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Grenfell Tower Inquiry Phase 2 Report – Just Terrible

I’ve generally stayed away from writing about the Grenfell fire tragedy. It just seemed too serious and horrible an issue to be talking about “bad buying” and technical procurement issues. What the victims went through is just unimaginable.

The Phase 2 report from the Inquiry was released recently and it is quite rightly highly critical of quite a range of people and organisations. Companies in the sector that provided materials used in the building; the architects and designers; the local authority and housing managers; central government civil servants; then-Minister Eric Pickles; the London fire brigade… they all bear some responsibility for what happened. Wider failures in building regulations and fire safety also contributed.

CIPS (the Chartered Institute of Procurement and Supply) contributed strongly to the Inquiry, initially chairing the Procurement Working Group as part of the Hackitt Review of building regulation and fire safety (leading to the Building a Safer Future report).  What became clear, CIPS says, is “there were many examples of poor commercial practices in the years leading up to the fire, focusing on price and margin at the expense of safety.”

I often hear complaints that public procurement is “all about price and nothing else”. I always push back on that and say that in my experience, price or even total cost is always an evaluation factor, but the vast majority of procurement exercises also consider other non-cost factors, which have serious weighting in the evaluation model. But it is probably fair to say that some parts of the construction procurement world have not exactly been at the leading edge of good practice thinking.

That seemed evident from the report, where too many decisions were made simply to save money rather than through a proper consideration of all the true “value for money” factors. And if a value for money model doesn’t include looking at the chances of killing people, then it should. This is from the Phase 2 executive summary report. (TMO is the “tenant management organisation” that was responsible for Grenfell).

“Although Rydon’s tender was judged to be the most competitive, it still exceeded the TMO’s budget. As a result, although the TMO had received advice from its lawyers that it would be improper to do so, it entered into discussions with Rydon before the procurement process had been completed leading to an agreement that, if Rydon were awarded the contract, it would reduce its price to an acceptable level”.

Illegal, bad practice, and of course led to Rydon, the principal contractor on the tower refurb, being focused very firmly on cost minimisation.

It was also shocking to see that the firms involved, including those that had basically lied about the products they were supplying, or had hidden test results, continued to win public sector work after Grenfell.

The Guardian reported that “about £250m in public deals have been made in the past five years with corporations involved in the high-rise’s refurbishment, according to searches of public contracts by the outsourcing data firm Tussell for the Guardian. They include companies currently or formerly owned by Saint-Gobain, which made the combustible Celotex insulation used on the tower, and Rydon, the main contractor for the works”.

Now the new UK (excluding Scotland) Procurement Act includes what are in theory stronger provisions to allow firms to be barred from public procurement competitions. The Prime Minister told Parliament that he wanted to ban the firms involved here. “This government will write to all companies found by the inquiry to have been part of these horrific failings as the first step to stopping them being awarded government contracts,” Starmer pledged.

That doesn’t seem as strong as you might expect, but no doubt there will be process that must be followed if we want to avoid legal challenge from those suppliers. I’ve been somewhat cynical about the chances of the new “debarment regime” in the Act really being effective, but I sincerely hope I’m wrong and these firms are kicked out of public business for a very long time.

It is difficult for individuals within large organisations to speak up sometimes. We can all get caught up in the corporate “groupthink” and perhaps misplaced loyalty.  (Look at all the people in the Post Office who knew the Horizon system was dodgy and that postmasters were being treated appallingly, but said nothing).  Grenfell shows how terrible the consequences of that sort of behaviour can be. So if your firm is expecting you to lie or deceive others about the chances of your product killing people, then perhaps you really should say something.

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CIPS Annual Report – a Mixed Bag

The Chartered Institute of Procurement and Supply (CIPS) annual report is out now for the year ending October 2023. I’m not sure exactly when it was published but it always takes a few months to emerge.

The report suggests it was another mixed year for the world’s leading procurement institute. Revenue was up 13% year on year, which is pretty impressive, driven largely by business from corporates in the UK and Middle East. The CIPS Corporate Award programme continues to bring in revenue as firms invest in professional development and capability, which is good news.

However, membership was down 4.5% which is less good news for what is supposedly a “membership organisation”.  That was mainly down to a drop in student numbers, with MCIPS-level numbers pretty static. Exam entries were also short of budget although recovered in the second half – that may be in part because of the well-publicised problems with the new system, which amongst other things, made exam booking tricky at times. And new student numbers were at their highest for ten years, so maybe the decline in student membership is just a “blip”.

Total income was £34.2 million, up 13% on the previous year but below budget. That led to an operating loss of around £400K, although the accounts are not easy to interpret given so many figures for pension valuations and adjustments, loans, and other one-off accounting issues. But the cash position actually improved, with group cash position standing at £5.2 million at year end. To be honest, I struggled to really understand how this increase came about given the loss in the year.   

Generally, CIPS still has the perennial problem that many students want to get their qualification but then don’t want to pay £200+ a year for ongoing membership. Whilst CIPS rightly says you can’t put MCIPS after your name if you are not a current member, I suspect many who pass the exams, and many employers, look at that qualification as more important than the ongoing membership. There are many other ways to demonstrate your continuous professional development these days that don’t cost a fortune.

It is also fascinating to see how CIPS continues to become much less of a UK-centred organisation. Australasia seems to have stabilised after some issues there.  CIPS MENA is not set up as a certified company, but by all accounts is doing very well in many middle-eastern countries, in terms of numbers and revenues, and the recent promotion of regional boss Sam Achampong to run half the world 80% of the world for CIPS indicates one reason why that has been the case in recent years.

Yet some problems continue in other regions. The US is an ongoing disaster really, losing money for CIPS year after year despite ambitious intentions. As Eddie and the Hot Rods once said, maybe it is time for CIPS to Get Out of Denver…

Looking at the numbers in detail, an analyst might worry about control of staff costs. There has been a 16% increase year on year in total cost, with staff numbers up only 4%, implying an almost 12% cost per person increase, well ahead of inflation. However, there is a major distortion.

Malcolm Harrison, the then-CEO, left rather suddenly in March 2023, yet the highest paid member of staff, presumably him, was in the £250-300K bracket for 2022-23 salary.  (Last year he was in the £200-250K bracket). That suggests he received in effect a full year’s package despite leaving just 5 months into the financial year. So his pay-off accounts for quite a chunk of that apparent staff cost hike, although the Trustees need to keep an eye on senior staff costs – there were 16 people earning over £100K in 2023, against 11 in 2022.

The new IT platform seems to have settled down somewhat now, so if that crisis is almost over, I’d suggest CIPS needs to focus on its membership proposition and numbers as the key strategic challenge, which raises some fundamental issues again about the whole nature of the Institute.  

It’s clear that getting rid of the President post has worked well in increasing the standing of the Institute (he said sarcastically…) although I do hear that the relatively new Membership Committee is doing some good work.  High profile individuals such as Sam Achampong and Savita Mace (membership committee) do a lot to keep CIPS in the public eye, but I feel that many of the Trustees (Board members) still need to do more to promote CIPS and the profession now the Presidential focal point has gone.  

But that is by no means the only reason why MCIPS numbers are in slow decline, even as P&SCM increases its importance globally. CIPS really needs to understand how to change that situation to improve its long-term prospects, or accept that it is now in effect a consulting, education and training business rather than one with a membership focus.

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2022 – How Was It For You, CIPS?

The Chartered Institute of Procurement and Supply (CIPS) has had a troubled couple of years. We saw major arguments about changes to governance, then implementation of a new Oracle technology platform to manage membership, exam bookings, events – pretty much everything really – has been a disaster. The CEO, Malcolm Harrison, left at the end of March in circumstances that weren’t altogether happy, I understand. The Institute did manage to publish its accounts on time, and you can now examine the document on the Charities Commission website here. They run up to October 31st, 2022, so we’re already two-thirds of the way though the subsequent financial year.

The headlines – CIPS Group turnover in FY22 was £30.2 million with net income of £2.4 million before investments and pension scheme movements. The turnover was below budget expectations, but still represents an increase 11% above FY21, and operating profit was above budget despite the revenue shortfall. Reserves were down on plan but not dangerously low.  

There are a number of wider points of interest in the report. I liked the focus on volunteers; I don’t think I have ever seen information provided before on number of volunteers, where they are and so on. The report is pretty honest about the problems caused by the system failure; there is talk of staff having to go above and beyond to keep the show on the road, workarounds and more.  But the report makes this claim.

“A programme is now in place to resolve the issues with the platform and to remove all workarounds. However the impacts have been significant with membership, exam bookings, revenue and profits all being negatively impacted.”  But clearly the issues were not resolved by the end of March when Harrison went – I’m not convinced all is sorted even now in July.   

But there is no simple number provided in terms of what the programme has cost or what more it might still cost to get the platform up and running.  However, there is a table that gives figures for “Intangible Fixed Assets. “Assets under development” stood at £4.9 million in November 21 and a further £2.6 million was spent in 2022. The assets under development were “brought into use” during 2022 – if all of this was the new platform, that means some £7.5 million had been spent by November 22.

Maybe some of this was other development though, but it is not clear. I was told a while ago that the budget was in the £5-6 million area so this would represent a major overspend by last November, with more since then. We’ll have to see what the number is in this year’s accounts, and maybe next year’s too! But it seems quite possible that CIPS will end up spending the best part of £10 million.

There have been other impacts too driven by these problems. MCIPS membership is down some 700 on the year, and the blame for that is put at the door of the system. Examinations revenue was up, although there was also mention of system issues there, so maybe it should have been even better. Some of the impact is not really financial but still matters. Talking to a Fellow the other day, it is clear that the issues have made even organising basic events much more difficult. The Fellows group has been one of the success stories of recent years; it would be a shame if it lost momentum simply because of a technical issue.

Looking at those membership numbers, and where revenue comes from, I think it is fair to say that CIPS is no longer primarily a membership organisation. Its two “core businesses” are student education and examinations; and corporate training and development. In terms of the latter, CIPS does not say how much of that revenue comes now from NGOs, governments and charities who provide grants to CIPS to help develop procurement in the developing world. The Bill Gates Foundation is mentioned, and the work in the health system in Africa sounds very worthwhile. Such revenue is not reliable year after year of course, but my feeling is once you get a decent reputation, there are a lot of funds out there for delivering these “good works”.

But 17,000 MCIPS members means membership fee revenue of around £4 million, only some 13% of total revenues. And it is hard to see that growing much, to be honest. As I’ve said before, so much of what used to be the CIPS membership proposition is now replicated by other organisations, from Procurious to the Sustainable Procurement Pledge, by tech and consulting firms or even by individual “influencers” in the profession, who together provide a huge among of insight, IP, networking opportunities and more – free of charge. Why pay CIPS if that is what you value?

So – wild idea – maybe CIPS should make membership free?

You would still need to do the exams or go through a rigorous non-examination route to get your MCIPS, but the “affiliate” status could be developed further for those who don’t want that. And just think how much more the CIPS membership list would be “worth” if it was five times the size it is now!  CIPS also needs to get better at working with software firms, consultancies etc – there is a lot more potential revenue there if CIPS gets its act together. But an expanded membership list would be a huge benefit.  And the credibility CIPS has in terms of winning corporate work or NGO and charity funded projects would also be far greater with more members.

The alternative is for MCIPS numbers to stagnate at best, and the organisation becomes that training and education body as I suggested earlier, with more and more focus on Africa and the Middle East  in the main.  But there are issues with the overseas approach too; the US was a disaster last year, losing over £230K after revenues fell and costs rose quite dramatically.  I’m also not totally sure about the ethics of doing so much work in Saudi Arabia. I guess our government and our football clubs don’t worry too much about that so there is no reason why CIPS should. 

In summary; CIPS had a difficult year, but to be clear, it is not about to go bust. However, the new system has cost millions more than planned and has caused other problems. Some of the overseas operations also look problematical. There is a new Chair and a new CEO (who has solid IT and procurement experience but has never run a business or a P&L before) just getting their feet under the table.  Core membership is static or declining, but education and training activities are going pretty well, with grant funded work in particular showing a lot of potential.

I gave up my membership last year after the governance shambles – but I wish the Institute well and hope 2023 proves a better year than 2022. I suspect some innovative thinking is necessary though.

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What’s Gone Wrong with CIPS Systems? Part 2 – Advice to Help Avoid Similar Issues!

In part 1 of this discussion, we talked about the issues CIPS (the Chartered Institute of Procurement and Supply) has faced in implementing its new systems. Moving away from the CIPS specifics now, here are some lessons related to this field, based on both personal experience and wider research.

  1. Nothing wrong with Oracle software, but small clients (and CIPS are small in the greater scheme of things for a firm like Oracle) sometimes struggle to get the attention that a Unilever, Barclays or Toyota might receive as customers of any software giant. In many sectors, including procurement software (which is not what CIPS has bought, I should say), I’ve always felt there is a lot to be said for smaller organisations choosing smaller suppliers.  
  2. Optimism bias is often an issue too. Suppliers are almost always likely to tell you that “yes, our product can do this” and “yes, it can be up and running in six months, no problem”. They might not be lying – but they omit to mention the conditionality. “Yes our product can do this as long as the data is in this format…” Or “yes, six months is feasible – as long as a, b, c, and d all apply…”  
  3. My understanding is that CIPS went for the “big bang” approach with the Oracle software. An alternative might have been to look at different aspects of the requirement – the student and exam booking element, core membership management, conferences and events, etc – and perhaps gone for a staged approach, with a more “best of breed with good inter-operability” approach to the software products chosen too. Whilst this might have looked somewhat more expensive and less rapid in theory, incremental approaches do tend to de-risk programmes like this.  
  4. The US example in Bad Buying mentioned in part 1 was undoubtedly made more complex by the involvement of several parties. I do understand why Oracle “don’t do implementation”, but immediately you have potential for dilution of responsibility when another party or parties are involved. Most senior buy-side people tell me they would always prefer “one backside to kick”, if you pardon the language. It’s not always possible, but having real clarity about who is responsible and accountable for what on the vendor side is vital. That’s true not just in technology, I should say, but in many other areas including construction, outsourcing projects, etc.  
  5. The Enigen statement (see part 1) is interesting in its mention of “evolving and additional requirements”. The very first chapter of Bad Buying is all about getting the specifications right. It’s the first chapter because it is the most fundamental cause of failure – if you get the spec wrong, nothing else matters. For complex technology projects, and that includes something like the Army’s disastrous Ajax armoured car programme as well as digital tech, changing specifications once work is underway will almost always cause problems. In terms of a software project, a client that starts saying, “oh, could we have that functionality as well please, sorry, forgot to mention it earlier…” is asking for trouble. Suppliers like to say “yes” of course, but not only can it lead to delays, it muddies the water in terms of accountability.  
  6. Software implementation that involves a systems transition – rather than a totally new system / functionality – is often difficult because problems with (for instance) transferring data don’t always come to light until you’re well into the project. It is easy to say that thorough due diligence before choosing a supplier or starting the programme is the answer, and of course that is important. But sometimes issues do emerge from the woodwork (or from the silicon, we should say) only once you are actually pressing that “go live” button!  is It is often a sensible move to look at cleansing data, perhaps using a real specialist in this area, as part of the pre-contract award market engagement process and planning.  
  7. On the client side, effective programme management is absolutely key. One would hope CIPS recognised that, but there might be questions now about factors such as the programme manager, governance, reporting, stakeholder and risk management. Now you can have a brilliant programme manager and still end up with a failed programme, but I’d hope the CIPS Board would be insisting on a detailed review of what has happened (if they haven’t done that already).  
  8. Expanding on that point, clients MUST understand they are reputationally, contractually and commercially on the hook for leading the implementation. You can’t just hand this off to software providers, SIs (systems integrators) or consultants. Programmes must have the right level of senior people involved and fully engaged from programme inception, and involved in governance of the project throughout. A lack of appropriate senior input is the root cause of many implementation disasters – leaders must ensure early decisions are made and do not get missed. Small issues can fester into multi-million pound disputes  requiring un-picking, and causing cost, delays and disruption.  

In November 2021, CIPS net assets (excluding the defined benefit pension fund notional surplus) were about £6 million. The accounts up to November 2022 should be out in the next couple of months – it will be interesting to see if the systems issues have visibly affected the financial position. For the sake of next year’s membership fee inflation, I hope not!

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What’s Gone Wrong With CIPS Systems?

Anyone who has been around in business for a few years knows that there is nothing more nerve-wracking, tense and challenging then implementing a new technology solution in a mission-critical area for the business.  When I was researching my Bad Buying book, I found enough case studies on that topic to have pretty much filled the book with that alone.  

I did include a few examples, from different sectors and countries, from an Australian government payroll system disaster to the US drugs firm FoxMeyer, who went bankrupt after major problems with a project that included two software providers plus a systems integrator.

But despite the challenges, digitisation is essential. A recent article quoted Malcom Harrison, CEO of the esteemed Chartered Institute of Procurement and Supply, as saying this. “Whatever your corporate goal might be, a digital platform is critical to making more informed decisions”.

Unfortunately, CIPS itself has run into difficulties related to its own set of new digital platforms which it has been implementing over the last year or so, including its website, customer and membership systems. In an email to CIPS members recently, CEO Malcolm Harrison apologised for the inconvenience members and students have experienced over recent months in using the platforms.  I had seen some comments which were critical of the new platform around social media, and even a comment sent to the Spend Matters website. Several mentioned exam booking as a particularly problematical area. But clearly the problems are wider than that.

In the email, Harrison explained that CIPS chose tech giant Oracle as the software provider, after a thorough procurement process.  But Oracle don’t do implementation themselves – which is true of many major software providers. (Company valuations are generally higher for pure-play software firms than for combined software / services businesses). Instead, an Oracle approved systems integration partner, Enigen, has worked on that task. 

In the email, a joint statement from CIPS and Oracle said this:  CIPS, Oracle and Enigen are committed to modernizing the CIPS member and customer experience. Oracle has stepped in to ensure the project delivers on its full potential.”

The cynical might wonder how Oracle will “ensure” that delivery, given they don’t do implementation, and some might feel there is an implication there that Enigen are at fault, that Oracle having to “step in” to sort things out.  

A spokesperson for Enigen gave us this short statement: “This has been a complex project with many evolving and additional requirements. We are working collaboratively with CIPS and Oracle to create an exceptional digital experience for their members.”

We will come back to that statement in part 2 of this commentary – it is interesting to see that mention of “evolving and additional requirements”. That will no doubt set off alarm bells with readers who have experience of large software programmes! And of course, if Oracle has now “stepped in” to sort out the problems, it does beg the question as to why this level of integrated involvement from the firm was not already planned and present in the implementation programme.

I don’t want to be too critical here. To be honest, I managed to get through my lengthy procurement leadership career avoiding responsibility for many significant systems programmes. That was partly deliberate and partly luck (thanks to RBS for buying NatWest just as we were starting the mega-SAP programme … which RBS canned, incidentally). This is intrinsically difficult work – when I talked to a good friend of mine, one of the best complex programme managers I have ever met, he simply said, “it can happen to the best of us”.

But these events are not a great advert for the procurement profession, or for the firms involved, so hopefully the issues can be resolved quickly. I would also hope that CIPS will be open with members as to what has gone wrong. That could represent a learning opportunity that might help thousands of other CIPS members and their organisations, and CIPS has plenty of opportunities to feature this programme and all the experience gathered from it through its own channels. In that spirit, in Part 2 we will suggest some general good practice points (not necessarily linked to the CIPS case) when it comes to major systems implementation programmes.  

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How will CIPS measure the success of its big changes?

A few weeks ago now, CIPS (the Chartered Institute of Procurement and Supply) announced the result of the consultation process on proposed governance changes. It proved to be a vindication and a victory for the Board of Trustees, with over 75% of those who responded agreeing with the Board’s recommendations. That means no more democratic voting for members to elect Congress and (indirectly) Trustees, and no more CIPS Presidents.

I campaigned for a proper consultation to be held, as it looked at one point that CIPS might just force through the  changes – and indeed had already made some (such as abolishing Congress) which it should not have done without such consultation. I wanted to retain some democracy, which I genuinely thought would be the result of the consultation. I also wanted CIPS to retain the President’s role, which I thought might be a close call in terms of wider opinion.  I “lost” convincingly on both those counts.

One learning from this is to beware of the positive reinforcement or “echo chamber” effect. The vast majority of people I spoke to – and who responded to my quick survey I ran here – agreed that democracy should be retained. I can only assume they were generally people similar to me, perhaps a lot of older members, Fellows or perhaps just liked-minded folk –  which is why they read my stuff here or on LinkedIn. But I really thought I would “win” on that point, only to find a clear majority disagreed with me.

What is really disappointing is that only one person ever debated with me publicly and was prepared to discuss the issues a little on LinkedIn. So either those who voted with the Board don’t hold very strong views or are terrified of my amazing debating powers… who knows! But my point is that it’s easy to think that “everyone agrees with me”. We must be careful not to fall into that trap when it comes to important business decisions too. Look for the contrary view, for the person who doesn’t agree with you.

So, CIPS members, you no longer have a vote. CIPS is similar now to your gym or the AA, where your “membership” means you are a customer with a right to use the service, not the National Trust or CAMRA (just to take two organisations I’m a member of) where you have a vote and hence play a (minor) role in the running and governance of the organisation.

Nothing wrong with that, but you might feel differently when you don’t have that role. You certainly expect a good product (service) from the gym or the AA – you act like a buyer, not a “member”, I suspect.  So this change might just focus CIPS members’ minds on what they get from the Institute, which would not be a bad thing.  

And CIPS faces a challenging competitive situation. There have never been as many options for professionals wanting to feel part of a community, or to access useful intellectual property, information and knowledge, or to participate in events.  Much of what is available in those areas is free to users too. Even on the qualification side, which is CIPS’ main area of competitive advantage, new options are emerging.

The other point I’ve been considering is how will the CIPS Board measure the success of these changes? Here are some suggestions.

  1. The new appointment process will lead to better people sitting on the Board, says CIPS. OK, that is somewhat subjective, but lets compare the Board membership in 2 years’ time with where it was in 2021. But I’d also want to know how active Board members are. How many meetings or  CIPS events (both large-scale and branch type meetings) did they attend? It is no good having high profile global CPOs as Board members if they never turn up or actively support CIPS and its members.
  2. CIPS will appoint a range of people to fulfil representational roles instead of a President, they say. So let’s measure media coverage of CIPS “representatives” as a reasonable proxy for activity.  In my opinion, CIPS really missed out by not having a Presidential figurehead as a spokesperson during the pandemic.  The CEO did his bit, but he had a business to run in difficult circumstances too.  
  3. Another aim of the new structures is to improve member engagement. So let’s see the number of branch and other meetings organised by or for members, including virtual gatherings of course, and number of attendees – those seem like good measures. Plus perhaps number of “projects”, task forces, groups or whatever set up for particular purposes or to carry out a piece of work.
  4. Ultimately, the best measures are probably the core metrics – full members of CIPS and total revenues.

We won’t be able to judge whether the changes have paid off for a while, so let’s see where the Institute is in two years’ time. Put May 2024 in your diary. Whether I will still be interested enough in procurement matters to be writing about it then is another matter altogether!

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Will My Supplier Deliver? Lotteries, Camelot and Challenges

In part 1 here I discussed the reports that Camelot, the current operator of the UK National Lottery, is going to challenge the government’s decision to award the contract for management of the Lottery to a different firm, Allwyn, headed by a Czech tycoon. That decision follows a lengthy and no doubt exhaustive “procurement” process.

There are suggestions that Allwyn have offered to make more money for charitable causes than Camelot included in their proposal. According to reports, that amount is not contractually  guaranteed, but may have played a major role in the selection decision.  Which leads us into the question of confidence – how do we know that supplier really will deliver what they promised?

There was a great comment on LinkedIn related to the part 1 article. The writer told of a major NHS procurement where a US supplier came in with a knockout bid, which led to other potential suppliers simply pulling out. Then, literally on the day the new service was due to go live, “At the eleventh hour the supplier had withdrawn, admitting that they couldn’t deliver the brief and make the savings claimed”.

There is a huge difference between what suppliers (some suppliers at least) will claim they can do and what they actually can deliver. There are no magic answers to this, but in my book “Bad Buying” I suggest thinking about “analyse, reference, test”.

Analyse means looking into the firm, the product or service that you’re going to buy, doing your research on the supplier and on whatever you are buying. The amount and depth of research needs to be proportionate to how much you’re spending and how critical what you’re buying is.

Reference means asking other customers of your potential supplier or users of the product or service you are buying about their experience. It’s an obvious step, yet it is amazing how many organisations don’t bother with this step. I was asked for input on a legal case in 2018 where an incumbent supplier challenged the decision by a large government body to award a contract to several other firms, meaning that the incumbent was going to lose all its business. This was a really sensitive service; if it went wrong, you might well see reports on newspaper front pages.

Yet when the incumbent firm asked questions about how the procurement decision was made, it became clear that the government organisation had done virtually nothing to check out what other suppliers were claiming in their bids. They had not researched the track record of the firms; they had not taken up references from other customers; they did not even seem to have checked whether the directors of bidding firms had criminal records! The buyer was simply believing the bidders and hoping for the best. The competition was eventually re-started as I assume the lawyers told the contracting authority they were going to lose in court.

Test means using techniques such as pilot programmes or small-scale rollouts that enable you to get a sense of the supplier and their capability, without immediately betting the farm on a particular approach. In a large organisation, you could run a geographical experiment with a new supplier or product. Give it a try in an area, region, an office or a factory, rather than moving immediately to handing over your entire business. Or you might initially use a supplier on a relatively unimportant piece of work.

In the case of the lottery, I assume that Allwyn’s references have been thoroughly checked out. Perhaps most critical – if this comes to court – will be how the projections of the money to be made for charity have been developed and verified. I’m sure the buyer would be expected to analyse Allwyn’s assumptions and proposals very carefully to assess the level of confidence in their figures. If they did not, that could spell trouble.

The final point to make here is that one report quoted Camelot as saying the evaluation had not been carried out as described in the tender. Now if that is the case, the lottery folk are in real trouble.

In terms of public sector tender evaluation, not doing what you told the bidders you would do is in most cases enough for a challenge to succeed.

You simply can’t introduce new factors once bids have been received evaluation; or even use factors that aren’t explicit. Don’t make assumptions. You can’t mark down a bidder for not providing a detailed quality plan if your question simply said, “tell me how you will deliver this work”. If the quality plan matters, tell them to provide it.

Enough of my ranting about evaluation processes (a favourite topic of mine, and we haven’t even got onto evaluating and scoring “price”). We will await the next stage of the Camelot story with interest.

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Camelot Challenges UK Lottery Decision – Highlights Key Issue of “Confidence”

Over the weekend, we saw reports that Camelot, the current operator of the UK National Lottery, is going to challenge the government’s decision to award the contract for management of the Lottery to a different firm, Allwyn, headed by a Czech tycoon. That decision follows a lengthy and no doubt exhaustive “procurement” process. This is from The Times (behind the paywall unfortunately).

The Czech bid, led by Sir Keith Mills, the man behind the London 2012 Olympics, and the former J Sainsbury boss Justin King, was deemed to have had an inferior business plan but managed to pip Camelot at the post by promising to deliver a much higher sum for good causes. There are suggestions that Allwyn’s bid was based on a forecast that it would raise £38 billion over the ten-year licence, which starts in 2024. This is believed to be a much higher figure than the forecast included by Camelot … Bidders were asked to supply a detailed forecast of how much they expected to raise, but with no obligation to achieve it or any form of penalty for failing to do so.

So this may come down to an issue that sits behind one of the common causes of “Bad Buying”.  In my book of that title it has its own chapter – “Believing the Supplier”.

That can relate to suppliers actually lying or deliberately misleading the buyer. It’s the tech firm that says they can develop and install the new software for you in six months, when they know its going to be more like 18.  Or the consulting firm that tells you they have lots of experience running M&A studies in Spain, when in fact they have one junior analyst in the London office who has a girlfriend in Madrid.

But more often it is suppliers whose intentions are good, but make promises and offers that they can’t really deliver on. They really do believe that software will be ready in six months; but they don’t actually have the experience or expertise to make it happen.

This leads to a particular issue in public sector procurement. Because that relies on formal tendering processes (for larger contracts anyway), we see a real difficulty for buyers in assessing two different aspects of the proposals received. They have to evaluate the apparent value of the solution proposed, which is what the legal procurement framework focuses on. But they should also assess the credibility of the proposal – the confidence the buyer can have in its actual delivery.

You might remember the “scandal” back in 2008 when the UK’s Qualifications and Curriculum Authority (QCA), which managed the school ‘national curriculum’ and associated testing process, terminated a contract it had put in place with ETS Europe to deliver tests for schoolchildren.  ETS failed to meet agreed timescales and the whole thing was a bit of a shambles.

The case illustrated a central challenge in many buying situations – how the buyer can assess whether proposals can actually be delivered by a potential supplier, even if they sound credible. It is relatively easy to write a convincing proposal to carry out services-type work or even to deliver certain physical items. I might tell you in beautifully written prose that my firm can supply you with the finest cocoa beans, or handle your outsourced pension administration absolutely brilliantly. Or even build a nuclear submarine … But how do you know I can actually do it? Here is an extract from Bad Buying that explains what went wrong with ETS, following an independent review into the case. 

“The Sutherland Review found that in many ways the procurement (buying) process in this case wasn’t run badly– the authors called it ‘sound’. ETS won with the lowest price, but also scored better than the alternative bidder on non-cost factors. The ‘Gateway reviews’ undertaken by the Office of Government Commerce were in general positive, too. However, the contract and the supplier clearly failed to deliver what was required. Why was that?

Issues were identified by the report around governance, the contract- management approach, some legal issues in the contract and specifications. But the report suggests that the weakness in the selection process came from two key factors. First, the QCA and the consultants running the process did not fully check out the history of previous contracts delivered by ETS. That might have picked up warning signals, as there had been issues with contracts in the United States. Basic financial health checks were done, but not an extensive reputational and performance due diligence.

Second, the buying process did not check that the assumptions about capacity made by ETS in their bid were realistic and accurate. The firm should have been challenged more strongly on its staffing plans. There were also concerns about the ‘end-to-end’ solution proposed and whether the firm really understood how different elements needed to fit together. Those issues appear to have been at the heart of subsequent problems.”

So it is this “confidence in the supplier’s ability to deliver” that has to be assessed somehow, and whether the supplier’s assumptions and plans are “realistic and accurate”. It is not just their conformance to the specification, the elegance of their proposed solution, or indeed the apparent financial benefits they might be offering.  

Going back to where we started, it is this issue that may come to the fore in the UK National Lottery case, assuming the decision is challenged. More on that in part 2.

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CIPS Consultation – Use Your Vote!

Last week, CIPS (the Chartered Institute of Procurement and Supply) launched a consultation with members in connection with the Institute’s proposed governance changes.  After our campaign to make sure members were properly involved, it is good to see CIPS consulting on a range of options, even if (as you might expect) the Institute does argue the case for its own preferred position.

For each of the four issues, you are invited to “vote” for your preferred. Whilst this is not a formal voting process, clearly CIPS will be heavily influenced by the numbers, so if you feel strongly about these issues, please do take 15 minutes to complete the consultation.

So here is my brief summary of the issues and my own personal thoughts.

Point 1 – The abolition of Congress and its replacement by a new “Membership Committee”.

I voted for OPTION 1 (the recommended option).  I think the abolition of Congress was handled badly and arguably should not have happened until after this sort of consultation.  However,  Congress never really established a clear role and, in any case, it would be hard to re-create it now. So we should give the Membership Committee a try, although I have some reservations about its role, which is to provide oversight of the Executive (CIPS staff) who will actually be responsible for member liaison. I worry that CIPS may not have the resource or skills to take on that wide-ranging responsibility, and I’d want to see proper plans if I was a Trustee … but we’ll see! 

Point 2 – Appointing or electing the GBT (Global Board of Trustees)

I voted for OPTION 3  (not the Board preferred option).  On balance, I believe that as a membership organisation, some democratic voting and election process remains important.  So if members no longer elect Congress, then we should have some ability to elect Trustees.  I appreciate that in CIPS preferred option, “all Members eligible to vote would be invited to approve the appointment of all Trustees at the Annual General Meeting”  but this would be rubber-stamping rather than a democratic process. I would also point out that no other professional Institute I’m aware of has moved to an all-appointed Board, and if half the Board is still appointed (rather than elected), I don’t see a problem with getting diversity and the “right people” in as Trustees.  Finally, if we have a combination of appointed and elected Trustees, we can assess which route brings in the best people over the next 2 or 3 years. If there is a clear “winner”, then there could of course be a future change.

Point 3 – The composition of the Nominations Committee

I voted for OPTION 1 (the recommended option). This is a no-brainer in my opinion. The Nominations Committee is very powerful now and will be even more so in the new structure. So it must be more independent of the Board than currently; but equally there should still be Board (Trustee) representation on it too.

Point 4 – Whether CIPS has a President (or multiple ambassadors, or a Patron)

I voted for OPTION 2  (not the recommended option).  This is a difficult question and caused me most thought.   I do see advantages to the multiple ambassadors option, which CIPS supports, but I also feel something important has been lost since we stopped having a President.  We should have had stronger representation and presence during the pandemic, when our CEO had enough on his plate managing the core organisation through difficult times.  Indeed, generally, I feel the lack of a President puts too much responsibility onto the CEO. The CIPS recommendation to abolish the post may be driven by one or two recent bad experiences with Presidents rather than clear logic, and I’d also argue that there is nothing to stop CIPS having multiple ambassadors as well as a President!

I reject the Patron idea – all that needs saying really is “Prince Andrew”. Finally, I don’t buy the argument that having ambassadors will save CIPS money compared to a Presidents.  CIPS does not have to fund a President to fly around the world. Again, that relates one bad experience, I believe (and I’ve heard there’s this neat tool called “Zoom” too …)  And surely managing “multiple ambassadors” has a cost anyway?  So on balance, I vote to retain the role.   

That’s it from me –if you are a CIPS member please do use your vote – and show that CIPS members are interested in the future of our profession and our Institute!

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What’s the Latest on CIPS Governance Proposals?

What, you may ask, has been going on with CIPS and the debate about the proposed changes to governance of the esteemed Chartered Institute of Procurement and Supply? (Start here if you are new to this topic).

You may remember I raised concerns about the way members were losing their right to vote (directly and / or indirectly) for members of the Global Board of Trustees (GBT), who ultimately bear responsibility for the Institute. That followed the abolition of Congress and its replacement by a Membership Committee – a step that, whatever you think of its merits, was not particularly well handled or communicated. Under the proposed model, Trustees would be appointed following an application and interview process, run by the Nominations Committee (NC).

As well as the issue of member democracy, many of us were also concerned about the power these changes vested in the NC, which did not appear to have the independence required if it was to play such a key role.  (I didn’t agree with the abolition of the President role either, but I didn’t feel so strongly about that).

I ran a quick survey that showed many other members shared my concerns, but then I had positive discussions with CIPS leadership on these topics in December. Critically, we agreed there would be a genuine and open consultation with members on the voting issue. That led to the Chair, Paul Thorogood, sending me an email in mid-December, laying out what he and the team had agreed would be the next steps. He agreed on a consultation in late January, which would address a number of issues, including, “The mix of trustees – appointed vs elected – on GBT and the process for appointing/electing members”. He also said that “Options will be proposed for each, together with pros and cons.  Members will be asked to select their preferred option in each case”.

I was happy with that, and backed off from my campaign whilst the consultation was being prepared; hence my silence on the issue recently.

I was therefore surprised – and annoyed – when I saw the communication from the CIPS CEO (Malcolm Harrison) to members last week and the new message on the website. That extolled the benefits and virtues of the process for appointing Trustees based on an application and interview process. It did reflect our discussions about the NC at least – but made no mention of member voting being retained.

Hang on, I said to Paul and Malcolm, that’s not what we agreed you would do.   Sorry, they said, the consultation is coming soon, this was just a communication about what is already happening now that Congress has been abolished – so new appointments to the GBT in recent months have gone through the interview process.  And we didn’t mean to go back on our agreement, they said, we didn’t think this communication was anything to do with the forthcoming  consultation.

The problem, as I pointed out, is that members would read the new note and feel the interview route and resulting dis-enfranchisement of members was a fait accompli. You’ve said all these positive things about the interview option – that is not exactly the level playing field we had agreed for the consultation.   

So in this week’s communication – mainly about ambassadorial roles – it was good to see some acknowledgment of that, as Malcolm says this about the Trustee issue.  

“In my message to you last week, I covered the proposals to open up the recruitment process for the trustees on our Global Board of Trustees which we had already communicated last year…. We wish to consult with members on several options, not just the proposal which we communicated last year. These options will be laid out in the consultation document which will be issued by the end of January”.

Confused? So just for the avoidance of doubt, the consultation, when it comes, is still important. If you feel strongly about preserving democracy in some form as a CIPS member, please make your voice heard. Personally, I would go for a mix of directly elected and appointed members for the GBT – but I accept that members may choose to support the 100% appointed route. No other major Institute has done this, as far as I can see, but CIPS could be a pioneer.  My main interest through this whole process has been to give the full membership a proper voice in the discussion, rather than just see a small group driving vital decisions.

The changes already made and proposed to the democratic process, to Congress, the Presidency and the GBT are really fundamental and change the whole nature of CIPS as it is currently described in our Charter. So it’s vital that CIPS does take governance – and the views of its members – seriously.

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