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Musk to address US government spending – what fun awaits!

In the legendary Philip Green review of 2010, the new UK Prime Minister David Cameron asked the retail entrepreneur to take a look at government procurement. Some years later, the rumour spread that Cameron actually wanted the Philip Green who was CEO of United Utilities (and later chairman of Carillion when it went under) to carry out the work – but his staff asked the wrong Philip Green!

Anyway, the TopShop leader looked at government procurement and came up with stunning recommendations – data was poor, buyers paid different prices and government should centralise more. All the usual stuff. He also invited some senior civil servants to his private suite at a 5-star hotel in order to complain to them that some government staff were spending £100 a night on hotel rooms in London…

The other rumour was that his final report was so unprofessional, another bunch of civil servants had to rush off and convert it into something presentable at the last minute before his presentation to Cameron. You can still see it now here, and it is pretty shoddy work. This sort of thing: “We found the following variations in price for laptops: Highest price: £2,000 Lowest price: £353 Differential: 82%.”

So might they have been different laptops, I wonder?  There was no mention of specifications here.  His solution was “government should buy direct from a multinational manufacturer’. Well, yes, that should do it.  And London hotel costs varied from £77 a night to £117.  Shocking!  He suggested mandating video conferencing.

To be fair, Crown Commercial Services and others in government procurement have got better at looking at markets and choosing the best procurement option and of course Green was correct to point out some failings.

But all this came to mind on reading that Elon Musk has been appointed to lead a new ‘Department of Government Efficiency’ in the US.  This will be the immovable object of US government procurement process and regulation against the unstoppable force of Elon Musk’s ego and self-regard. It has the potential to be hilarious (if you’re not too close to it, anyway).

Trump said in a statement that Musk and co-leader Vivek Ramaswamy (another entrepreneur and previous Presidential candidate who has some VERY odd views) “will pave the way for my Administration to dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies.”  The new body won’t be a government agency but will ‘create an entrepreneurial approach to government never seen before’. Their appointment is only until July 2026, which is also interesting, as it means everyone knows they only have to resist the duo for 18 months and they will be gone …

How will this play out for Musk and his mate? To begin with, lots of people are no doubt pouring over the detail of every contract he has ever signed with government, in SpaceX or elsewhere, looking for ‘inefficiencies’.  They will find that ‘waste and fraud’ exists but is much harder to root out than they think.

In the procurement space, then they will come up against all the usual barriers to saving money quickly, including long-term contracts that can’t just be re-negotiated, the need to run lengthy competitive processes or get sued by annoyed potential suppliers, lack of skills and resource in government procurement… and if he brings in external support to help (the Department has no staff currently), he’ll get castigated for ‘wasting money’ on consultants.  

So for instance he could reduce the ‘bureaucracy’ of procurement by getting rid of all the rules and processes around supporting smaller or minority-owned firms. But the biggest group that benefits from that in the US is probably military veterans, so presumably that wouldn’t go down well with Trump supporters.

He could cut through the regulations and give buyers more discretion, or even allow more non-competitive procurement processes. But for every supplier that benefits from a direct-award type contract, there are usually several who don’t like it. Watch out for a boom in legal challenges if this is a route he takes.

He might genuinely save money by simply stopping spend in certain areas. No new laptops or  consultancy contracts for the next 12 months, that sort of thing. That works, until another Trump favourite complains to the President that they can’t implement their new policies because they can’t engage McKinsey to help. Or buy a laptop.

Anyway, maybe I’ll be surprised and the two of them will turn out to be thoughtful, innovative and effective reformers of US government spending / acquisition / procurement. It’s going to be ‘fun’ watching from afar, anyway.

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The Minister for Public Procurement Speaks!

Yes, as we’re into the UK election campaign now, articles for the next few weeks may well have a political theme I’m afraid.

Alex Burghart has been in his role for 18 months, which given the turnover in the “UK Minister for Public Procurement” role over the previous few years is a positive. He is a teacher and academic by background, with a PhD in History, who then became a political adviser. So no business experience, but a clever guy, clearly. He spoke at the Procurex National event in Liverpool last month, and his speech is now up on the Cabinet Office website. So first of all, let’s give him credit for showing up and also to Procurex for getting him to attend. Let’s have a look at some of his comments on the new UK public procurement regulations, due to come in to force in October, with my comments on various of his remarks.

“And at the heart of this is ensuring more transparency than ever before, so that we’re spending taxpayers’ money in a way that can be properly scrutinised”.

Rather oddly, that is about all he says in terms of transparency, which is actually one of the biggest changes in the Regulations, with a host of new requirements for buyers. I’m in favour of more transparency but I do worry about the workload burden for already stretched organisations.

“A new duty will require any contracting authority to consider SMEs, to take account of their unique challenges, and we have introduced 30-day payment terms on a broader range of contracts, in response to what SMEs asked us to do”.

“Consider” SMEs does not of course mean using them. I’ve written many times before about the daft SME target for government spend and indeed I do not really see why we support SMEs rather than social enterprises, minority owned firms, local firms, innovative start-ups… The answer is political of course.  So we’ll see whether the Act has any impact on public procurement SME spend – I have my doubts.

“We’re also creating a new central digital platform for suppliers to register and store their details, so that they can be used for multiple bids, and enable them to see all the opportunities in one place”.

Yes, good idea, Sally Collier and I proposed this in 2009 when I was working in government. But given the track record of government developing new platforms, I’ve got my fingers crossed for this one.

“It puts a requirement on public bodies to provide feedback on bids, giving you greater consistency of feedback, helping you shape your next bid”.

This is one of a couple of rather odd or misleading statements from Burghart. There has been a requirement to provide feedback for as long as I can remember and indeed, there are some concerns that the new requirements may lead to less useful feedback. But we’ll have to see how that pans out. Not new or radical though in any sense.

“We are making value for money a core part of our process – ensuring that all contracting authorities must place value for money at the forefront of all procurement activities”.

So what were we basing our procurement decisions on up to now? It seems odd, particularly for a party that has been in charge for 14 years, to suggest that public procurement hasn’t been based on value for money up to now!  But it has, this is just nonsense, unless I’m missing something.

But, perhaps most importantly, we are also going to create a register, accessible to all public sector organisations, that will list suppliers who must – or may – be excluded from contracts.

This is clearly NOT the most important aspect of the new regulations. (I would say that the flexibility to design new procurement processes, which he didn’t really mention, and the transparency rules are the most important).  It is to be welcomed, but benefits will be limited and the proof will be in the implementation. I will be amazed if there are more than a handful – literally – of suppliers on this list by the end of 2025, let’s say. It is well-meaning but will prove very difficult to implement.

A new National Security Unit for procurement in the Cabinet Office will review suppliers for potential risk to our national security in a way never achieved before. It will also conduct investigations and make debarment recommendations to Ministers alongside the Procurement Review Unit, which will do the same for other exclusion grounds.

That sounds good but again let’s see if it actually has any real effect.

Not a bad speech then, all in all, but assuming there isn’t a miracle on July 4th, the Tories will be blaming Labour for “not implementing the new regulations properly” if it all proves to be a disappointment. Burghart has what looks like a very safe seat, even with the predicted swings, so he may well still be around to comment anyway. Indeed, he might be Leader of the Opposition the way things are going.

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Is UK Public Procurement Getting Confused About AI?

This is a big year for public procurement in the UK. In October (probably) the new Procurement Act becomes law, finally replacing the EU public procurement legislation with a new set of regulations designed by and for UK organisations.

Generally, I feel the Cabinet Office policy team did a good job steering the consultations and proposals into a set of new rules, although there are some issues that concern me. But the team has now tied itself in knots somewhat over a different issue that has suddenly leapt to the forefront of everyone’s minds – how AI might affect public procurement (and many other aspects of our life of course!)

A PPN (Procurement Policy Note) was issued the other day that has caused some controversy and confusion. I must say, PPNs are usually clear and helpful, whether or not you agree with the underlying policy they are communicating, but PPN 02/24 is a mess.  Having read it a few times now, I think the problem is that it tries to cover too many issues, all AI related but really quite different, in one note.  I can see the following all mentioned in the note:

  1. Concerns about the use of AI in writing tender responses and proposals, in particular whether AI responses are likely to be inaccurate in terms of reflecting the actual capability of the supplier or how they will deliver the contract. In other words, the risk of AI generated bullsh*t showing up in bids. 
  2. Confidentiality or even national security issues in terms of firms using government documents connected with the procurement process to train AI systems and models.
  3. Worries that AI becoming ubiquitous and cheap is going to lead to many more suppliers putting in bids in response to opportunities, putting stresses and strains on procurement (and other) resources in public bodies.
  4. Issues around the actual purchase of AI solutions.

It seems to me that these are totally different issues. For instance, even if there was an outright ban on any use of AI in developing bids (which would be daft), there would still be legitimate security and confidentiality issues around the use of government documents in “training” AI.  That needs to be considered, but really has very little to do with procurement.

Similarly, advising people how to buy AI technology well is fine, but that surely is no differ relay to “category-related procurement advice” around energy, laptops of anything else. It is not really a procurement policy issues.

The first point – on use of AI in writing bids – has probably gained the most comment and criticism. The PPN suggests that buyers should ask suppliers to disclose whether AI has been used in bid construction, but that the answer “should not be scored” as part of the evaluation process. However, if the supplier says “yes” , might that mean their scores for other questions will be reduced if buyers know AI was involved? This could be a legal minefield.  And as others have pointed out, asking questions “for information only” in tenders is not good practice, only increasing bureaucracy and cost for bidders and indeed buyers.

The PPN also mystifyingly mentions the “risks” inherent “if a bid writer has been used by the bidder”. Sorry? I mean, someone always writes the bid. I assume they mean an “external” bid writer, but in my experience such individuals usually take more care to reflect the organisation accurately than some poor sales person who gets landed with the task of writing the document! 

The key point surely is that any bid should reflect the organisation’s capability and experience accurately, and provide a proposal that is meaningful and realistic about the actual goods and service that will be delivered if that bidder is chosen. That applies whether AI was involved or not. Indeed, humans are just as capable as AI of making up nonsense to put into bids – in fact, I suspect humans, being more creative, are more likely to write lies or nonsense than AI.

Anyway, this is a badly thought-out PPN, written in haste I assume, and further clarification and development of the very different points discussed within it will surely be necessary.

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15 years of government policy failure – can Shirley Cooper change that?

Congratulations to Shirley Cooper, CIPS Past President, who has become the UK government’s “Crown Representative for small businesses”. In that role, she will represent the interests of smaller firms, particularly in terms of their ability to win government contracts. “She will work with the Cabinet Office’s Small Business Advisory Panel, departments, suppliers and trade bodies to further level the playing field for small businesses, start-ups and social enterprises and ensure they can compete for and win more government contracts” says the announcement.

The government’s policy goal to increase the amount of spend going to SMEs is a long-running failure. I worked with Sally Collier of OGC on the implementation of the first review of small business and government procurement, the Glover review, way back in 2009. We recommended that there should not be a target or targets set for spend with SMEs – we felt targets would distract and take resources away from actually doing real stuff that would help SMEs. But the new coalition government disagreed, so a target of 25% was set, with no real logic behind it.  

It wasn’t hit in the first few years, but ridiculously, the Tories said they would increase the target to 33% in the 2015 election manifesto, purely to say something that sounded good to appeal to the small business lobby. Everyone in public procurement knew it was a ridiculous move. But surprisingly, the Tories won the election and the target was increased. Even the Public Accounts Committee in 2016 concluded “it is not clear how the Government decided on 33% as a target or how achievable it is”. 

The answer to the achievability question is that the target is impossible to hit because a few organisations dominate the overall spend figures – particularly MOD and National Highways (previously the Highway Agency). Because SMEs can’t build aircraft carriers or the M25, even if every other department does really well, the target won’t be achieved because of those big spenders.

So the government decided that the target should include second tier spend, the money big suppliers spend with smaller suppliers of their own. Of course, if you are going to add this in, then following the logic, really you should subtract the money SME first tier suppliers spend themselves with big suppliers! Anyway, many of the large suppliers to government don’t really track their own spend with SMEs. I suspect when government asks its first tier suppliers for the data, many of them just make up the numbers.

So in 2021/22, the total spend with SMEs went down from 26.9% to 26.5%, including that indirect second tier spend. Direct spend went down more dramatically from 14.2% to 12.3%.  But what happened in 2022/23, you say? We don’t know yet. The data tend to come out around 18 months after the end of the period in question, either because it is so difficult to put together or because if you publish it really late, it takes some of the potential political heat out of the report. Maybe both.

The decline may be due in part to another trend that has been reported by the National Audit Office. More spend is not competed these days, with more use of frameworks, direct awards and single supplier contracting. Whilst SMEs are on many frameworks, that mechanism makes it easy for buyers to just choose their favourite (usually large) firm. 

There is talk about how the new Procurement Act will help SMEs, and to be fair, there are a couple of positive factors there. “The Act places a requirement on contracting authorities to assess the particular barriers facing SMEs throughout the entire procurement lifecycle, and to consider what can be done to overcome them”, for instance.  

Tougher “rules” on prime contractors paying sub-contractors could also help if policed. A single registration system for potential suppliers is a good move for everyone (Sally and I suggested that in 2009). But the idea that the greater flexibility for buyers and contracting authorities will suddenly lead to a boom for SMEs is just wishful thinking in my opinion.

There are also a whole range of arguments around whether supporting SMEs is a sensible policy goal at all.  Might it be better to support diverse, minority owned business? Or social enterprises? Or innovative start-ups? Or firms based in deprived areas?  Is simply looking at size a sensible way of targeting assistance?

So really, the role of the SME Crown Rep has historically been as a figurehead to show the government “cares” about SMEs, and get some votes from small firm owners. In fact, big firms have continued to rule the roost in terms of actually winning contracts.  Maybe Cooper can change that – we’ll see, but I wish her luck and hope she can have an impact. It woudl also be interesting to know how she plans to measure her effectiveness.

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Competition in Public Procurement – Thoughts on the PAC Report

The UK House of Commons Public Accounts Committee (PAC) published a report last week titled “Competition in Public Procurement”.  It’s a shame that the report came out so close to Christmas and in the middle of Gaza, the Covid inquiry, Conservative Party meltdown and general office party debauchery. That meant it got less publicity than it should have, because it contains some important analysis and recommendations. It is also very relevant because 2024 is going to be the most important year for public procurement in ages, with new regulations and (probably) a new government too.

The PAC usually takes reports from the National Audit Office as their starting point and this is no exception. NAO published “Competition in public procurement – lessons learned” in August and we covered it here. But this PAC report does pick up on some other issues, such as the need to transition to the new procurement regulations in October 2024.

“We are concerned that the government may not have sufficiently considered the time, money, and resources required to provide the commercial capabilities to successfully implement the Procurement Act 2023”, says the PAC.

But the heart of the report questions (as NAO did) whether the UK government is getting value for money (VFM) from procurement spend, in particular by using competition effectively.  One of the core issues here is the lack of good data around public procurement which means “government is unable to evaluate competitive trends, understand how effectively markets are open to small and medium enterprises (SMEs) and other companies outside government’s strategic suppliers, or set out clear directions and guidance for contracting authorities”.

That is a fair comment, and it appears that there is less competition in public procurement than there was a few years ago, which is a worry. But I do struggle a bit with the concept that better data will allow you to judge VFM. All of us who have worked in procurement know how difficult it is to absolutely KNOW that the contract or deal we have done is the best we could have achieved or even that it is genuinely good VFM. More data in itself does not necessarily help in that.

What you can do is look at the inputs into procurement activity as a proxy for getting the right outputs. That is why aspects such as having the right processes, policies, systems, trained and capable people, strong competition and so on are so important. We can make some assumptions that if you get all that right, you probably will get good value out of the other end.

On that note, the report picks up on the growth in use of frameworks in recent years. Now frameworks do have a valid role to play, but as the PAC says, “the Government Commercial Function has not provided sufficient guidance to address the potential risks to competitive benefits”.  Used wrongly, frameworks can contribute to closed or competitive markets, and provide a route for buyers to simply choose their favoured suppliers without real competition. That may be done for different reasons.

  1. “Reasonably good” reasons – “we’re in a real hurry and I know this firm can meet our needs”
  2. “Poor reasons – “We’re short-staffed, I just don’t have the resource to run a proper competition”
  3. Or REALLY bad reasons “I’ve been unofficially promised a job with this software firm / consultancy when I leave the civil service so it’s worth my while keeping them happy now”.

The PAC does make the fundamental mistake of bleating on about SMEs (small firms). It really is about time we had a proper, rigorous review of the idea that supporting SMEs is the right policy. Why not minority owned firms, or social enterprises and charities, or innovative start-ups, or local firms? The supporting SME policy has in any case failed to deliver against its objectives for a decade now, so for goodness sake, let’s take a proper look at it.

If Labour does win the election next year, there are radical steps it could take and a review of the SME policy would be one. But abolishing Crown Commercial Services would be another. CCS has many successes and positives, but it does inevitably support the idea of central contracts and frameworks, many of which are fundamentally anti-competitive. Then all the little buyers around the country are encouraged to use them, because they don’t have the skills or time to do procurement properly themselves.

The PAC report says this. “While we acknowledge that government has made progress to professionalise the commercial function at the centre, we are concerned that it has not sufficiently prioritised the need to develop that expertise across government, to ensure the successful implementation of the Procurement Act”.

I think that is a fair point. If Labour is serious about devolution, then it will be interesting to see if that strategic thrust is applied to procurement as well as to other policies and approaches. If so, Labour will need to spread the expertise that has been increasingly concentrated in Cabinet Office, break up large national frameworks, drive more competition, encourage a wider range of firms into the public sector supply base, and get more procurement expertise to the front line.  Will that happen? I have my doubts, but we’ll see.

Anyway, the PAC report is worth 20 minutes of your time over the festive period. Enjoy… and happy Christmas! 

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A Bad Buying Play in One Act

(Peter is sitting at his computer, shopping on Amazon. The CEO, Shirley, enters his office).

Hi Peter, how’s that big project going?  I’m pleased to see that you’re taking personal responsibility for it, as our Head of Procurement. It’s an important project for us.

  • Thanks Shirley, yes, I’m on top of it I think.

So the CFO told me that we’ve started making payments to the service provider?

  • Yes, indeed. We paid them around £140 million last year.

OK, so what are they delivering now? How’s it going?

  • Well, nothing yet, that was just to get them on board really, get their co-operation, and help them get set up, you know what I mean.

Not sure I do really … so when do we expect to actually start getting some services from them? Soon I hope.

  • Well, we don’t know to be honest. I mean, they’ve pushed back on the specification in one area. Apparently we wanted them to do something that might be outside international law. So we’ve still debating that.

But we won’t spend any more until this is sorted?

  • Well actually, there was another £100 million we paid in April. Sorry, didn’t I mention that before?  

So that’s £240 million and nothing to show for it. Are you are absolutely sure they will actually deliver the services?

  • Well no, we might still change our minds. Or they might raise more issues. Or that legal issue could get in the way. But don’t worry, we’ve agreed we’ll only pay another £50 million next year. So that’s good news…

Well, thanks for explaining. I’ve got something for you (she hands Peter an envelope).

It’s your P45. £290 million, for nothing. It’s a disgrace and frankly – you’re useless.  Security will escort you out.

Yes, it is spot the analogy time. I do have some strong views on the refugee issue in the UK and more widely, because I see bigger problems ahead driven by climate and other developments that will increase the flow of refugees further. I’m not a “let them all in” person by any means. But keeping the politics out of it, the handling of the Rwanda issue by the UK government is just sheer incompetence. It is a huge waste of money from a government that has made huge wastes of money its speciality. It is truly dreadful.

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UK Government Spend With Smaller Firms Declines

Without fanfare or comment, in the middle of the holiday season, the UK government recently published the data for spend with SMEs (small and medium enterprises) for 2021/22.  This covers central departments, and some associated bodies, although the definition of what is in and what is out is not always clear. The data is given as direct spend – money that goes straight to the small firms – and indirect, the spend that goes via larger firms that then use SMEs in their supply chain.

It is not unusual for it to take over a year from the end of the period in question before data is published. That is in part because it does take a while to gather the data, but I suspect the publication might have happened sooner if there had been a positive story to tell.

But the headline number was that SME percentage spend declined in 2021/22 compared to 2020/21.  The total was down from 26.9% to 26.5%, and the direct spend was down from 14.2% to 12.3%. That does not look good against the government target of 33% of spend.

Indirect spend was up by 1.4% but that was not enough to compensate for the drop in direct spend.  It looks like the main reason for the overall decline was a big drop in the Department of Health and Social Care (DHSC) SME spend year on year. I suspect that is the “PPE effect” – as we know, there was lots of PPE bought in 2020 and 2021 from smaller firms. They were often crooks, chancers and friends of ministers, but they were SMEs, nonetheless.

Until the pandemic, the DHSC spend was relatively small compared to MOD and Transport – the two “traditional” big spenders.  Most health spend was out in the Trusts so not captured in this data. But the huge amount of “central “ buying, on PPE but also track and trace and other projects, pushed up the significance of DHSC in the overall numbers.

In 2019/20, DHSC spend was just £3.1 billion against MOD’s £21.1 billion. But the figure shot up to £13.3B in 20/21 (MOD was £19.5B) and was still £11.5B in 21/22.  In 20/21, 23.3% of the DHSC total was direct SME spend, so that made the year look better, but by 21/22 that dropped to 14.2%, pulling down the whole percentage.

I’m going into some detail there because it does demonstrate how ridiculous looking at the overall number actually is. When one factor – PPE – in one Department can skew the whole data set, it is pretty useless. But let’s go back in time and look at how this target emerged.  

Supporting smaller firms was one of the first “social value” type issues government embraced. I worked in the Office of Government Commerce (part of Treasury, the UK finance ministry) as a consultant back in 2009 on the implementation of the 2008 Glover report – “Accelerating the SME economic engine: through transparent, simple and strategic procurement”.  (That link took some finding!)

But Sally Collier (OGC’s Policy director) and I didn’t really like the idea of targets for spend with SMEs for various reasons. One was the difficulty of setting sensible targets, which really needed to vary by department to be meaningful. We were interested in departments and buyers simply doing the right things, and therefore also worried that targets would mean effort going into the data, not the real action. But our advice was ignored and after the 2010 election a 25% target was set. 

It quickly emerged that 25% was unachievable. The Ministry of Defence and the Highways Agency (Transport) accounted for almost half of central government procurement spend and there was no way an SME was going to build a warship or the M25 motorway.  So the target was changed to an “aspiration”, a classic Francis Maude fudge, and then indirect spend was included to make it easier to hit the target.

But many of the first-tier suppliers to government have no idea really how much they spend with SMEs, so the data is pretty dodgy. Then the 25% target – which had never been achieved – was stupidly changed in 2015 to 33%, purely because the Cameron government wanted to say something positive for the “small business” lobby in their election manifesto.  And 33% is unachievable too, as we’ve seen, even including indirect spend.

The other issue is whether supporting SMEs is the right target today. We have become much more sophisticated in the 15 years since Glover and now most large private firms are interested in supporting diverse suppliers, not simply small firms.

So why not shift the focus to using government procurement to support charities and social enterprises, minority owned firms, innovative businesses, firms in deprived areas or those that employ lots of disabled people?  You don’t see Unilever or other admired private sector businesses defining some prospective suppliers as special just because they are small. Indeed, many SMEs are small because they want to be, or because they just aren’t very good.

But there has been good work in government over the years in terms of helping SMEs. For example, even back in 2009, MOD led some impressive initiatives to promote SMEs through their supply chain. But really, this element of public procurement policy is crying out for a refresh, a more nuanced set of objectives and – if we must have targets – something that is realistic and motivating, not a painful data collection exercise that is bound to end in failure.  

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Always Check Those Invoices!

The US Government Department of Justice recently issued a news release.  

“Booz Allen Hamilton Holding Corporation has agreed to pay the United States $377,453,150 to resolve allegations that it violated the False Claims Act by improperly billing commercial and international costs to its government contracts. Booz Allen, which is headquartered in McLean, Virginia, provides a range of management, consulting, and engineering services to the Government, as well as commercial and international customers”.

I do love the precision of the final $150 on that number! Couldn’t they have rounded it slightly?

The accusation was that between 2011 and 2021, the consulting firm charged costs to its government contracts and subcontracts that should instead have been billed to its commercial and international contracts. That particularly applied to some indirect costs. So the government was allegedly paying for activities and services that had nothing to do with the work the firm was actually doing for government organisations.

Now allocating overheads can be a tricky issue, as many of us know. And Booz Allen issued a statement, as you might expect.

“Booz Allen has always believed it acted lawfully and responsibly. It decided to settle this civil inquiry for pragmatic business reasons to avoid the delay, uncertainty, and expense of protracted litigation. The company did not want to engage in what likely would have been a years-long court fight with its largest client, the U.S. government, on an immensely complex matter. The company fully cooperated with the government and is pleased to move forward.”

So there is no admitting liability or guilt here. I can understand why the firm does not want a long, expensive fight – on the other hand, if you were 100% sure of your position, many firms would choose to take it further rather than handing over quite such a large amount of cash.

The most amazing element of this story is this. The investigation was sparked by a whistleblower, a former Booz Allen employee, Sarah Feinberg, who tipped off the authorities about the alleged misconduct from 2011 to 2021. And now she will receive no less than $69,828,832 as a thanks (it’s that precision again…)  

$69.8 million!  Good grief, I’m going to have a good think now about every firm I’ve ever worked for and whether they might have done anything “naughty” in their dealings with the US government …  

The moral of thee story is simple. Check your billing from professional service firms. I once took on a senior interim commercial/procurement role in government with an organisation that had around 100 consultants from one firm working on its major programme. That was £500K A WEEK we were paying this firm (it better be nameless…)  

I took a look at the invoices – incredibly there was no contract manager for this contract – and found that amongst other things, we were being billed for the senior partner’s assistant. The partner was only working about a day a week on our project, but we appeared to be paying a grand a day, every day, for his PA. We were also billed for the whole day for the whole team when I knew they had stopped work at lunchtime for their office Christmas Party! “An unfortunate error” I was told.  I saved £50K with one phone call there…

Of course, if you can structure any professional services assignment on a fixed price basis, most of these issues are avoided. That approach is usually – although not always – better for the buyer and actually arguably for the provider too. That is another question in this Booz Allen example. Why was so much government work being done on what sounds like a pretty loose “time and materials” basis?

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Would You Employ These Men?

Assume you are a CPO recruiting for a senior procurement role.  The person will have some power in terms of choosing suppliers and negotiating contracts, although others will be involved too (because you understand the corruption and fraud risks around concentrating that sort of power in a single person).

You then discover that this individual recently paid a fine of several million pounds to the tax authorities because of a transaction from a few years ago. The tax authorities found that the individual had managed their affairs in a manner that crossed the line from “tax avoidance” into “tax evasion”, even if it was not deliberately criminal evasion.  But when you tackle the person about it, they explain it was simply “careless” and they had no intention of doing anything illegal.

I mean, they tell you, we’ve all done it. You just carelessly set up a new business but then register the shares in your father’s name, offshore of course, then set up a complex process so that you can still benefit personally from the value of those shares. And when they’re sold, you avoid capital gains tax. Just careless.  (You also discover he made a lot of money working for two oil companies that had an “interesting” history, including senior management fraud and corruption – although he wasn’t involved in that personally).

How do you feel as CPO? I would suggest this person would not be employed. There would be questions about their personal ethics and whether they could be trusted with the organisation’s money, let alone the reputational risk to the organisation and indeed to you if the CEO finds out who you are employing. 

Now let’s consider another case. Another senior procurement executive is about to award a contract to a single consultant to carry out a very sensitive strategic assignment at Board level. There are a handful of individuals – from different firms – in the running. Your executive makes the choice and the consultant starts work. You then discover that a few weeks before the appointment, your executive asked the chosen consultant if they could help him get a loan of £800,000. The consultant was indeed helpful, and linked your exec up with someone who could make that loan.

Where do we start with this? As the CPO, you might wonder first of all why your exec needs that loan – they’re paid a decent six figure salary, after all. That rings alarm bells. A gambling / drug habit to finance, maybe? Blackmail? Not good for someone in a responsible position handling the firm’s money.

But on the core issue, I think you would fire them, or at the very least put them on a final warning (if the internal policy is not strong enough to support a dismissal). It was totally inappropriate to ask a potential supplier for favours at any time, in particular when you are in the process of making a contract decision. Personally, I would not be able to trust this individual again, so sacking would be my preferred option.

You might have a little more sympathy with the consultant. They were put in a difficult position, and all they did was make a connection – it is not like they handed over cash. (However, you do feel a little awkward when you discover the consultant previously donated a lot of money to help restore your firm’s sports and social club …)

But you have to tell the supplier that the competitive process will need to be run again and unfortunately they will be excluded. They should have politely declined to help and really should have blown the whistle on the exec and come to you as the CPO with the story.

The case studies here are of course parallels to the stories of Nadim Zahawi, Conservative party chairman, and Boris Johnson, ex-Prime Minister, and his dealings with the Chairman of the BBC, who he appointed after asking him to help Johnson get a loan. To make matters worse, Zahawi was actually Chancellor (finance minister) at the time he was being fined. He was the ultimate boss of the tax authorities!

So we’ve got into a situation in the UK where the people who are running the country have ethical standards that we would not tolerate in a mid-level procurement manager. The feeling that the rules do not really apply to them, personal disregard for ethical behaviour (remember the long history of Johnson’s many children, deserted wives, and lovers having abortions), a lack of care about conflicts of interest – they are all character traits that would make us run a mile if we saw them in a potential recruit.

This is not just a rant against these individuals. The wider issue is that it sets a terrible example. Young – and not so young – business people, including those involved in procurement, look at the standards of behaviour and think “well, if that’s OK for our leaders, surely I can accept a trip to the Grand Prix from that IT firm who want our business”.  Or perhaps feel it’s OK to award a contract to a firm on the basis of a nod and a wink that there’ll be a nice job next year in that business on twice the salary.  

Once standards start slipping in an organisation or country, it’s tough to turn things around. My feeling at the moment is that the UK is rapidly sliding down the league table in terms of national corruption, ethics and standards of behaviour in public life. When we see this sort of thing going on in Nigeria, Turkmenistan or Myanmar, we shake our heads and say, “what a corrupt, backward country that is – look at the crooks and chancers they have in charge!” 

Well, here we are.

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Gareth Davies, NAO Supremo, On Efficiency, Standards (and Procurement)

Last week, Gareth Davies, head of the UK’s National Audit Office, gave a speech to members of parliament and civil servants. He drew on the experience of NAO in carrying out dozens of reviews over the last three years to highlight “three big lessons for public spending in large scale emergencies”.  All three have implications for and are related to procurement in some sense.

“Firstly, the importance of maintaining basic standards of public accountability even in a crisis, and restoring normal controls as soon as possible. 

Secondly, the central role of good quality data in responding quickly and targeting resources accurately. 

And thirdly, the need for a new approach to improving the country’s resilience to large scale emergencies, which minimises the impact on current and future taxpayers”.

Under the first heading of basic standards, he accepts that there wasn’t time to carry out full and normal processes in areas such as PPE procurement or furlough loans. But there was then no excuse for government failure to apply the safeguards of transparency, for example in terms of large PPE contracts.

“It was therefore a concern to see significant delays to government publishing the details for some (often very large) contracts that had been awarded without competition. It is not an onerous task to publish this information promptly, and it is a vital one”.   

Timely accounting is also key, and he points out the worrying situation in local government where a third of councils at the end of September 2022 had still not published their accounts for the year ended March 2021! Given the waste of money / fraud /massive incompetence that is now coming to light in councils such as Thurrock, Croydon and Slough, timely accounting is “critical to protecting taxpayers and maintaining trust in public spending”.

Under the good quality data headline, he praises some aspects of the NHS App as a good example of the benefits that data can bring, but government has to do more, and progress has been too slow. There are three key issues that can help drive greater efficiency:

  • Data standards: essential for efficient use of data, held in a consistent way
  • Data quality: for accurate and reliable results and maintaining public confidence 
  • Data sharing: so that citizens don’t have to repeat themselves 

Finally, resilience – “how is government ensuring that our country is resilient enough to withstand costly crises, without placing an unaffordable burden on taxpayers? And what will good value for money look like in future pandemic planning?”

We need more flexible approaches, he says, but above all we need a more considered approach to risk. For instance, given climate change, there are major issues around water supply, but NAO found no convincing plans to stop the south of England running out of water by 2040! (That’s a worry for a vegetable grower like me even with 8 rainwater butts / bins dotted under various drainpipes and around the garden…)

“To be truly resilient, government must plan for scenarios that it previously dismissed as extreme, and revisit its assessments of how likely they are to happen. This is crucial if we are to achieve value for money, not just in the short term, but for future generations.” 

His final remarks on efficiency in government spending more generally focus mainly on evaluation and evidence. Basically, government spends money and has little idea of whether it does what it was supposed to (or achieves anything at all in some cases). Here’s a shocking fact. In 2019,  – “out of the government’s 108 most complex and strategically significant projects, only nine were evaluated robustly. Seventy-seven of them had no evaluation arrangements at all”.

There are other good points around efficiency. Understanding and managing demand for services is key; and we need more and better investment in digital services (with the caveat that projects are consistently over-optimistic about implementation in the public sector).  Davies wants more focus on the nuts and bolts of efficiency. “We have seen too many high-level ambitions fail to be translated into concrete plans, adequately resourced and tightly-managed. The skills and organisational discipline required for this are well understood, but they are not always valued and prioritised in government.” 

Indeed. I still wait to see the first appointment of a Permanent Secretary who has risen through roles in procurement, commercial, project management and delivery, rather than the traditional policy and private-office-heavy route. That would be a real indicator that government is taking these messages seriously!

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