Tag Archive for: Transparency

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Is Labour getting to grips with public procurement?

It is nine months now since the Labour Party was elected to power in the UK. Most of the country – including me – were happy to see the end of the incompetent Conservative government, and although I voted LibDem, I was pleased to see a change at least.

I had high hopes that Labour would take a serious look at government procurement, cost management and allied to that, fraud and corruption in the public sector. But in these areas, there has been little really to get excited or enthusiastic about. Yvette Cooper announced that the Home Office was taking some sensible steps, and we had the freeze on ‘purchasing cards’ in response to what seemed to be some lack of control on expenditure. But we haven’t seen much of a co-ordinated and structured drive to reduce costs, despite the looming economic crisis for the government and the country.

To be fair, there has been plenty to keep the government occupied. Ukraine and the seismic Trump upheaval, as well as ongoing pressures from immigration, the NHS and more has clearly led to an incredibly difficult agenda. But the lack of any real focus on tight management of costs is disappointing, and indeed government borrowing hit record levels last month, well above the expectation.

Some of us got excited by the creation of an ‘Office for Value for Money’. But that looks now like a performative move, creating an organisation without much power or pace. It has a part time chair, contracted just for one year, supported by “a multidisciplinary team of up to 20 civil servants based in HM Treasury”. That ‘up to’ is always a give-away. Members of Parliament on the Treasury Committee have already suggested it is under-resourced, duplicates the work of others and is unlikely to provide value itself.

It’s first recommendation was that Treasury should introduce “a rolling programme of VfM (value for money) thematic reviews in the years between spending reviews, with the first set of reviews to take place in 2026”.  Well that really gets the blood racing, doesn’t it? Perhaps that is a sensible ‘machinery of government’ initiative but it isn’t going to help address the UK’s £151.9 billion 2024/25 deficit (which means the government borrowed £3000 for every adult in the country last year, a scary thought).  

Another disappointment came with the appointment of the ‘covid corruption czar’ – renamed the Covid Counter-Fraud Commissioner.  Tom Hayhoe was appointed in December on a one year contract for three days a week.  (I can only assume they wanted him and knew he could only do three days a week so advertised the job like that). Again, he will have a ‘small team in the Treasury’.  So what have they delivered so far? I can’t find evidence of anything.

Another indicator of a lack of real focus on procurement spend is that in the first six months of the Labour government, spend on consultants was the highest since 2020, during the pandemic, according to data firm Tussell. About £838 million in consulting contracts were awarded in the latter half of 2024, compared to approximately £620 million over the second half of 2023 and £480 million in 2022. And recent tenders issued by the government’s central buying organisation, Crown Commercial Services, seem to focus more on CCS revenues and profit (‘let’s make sure all the big firms get a place on our frameworks’) rather than trying to improve value for the taxpayer.

The revolving door between top officials and suppliers continues too. “Sir Alex Chisholm, who was the second most senior civil servant in the country, has become a senior adviser at Boston Consulting Group (BCG).” The committee that monitors these moves, ACOBA, continues to be a waste of space. At least Rachel Reeves, the Chancellor, has finally realised that accepting free tickets for gigs is not a good look for someone in her position. But then the Prime Minister didn’t initially seem to see anything wrong with gifts of clothes from donors.

Generally the whole climate around spending public money does not really seem to have changed since the Tories were in power. I hoped for a new era of probity, reform where it is needed, tight financial management, focus on procurement, and a crackdown on corruption. Unfortunately, I’m not seeing it so far.

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Labour Wants to Use “PFI” – Please Be Careful!

As we’re into the election period in the UK, the Labour Party is promising capital investment (in roads for instance) but saying that much of the money will apparently come from the private sector. This has brought back memories of the previous “Private Finance Initiative”, which was actually invented by the conservatives under John Major in the early 1990s but was enthusiastically embraced by Labour after 1997 when Tony Blair won the election.

I was procurement director at the Department for Work and Pensions for two and a half years, 1995-7, serving when Labour came into power, and was involved in some large PFI projects, including new construction programmes and some IT initiatives. Then in the noughties, I was consulting in government and held a couple of interim commercial director posts where PFI or similar initiatives were relevant too, including the ID Card programme.

So speaking from the inside, I can say that there were a number of positive aspects to PFI, despite later criticism. Having a single entity responsible for the financing, construction and then maintenance of a new hospital for instance created a clarity of purpose and an interest in whole-life costs. However, there were some less positive aspects which Labour must avoid if it is to make a success of PFI Mark 2 (or Mark 3, or wherever we are up to now).

In the past, some dubious financial engineering was definitely encouraged to get projects through the business case process. The comparisons were generally made in terms of the basic cost of the building in the case of construction projects. So PFI projects were often compared using “cost per square metre” metric, as the ongoing PFI charges overt the contract period were often based on that as the charging “unit”. That figure included the cost of capital, the construction cost and probably the basic infrastructure maintenance. It would then be looked it against the “public sector comparator”, i.e. what it would cost the government to provide the same facilities.

I actually sat in meetings where the PFI adviser (more on that later) said to a supplier, “the public sector comparator is marginally lower than your figure – you need to improve that”. Now that sounds like good negotiation, but the twist was this. The contract usually included a whole list of ongoing activities where the buyer would be locked into using the PFI supplier. And these were rarely included in that value for money comparison. So suppliers were encouraged to make their money on these extras, often around ongoing supply of goods or services, and keep their base charges low to get through the business case process.

The other way of making the contract attractive for the provider was to make it longer. Hence ridiculous 60 year contract periods, with guaranteed price increases of course, which again circumvented the business case issue as the comparisons would rarely look that far into the future.

So this is why seemingly trivial services or one-off type activities ended up costing schools and hospitals a fortune.  “Another school had to pay £302 for a socket, five times the cost of the equipment it wanted to plug in”, as the Daily Telegraph said in one report. This wasn’t an accident or bad negotiation – this was because the payment mechanisms were constructed deliberately to make the basic occupation charges look lower, with the provider making their money from these ‘extras’.

That would improve the apparent business case; then later on the occupier gets hit with unexpectedly high charges. It represented a conspiracy really between all the parties to make these projects happen, and arguably was a failure of finance and procurement across many organisations while these deals were being done; or at least a failure to stand up to pressure from other quarters and point out loudly the problems that were being stored up for the future.  I will take some credit though – one of the (probably few) good things I did in my DSS job was refuse to allow catering, cleaning and security to be included in one large property PFI deal we did, because I was concerned about future lock in for decades. That probably saved millions.

The other very dodgy aspect of “old PFI” was the role of Partnerships UK (PUK) in all this.  From 2000 onwards, Treasury promoted the use of PUK’s services – at extortionate consulting rates – for advice to public sector clients on particularly the commercial and financial elements of PFI deals. If you didn’t pay your three grand a day for a PUK adviser, you wouldn’t get your project approved by Treasury, was the feeling.

Yet PUK was 49% government owned, and 51% owned by the banks! That was a clear conflict of interest there in terms of PUK’s enthusiasm for PFI deals which made huge profits for those same banks. And the politicians – and even some top civil servants – were probably looking forward to their nice non-exec roles with the same organisations once they retired.

So Labour needs to take care here if it wants to bring back PFI-type ideas. It needs considerable commercial and procurement expertise on the government side of the table – and it must make sure the people who are supposedly representing the taxpayer in those discussion really do have our interests at heart, and are not feathering their own nests.   

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Are We Seeing Pandemic-Related Bad Buying?

The pandemic crisis broke just as I was signing off the proof copy for my new book, “Bad Buying – How organizations waste billions through failures, frauds and f*ck-ups“. I thought briefly about adding some pandemic-related stories, but quickly decided there wasn’t time to do it justice without delaying publication this autumn – which neither Penguin nor I wanted.

But I may well want to write something substantial about the procurement issues connected with the pandemic, because it is clear already that there are many. Not all of these by any means are “bad buying”, I would stress. I’m sure we will find that there is some great work going on, in the centre of government, in hospital trusts, in the NHS Supply Chain network, and indeed across many other organisations in local government, social care sector and so on. If I do write a book, I hope and expect that there will be as many stories of great procurement work and even heroism, as well as some failures and issues to report.

Certainly, there are enough stories emerging that will require further investigation. The mis-management of the “pandemic stockpile” of PPE (personal protective equipment) is one. Although this has had some media attention, it looks to me like a bigger failing than has really been exposed so far. How was so much of the stock allowed to get out of date, for a start? What about the “lost” items – a failure of stock control and information, or something more criminal?

PPE generally has had plenty of coverage in the media, and some of it has not been fair. Once the pandemic took hold, the global demand for PPE shot up to an extent that supply problems were inevitable. But there will be questions asked about whether the UK was agile, flexible and fast enough in its response – and no doubt other countries will ask the same thing. That will lead on to interesting debate about the whole structure and strategy for NHS procurement.

Then there is the UK’s “ventilator” challenge, in which various firms were asked to produce ventilators – with varying degrees of success. There was also the very odd decision to ask eBay to build a marketplace for PPE, which did not go well, when others such as Basware and Proband could have done it in hours based on existing capability.

That last point highlights a real frustration. There is just no transparency around how and why certain firms are being awarded contracts. Of course, we understand you can’t spend months running an “OJEU” compliant procurement process in the middle of the crisis. But it is not unreasonable for us to want to know something about how and why firms like Clipper, eBay, Palantir, Deloitte and others are being chosen, and the terms of the contracts they are working under.

If the silence continues, then we might start thinking that these decisions haven’t been taken for the right reasons. I doubt very much whether brown paper envelopes have exchanged hands, but there  are other forms of “corruption”.

I’d argue any supplier selection decision that is influenced by factors  other than objective business reasons is corrupt to some extent – that includes simple laziness (“I can’t be bothered to do the research or analysis so I’ll just give this random firm I’ve heard of the contract”), nepotism (“giving the contract to your mate”), or choosing a firm based on the fact that you rather fancy getting a job with them one day in the future.

That last idea was suggested to me as a reason for some of the tech decisions we’re seeing – “the techies in government all want to work for someone sexy like Google, Apple, or Amazon, so they find ways of working with them in their current jobs and hope to get noticed” was the suggestion.  Mind you, that doesn’t stack up with the route chosen on the tracking app…

I’ve always tended to go with the cock-up rather than the conspiracy theory when things go wrong in government. But we need some visibility around all this “emergency procurement”, or we might start thinking the worst.

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