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Fancy a Great Job?

There was a major announcement this week in UK public sector procurement.  Gareth Rhys Williams (GRW), who has been Chief Commercial Officer for government since 2016 was appointed the new Chair of National Highways, which looks after major roads across the country.

I assume that Rhys Williams will therefore be standing down from his commercial role. I’ll be taking a longer look at his track record shortly, which is mixed. There have undoubtedly been some positives, but the many billions wasted on PPE during the pandemic and the infamous “VIP route” for friends of Ministers will always sit in the other column. On the other hand, I don’t see him getting involved in a business committing a huge (alleged) fraud when he eventually leaves government, unlike his predecessor…

He has also appeared recently in an exciting and inspirational video made by recruitment firm Odgers to promote a current senior vacancy in the government commercial world, the Commercial Director for the Ministry of Justice. OK, the video is not really exciting and inspirational. Rhys Williams comes over as a very decent chap, which I believe he is, but there is not a hint of charisma or energy in his “performance”.  Lucy Harding, the excellent Odgers Partner and interviewer, tries her best but my goodness, it is hard going.

Indeed, my reason for writing this is to say this – the job is more interesting than you might think if you merely watch the video!

The MoJ is a very interesting and complex Department, and the Commercial Director role reflects that. You’ve got the core central department, then related organisations such as the Probation Service, Prison Service and the Legal Aid Agency. I was a Commissioner (a non-exec in effect) for its predecessor, the Legal Services Commission in about 2006-10 and just working out how to manage the £2 billion legal aid spend with the legal “market” is a task that would challenge most CPOs! And it still hasn’t been sorted out from what I can see.

There have been major capital investment construction programmes in the prison sector and the  courts service, some moderately disastrous IT programmes, and probably some better ones we don’t get to hear about, and the famous prisoner tagging scandal, where the then CPO at MoJ and his colleagues put their Sherlock Holmes hats on to investigate a tangled web of dodgy supplier behaviour. (That was one of the most interesting procurement stories I ever reported on in my Spend Matters days).  All in all, it really is a fascinatingly complex Department, and there is as wide a range of procurement tasks and objectives as you will find anywhere.

So if you like a challenge, go for it. You will also be working in areas that really matter to citizens. In my time as a government procurement director, I did find that genuinely satisfying, compared to buying skimmed milk power for Mars or computers for Dun & Bradstreet. You do run the risk of appearing on the front page of the newspapers – which happened to me once – but actually, that just emphasises that you will be doing stuff that matters.

I’m sure Odgers is very open to applicants with different backgrounds, so don’t think that your track record in terms of which sector(s) you have worked in matters. And in the video, GRW talks about progression. Well, there is his job to aspire to, which he doesn’t mention!

Assuming he is going soon, it would be too soon I guess for this new appointee, but that role is a possibility in the future. As GRW does say, there is also the chance to move into a non-commercial operational role in government. A very capable women who worked for me at NatWest in her early career moved into government procurement at a middle management level but ended up in a very senior and high profile line management role in the civil service.

Anyway, you’ve got to get your application in by February 25th, so you haven’t got long…

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You Get What You Incentivise

Incentivisation is a topic that probably isn’t discussed in procurement as often as it should be. I find it fascinating, as it encompasses a mix of finance, economics, contract law, psychology, low cunning…  How we construct contracts, the success measures we set for suppliers, how we reward their good behaviour or performance and punish the opposite – these all feed into how they behave.

Suppliers generally behave rationally given the incentives they are presented with. In the Bad Buying book, there is a whole chapter on the topic, because I found so many interesting case studies about incentives going wrong.

We see another example in a slightly different context in the UK at the moment, where the dental element of the National Health Service has failed in its core objective – to keep the nation’s teeth in good condition. A BBC investigation in 2022 found that nine out of ten dental practices weren’t accepting new NHS patients.  In some regions, that figure was 98%. That has led to more and more patients turning up at hospitals with terrible dental problems that require urgent treatment – which puts more pressure on over-stretched hospitals of course. Tooth decay is the most common reason for hospital admission of young children, shockingly. And 20,000 adults and 60,000 children were hospitalised last year to have teeth extracted under general anaesthetic. 

There are stories of people pulling out their own teeth, or making homemade dentures, fillings and crowns. We seem to have gone back to Victorian times. And it is all because the contract for dentists incentivises the profession in a manner that has led to that situation. The NHS contract does not pay dentists based on their actual effort, and does not allow them to make what they consider a reasonable income. So they have learnt that treating only private patients will reduce their patient numbers, but overall, the dentist will make more money. More and more practices are taking this view, unfortunately, making totally rational decisions.  

Funding for dentistry has been cut under this government. And one of the incentivisation issues is that the dentists’ contract does not always relate the income they make to the amount of work they do. So, simplifying the problem, their pay is broadly based on a fee for each course of treatment they deliver to an individual. So they receive the same amount whether they do one filling for me or six.

There is a vicious circle here – if people can’t find an NHS dentist easily, by the time they do, they probably do need more work doing, so they are even less attractive for the remaining NHS surgeries.  The current contract actually goes back to the days of the last Labour government, but the Tories have done nothing to address this issue in recent years – until now, when they see it becoming a potential election issue this year.

One solution would be to increase the supply of dentists, which in classic economic terms should drive prices down in the market – pushing more back into NHS work perhaps. But the five-year training scheme means this is impossible in the short or medium term. Another possibility would be forcing dentists to do NHS work for a certain number of years after qualifying, given they benefit from the taxpayer subsidising their training. Neither option has been tried.

Last week, the government announced incentives to encourage more dentists to do NHS work, but the profession doesn’t think this will work. We will see. But devising a contract that incentivises the behaviour the government (and the taxpayer) want to see should surely not be impossible.

However, politicians have struggled with contracts and incentivisation for the medical profession for years. I remember the new GP contract for first line “family doctors” that was agreed by the Labour government back in 2004. My friend who was a GP told me that he and his colleagues were astonished how favourable it was to them. When he first read the letter about his new payments and contract, he honestly did not believe it.

Anyway, I am fortunate to still have an NHS dentist, although I’m also fortunate to be able to afford private additional treatment when I need it. But the current situation is a disgrace. When we see people travelling from the UK to the Ukraine – a country at war – to get dental treatment, you know something has gone badly wrong with the UK situation.

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What does NAO think about NHS Supply Chain?

Last month, the UK National Audit Office published “NHS Supply Chain and efficiencies in procurement”, a report looking particularly at the National Health Service’s Supply Chain organisation. Supply Chain (SC) acts as a central procurement “organisation”service provider”, putting in place contracts for a huge range of goods and services that can be used by hospitals and other NHS organisations.

It has a complex history, going back 50 years or so, which we won’t fully explore here. But after its perceived failure during the pandemic in terms of supplying PPE in particular, it has been going through yet another re-organisation or “transformation”.  The operation of various “category towers” had been outsourced – although the outsourced service providers were actually other NHS procurement organisations in most cases. But now the category work is being brought back in house.

As we might have expected, the report paints a mixed picture but on balance, I would call it a somewhat worrying report. There is still a lot of mistrust between SC and procurement leaders in many health trusts. Much of that is historical, but more needs to be done.

One example of this is the “eDirect” service. SC operates a logistics service, delivering to NHS sites from its own warehouses. But it also runs “eDirect”,  a direct delivery services from suppliers to the NHS – more of a “dropshipping” model, as it were. However, that has not been working well. The report says that procurement route accounted for around £1.5 billion of orders via Supply Chain in 2022-23, but more than a quarter of orders were delivered late, by an average 22 days, between June 2022 and March 2023. I hate making facile comparisons, but Amazon would be horrified if it was providing that level of service.

The mistrust also comes from issues such as the measurement and reporting of “savings” – basically, SCL reports big numbers to justify its existence, but many Trusts don’t recognise the numbers or feel that SCL is really delivering tangible savings they can see in their own organisation. In 2019, the Department of Health set Supply Chain a target to deliver £2.4 billion savings by 2023-24. SC told the NAO that it had exceeded its £2.4 billion savings target as of 2022-23, however NAO did not (or could not) validate this and there seems some confusion over how the rather weird savings methodology was initially agreed.  

So it was interesting to see just yesterday (January 31st) Jacqui Rock, Commercial Director at NHS England, announcing a new unified savings measurement process for the NHS. We’ll see if this solves the problem.

Clearly, there is a lot of change going on in the Supply Chain organisation, and it has not all been plain sailing. I was worried around a year ago when two very good senior executives left Supply Chain suddenly (and not to go to better jobs) – not a sign of a happy ship. So how does NAO rate the effectiveness of the transformation programme? More concerns here;

“Transformation is not being run as a multi-year programme, instead it is managed on a year-by-year business cycle in line with NHSE’s business planning process. Supply Chain has not articulated clearly defined or measurable objectives with a detailed and costed timetable for delivery. There are gaps in Supply Chain’s senior leadership team and an over-reliance on the Chief Executive Officer.  Recruitment of senior staff is being slowed by time taken for the civil service approvals process and the addition of an extra layer of approval for high-cost posts created by its move to NHSE …”

There are two sides to every story of course and some Trusts (and people within them) are guilty of pursuing procurement independence for their own reasons. But those reasons aren’t always selfish and the report is disappointing in the sense that it suggests that Trusts should make more use of Supply Chain, without really explaining why that would be a good thing, other than assuming bigger buyers get better deals.

“Supply Chain estimates that trusts spend approximately £3.4 billion outside of its function. Trusts are largely free to purchase goods outside Supply Chain. Supply Chain estimates that, as at September 2023, trusts’ annual procurement spend through Supply Chain was £4.5 billion with £3.4 billion spent outside of Supply Chain’s function”.

But is this lack of use of SC a good thing or a bad thing?  Trusts cannot be forced into using Supply Chain given their legal independence, so there is always a tensions here, and I do wonder sometimes whether the NHS is just too big. I’ve argued for years – not just in the NHS context – that the benefits of aggregation and centralisation in procurement are almost always over-estimated. Trying to do effective “central procurement” in an organisation that employs 1.4 MILLION people in the UK is perhaps just too much to expect. I wouldn’t take on the Supply Chain CEO role for £1 million a year and a knighthood, so I do have sympathy for the team there, but maybe this is just an impossible task.   

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