Tag Archive for: People

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The Minister for Public Procurement Speaks!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Would You Employ These Men?

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

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

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

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

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

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

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

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

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

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

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

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

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

Well, here we are.

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Why Did Apple Sack Top Procurement Guy?

Tony Blevins was sacked as Apple’s VP of procurement recently. He was at a car event in Pebble Beach with his Mercedes-Benz SLR McLaren when he was approached by TikTok creator Daniel Mac, who asks the owners of expensive cars what they do for a living. Blevins answered “ ‘I have rich cars, play golf and fondle big-breasted women, but I take weekends and major holidays off. Also, if you’re interested, I got a hell of a dental plan.’ 

That’s an approximate quote from the 1981 comedy movie, Arthur, where Dudley Moore says ‘I race cars, play tennis and fondle women, but I have weekends off and I am my own boss.’  So it wasn’t an original comment, which doesn’t really excuse him – also, if you are going to say something some might consider offensive, at least make sure its funny!

Anyway, the video hit the Internet, staff at the firm complained to Apple HR, and he went. He apologised, telling Bloomberg, “I would like to take this opportunity to sincerely apologize to anyone who was offended by my mistaken attempt at humor”.  

Blevins reported to either the CEO Tim Cook or COO Jeff Williams. He was known as the Blevinator and had a reputation as a fearsome, tough negotiator, with stories of his tactics reported in the press – including getting FedEx to hand-deliver his rejection of a price proposal to their rival, UPS!  To be fair, some of his tactics seem pretty smart. Running what was in effect a real-life reverse auction by going from supplier to supplier in their hotel rooms, negotiating to drive down price on glass for the new Apple office seems a reasonable approach to me. He also rotated staff every couple of years to avoid them forming close relationships with suppliers – again, many firms do that and to some extent it is not a bad idea from a complacency or indeed corruption poot of view.

But we might wonder why Apple needed to take such a tough line with suppliers given their very healthy profit margins. The simplest answer is – because they can. Power is still the basis of commercial relationships, as Professor Andrew Cox always told us. Where Apple hold that power, why wouldn’t they use it with their suppliers? We could argue however that sacrificing a little margin in order to develop stronger relationships with key suppliers would be worth it in the longer run. And if Blevins tough negotiation actually drove suppliers out of business or out of Apple’s supply base, then it certainly wasn’t sensible.

So there are three reasons why Apple might have got rid of the Blevinator. The most obvious is the (arguably) offensive nature of his comment, and perhaps what it might indicate about his general attitude. Tim Cook, CEO of Apple, has spoken about the need to get more women into tech roles so his CPO making such comments is not the best support for that objective.

The second might be that Apple wants to move away from the old-fashioned leveraged approach to procurement and become more collaborative, working in a more harmonious manner with suppliers. Blevins might have stood in the way of that, representing as he did that previous tough approach.

And finally, in many firms, a CPO driving a supercar might ring some alarms. I remember a Ministry of Defence procurement official in the UK years ago who earned maybe £60K a year (in current terms), yet lived in a multi-million pound mansion in the Thames Valley. Surprisingly, no-one asked the key question – where did he get the money from? The answer of course was “bribes paid by suppliers”.

Now I’m not accusing Blevins of anything of that nature – I’m sure he earned plenty from Apple. Finding the odd half-million for his car wasn’t a problem for him given his likely stock options. But perhaps driving that sort of car just isn’t the sort of image a CPO should project.  And a supplier might well think, “Apple can afford to pay me a bit more for my product if its VPs are driving supercars!”

Anyway, this is a “Bad Buyer” story rather than bad buying, but fascinating, nonetheless. And if you want to learn more about it, do listen to Kelly Barner’s excellent podcast on this topic at Supply Chain Now  – it’s a very enjoyable, informative and interesting 20 minutes during which time she goes into more detail on Apple’s approach to suppliers – and how that might be changing.

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