Lessons learned from some years of working in the world of Public Sector procurement
After what seems a lifetime in either selling into the Public Sector or advising Public Sector clients on how to get the best from their procurement activities, I thought I had seen it all. But now and then, something else happens and my “all” expands a bit more. So what are my latest thoughts on getting that elusive “good” procurement? Well, here are a few.
It is no secret that the entire Public Sector procurement process is designed to remove unfairness. It tries to ensure that the supplier with the best overall answer to the needs will get the contract. It is based upon the people with the problem, documenting their requirements and then making a case for the spend. If they can convince their organisation, then they will get the budget and the procurement begins. So far, so good!
However, the success of the procurement exercise depends upon three quite disparate groups agreeing that the eventual choice of supplier is best.
Those With the Problem
There is the group who has the problem. They know what they want. Indeed, they are paid for their expertise and their operational knowledge. They absolutely know what is best for them to deliver the service they are set up to provide. They are looking for the very best they can get, to be able to do their jobs most effectively and most easily. They are probably measured on how well their job is performed and excellence in delivery is a key aspiration for them.
Those With the Money
Then you have the group that controls the money. Of course, they want the best product or service. However, their view is tempered by the availability of funds and the competing pressures of other funding requirements. What they want is for the entire organisation to be seen as effective and to be making the best use of its resources. But they are not practitioners and so they have to make their judgements based on their interpretation (generally as non-experts) of the competing claims for money which have been heaped upon them. To them, success looks like keeping the funds under control.
The Procurement Experts
Then we have a third group who are expert in engaging the marketplace and ensuring that the process is conducted fairly and accurately. Although they may well be absolutely committed to assisting the organisation to achieve its goals, their focus is on getting the competition run without a hitch. They want a procurement exercise completed on time, without any competitor challenges to the decision and to able to robustly defend any later scrutiny of the procurement with a complete and auditable paper trail. They will tend to measure success in terms of the level of adherence to the process and be less concerned (but not unconcerned) with what is purchased and its costs. After all, they are not practitioners and it’s not their money!
So we have a process which attempts to bring each of these differing views into alignment. The practitioners come up with a series of detailed criteria against which the procurement should be measured. The money controllers decide the budget and what the relationship between price and “extras” should be. And then the procurement team sanitises all these requirements to ensure no particular supplier or solution is obviously favoured. This latter team then runs the procurement competition. Whatever the outcome produced by this process is, this result will entirely satisfy all three groups – of course it will?
Well, sometimes it does not. So where does it go wrong? My experience is that it is at the boundaries.
The first boundary is where the practitioners set out their requirements, which are then pruned back by the money controllers and the procurement team. The practitioners know that they won’t get the money they really want so they may inflate their requirements. The money controllers know what is going on and, in any case, they have to get the balance with the other areas of spend right. As a result, they will seek to limit the budget and raise the impact of price within the evaluation process.
Then the procurement team will water down the specification so that it is “fair” and here is further potential for the practitioners to lose out. We have seen that when a Public Sector contract is let, sometimes what is purchased works out fine. But as a result of the successive dilution of the requirement, sometimes a purchase can be made which is entirely correct by the process but does not actually meet the practitioner’s original need. This can often be seen when a high level of spend has occurred on a project and then it is suddenly discovered that a large overspend is needed to get the real results the business actually has to have.
The next thing that happens is that the competitors, who should know even more about their specialism than the “expert” practitioners, try to put the buying organisation “right”. They do this by not answering the questions they have been asked in the Invitation to Tender, but answering the questions that “should have been asked” instead. Of course, the practitioners may think that such responses are entirely right and justifiable. However, the process police cannot let these “right” answers through; to do so would open the entire procurement up to challenge, delay and financial exposure. This competitor does not get the contract and everyone loses, including the taxpayer.
We had a good example of this recently (albeit the other way around) where the incumbent was desperate to provide the ongoing service, but fixated on doing it at the absolute minimum cost. It generally ignored the weightings in the tender documents and totally relied upon the information it was getting (from its long term, supportive and friendly practitioner contacts in the business) that ultimately cost would overcome everything else. The practitioners, also, badly wanted the incumbent to continue and everyone wanted to avoid the transition costs of changing suppliers. However, the procurement team had excluded transition costs from the evaluation (to make it a fair competition!) and, surprise, surprise, the incumbent subsequently lost out to what turned out to be a higher cost but better scoring competitor. Then, of course, all the costs of transition were incurred!
In fact, any deviation from the process will put a competitor’s bid at risk. We have had a bid which could not be loaded onto the electronic portal (because too many competitors were uploading bids at the last minute) and arrived 2 seconds (yes – 2 seconds) late, and which was denied entry into the evaluation process. I’m sure you can visualise the challenge which would have arisen if they had been allowed to continue. We have, also, had procurement teams who have helped their preferred bidder to the “right answer”. When this was uncovered the entire competition had to be rerun. However, on this occasion the bidder came top for the second time, without any assistance.
Diverging from the process can also put the procurement team’s evaluation at risk. We had another bid where the winning bid was supposedly 0.2% better than our client’s, who was told it had lost. At the debrief it emerged that the price had been normalised (lowest price gets 100%, the higher prices get a reduced percentage by the amount they are more expensive) through a process which was described in the Instructions to Tenderers. However, the procurement team had then applied the same logic to the quality score (100% to the best score and lower scores get a reduction in percentage in proportion to how much lower they were). However, this process was not contained in the tender instructions. Once this second and illegal “normalisation” was removed, our client had actually won by 0.1%! In the end, instead of demanding the win decision must be reversed, our client accepted that the competition would be completely rerun for the sake of the “relationship”. In the new competition, both these top scoring competitors came second and third to an outsider who decided to have a go when the competition was restarted!
The Supplier’s Responsibility
We have had many other similar situations which have all led to our belief that a “good” procurement cannot be achieved without a realistic and long term objective view being taken by all sides. We believe that a “good” procurement always starts with the supplier. After all, if the supplier is not more expert in its core business than its clients, it should question if it has a viable business.
We think it is up to the suppliers to educate the practitioners in the “art of the possible”, the benefits of its innovations and their constraints. The procurement team also has some responsibility here too. It must engage in really good market testing and then give feedback across all groups, to help ensure that the practitioner understands what is possible and available in the market. Through these processes the practitioners can then make a convincing and balanced recommendation to the non-expert procurement team on how the technical elements of a competition should be run. The suppliers, also, need to have sufficient dialogue with the money controllers so they can understand the cost/benefit of the specification approach the practitioners will be suggesting. Then they can more realistically balance this against their other long and short financial pressures.
The Procurement Team’s Responsibility
The next step is for the procurement team to put a specification that works best for the taxpayer. Artificially cutting out chunks of cost or capability to seek a “fairer” competition may not be fair for those that eventually have to pay the bill. It is crucial to achieving a “good” procurement that the specification is not constructed in isolation within the terms of any one specific procurement exercise; we think it must always consider the wider aspects of what the taxpayer should expect to receive. Moreover, if the procurement function is seen as an obstacle or blocker by the practitioners, it is failing and any subsequent purchase will not be a “good” procurement.
The Bid Team’s Responsibility
Then, the competitors must only respond to the questions they have been asked. It is too late at this point to put the procurement team right if the published specification is wrong. Either they must bid for what is asked or withdraw (which if, as a supplier, you give a good explanation of your reasons for not bidding, you may still get the competition stopped and rerun with different, better criteria).
Even more important for the supplier is that all the questions must be answered in line with the evaluation criteria, otherwise they may not be marked. But then the supplier still has to make a convincing sales argument. Woe betide the organisation who puts a project manager in charge of the bid because “a Public Sector bid is only another project. Isn’t it?” Do this and you will get a bid document delivered on time and to bid budget. But you probably won’t get bid document which wins!
A Way Forward
So I believe that running and responding to a “good” Public Sector procurement competition is very different from procurement in a commercial environment. We run consultancy engagements and training courses for both Public Sector and commercial teams. Yet, on every engagement we find that exposing the aspirations, constraints and practices of one side to the other still delivers blinding insights about how things can be done better. Counter intuitively, it is generally the most experienced members of these teams that seem to gain most from these insights. Want to see what we can do? Have a look at www.sixfold.biz or give me a call on 01227 860375.