governments, large corporations and international organisations to take the issues seriously and take appropriate action when issues come to light. As TI say:

“Corruption is the abuse of entrusted power for private gain. It hurts everyone whose life, livelihood or happiness depends on the integrity of people in a position of authority”.

Working with them made me realise the hugely damaging effects of corruption in supply chains. There is an obvious cost to the organisation buying (and being bribed); in a public organisation, it is the taxpayer in that country who bears the additional cost of the purchase that is inevitable to  cover and fund the bribe.  So there is a transfer of wealth from the  economically active (but probably poor) local taxpayers to a corrupt and criminal class (the middle-men and receivers of the bribes), who then get richer and stronger, which gives them opportunities to get more power and exercise more corruption.  The logical conclusion of all this, taken to extremes, can be “failed states”.

And think about this.  If you are a supplier bidding for contracts, and you know you can be beaten by a competitor with a worse product and poorer value for money, but who pays bigger bribes, why would you bother?  Why go through a fake competitive process?  Or what is the point of striving to make your product or service better? You might as well give up, or ‘invest’ in bigger bribes yourself rather than the value of the product. So the organisation purchasing may receive over time worse and worse actual value and performance from what it is buying, as the bribes get bigger and bigger.

So next time someone says, “well, a few bribes don’t really hurt anyone, it’s just the way they do business in country X”, remember the corrosive, evil and poverty-creating effects of endemic corruption.  I’d love to see organisations like CIPS doing more in this field, and to everyone reading this in countries where this isn’t a problem, be grateful, but be vigilant.

I’ve got a post on the Supply Management blog which looks at appropriate category management strategies for the acquisition of Cabinet Ministers.  Read it here.  Some amusing comments as well!

Supply Management features the sad story of Northern Ireland Water:

“Four members of the Northern Ireland Water (NIW) board have been sacked for failures in procurement governance around contract awards – and there may be more dismissals to come, a minister has warned.

NIW chairman Chris Mellor and three other non-executive directors – John Ballard, Ruth Thompson and Declan Gormley – have been dismissed following a “serious breakdown in the governance and control framework” of contract approvals.”

But in the spirit of investigative blogging, I have got even more fascinating detail than the SM article suggested.  If you plough through the detailed report here, the contract, let as a single tender,  that triggered the whole thing is itself a contract for procurement consultancy!  And not just that – it appears to be a ’share of savings’ consulting contract where the supplier (unnamed) is claiming £ million plus as their share.  From the report;

“The investigation into Contractor A, a consultancy specialising in procurement, had
concluded that that organisation had been engaged through a STA with a spend to date of
£660,000, a further £50,000 in the pipeline and a settlement on the six per cent incentive
bonus relating to ‘identified savings’ yet to be reached (detailed in Schedule 7 to the
contract master agreement and relating to the termination of the Customer Billing/Contact
contract). We understand that in December 2009 NIW received a further invoice for
£888,000 based on Contractor A’s calculation of the savings and interest to date on the
claims identified, which remain outstanding. We were told by NIW that the position is
under consideration.

A ’share of savings’ invoice for £888,000 “under consideration”! I bet it’s under consideration….and how much further liability might NIW be carrying for this contract?

So we have a failure of procurement governance in the engagement of a procurement consultant whose assignment was to look at other procurement spend.   Irony on irony….

I’ve always had real concerns over contingency fee based consulting assignment except in some very specific and clearly defined areas.  The “we’ll take a share of whatever procurement savings we can find”  contracts in my experience almost always end in tears. I’ve twice gone into organisations to help clear up the mess left behind after such assignments, and in both cases the client ended up paying most of the contingent fees after painful legal disputes. Be very careful….

Finally, anyone know who the procurement consultant is in this case?  Anonymous comments welcome!