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How Competitive is UK Public Procurement?

A few weeks ago, the UK National Audit Ofice issued a report titled “Competition in public procurement – lessons learned”. 

Unlike most of that organisation’s reports, it wasn’t looking at a specific project within one Department, but rather looked across central government at how procurement “competition” is working to help “support efficiency, innovation and quality in public services”. As the NAO says, when competition is lacking or ineffective, other safeguards need to be pursued otherwise the end results can be negative for the taxpayer. 

But the overall findings given in the report do not paint a reassuring picture.

“Our review of competition in public procurement has found that government cannot show how well competition is working, and that the structures to encourage and support the use of competition are not all working as intended. Departments are unclear how to engage with the market before they let a contract, and do not consistently follow central guidance. For example, they routinely extend contracts rather than retendering them. The Cabinet Office provides guidance but does not take advantage of the data it collects to understand more about competition and gain further benefits”.

Extending contracts can be done for good reasons, but often it is just the lazy option. It may be happening more often because of a shortage of staff today but that is no excuse really. The need for some further analysis of this and action from Cabinet Office is even more pressing when you read this.

“Government procured 72% of its large contracts through frameworks in 2021-22 compared to 43% in 2018-19. Frameworks are designed for procuring common goods and services to allow departments to access economies of scale, but they are not always the way to achieve the best competition. Guidance produced by government states that where the goods or services are not common, a full procurement process should be undertaken.”

I found that genuinely shocking. I’m not surprised use of frameworks has risen, and used properly, they can be an excellent mechanism. However, to see that growth, almost a doubling of the number of contracts awarded in that manner over just 3 years, is quite shocking. It really does require some serious analysis as to why this has happened and what the consequences might be. NAO didn’t look at how often “direct awards” are made from frameworks unfortunately.  Those awards are obviously much more anti-competitive than running a proper “call-off competition” from a framework (although even that does of course shut out non-framework participants). 

The NAO makes some sensible recommendations, suggesting Cabinet Office should work with Departments to improve data and published information, drive better early market engagement and look more carefully at the frameworks issue. But there seems little doubt that competition in central government procurement has declined dramatically in recent years. If like me you believe that competition is THE most fundamental driver for value for money, as well as an essential element in the fight against fraud and corruption, that has to be worrying.

My feeling is that too many people, from politicians to senior budget holders to some commercial / procurement people themselves, are happy for frameworks to be used and contracts extended. That is both to save time and money on running procurement processes, and in many cases, so they can fundamentally choose which supplier they want to use and just put a veneer of governance around that. Occasionally that choice is driven by corruption , but usually it is people who genuinely think they are doing the right thing. But it is fundamentally anti-competitive.

There is no doubt that Gareth Rhys Williams, (government’s Chief Commercial Officer), Crown Commercial Services and the GCO have done some good work in terms of the “inputs” to government procurement. The focus on people and training, and the various impressive “playbooks” are evidence of this. But certainly from the outside, there is less evidence of the tangible outputs that have resulted from this work, other than somewhat  spurious “savings” numbers that are produced.

Indeed, on that note, the NAO says this in the recent report. “Government monitors savings from individual frameworks by comparing their prices to estimations of prices charged by suppliers outside the framework”.  That’s not exactly rigorous, is it? Particularly when the procurement process for one of the largest frameworks (the management consulting example I analysed here) was explicitly designed to allow the big firms to win a place without needing to submit particularly competitive pricing.  (I should say that I believe Simon Tse has done a great job running the operational arm of Crown Commercial Services in terms of meeting that organisation’s objectives in recent years. I might question some of those objectives however!)

But more competitive government supply markets surely must be a fundamental objective for government procurement. The NAO report suggests that it has not been achieved over recent years.

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HS2 Rail Programme Rated as “Undeliverable” by Government’s Own Experts

I’ve decided that I’m going to win the 100 metres sprint at next year’s Paris Olympics. I believe the benefits for the UK economy will be huge and I will inspire millions with my efforts. My wife has pointed out that my best time for the event was 13.8 seconds, recorded at Houghton School some years ago (many years ago to be honest). I need to beat that by some 4.5 seconds next year, but I am quietly confident.

However, in her annual report on my planned activities, Jane has had the temerity to rank my chances of success as “red”.  That red rating indicates that “successful delivery of the project appears to be unachievable.” That means “there are major issues with project definition, schedule, budget, quality and/or benefits delivery, which at this stage do not appear to be manageable or resolvable”.

I am disgusted by this lack of positivity. My gold medal will lead to transformational benefits for generations to come, improving connections and helping grow the economy. And I have already spent billions on food supplements, very expensive training programmes and massages, so you wouldn’t want to waste that money, would you?

That is pretty much the situation with HS2, the high-speed rail programme that is going to link London with other cities in England. The latest report from the Infrastructure and Projects Authority (IPA), which sits within the government’s Cabinet Office, has given the first two phases (1 and 2a) of the HS2 programme an unachievable “red” rating, defined as above.

There is no mention of HS2 anywhere in the report’s various narrative sections, despite the fact it is the biggest single programme in the UK in terms of cost.  In the table that list all 250+ projects, all it says next to the red rating is this. “A new railway connecting the country’s biggest cities and economic regions enabling rebalancing and regional growth in the Midlands Engine and Northern Powerhouse – through a high capacity, high speed and low carbon transport solution”.

And the Department for Transport’s response is also pretty much as above.

“Spades are already in the ground on HS2, with 350 construction sites, over £20bn invested to date and supporting over 28,500 jobs. We remain committed to delivering HS2 in the most cost-effective way for taxpayers. HS2 will bring transformational benefits for generations to come, improving connections and helping grow the economy”.

That really is treating us as idiots. No attempt to actually respond to the undeliverability issues, or explain how “red” will turn to amber and green, just that they’re committed to it and we’ve spent a sh** load of money already, so hey, let’s spend another £50 billion or so. At least.  

Clearly, all those supposedly super-clever people in Treasury and Department of Transport have never heard of the sunk cost fallacy. Well, of course they have heard of it but this is politics. Civil servants just have to do what their masters tell them, but you can be sure HS2 will be disappearing from a lot of senior peoples’ cvs on LinkedIn in a few years’ time. This is just a terrible, disgraceful and ridiculous waste of public money, from the beginning when the business case was manipulated to appear positive, and my daughter’s generation will be asking questions for years to come about just how we allowed this to happen.

William Hague in The Times agreed.

“If I were still in government, I would be climbing the walls about this. I would want to stop all work on HS2 today, but I know I would be told that the contracts signed for its construction make that impossible. I would want to fire somebody senior, but I would be informed that the chief executive of HS2 Ltd already quit last month so that satisfaction would be denied me.

Then I would say that if we can’t cancel it we should at least make sure that the bits that haven’t been abandoned will work well, but I would be told that the cost of making it start in Euston has doubled recently, that no one could decide how many platforms they wanted to build, that this crucial part is currently unaffordable and that the transformational, high-speed connection of Birmingham to central London might not even reach the latter. And then I would want to scream”.

Indeed, the IPA report is generally disappointing. It is full of case studies of successful projects and programmes (244 now in the portfolio), with little or no discussion on the problems. And I’m not sure how the rapid charging fund for EVs can be seen as a success when you read this. Most of the case studies have a few initial issues but are turned round thanks to the IPA to deliver success.  It reads in the main like a marketing document from a consulting firm. (I actually wonder whether privatisation is on the cards?)  I suppose we shouldn’t be surprised, at the end of the day, the IPA is not truly independent, it is part of government, so it does have to toe the party line.

It is also noticeable that so many projects are rated amber – no less than 80%. That can be a bit of a cop-out rating really. It says there are issues, but nothing too much to worry about. I think when the IPA or its predecessor first started, there were amber/red and amber/green ratings too, but I suspect that put too many projects into the (at least partially) red bracket, which is embarrassing for the government. But really having 80% of the projects ranked at the same level reduces the usefulness for any external scrutiny.  

Anyway, in the couple of hours it has taken me to write this, another £4 million or so has been spent on HS2. What a waste.

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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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Support to Disadvantaged Suppliers Attracts Fraudsters

Programmes to support minority owned businesses, smaller firms, social enterprises and the like via public sector procurement have become increasingly popular over recent years in many countries. The Social Value Act in the UK in 2012 made this sort of action more prevalent in the UK, but the USA is probably where such schemes are longest established.

However, the irony is that the more successful such programmes are in terms of actually directing spend towards such suppliers, the greater the temptation for fraud and corruption to spring up. Genuine firms that need support might lose out to unscrupulous criminals and conmen/women.

One mechanism for that is basically using what we might call “non-value for money” evaluation criteria to award contracts to a supplier that doesn’t really deserve them. That can lead to distortion in the selection of winning bidders. “This firm’s bid wasn’t the cheapest but they are a small firm / owned by a women / promise to employ lots of disabled local people. That gave them lots of marks for “social value” in the bid evaluation”.  What isn’t made public is that the firm is also owned by the budget holder or decision maker’s sister-in-law.

The other quite common fraud is where a firm is apparently owned by a person or people who qualify as a “minority” but in fact, control rests with non-minority owners. We have seen that a lot in the USA and also in countries such as South Africa which have had schemes to give preference to black-owned businesses in public procurement.  I gave several examples of this in the Bad Buying book from both of those countries.

But this is still going on – a recent report in the Chicago Tribune highlighted a current case. It is not clear yet which of those two mechanisms is suspected here; is it disguised ownership or the use of minority programmes to favour a firm for improper reasons?  But federal prosecutors are “investigating possible minority-contracting fraud involving a series of Chicago government contracts worth hundreds of millions of dollars, including many with ties to a clout-heavy trucking and recycling company owner, according to sources and documents obtained by the Tribune”.

James Bracken and his wide Kelly own several companies engaged in construction, waste management and transportation. Investigators have asked city agencies for copies of bid documents and more relating to several contracts and for information relating to the city’s women and minority owned “set aside” programmes.

The programmes started in 1990 with the aim of awarding at least 25% of the total value of all city contracts to minority businesses and 5% to women-owned operations. But there have been accusations of fraud from the beginning. Company owners, chasing multimillion-dollar contracts, have put up phony “frontpeople” to get certified as minority or women-owned. Another route is to claim that a high percentage of work will got to minority subcontractors. In my experience, that is the sort of claim that rarely gets checked once a contract is operational!

A lot of this comes down to procurement carrying out the appropriate due diligence and checking out firms at the bidding stage, managing contracts well once they are operational, and of course keeping an eye out for conflicts of interest and other potential drivers of corruption. It is a constant battle between the forces of good (procurement, usually) and evil (certain dodgy potential suppliers and general low-life scum!)

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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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Why Isn’t Competition Working in the UK Petrol Market?

Why are prices so high in many countries, including the UK? Global forces and events are part of it, but there is increasing evidence that firms providing goods and services are increasing profit margins at the expense of the consumer. This week’s report on petrol prices in the UK from the Competition and Markets Authority (CMA) was an example of this. Calculations show that margins have increased over the last three years and we are all being ripped off to the tune of some 6p per litre. Competition was “not working as well as it should be” said the CMA.

But surely, in a dynamic, capitalist society, excess profits leads to new market entrants, who compete on price and undercut the current providers, whilst still making an adequate return?  The economists would agree that this is the case – but only in a perfect market. And you need certain conditions for that, including that it must be reasonably easy for new entrants to establish themselves.

That is the problem here and in many other markets. For a number of reasons, there are so many things we all buy where we just don’t see real, strong competition, because it is almost impossible for new entrants to break into a market.  Look at petrol retailing. Finding new sites and getting planning permission would be a nightmare. The capital cost of building the premises would be huge, with all the legislation (quite rightly) around petrol storage and handling adding to the burden.

Look at how difficult it has proved for new retail banks to break into a market still dominated by firms that have been around for centuries – even though most consumers don’t rate those providers very highly.  We haven’t had any new supermarket chains in the UK for some 30 years now since Aldi and Lidl (who were already long established elsewhere) started here. Again, the barriers to entry, from planning issues to up-front cost, as well as the financial power of the incumbent firms, all make it very tough.

So we have the cost of entering a market, legislative burdens and incumbent power as key barriers to entry. Geography is another; I’m not going to drive another 10km each way to buy slightly cheaper petrol, and lose all my “savings” on the extra mileage!

But particularly when we come back to corporate procurement, some of the market dominance we see has been caused in apart by the actions of customers and indeed of procurement professionals. I gave five examples of the ways in which this happens in terms of corporate procurement in the Bad Buying book. Here are the first two.

1. Buyers aggressively aggregate their own spend, believing they’ll get better deals if they offer bigger contracts – until in some industries, only the largest can meet our needs. Buyers might insist that suppliers must service every office or factory across the US, or Europe. Smaller firms and start-ups, who often offer real innovation, flexibility and service, are shut out of the market.
Buyers assume economies of scale, that “bigger is better” and bigger deals mean lower prices. But that is not necessarily true; the price curve may flatten after a certain volume, with further increases in volume not generating any further price reduction. There are even cases where you  see dis-economies of scale – the buyer pays more as the they spend more.


2. Buyers value consistency above innovation and experimentation. At times, you should value tried and tested solutions over exciting new ideas. “Ladies and gentlemen, welcome to the flight, this is the very first plane to be fitted with an exciting new automatic pilot system, and we will be turning it on once we’re airborne”.  You might not want to hear that!
But take caution too far, and you help create markets dominated by a few large suppliers, with increased risk of buyers suffering from dependence. That’s relevant in private firms and perhaps more so in government, where risk aversion from employees and politicians means companies get into dominant positions because buyers “know” they’re a safe choice. That doesn’t always work out – Serco and Capita seemed to be safe for major UK government work, until both ran into severe financial difficulties. More willingness to engage with other initially smaller suppliers over the years could have created a more dynamic market.

Whilst we may not be able to do anything much personally about the supermarkets dominance of the petrol (and groceries) markets, we can take actions to mitigate the risk that we accidentally help to create monopolies or oligopolies in our business (procurement) lives. We should aways be thinking about how we can contribute to dynamic, competitive markets, with new entrants regularly arriving to put pressure on established firms. That’s the healthy situation that we should hope for and work towards where we can.

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Disqualifying Suppliers from Government Contracts

It feels like the new UK Procurement Bill has been moving through Parliament for years – it is only a year in fact, although before that there was an extended period of consultation.

One of the themes of the Bill is that it should be easier for the contracting authority (CA) to “bar” or disqualify suppliers from bidding altogether. That has been possible for many years if the supplier or one of its directors had committed certain criminal acts, but the new legislation includes exclusion for poor performance for the first time.  There is also exclusion for “improper behaviour” which has led to a supplier gaining an unfair advantage in the competitive process.

However, the authority will also have some flexibility. The new rules mean that the existence of a mandatory or discretionary exclusion ground is not enough in itself to throw the bidder out of the process.  The CA has to first decide if the circumstances giving rise to the exclusion are likely to happen again. That’s quite a difficult and potentially controversial assessment to ask the buyer to make, in my view. There is also going to be a centrally-managed list of firms that have been barred.

It will be interesting to see whether there will really be any significant change of behaviour in this area. In truth, CAs are very cautious about barring firms, fearing I suspect legal challenge and endless argument getting in the way of running the actual procurement process. I’m not sure that will change.

An interesting example of this unwillingness was reported recently on the Nation Cymru website. Campaigners have accused a National Health Service Trust of ignoring anti-fraud regulations by allowing two firms that have been convicted of bid-rigging to form part of a consortium to build a new cancer centre in South Wales. The Acorn Consortium is the preferred bidder for constructing the new Velindre Hospital in Cardiff. That project has faced strong opposition on environmental and medical grounds, and it is those against the construction who have raised this issue.

Nation Cymru has described how two of the consortium members – the Kajima group and Sacyr – have been found guilty of fraud offences in Japan and Spain respectively. As the website reported,

“Kajima was sentenced for bid-rigging in March 2021, with one of its executives receiving a suspended prison sentence and the company itself being fined 250 million yen (around £1.53m) for its role in the scandal, which involved a number of firms colluding with each other on the construction of a railway line to maximise their profits. Sacyr received a penalty of €16.7m in July 2022 for its part in creating a cartel aimed at aligning bids for government contracts”.

When asked why this had not led to exclusion, a Velindre University NHS Trust spokesperson responded: “The robust procurement process has been undertaken in line with procurement law, UK and Welsh government policy and all required due diligence has been undertaken.” 

I’m not sure that’s a good enough explanation really. When the spokesperson was asked to explain in more detail why “regulation 57” (which covers this sort of thing) did not apply or was over-ruled here,  they “did not offer an explanation”.  I do think they should say more.

But conceptually it’s a tricky one. With my buyer’s hat on, do I really want to kick out what presumably is my best bidder because two possibly quite minor consortium members did something bad hundreds or thousands of miles away? On the other hand, we do have regulations for a purpose. 

In terms of the justification, having had a quick read of “regulation 57” (it’s some time since I studied “the regs”), I suspect the answer lies in the famous “self-cleaning” clause. That says, “Any economic operator that is in one of the situations referred to in paragraph (1) or (8) may provide evidence to the effect that measures taken by the economic operator are sufficient to demonstrate its reliability despite the existence of a relevant ground for exclusion”.

So basically, if a supplier can show that it has taken lots of steps to make sure it will never, ever get involved in bid-rigging again, or any of the other reasons for mandatory OR discretionary exclusion, and the buyer is naïve enough – sorry, I mean if the buyer analyses those declarations and decides they are valid, then the supplier is back in the game.

You can see the logic in this, but it is a bit of a “get out of jail” card really. It’s also another reason why in practice, we so rarely see suppliers barred. It will be interesting to see whether anything changes once the new Bill has been implemented – but I have my doubts. Barring is potentially just so fraught with hassle and risk.

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Twelve Tips for Presenting to a Procurement Audience

As we are in the midst of the late spring conference season, I thought I would re-visit and update an article I wrote some years ago for the Spend Matters website. This is aimed primarily at solution providers who are speaking to a procurement audience, rather than procurement practitioners who might be speaking, although much of the advice is still applicable.

My definition of a “successsful” session is that the presenter gets across whatever message they aim to communicate, be that education, information, or a sales proposition, and the audience finds it worthwhile, ideally in terms of both enjoyment and usefulness in some sense.  Some direct or indirect leads resulting from the session would be even better. So here are my suggestions, based on my many hours of enjoyment and probably an equal amount of suffering at these events.

  1. The procurement audience is not really interested in the history of your business (unless it is REALLY fascinating), how many factories or offices you have around the world (particularly if you are speaking to managers who only operate in one city), or even the detail of your latest financial results. We will check out those things if and when we start to work with you.
  2. So keep the general background on the firm brief – when it was founded, approximately how big it is, what you do. Two minutes. The same applies to you personally. Two or three sentences about your background is enough. I’ve seen speakers spend half of their valuable time giving background that I guarantee no-one in the audience cares about.
  3. The audience does understand that you are there to promote your own firm, so don’t feel shy about doing so. But there are ways of making that interesting for the audience.  Detailed product / service descriptions are rarely a good use of time. Similarly, actual demos (of software for instance) often lose much of the audience and can easily go wrong. A few screen shots can be useful though.  If you have an exhibition stand at the event, you can offer to show delegates the product there.
  4. Think of the presentation in a similar way to the wider sales process. What is the problem or issue that the target audience is facing, and how does your offering help to solve that? Describe the issue, put it in context, explain why it matters, then outline how you can help. A little bit of looking to the future can be included and adds interest – “our new product, out later this year, will do this even better…”
  5. Don’t be afraid of making direct comparisons with your competition – but be honest of course. Even if a procurement executive sees the need, they will be wondering why they should buy your product and not someone else’s.  Don’t criticise the competition too directly, but feel free to say, “our product does this and this which no other competitor can provide”.  And there is nothing wrong with saying “we also have the lowest cost product on the market” if that is one of your selling points!
  6. If you work with many organisations on the buy side, you have an overview that each buyer may not have individually. That puts you in a good position to talk about broader issues, or the best practice you have observed, or provide “war stories” about positive or indeed negative things you have seen. Often, speakers only get into this when it comes to the questions, but that broader view can bring insight to the audience during the presentation.
  7. Surveys, reports and similar that your organisation has done or contributed to can provide interesting content – but be careful of the “so what” factor. The number of times I’ve heard a speaker saying “43% of procurement directors say they don’t have the right technology…”  Well yes, but so what? Check that anything of that nature is relevant to your message and genuinely interesting to the audience.
  8. The question and answer session should be key. Debate is good, you can reinforce some of your key points, and even find out if you have interested prospects in the audience. So leave enough time. In a 30-minute session, I suggest 5 minutes for the introduction (you will inevitably start 2 or 3 minutes late), 15 minutes of core content and 10 minutes for Q&A. Have a question you can put to the audience in case no-one volunteers – “I mentioned the issues with managing stakeholders in the health service –  has anyone found a good way of involving senior clinicians in these decisions”?
  9. Humour is fine if you can pull it off, but obviously be careful! Getting some involvement or reaction from for the audience early on is another tactic which increases participation and focus (personally, I find it also relaxes me as a speaker). If you don’t have a joke (a mildly amusing remark about something in the news can often work), maybe ask a question just to get some early engagement, relevant to your topic of course. “How many people here have sustainability as a key objective this year”? 
  10. Do a timed run through (even if it means talking to yourself on the train on the way to the event) to check the timing. There is nothing more frustrating than a speaker who says, “I’ve only got a few slides, I’ll speak for 10 minutes then we can have a good discussion” and then waffles on for half an hour.  Running out of time is amateurish and speaks of a lack or regard for the audience.
  11. Any slide that is on the screen for less than a minute or so is usually worthless (unless it is a clever, quick visual joke or something similar!) Equally, a slide with so much content packed onto it – words, charts, tables, diagrams – that no-one beyond the first row can read it is a waste of time too. If you have anything of a complex nature that you really want to communicate, put it on a hand-out. It is a personal thing, but I would tend to use between 8 and 10 slides for a 15-minute session. Trying to fit 30 slides into 15 minutes rarely works well.  Not using slides is fine too, but you need to be a really good and confident speaker to pull that off.
  12. Presenting does not come easy for everyone. But do try and bring some energy and enthusiasm to the session. You are in effect entertaining the audience as well as imparting something useful. If you look or sound like you don’t want to be here with us, or it is clear that you haven’t put much effort into the session, why should the audience bother listening or engaging?

If you have thought clearly about your session, prepared and rehearsed well, you will feel better and more confident. And that means the audience will have a better experience too. Good luck!

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Huge Ship, Tiny Error, Major Problem

Picture: LPhot Alex Ceolin, UK MOD© Crown copyright 2019

You may know the expression “don’t spoil the ship for a ha’pworth of tar*”, but we have a case now where the ship most certainly has been spoiled – or at least put out of service for some considerable time – because of a tiny error in manufacturing. The impact of this has also led to a tricky contract management situation.

In August 2022, the British aircraft carrier Prince of Wales broke down just one day after departing its Portsmouth base for training exercises off the US coast. That was hugely embarrassing for the Navy given the ship had cost some £3.1 billion and this wasn’t the first problem since initial launch in 2019. This time, the issue was traced to a starboard propeller shaft fault and an installation error. Responding to a recent parliamentary question, Ben Wallace, the UK Defence Minister, said that based on “initial reports” the shaft was misaligned by 0.8 – 1 millimetre. That is a tiny mistake, but apparently caused a huge problem.

As well as the operational issues this caused, the question of who should pay for the error is also complex. Construction and delivery of the warship was carried out by a consortium of three firms under the banner of the now defunct Aircraft Carrier Alliance. BAE Systems, Babcock and Thales were all involved, which makes it complex to assess liability. Will the Ministry of Defence (MOD) end up paying or will they be able to pin the responsibility onto one or more of the firms?

A report on the “Breaking Defence” website said that the MOD “declined to comment on why the repair bill liability decision has not been made yet, nor when a decision is likely to be made”.  But MOD did say that repairs were likely to cost some £25 million, and that an investigation was looking at how to ensure the failure was not repeated. Well yes, one would hope that the same won’t happen again!

John Healey, the Labour Party’s shadow defence secretary pointed out that since the ship entered service in December 2019, it had spent 411 days in dock for repairs, compared to just 267 days at sea. A previous deployment also ended in embarrassment and a quick return to base in Portsmouth after an internal flood left the engine room and electrical cabinets submerged for 24 hours. The current repairs were supposed to be completed at the Rosyth dockyard in Scotland by February, but at time of writing (May 2023) still seem to be going on.

We could draw analogies here between our (literal) flagship and the wider state of the UK. Still pretending to be a significant global power, but incapable of actually doing anything to live up to that fantasy and all that sort of thing. But keeping to the facts, in a more mundane fashion it does highlight the importance of absolute clarity in the contract whenever you are buying from a consortium of any kind – and that doesn’t just apply in the military world of course.

Don’t assume a consortium will act as one entity if something goes wrong. It’s just as likely that each party will fight to protect their own position, which can leave the buyer in a difficult position, as we may be seeing here. So a strong and clearly written contract, including a definition of what will happen if there are issues after the formal consortium is dissolved, is essential.

And you can see why the UK Treasury (finance ministry) is not too keen on increasing the MOD’s budget for spending on more equipment, even given the present Russian threat. Cases like this (as well as high-profile failures such as the Ajax armoured vehicles) all add to a lack of confidence that such money would be spent well.

* A bit of research suggests that the expression was originally about sheep rather than ships! I didn’t know that…

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TSB Systems and Contracting Failure- CIO Fined

In my Bad Buying book, I wrote about the IT disaster that affected millions of TSB bank customers back in 2018. Here is the story from the book.

“In 2015 Sabatell acquired TSB, a UK-based retail bank, formally part of the Lloyds TSB Group. TSB at some point needed to move onto its own IT platform, rather than continuing to use the Lloyds  group systems, as they were now competitors to their former parent company. But the move, in April 2018, turned into a disaster.

Account holders couldn’t use mobile or Internet banking, and some reported seeing accounts details from other account holders. Customers struggled for weeks to make mortgage and business payments, as the new TSB systems failed to function properly. The issue was serious enough to be raised in the British Parliament, and in September 2018 TSB’s CEO, Paul Pester, resigned.

In March 2019 The Sunday Times reported that an investigation into the affair put much of the blame onto the IT firm that handled the transition.13 However, the twist was that this firm was SABIS – which is part of the Sabatell Group itself. So although it has a separate identity, this was in effect the internal IT function of the group that owned TSB.

Reports suggested a range of technical and programme management issues around the deployment of new software, rather than problems with the underlying infrastructure. But whatever the cause, the whole episode cost TSB £330 million,14 and there is a  ‘provisional agreement’ (according to the firm’s annual report) for SABIS to pay TSB £153 million. In November 2019 an independent report from law firm Slaughter and May concluded that the issues arose because ‘the new platform was not ready to support TSB’s full customer base’ and, second, ‘SABIS was not ready to operate the new platform’.

Questions have to be asked about the choice of ‘supplier’ here. Was SABIS the right choice to carry out this challenging task? It certainly doesn’t appear so, in retrospect. Did TSB have a choice, or was the firm told by top Sabatell management that it had to use SABIS? Would a firm with a wider and broader experience of banking systems than SABIS have done better? And why didn’t TSB accept the offer of help from Lloyds, which was made as soon as news of the problems broke?”

Now, five years later, there is an interesting postscript. Carlos Abarca, who was the TSB chief information officer, has been fined £81,620 by the Prudential Regulation Authority (PRA), the body that provides oversight of the UK banking system. In their 35 page report, they explain how Abarca’s failure caused a debacle that might have threatened financial stability more widely.

He apparently ignored early signs that the migration was not going well before the big switchover. He “did not ensure that TSB formally reassessed Sabis’s ability and capacity to deliver the migration on an ongoing basis”. Sabis told Abarca that they were migration ready and that subcontractors had given written confirmation that their infrastructure was fit for purpose. but the Authority felt this was not enough because the statements were caveated with comments about outstanding tasks. Abarca also did not obtain a written updated confirmation of readiness from Sabis when he told his own Board everything was ready for the transition.

The PRA said, “Mr Abarca’s failings undermined TSB’s operational resilience and contributed to the significant disruption TSB experienced to the provision of critical functions and potentially impacting on financial stability”.

This might be the first time a senior executive has been fined and disgraced for a failure in contract and project management. Now clearly in most industries, there is no equivalent of the PRA to  carry out this sort of investigation and take such action if someone screws up in a similar manner. But if you are in the financial services industry in the UK, it is a warning. If you are responsible in some way for operations, and that includes some procurement and contract management activities, then you must be very careful and must conduct your work with considerable diligence. And make sure you cover your back carefully at every point if a supplier tells you, “yes, everything is fine, don’t worry”!

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