One of our suggestions in the White Paper (the Perfect Storm – here and in previous posts) was to place greater emphasis on price in public sector tender evaluations.

I’ve talked to two smart and experienced procurement people – both CPOs in local authorities – recently and interestingly, their view was that I hadn’t gone far enough.  One is very experienced in the public sector, the other new to it, but both feel that for most contracts, given that the the short list should all be capable of doing the work, why should cost not be the great majority of the award criteria and process? As one put it:

“At selection stage (open and restricted), all suppliers post pqq should be capable of supplying the required quality (fit for purpose) and I can’t see why price/cost shouldn’t be weighted between 75 and 100%”.

And the other:

“we might argue that in many cases, provided the minimum standards are properly set, we are only interested in price and (broadly defined) running cost”.

I’m still not sure I would go quite this far but as the deficit reduction actions bite, this looks like something the public sector needs to consider and discuss as a matter of some urgency.

And in the US, trade bodies are fighting back against a similar move (wasn’t my idea – haven’t got into the US government yet!).  Paul Snell of Supply Management magazine pointed out this to me;  a trade association complaining about an amendment to the Federal IMPROVE act of 2010 entitled “Requirement that Cost or Price to the Federal Government Be Given at Least Equal Importance as Technical or Other Criteria in Evaluating Competitive Proposals for Defense Contracts.”

Apparently, according to IPOA (the Association of the Stability Operations Industry; crazy name, crazy guys!), this “would effectively hamstring the ability of contracting officers to use discretion in awarding contracts and sets the stage for compulsory acceptance of the cheapest offer, minimizing other factors such as experience, quality or past performance.”

But the amendment doesn’t say the cheapest; it just says cost must be equally weighted with other criteria.  That doesn’t seem unreasonable to me when the US (like us in the UK) is facing public deficit and debt that is not a million miles away from Grecian in scale.

Anyway, an interesting topic I suspect will be much debated as we get into serious cost reduction territory over the next months…

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!

The latest unemployment figures were somewhat confusing; the headline doesn’t look too bad, down 33,000, but when you get into the details, things start looking less positive.

Very worryingly, the number of people out of work for over a year rose 61,000 to 687,000.  The number of people no longer seeking work has grown, and therefore the overall number in employment has declined by 54,000.  And the public sector continues to be the main engine for growth, with 7000 additional jobs through Sept- December 2009 (while the private sector declined by 61,000).   And we all know that can’t continue.

Closer to home, I was struck by the thinness of the Supply Management jobs pages in this week’s issue.  I don’t know whether it is an Easter effect in part, but there are the grand total of just 5 organisations advertising.  Well done to Rolls-Royce; the only private sector organisation of the five.  So no signs there of booming times ahead for procurement people; although as I said here, my most recent discussions with recruitment firms seemed to be a little more positive.