In many countries, the image we have of German business and management is one of efficiency, formality and organisation. My view was shaken a few years back when I experienced the chaotic programme of work on the railways in and around Berlin, with chaos in stations and no help or communication apparent for confused travellers. Then we had the Brandenburg Airport fiasco, one of the best case studies in my Bad Buying book! It finally opened last year, 10 years behind schedule and billions over budget after a whole spectrum of incompetence, bad planning, fraud, and financial mismanagement had been demonstrated during its construction.  

Another more recent story shows that less than perfect side of German management. Patricia Schlesinger was the €300K a year the director (CEO) of Berlin-based RBB, one of nine regional public broadcasters in the country funded by the taxpayer. But she resigned this week after a series of accusations about money wasted, conflicts of interest and improper procurement – in fact, the word “embezzlement” is even being used.  Berlin’s public prosecutor is looking at accusations she used RBB funds to pay for lavish dinners at her home and private use by her husband of her company car and chauffeur.

Wolf-Dieter Wolf (crazy name, crazy guy…), chairman of the RBB board, also stood down. He is linked to some of the accusations and is seen as being complicit in her behaviour.  Perhaps most extravagant was the €658,112 spent on refurbishing her office, according to The Times – shades of Fred Goodwin, the ex-Royal Bank of Scotland head. When the new RBS HQ opened in 2005 there were reports of over-the-top office furnishings and his own “scallop kitchen” (denied by his lawyers, we should say)!

In Berlin, the parquet flooring for Ms Schlesinger’s office cost a mere €16,783, and (here comes a Bad Buying link) complaints by the internal compliance department that no other quotations for the work had been sought were overridden.

The accusations began in June with a report by the news site Business Insider that Schlesinger’s husband, Gerhard Spörl, a journalist, had been awarded a consultancy contract by the state-owned trade fair company Messe Berlin. That contract was allegedly signed off by the company’s supervisory board chief, the same Wolf-Dieter Wolf. Was this an example of nepotism and favouritism? Then other consulting-type contracts emerged with little evidence of proper procurement, with accusations of Schlesinger and / or Wolf in effect favouring their friends.

Of course, this apparent arrogance and disregard for rules is something we see frequently and is not limited by geography, sector or type of role. (The Bad Buying book has quite a few examples, as you might expect). The boundaries between disregard for the organisation’s money or rules and outright fraud are also sometimes difficult to define exactly. However, there seems to be a character trait that means some people just feel they deserve more, they deserve to be treated differently and the rules don’t or shouldn’t apply to them. Boris Johnson comes to mind, as does Carlos Ghosn, now an international fugitive after running Nissan and being accused of using corporate expenditure for his personal benefit.  

But back to the German broadcaster case, and I’m trying to think of a good way to close this article. I mean, if only there was a word for that feeling of pleasure we get from someone else’s misfortune, particularly when they think they’re better than you…!

I’ve caused some controversy on LinkedIn by asking questions about how Russia seems to be able to afford so much more military equipment than the UK for about the same level of expenditure.  That generated some interesting comments and also some people feeling this isn’t the right time to ask such questions. 

But a foreign policy expert from the Atlantic Council (and an eastern European himself), Damir Mirusic, says this “ It’s time for Europeans to stop watching in sorrow and guilt, and start watching with furious anger. Stop eulogizing your dreams about a better world. Wake up”.

That comment has been playing in my head for a couple of days now. I’ve felt “furious anger” since Thursday, anger that we have allowed ourselves to be “played” by Putin. We’re almost all complicit in this – me included.

Russia is not an economic powerhouse. But we’ve run down our military capability, wasted money on military equipment that doesn’t work. We’ve offered succour to every Putin crony and Russian crook who wanted to launder their money through London and enjoy our lifestyle. Russian money has funded political parties and the Brexit campaign. (No, I wasn’t a Remainer, actually).  London lawyers get rich suing journalists when they get too close to the truth about the oligarchs.  Absolute di****ds like Arron Banks and Farage have spouted their nonsense in support of Putin (and don’t get me started on the equivalent in the US). And I haven’t been out on the streets or even out on Twitter making enough noise about these issues.

So it feels like a time to ask difficult questions, and not just in the UK, I should say. I heard a German commentator say that the entire German foreign policy approach of the last 20 years “lies in tatters”. Angela Merkel carries some responsibility here, as she does for Brexit.  Her reputation is slipping away. Many European countries have failed to spend enough on defence, relying on the US to protect us from our foes. Energy dependence was another mistake. That has to stop now, and the amazing response of many countries including Germany in the last couple of days suggests that we have entered a new era at incredible pace.   

Anyway, trying to be calm… there are going to be many more difficult questions for businesses over the coming and months. That will apply on the revenue side – if Russian assets are frozen in Europe and the US, what might happen to factories owned by “our” firms in Russia, or stakes in Russian firms e.g. BP now trying to offload its 20% of Russian oil giant Rosneft.  But of course there are also major supply chain and procurement implications. This isn’t by any means an exhaustive list, and things will change daily or hourly, but issues are going to include;

Materials / products sourced from Russia – sanctions will certainly restrict some trade and buyers will have to be aware not just of first tier issues but what happens down the supply chain. Some may not even be aware that a material or component is of Russian origin and is important for a supplier’s supplier or even a supplier’s supplier’s supplier… etc.  40% of the world’s supply of Palladium comes from Russia, for instance.

Suppliers in Ukraine – not just raw material or products are affected. Ukraine has a pretty large international services sector now. For instance, I have friends who have been working with very capable software development firms in that country. I have no idea what is going to happen to that sort of trade, or whether those young programmers are currently out in a trench somewhere with a rifle. It’s a terrifying thought. 

Shortages of some products and consequent inflation – we’ve already seen major price increases for a number of commodities (oil, grain etc).  Whatever happens it seems likely that some of these issues won’t be reversed quickly. There will no doubt also be shortages of some manufactured goods too, whether because of sanctions or reduced production levels.

A desire to improve supply chain resilience – I’ve been speaking about this via various webinars and articles for some time. The pandemic, alongside geo-political tension, has already led many organisations to look at reducing dependence on “global sourcing” and instead consider re-shoring, insourcing and local / regional sourcing.  That is only going to increase in pace, I suspect given what is going on now, meaning more work for procurement teams. 

Shipping – I’m far from being a deep logistics expert but just reading about the strategic importance of the Black Sea makes you realise that there may well be consequences of the conflict in terms of transportation costs, timings and availability of capacity.  Air space restrictions will have an impact too.

I’m sure there are major issues I’ve missed. But that’s enough for now and that list will I’m sure keep many of my professional colleagues busy for some time to come.  Finally, I have made a donation to the UNICEF Ukraine fund. It feels like the most useful and tangible thing I can do right now.

PS the importance of good logistics management is being demonstarted very vividly by the Russian advance …

Today, our final two Bad Buying awards for 2021!

Creative Fraud:  I-Tek, its Owner and Staff

Multiple Fraud Related to Imported Goods (and more…)

This case may seem relatively small compared  to  some of the mega-waste examples we have seen this year, but what made it a worthy winner was the way it combined three distinct types of procurement fraud in one rather neat package.

Beyung S. Kim, owner of Iris Kim Inc, also known as I-Tek, and his employees, Seung Kim, Dongjin Park, Chang You, Pyongkon Pak, and Li-Ling Tu, pleaded guilty to a procurement fraud scheme involving millions of dollars in government contracts over several years, mainly supplying various US defence agencies. They were sent to prison in August 2021, after providing everything from swimming trunks for West Point cadets to spools of concertina wire. The problem was that the goods were made in China, but were illegally re-labelled to look like US-made products. That violated the terms of the contracts as well as laws that stipulate certain contracts must be fulfilled by US-made products.

The second fraud came when investigators found that an employee who was a disabled military veteran was listed as the firm’s president in some bids – but he wasn’t. That meant the firm was eligible for contracts reserved for companies owned by disabled ex-service people. (We’ve seen a number of frauds of that nature in recent years, so of which are featured in my Bad buying book).  Finally, the conspirators also submitted false documents and lied about the value of the goods imported into the U.S. to avoid higher duties and taxes.

All in all, a pretty wide-ranging procurement fraud, covering several relatively common areas of illegal behaviour, adding up to an impressive winner of the Bad Buying Creative Fraud Award.

…..

Not Really Technology Award: Greensill Capital

Not an SCF FinTech, Just a Risky Lender (and Several Very Naughty Boys)

Greensill Capital, the firm built by Aussie farmer’s son Lex Greensill, collapsed in March, and the losses to investors who backed the firm are still unquantified but may run into billions. The UK taxpayer is also on the hook for state-backed loans and perhaps even pension support for steelworkers (because of Greensill’s close links with Liberty Steel).

Greensill presented itself as offering innovative tech-backed supply chain finance (SCF) products, but (to cut a long story short), their business model turned out to involve borrowing money cheaply by presenting the investment as low risk, then actually lending it out in a VERY risky manner.

Ultimately, it was lending money to the Gupta Liberty steel empire based on the “security” of vague future revenue flows that did for Greensill. Some of those revenues were supposedly going to come from firms that weren’t even current customers of Liberty!

This was not “supply chain finance” in the sense that any off us in the supply chain world had ever heard of before. It looked very much like unsecured lending with funds coming from sources (including Credit Suisse-promoted bonds) who were unaware of just how risky that lending really was.  Greensill also talked about being a “fintech” business, which they clearly weren’t, but dropping that bit of bulls**t into the conversation gave the firm more credibility. Their lending was facilitated through other genuine fintech-type platforms such as Taulia.  

Lex Greensill himself leveraged his role as a UK government “Crown Representative”, working to promote SCF within the Cabinet Office, to wheedle his way into winning some work in the public sector. He was supported for frankly incomprehensible reasons by a number of key people, including the late Sir Jeremy Heywood, the Cabinet Secretary. The various investigations showed that some senior procurement people and politicians were not taken in, including Minister Francis Maude, but Greensill got onto a Crown Commercial Service framework, and won contracts for offering NHS payments to pharmacies as well as “salary forwarding” to some NHS staff.  

Government’s Chief Commercial Officer at the time, Bill Crothers, initially didn’t seem keen but came round to the Greensill cause, and became a director of the firm, no doubt encouraged like ex-Prime Minister David Cameron by the prospects of making millions. Cameron’s behaviour has stained his reputation – such as it was – forever. Having left office, he harassed everyone he knew in government to promote Greensill’s cause, right through to 2020 when he tried to gain advantage for Greensill under pandemic financing and lending schemes.

We can’t call what happened “fraud” yet, although investigations that might lead to criminal charges are continuing. It is hard to believe that nothing criminal went on, but we will see. However, whatever it was, it fully deserves the Bad Buying Not Really Technology Award based on the scale, innovative nature and continuing implications of Greensill’s actions.  Indeed, if we had nominated an overall winner this year, I suspect Greensill would have won that ultimate accolade…

Happy New Year and let’s hope for less Bad Buying in 2022!

Thanks to Supply Management website for drawing my attention to a new e-book, which is a  collection of chapters from different academics and researchers, all around the theme of public procurement in times of emergency.

Procurement in focus – Rules, Discretion and Emergencies is published by the Centre for Economic Policy Research (CEPR), a network of over 1600 research economists based mainly in European universities, and it is edited by Oriana Bandiera, Erica Bosio and Giancarlo Spagnolo. It can be downloaded here (free of charge).

It is somewhat academic in nature, as you might expect, but it has interesting and useful commentary on issues related to emergencies and corruption – and indeed more general insight into public procurement issues. The chapter on procurement competence, for instance, applies more widely than simply during a crisis.

The authors start by defining this “problem” with public procurement.

The procurement of public goods and services is a textbook example of moral hazard: an agent buys goods that he does not use with money he does not own. The agent’s goal is typically set to achieve ‘value for money’ for the taxpayer, but value for money is hard to measure and often not entirely under the control of the agent. The latter makes the contract between the state and its procurement agents incomplete and, for economists, very interesting.

This issue of moral hazard and “agency” leads to a fundamental issue with public procurement. As the authors say:

The core theme that runs through the book is the fundamental tension between rules and discretion. Rules limit agents’ ability to pursue their private interests at the expense of the taxpayers, but discretion allows them to use their knowledge of the context and react quickly to unforeseen changes. 

During the pandemic, and at other times of disaster or emergency, procurement regulations are often suspended or more flexible approaches are allowed. That increases the speed and flexibility with which important procurement activities can be delivered, but it also increases the chance of fraud, corruption and waste. How to balance those two aspects is tricky, to say the least, as the furore in the UK over PPE procurement last year has shown.

There is no doubt that buyers had to move quickly to save lives; but did that speed and lack of process regulation allow corruption or at best “cronyism” to thrive? It certainly did cost the UK taxpayer billions, as more PPE than was really needed was bought, at hugely inflated prices compared to those that were usual in the steady-state market.   

From a Bad Buying viewpoint, corruption is often hard to identify and therefore hard to measure in an academically rigorous way.  So researchers generally use “proxy measures” – for example, looking at the number of contracts awarded without competition, single bidding situations, or very short deadlines for bids. Clearly, we saw more of this behaviour during the first emergency period of the pandemic. However, in some cases, emergency procedures are still in place, and the book questions why this continued higher risk of corruption is being allowed to continue now, given that in most cases, supply is no longer quite so emergency in nature.

The chapter by Mihaly Fazekas, Shrey Nishchal and Tina Soreide, titled “Public procurement under and after emergencies” is particularly relevant to what we have seen in the last 18 months or so. It acknowledges that procurement must be handled differently in times of emergency, and makes these sensible recommendations:

  • Preparations for emergency situations should include defining crisis-ready contracting procedures, outlining fundamental principles of crisis response, putting in place effective ex post controls and setting out a risk-based sanctions framework. Controls should be targeted at high-risk procurement without disruptive, wide ranging monitoring frameworks.
  • Monitoring and controls are best reoriented towards outputs and results rather than procedural correctness because deviations from standard open tendering processes (e.g. short advertisements) are unavoidable in times of crisis (Fazekas and Sanchez 2021).
  • Strengthening non-bureaucratic controls of public procurement outcomes may counter-balance loosened ex ante procedural checks. For example, greater attention from civil society and the media may contribute to stronger political accountability, which is likely to increase the cost of corruption in emergency spending.
  • While many of the corruption risks in emergency procurement are hard to avoid and control, ringfencing emergency rules both in time and by market is crucial. Obviously, if emergency spending is needed in healthcare, there is little justification for relaxing the rules for building football stadiums, for instance.

Much of the book is well worth reading for anyone interested in the fundamental principles and issues of public procurement. It is also very relevant at a time when the UK is putting together its new post-EU public procurement regulations – and we hope to feature more discussion around that here shortly too.  

It is now just over a year since Bad Buying was published and it has sold literally millions thousands of copies all over the world.  Thanks to everyone who has bought the book and all who have commented on and reviewed it on Amazon and elsewhere –  that is much appreciated.

The book has been translated into Polish, and I’m delighted to say that this month it won the Coup de Coeur du Jury Prize at the Plumes des Achats procurement book awards in Paris. This contest is run by four leading procurement association (ACA, ADRA, Club des Acheteurs IT and X-Achats). The “reading committee” is made up of around 30 practitioners, academics and researcher in the field and books in both French and English are considered.

Unfortunately I could not go to Paris for the dinner and awards, but I’m very grateful to everyone involved – it was a very unexpected honour to receive the news! Well done also to the other prize-winners. The list is here with more details about the event and the associations involved.  

There was a cri de coeur from Matthew Parris in  today’s Times newspaper (behind the paywall). He was concerned about the British public’s expectations that the government could sort out all and any of our problems. As he put it;

“Even we lucky British will sometimes encounter shortages and gluts. Is it now the government’s business to smooth them out for us? Increasingly, that is the assumption”.

We’ve seen in recent weeks issues with supply of food to supermarkets (although I can’t say I have noticed much of a problem), stories that Nando’s were short of chicken, then we’ve had genuine shortages of carbon dioxide and a petrol “crisis” caused mainly by politicians telling us there wasn’t a crisis. Parris sees this expectation that the government should solve every problem as a slide leftwards politically. He is a believer in the free market, which is why he originally became a Conservative supporter and MP, and thinks the government should stand back more often.

I believed in the free market, in Adam Smith’s Invisible Hand, and the quiet, patient but unstoppable power of price in regulating demand and stimulating supply. I believed that if you’re short of applicants for a job you raise the wage. I laughed at government attempts to control prices as a way of keeping down inflation. I knew you couldn’t buck the market”.

I also share his fondness for free markets. However, the problem is that very few markets are truly “free” in the theoretical sense and certainly few function perfectly. Indeed, that is something most procurement people understand from their own bitter experience. For instance, a perfect free market is open to new entrants, and indeed it is easy for existing players to withdraw. It is unregulated except perhaps for fundamental criminal laws (don’t poison people with your beer or sell cars with no brakes).

But for a number of reasons, it feels like fewer and fewer markets really are anywhere near perfect or free. Take the shortage of lorry drivers – something that is hitting the UK particularly badly, but is an issue elsewhere in Europe too. (It does appear however that Brexit is a contributing factor in the UK, according to the industry expert view).

In a truly free market, thousands of people would be rushing to change jobs to earn the £50K per year plus now on offer for driving trucks. But we insist that new drivers (not unreasonably, I should say) go through extensive testing. That is a time and cost related barrier to entry. We have restricted free movement of people into the UK post Brexit, closing another “free market” option.

In other areas, the government has attempted to create dynamic new markets, but it is not as easy as it seems. Take the domestic energy market. We have seen plenty of new market entrants, but with increasing regulation and price control from the government, it has moved far away from the vision of a truly free market. That whole market is now unwinding and collapsing with the increase in wholesale gas prices. (There is also what feels like an increasing tendency for con artists and scammers to get involved in these quasi-markets – maybe that is a topic for another day, but it feels like the UK is becoming steadily more susceptible to business-related fraud and corruption).

And during the pandemic, the government “interference” in how markets operate was even more extensive. The government stopped tests for new lorry drivers because of social distancing rules, for instance. We might understand why that was the case, but it has been a contributing factor towards the current shortage.

Indeed, coming back to Parris and his complaint, the government has “interfered” so much in our lives during the pandemic, I think increasingly people do feel that the government can and should sort out every problem.  Those in charge told us where we could go for a walk and who we could visit, so why not expect that they can guarantee my Nando’s will be available and make sure there are enough lorry drivers to go round? That might not be an appropriate view, but I suspect it is quite prevalent.

What does all this mean for procurement professionals? Aside from many now operating in fire-fighting mode, simply focusing on securing immediate supply into their own organisations, it points out the importance of truly understanding how your own key supply markets work. Are they genuinely free markets that respond quickly to changes in demand, with new entrants, innovation and dynamism? Or are they controlled or restricted in some way – by government or by other barriers to entry (it wasn’t regulation that led to Facebook’s domination of its market, for instance).  

The pandemic shock has highlighted vulnerabilities in supply chains and exposed markets that already had inherent issues and weaknesses. So to avoid “bad buying”, understanding how your key markets really operate must be a priority.

There have been interesting developments in terms of procurement of PPE in several European countries.   Last month, the Times reported that magistrates in Italy had ordered the seizure of property worth more than €70 million (£60 million) including a yacht, a Harley-Davidson motorbike, watches and several apartments from eight middlemen.  They are accused of exploiting the desperate shortages of PPE last year at the height of the pandemic.

The allegation suggests that a group of businessmen earned commissions worth €72 million on the purchase of 800 million facemasks from China. Those masks cost the Italian government some €1.2 billion. The suspects are accused of “illicit influence trafficking, receipt of stolen property and money laundering”. There is some cronyism involved here too. One of the accused is Mario Benotti, 56, a journalist and general director of two technology companies, and someone who knew Domenico Arcuri, 57, the Covid commissioner.  But Benotti says that he intervened to help his country and because Arcuri asked him to.  He acknowledges getting €12 million but says he earned it.

It has to be said that a margin or commission of €72 million sounds a lot. But on a spend of over a billion, that is “only” 6%.  Is that really exploitation?  A BBC Panorama programme this week suggested that firms such as Ayanda Capital made significantly more than that supplying the UK with PPE – a margin of 15.8% according to Tim Horlick, the boss. But in any case, if 800 million masks cost €1.2,  that is €1.5 per mask, which shows just how crazy the market got last year.

In Germany, the scandal is deeper and more shocking. Several leading politicians have been forced to resign because of the money they made personally from the pandemic shortages. Earlier this month, two members of the parliament and of Angela Merkel’s ruling CDU party resigned this week because of the scandal.

It appears that Georg Nüßlein and Nikolas Löbel both personally profited from government contracts for face masks. Löbel is alleged to have received €250,000 in payments for brokering a deal between a Chinese supplier of masks and the German cities of Heidelberg and Mannheim. Nüßlein is accused of making €660,000 through a consultancy firm for lobbying the government on behalf of a supplier. Mark Hauptmann, from the eastern state of Thuringia, is the latest to go. He is stepping down due to his alleged links concerning medical supplies and Azerbaijan. It all seems somewhat opaque, but Hauptmann has admitted that Azerbaijan and other countries paid for adverts in a newspaper he publishes.

Coming back to the UK, we also don’t know if any of our politicians took their cut for promoting PPE suppliers onto the “VIP” path, which greatly enhanced the firms’ chances of winning contracts. We still don’t know how Ayanda Capital and others were chosen to be awarded contracts, or why each got the size of contract they did.  This week, the BBC Panorama programme looked at how some very odd firms won huge contracts or acted as facilitators, such as an upmarket dogfood business! It also exposed that details of some contracts awarded last spring and summer have still not been published.

But there only four possible options in terms of the process used in the UK to select suppliers.  

1. There was an actual selection process. I don’t mean the due diligence assurance which was carried out once a firm had been chosen – I mean the process for choosing which firm would get which volume. But if there was such a process, we still don’t know what it was.

2. It was random. All the names in a hat …

3. It was literally first come, first served. The first firms that got their offers in won the work, until all the volume needed was covered.

4. It was fundamentally corrupt.  

We still don’t know which of these is the most accurate explanation, and until we do, we can’t rule out the possibility of more scandal emerging in the UK, as we have seen in these other nations. This story isn’t dead yet.

One of the first disasters of the current Covid crisis in the UK was the transfer of thousands of people out of hospitals into nursing and care homes, without checks as to whether they had the virus. That put the focus again on the social care sector, and although most of the staff in homes have conducted themselves with great dedication and bravery since then, many issues remain.

I wrote an article on the topic some 5 years ago – here is an excerpt.

What market presents the biggest single challenge in public sector procurement? It has to be Social Care. A spend category worth some £20 billion a year in terms of local authority third-party spend. A category almost totally outsourced now, where funding is being cut by local authorities as their grants from central government are slashed. That is causing a reduction in supply, which in turn is driving severe problems for the NHS as record numbers of ”bed-blockers” are stuck in hospitals because of the lack of a social care-supported  alternative at home. A market where major providers have gone bust and more are teetering on the brink, with the vultures of private equity waiting in the wings.

Since then , we’ve seen more major providers going bust, and yes, the private equity firms have moved into the sector. Many homes rip off their privately paying residents, charging them far more than they charge those funded by councils who use their negotiating power to beat down prices. Meanwhile, too many staff are badly paid, staff turnover is high, and the quality of care is variable.

But these issues are not restricted to just the UK. In the Observer yesterday, Will Hutton wrote about the private equity sector in general and the care home issue in particular. He described the tragic death in a home in Spain of an 84 year old man, Zoilo Patiño, whose body was found in a locked room 24 hours after he died.

“The subsequent investigation into the management company – DomusVi, which had been contracted to operate the home – showed it had been stripped down to a “fast-food version” of healthcare by years of cuts: there was only one care worker for every 10 residents, with not even the PPE to help cope with a dead body”.

But DomusVi, Spain’s largest care home operator, is actually owned by ICG, a British private equity company. As is usually the way with private equity, the company was refinanced and is loaded up with debt – that leverage being one key way in which private equity makes its money. Stripping out costs, or “increasing efficiency” if we’re being kind, is another route often followed. For instance, Hutton claims that Care UK, backed by Bridgepoint private equity, has reduced staff numbers by a third while doubling the number of beds provided in the homes it operates.

Social care services, including care and nursing home provision, are bought by dozens of local authorities around the UK.  Many do a good job in a difficult situation, but this is a spend category that really cries out for some serious national thinking and strategy. We need to ask whether this is a suitable sector for private equity investment; whether there should be more scrutiny of the financial state of providers; what minimum standards might be imposed; and perhaps how to encourage more local, third sector and diverse suppliers into the market – as well as sorting out the funding of care, which is an issue that goes well beyond procurement.  

But the UK central government has never shown any appetite for this sort of involvement on the procurement front. This is in effect, national “Bad Buying” by omission. Whilst over the years, huge amounts of effort, skill and money have been spent putting together strategies and collaborative approaches to buying stationery (!), energy, cars or laptops, OGC, CCS, YPO and all the other collaborative bodies have shied away from social care, as have the strategists in Cabinet Office, the Department for Local Government (whatever it is called this week) or Treasury. 

Perhaps the promise of a new approach to social care funding will provoke some serious action on the procurement and market side as well. We can only hope so.

Is that expensive “sea bass” in the restaurant, or that you buy as “Category Manager – Fish” for a frozen food manufacturer –  really sea bass? Or is it a cheaper product? Or even something that should not be sold at all, an endangered fish species perhaps. What about those electrical components? Are they genuine, made by the reliable firm whose name is on the case, or are they counterfeit, bad quality products from an obscure plant in an obscure country?

There is a whole category of procurement-related fraud that is based on buyers not getting what they thought they were paying for, and you won’t be surprised to know that a chapter in my forthcoming book  “Bad Buying: How Organisations Waste Billions Through Failures, Frauds and F**k-ups” covers that very topic.

There are some pretty surprising cases too. Even bulk oil shipments can lead to issues, as there was a court case some years back based on a very large firm shipping oil that was apparently lower grade than the specification agreed with the buyer. So as in that case (or indeed the sea bass example), it can be very difficult to know if you are getting something genuine. Understanding the provenance of what you are buying is key – but not always easy.

However, a story this week from Moldova made even my jaw drop. The “counterfeit” goods in this case are … helicopters! Balkan Insight website reported this.

“The Moldovan Prosecutor’s Office for Combating Organised Crime and Special Cases and investigators from the Police General Inspectorate closed a clandestine factory in the Criuleni area near the Dniester river in the east of the country on Tuesday that was producing copies of Kamov KA-26 Soviet-type helicopters”.

The helicopters were destined to be illegally exported to other ex-soviet countries, and were “produced without the necessary permits and documents of origin for the parts and equipment used.”

 It is not clear whether the buyers knew they were getting unauthorised machines (but presumably at a lower price than the “real thing”) or whether they though the items were genuine. It also raises questions of safety of course. Were they actually made to the right specification, but the manufacturer was acting without the right permissions, or might the helicopters have proved dangerous as well as dodgy?

Anyway, this certainly qualifies as a prime case of Bad Buying, and one of the more interesting cases of what we might call “provenance fraud”. It also has confirmed my personal vow never to step into a helicopter again. I did once, from the centre of New York out to the airport, and while it was an “interesting” experience, it was also a “never again” moment!  

The state-of-the-art, whizz-bang, latest technology printer that the Irish government bought in 2018 was going to produce wonderful documents at, one assumes, a competitive cost. The Komori equipment is highly rated, but there was only one problem for the government. 

When it arrived in Dublin, in December 2018, it simply didn’t fit into the building where it was supposed to be housed.  It had to be shipped off to a storage unit at Ballymount Industrial Estate, where it languished until September 2019 at a cost of €2,000 a month while building works were carried out – to “tear down walls and embed structural steel” to make room for the behemoth.  Now a report on the fiasco by Dail (the Irish parliament) clerk Peter Finnegan has revealed the cost of the episode, which seems to grow every time it is reviewed.

€230,000 (excluding VAT) was spent on “unanticipated renovations to the printing room” because the equipment just wouldn’t fit, because “ the requirements of the building and other regulations in relation to ‘head height’ were neither understood nor examined during the early critical stages of the project”. The cost of the printer itself and associated equipment reached €1,369,605.

There have also been reports that staff haven’t been happy about the new equipment, asking for further training and (rumours say) more money for operating it. The Register also reported that the “IT department is hesitant to grant access to the printer, making it difficult to print documents from official government computers”.

All in all, this is a great example of Bad Buying caused by failing to check in detail the specifications for what you’re buying and how that relates to the environment around what you’re buying.  And remember, even in the case of complex equipment, it is not just the technical specifications that matter – mundane issues such as size can cause just as many problems as some obscure technological flaw or failure!