As we discussed here, our Blog has merged with Spend Matters, probably the world’s greatest procurement blog / web resource, to form Spend Matters UK / Europe.

Please visit us here and don’t forget to bookmark the new site -

http://spendmatters.co.uk

for Procurement and Supply Chain news, views, opinion, and analysis: as well as the odd post on music, politics and Wayne Rooney’s BATNA!

Things will only get better; I am the Lead Editor for the new site and will be writing extensively, but we will have more from Jason Busch and exciting guest writers.

Please come and visit our new residence – take you shoes off please, new carpets you know!

If you are interested in our consulting business, Procurement Excellence, which continues as usual,  our website is here or contact me on psmith@procurementexcellence.com

We get some great comments on our posts but I think they get somewhat lost, sitting at the end of posts that have fallen down the page.  So here are some recent examples.

Steve Mullins – a legend of the procurement world no less, and a man clearly in the know about this topic – comments on my post about the new Lloyds TSB CPO.

Hi Peter – and my first input to your blog – much enjoying it by the way. Thought I could usefully add some thoughts on the ‘Michael@LBG’ saga. I understand that the recruitment process was run by a specialist in house executive recruitment team who deployed a global search. A short list of 6-7 was worked up, including a number of highly credible and experienced candidates well known to us. My understanding is that the process itself had five clear steps including a pretty searching half day assessment centre to check out not just capability and competence but also whether people would work well within the LBG culture. Very sensibly, one of the interviewing team was an ex CPO who is now in a senior operations role at LBG. And LBG indicate that Mark Fisher did not have Michael in mind from the outset, or at least not in a way that was evident to interviewees.

Happy to stand corrected Steve.

Then we have Jeremy Sams, who asked the thought provoking question, “is category management dead?”  I answered a firm ‘no’ to that, and Jeremy wanted to point out a couple of things about my post.  Sorry I didn’t know who you were Jeremy, but as I said last time, you have kept a low profile on LinkedIn, Google etc – that may have changed now.  And provoking debate with articles like yours is absolutely what it is all about.

Let’s just correct the inaccuracies/assumptions. The ‘by-line’ was requested by me, simply because I work for an organisation that is sensitive to its name appearing in print! There was no ‘concern about the piece’ from Supply Management, far from it! I wrote it from the heart, sent it to them and they wanted to publish it. They (and I quote) felt it was “interesting, thought-provoking and also instructive”. Whether you know me or not I am highly qualified in procurement and have many years experience across different industries at a senior level. I am very pleased that my article has created interest and debate and fully expected that it would generate criticism!

Florence Gregg has interesting thoughts about the ‘lottery’ method of selecting suppliers.

I understand that a lottery approach is starting to be used in some organisations. I’ve been told by suppliers who’ve been through this approach, that when the PQQs are received if the CA’s intention is to bring through, say, 8 to tender; the CA randomly selects 8 PQQs and these are evaluated. If upon evaluation not all not meet the published minimum passmark, the CA goes back and selects a further 1, 2 or whatever number and repeats the process until it gets the required number of tenderers.
I suppose as a micro business who sometimes tries to bid against the bigger consultancies, my PQQ being pulled ‘out of a hat’ could give me a better chance of getting through, than being ranked and falling just below the cut-off point. The odds, 40 PQQs and an intention to invite 8 to bid. My chances of getting selected (assuming I am capable of attaining the minimum score) is 8:40 – a 20% chance. Firm X, a bigger ‘usually always shortlisted’ has the same 20% chance of being selected; or, more interestingly, an 80% of not being selected – now that would be interesting!

I will be responding to Philip Hoult’s comment asking how easy it will be for the Government to give more business to charities with a new post shortly; and thanks (as always) to Christine Morton for her thoughts on the aircraft carrier fiasco / brilliant piece of supply chain strategy (depending which view you take…!)

Keep the comments coming please…

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.

The Times from behind their paywall reports that the reason the second UK aircraft carrier is going ahead is that the contract was ‘unbreakable’ – it guaranteed the shipyards 15 years work.  Therefore cancelling the second carrier would have cost more than completing it!  That is a pretty unusual thing to do in contracting and procurement terms to say the least; reserving capacity I suppose, but over a very long period.

The Times says,

BAE signed a draft terms of business agreement three years ago with the Labour Government that would cover 15 years of unspecified shipbuilding work.  The contract was signed officially last year.

I would love to know how MOD procurement people felt about this.  Was it a case of (in their eyes) a solid and sensible commercial deal, locking in a supplier long-term in a market with limited supply options?  Or did they sign though gritted teeth, having made sure they covered themselves by getting ministers to tell them formally to contract in this unusual manner?  If I could employ a few investigative journalists I’d be onto that one….

Perhaps in future, if Government contracts are published (although the Coalition is backing off from this promise, as we reported here), we may at least know sooner when this sort of thing is going on, although I guess this may have come under national security constraints anyway.

And on a different but related note, my late Father in Law will be turning in his grave as our nuclear submarine runs aground – he was the UK’s top submarine designer / engineer for many years and wrote the standard textbook on the topic.  I thought it was particularly amusing that the method of getting the sub free eventually was basically ‘tie a rope around her and pull’ – very high tech!

There is a lot of good stuff going on in CIPS, some of which we discussed in our post yesterday regarding the CIPS Chief Executive’s interview in Supply Management.  But today, I’m going to be less positive, because on one particular point, I believe David Noble is pursuing an extremely misguided objective.

He wants procurement people to have a ‘licence to practice’ in the same way that accountants or doctors must have a professional accreditation in order to work in their professions.  Well, actually, you can be a CFO without being a qualified accountant; it is only a few statutory areas, designed for the protection of shareholders, customers, and suppliers that require an accredited accountant’s input.  So I’m not sure the analogy even holds there.  And as for doctors; well, that stationery contract is hardly a matter of life and death….

Presumably the CIPS qualifictaion would give you such a ‘licence’.  Now, I can see some merit in this in the public sector, particularly in the developing world, or if corruption is a big problem.  I could see a Government deciding that any public sector buyers should be appropriately qualified.  Fine – if that’s what he means, Noble should make the extent of his ambitions clear.

But he seems to be implying it should apply also to private sector firms.  So no IT, HR, Marketing, or Production manager would be ‘allowed’ to spend the firm’s money?  This looks far too much like our profession trying to create a  monopoly – just the sort of thing we hate when we see suppliers doing it.

And frankly, while I’m a big CIPS supporter, some of the best procurement managers who ever worked for me weren’t CIPS qualified; and some of the worst were.  I wouldn’t give up my right, as a CPO, a CEO or a business owner, to choose who I employ to spend ‘my’ organisation’s money.  It is not for CIPS to try and create a closed shop and tell me how to run my business, thank you.

If I were a CPO, and someone from CIPS suggested this to my CEO, I would be incredibly embarrassed; no CEO I’ve ever met will treat this as a serious idea.  It risks making CIPS look self-serving and ill-informed about how business works.  Has the CIPS Council and Board really approved this as a strategic aim?

I look forward to some interesting comments!

Cap Gemini published their Global Chief Procurement Officer 2010 Survey report a couple of weeks ago. (Available free, registration required).  It is a slightly unusual document in that it is very much in two halves.  The first part is a fairly conventional but useful  survey of procurement leaders, with analysis and comment as you would expect.  I’ll come back to that in a moment.

The second part though is a collection of seven papers written by Cap Gemini procurement and supply chain consultants, designed to address the changing needs and new strategies for procurement, under these headings:

• Building a collaborative relationship with the CFO
• Establishing and delivering longer-term strategic objectives through data, technology, processes and talent
• Building the right organization and operating model
• Extending influence into service spend
• Employing procurement-as-a-service to transform the organization
• Understanding best practice in procurement performance measurement
• Using Lean procurement to remove barriers to innovation.

They are quite technical, detailed – some are almost ‘academic’ in style.  I need to read more thoroughly but while some of the content does push the Cap cause a little (such as a positive spin on procurement outsourcing), there seems to be some good IP amongst it as well.  I’m somewhat surprised though that these papers have been presented as add-ons to the survey results, as I’m not sure how many people will actually get to them, let alone read them in detail.  I wonder whether they might have been better as separate ‘white papers’ or similar?

Anyway, back to the survey.  From the responses, most firms believe we are coming out of recession, but Cap say that:

“If that is the case, then the behavior of most Procurement organizations seems to be slightly misaligned”.

CPOs and their organisations are, in Cap Gemini’s opinion, too focused on cost reduction rather than on,

“…innovation and bringing growth to the company’s top line.”

I’m not sure I agree; when you go through difficult economic times, it doesn’t seem surprising that procurement will reflect the organisational need to batten down the hatches and drive for savings and value.  Anyway, more positively, 70% of respondents report directly into the Boardroom, and a quarter to the CEO or Business Head, which means procurement is better positioned to take on a more strategic role than ever before.

CPOs seem to be aware that their role is changing and needs to change, and there is also a trend towards more centralised or centre-led organisational models; perhaps in response to tough times and / or a recognition of the value procurement can bring where it has appropriate control.  Spend under control of Procurement is showing a steady growth across the sample as well; this to me is one of the two or three key metrics for measuring procurement success.   However, when we look at the detail, only 49% of CPOs have contingent labour under control; as we’ve said before, a key area with a lot of potential.  Legal services coverage is even lower at 38%.

The most shocking finding for me is that 64% of organisations are putting less than 20% of their spend through ‘eProcurement’.  As Cap seem to define eProcurement as pretty much anything from eSourcing to auctions to transactional platforms (catalogues, workflow), then that seems very low and suggests huge untapped opportunities.

Anyway, the survey results are well worth reading; and the papers worth a browse to identify where they may address any current issues you’re facing.

In truth, there weren’t many big surprises in the Review, although you might consider squeezing another £7 billion out of a range of seemingly obscure welfare measures either impressive or harsh.

But there is still no real clarity on what it means for Government procurement, including OGC / ERG, although the additional £3 billion admin savings in Whitehall doesn’t bode well for procurement jobs in central government.  There was no overarching indication of a strategic view on how procurement actions might help the situation, so we will have to wait for individual organisations to start announcing their own more detailed plans.  But I thought we would look instead in this post at what this all means for private sector suppliers to the public sector.  I don’t pretend this is all-encompassing, but rather a few immediate thoughts on winners and losers.

Losers

Private landlords letting to housing benefit claimants; whilst the new restrictions will be tough on some claimants, there have been market distortions and super-profits available to some landlords so reform was needed.

Legal Aid lawyers; the Ministry of Justice budget settlement is pretty tough and Legal Aid is a major part of that, so I expect big cuts here. (The effect of the cuts on the whole justice system – prisons, courts, Legal Aid – is in my opinion where the Coalition is most politically vulnerable to future ‘events’).

Small business generally; however it is positioned, more Philip Green type ‘centralised procurement’ is unlikely to be good news for SMEs.  Even at more local level, Police or local authorities collaborating more in procurement terms may make sense, but is rarely good for small, local suppliers.

Consultants in general, particularly those with major central or local government business; Health may be a better prospect given both the slightly healthier budget position and the magnitude of structural change there.  Expect announcements of redundancies and consulting firms going under soon (OK, don’t all cheer at once….).

Winners

Some major capital project suppliers; Crossrail, major road projects and wind have all come out of this reasonably well.  My shares in Balfour Beatty are probably OK, although the schools capital budget is way down on what ws going to be spent under Building Schools for the Future.

‘Social care’ providers of goods and services who can take advantage of the growing ‘personalisation’ agenda in this sort of care provision (giving individuals their own budgets rather than goods and services being provided centrally).  This may be an area where innovative and smaller firms can compete.

Procurement lawyers; with work more scarce, and more centralisation, suppliers are going to be less reticent about challenging procurement decisions.  If you don’t win the central contract, you are out in the cold, so why not challenge?  And if procurement teams are stretched, and corners are cut….

Consultants and software providers who can link their work directly to savings and ideally take on some risk in the process; and the procurement area must be a key target for this sort of proposition.  One would expect there should be opportunities in areas such as Spend Analysis, eSouring, electronic auctions; and in cost-reduction delivery services (don’t use the consulting word, whatever you do) that might work alngside smart technology.  There should be some mutual advantage to the public sector and solution providers who can take some risk, deliver a service with real outcomes and value, and help make the savings needed.

But we’ll see…

David Noble is one year into his role as CIPS Chief Executive and Supply Management has a very interesting interview with him.  I’m going to publish two posts on this; today it is the good news; tomorrow I’ll pick up on one particular issue where I’m somewhat less positive!

When Simon Sperryn, the previous CEO, ‘left’ suddenly in mid 2009, Noble was parachuted into the role; but given he didn’t come through a long, detailed recruitment process, he has been a pretty good argument for emergency appointments.

He has stabilised what was rapidly becoming a difficult situation for CIPS, got the finances back on track, and revenues are increasing again by the sound of it,  so he – and the Board and Council – deserve a lot of credit for that.

Membership at 65,000 continues its seemingly inexorable growth.  However, with 20,000 students in China, that brings big issues over the next few years in terms of offering those people ongoing support once they have their qualification.  But that’s not a bad problem to have.  And the CIPS qualification is becoming increasingly recognised as THE global standard, particularly amongst the public sector worldwide ; again, a great strategic position to be in for the Institute. There may be competition coming from sources such as IIAPS but CIPS is well positioned here, and certainly seems to be in a better position than ISM in the US for instance.

In the Corporate market, CIPS is trying to expand, but cautiously. Supply Management says that Noble,

“…reports success in his goal of making the institute a “first port of call” for CPOs, and would particularly like to explore the area of corporate membership. “

But this is a tougher area for CIPS; there is strong competition in the corporate market from networking / solutions organisations such as the Strategy Council and particularly Procurement Leaders; and getting too far into what might be termed ‘consultancy’ brings some dangers for the Institute.   And despite Noble’s worthwhile attempts at “pushing the message to senior business people, politicians and civil servants”, I am not convinced CIPS is really listened to in Whitehall  (’twas ever thus; I know previous top civil servants  considered CIPS the ‘trade union for buyers’ and were duly suspicious of our motives!)

But all in all, there is a lot to be positive about; and I was pleased to see Noble talking about social media and a “negotiating challenge” for schools and colleges.   I regret we didn’t get into this sort of activity enough when I was involved with CIPS, and if Noble and his team can finally grasp that opportunity, and make procurement a profession of choice for the next generation, that will be a significant achievement.

Tomorrow – my big “on the other hand”….!

I have written a White Paper, sponsored by American Express, looking at the challenges for public procurement given the current economic situation (and of course the Spending Review).  It looks at what public procurement needs to deliver, the risks if the wrong steps are taken, and what procurement can and should be doing to drive savings and value given that the resources for procurement itself are likely to be also under pressure.  “Doing more with less” sums it up.

The paper is available from Ben McKee at Amex [Ben.E.McKee@aexp.com] and I think through their website shortly.

Amex are also hosting a seminar next Tuesday, 26th October at 45 Millbank, running from 9.30 am till lunch (provided if you want to stay and network):  “Public Procurement – Rising to the Challenge of the Spending Review”.

I am talking about the issues identified in the White Paper, but perhaps more interestingly, the keynote speaker is Nigel Smith, until recently Chief Executive of OGC.

There is no charge for the event; and there are just a few spaces still available.  If you are interested, please also email Ben at Ben.E.McKee@aexp.com including your name, organisation and job title please.  It should be interesting and, I suspect, quite lively with plenty of opportunity for debate.

I enjoyed this piece from Jon Harvey about his experience of being on the receiving end of procurement processes, even though it made me laugh and wince at times as a member of the procurement profession!  His ironic guide for procurement people describes how we should:

“Make sure that the PQQ is at least 65 pages long with 367 separate items of information to gather”.

He has obviously had some bad experiences, and I must say even with my more limited experience of bidding formally for work, I recognised much of this.  He provides organisational development consultancy, but finds that buyers often treat this service as a simple commodity – one of the points Fiona and I covered in our book, where the providers we interviewed put this pretty much top of their list of complaints.  As Harvey says,

“Many of the questions you use when sourcing (for example) office products, utility supplies and other bulk purchasing can be used with these consultants too.”

He also describes buyers using a lottery to select which PQQs even get evaluated.  I assumed this was illegal (in the public sector) but on checking I believe it is allowable as long as you tell suppliers in the advert that you may do this.  It is, of course, truly appalling procurement practice even if it is legal….!