Bad buying takes many forms, and there is a risk we might see a new driver for poor procurement emerging in the coming months and years. The problems are avoidable, but we need to be aware of the risks.
Social value has become a very hot topic in the public sector in many countries. Recently, I wrote two articles (here and here) on the topic for our Procurement with Purpose website. That is my other major interest at the moment, alongside “Bad Buying”, and we might consider those aspects two sides of the procurement coin. Procurement with purpose is all about how (if we are smart) the money organisations spend with suppliers can contribute to environmental, social and economic improvements that go beyond the specific contract. That is exactly the same as “social value” in the public sector.
So we are now seeing public contracting authorities incorporating social value factors with quite significant weightings in the evaluation process. Indeed, this is not just relevant to the public sector. Vodafone announced recently that they were going to use similar factors in their supplier selection models. Choosing a supplier is then not just about price, service and quality, but can also incorporate a range of other factors, from emissions, to employment of disadvantaged people, to support for local sub-contractors.
That’s fine, and we applaud the concept. But one fear is that we could see firms being selected based more on their social value offering than on their actual ability to do the job.
Scotland has led the way in many senses in terms of applying social value, and we interviewed one of the key leaders in that effort, Julie Welsh, for the Procurement with Purpose website a while back. But there is another side to the story. The Ferguson Shipyards case is an example of a firm that was supported with public contracts, in part with a view to supporting Scottish business and employment. Unfortunately, it appears that the shipyard may have been incapable of building the two ferries for which the government contracted, and costs to the taxpayer will run to over £100 million more than planned.
Reports suggested that the bid “was the highest quality bid received, in other words the highest specification, but also the highest price” of all the six yards competing for the job. It seems likely that a high mark for social value contributed to the shipyard being the top score on “quality” and winning the bid – yet in fact, it failed to actually do the work, as well as being the most expensive bid. Without knowing the full story here, it does illustrate the need to maintain proper procurement processes and a commercially sensible approach. Suppliers must not win work on social value alone.
That means social value weightings must be proportionate, and not outweigh what is the core goal in all public (and indeed private) sector procurement – finding the best supplier to meet our needs and provide the best overall value. Incorporating social factors in that “value” is fine, but it should not come before the supplier’s capability to do the work properly and cost effectively.
Another key issue is how we can ensure that the social value offered is meaningful. It should not become skewed by politics, or relate to factors that are immaterial to the contract or the needs of the buying organisation. It should also be capable of some sort of tracking and measurement to ensure the supplier does deliver on their promises; a focus on social value makes the need for effective contract management stronger than ever.
There is also a risk that fraud and corruption could emerge as social value becomes more important in terms of winning contracts. I won’t go into that here, but it is discussed in my articles on the Procurement with Purpose website.
So all in all, incorporating social value or procurement with purpose factors into supplier selection has the potential to be good news. On the other hand, if it isn’t handled with care, it could actually drive more “bad buying”. Our advice therefore is to implement with care and thought.