Writing a Tender Specification - Course, Manchester 29th November 2016

I'm stepping in for Eddie Regan, who has another course at short notice, to present Writing a Tender Specification in Manchester on Tuesday 29th November 2016.  Fuller details are here.

Usually a very interesting event - throws up quite a few questions, and of course the main issue is that if we don't have the right specification the procurement almost certainly fails to deliver the right outcome.

It might be my last UK course in 2016 - should be a good one.

Course: Effective Purchasing, Tendering and Supplier Selection, 18-22 December 2016, Dubai

Last course of 2016 for me is in Dubai, and I hope that we shall give a good send off to what has been a rather dramatic year (to say the least).  I rather hope that 2017 will be less dramatic.  Let's be optimistic about it, anyway.

This might be my last Dubai course for some time (we are still looking at 2017 dates) so I hope that I shall see you there.
The course title rather says it all, but there is a full description and book form here.

After that is Christmas in the UK, and then 2017.  Bring it on.  Hope you have a good one.

Course: Advanced Purchasing Management, Amsterdam, 12-16th December 2016

So, just in time for Christmas, I am running a course on Advanced Purchasing Management in Amsterdam.

The more I work in business the more I think that management as a process is undervalued.  This course looks in particular at Procurement management, and moves it beyond transactional efficiency to something that really delivers value for the organisation.  At helps to prepare for the sort of economic shocks that seem to be all too common this year.

Details on the link above - Amsterdam will be damp but lovely at this time of year.  Hope to see you there.

Course: Tendering Procurement and Negotiation skills, Dubai 4-8 December 2016

I am currently in damp old London Town, but in a couple of weeks I shall be off to Dubai to run Tendering, Procurement and Negotiation skills.

We have run this a couple of times already this year and the reception has been good - well I know I would say that but it has.

It is a bit of a "Ronseal" course - it does what it says on the tin.

Dubai is great in December - particularly the shopping.  Even if the exchange rate has not been in favour of sterling recently.  Hopefully the course content will help get over the shock.  Hope to see you there.

Procurex Scotland 9th November 2016, SECC Glasgow

I've just had a great time at LGPE at Olympia in London with BIP Solutions - see above.  Their next event is Procurex Scotland next week.  I can't be there because I shall be running the Introduction to Public Sector Procurement for CIPS in Greenwich, but it should be a great event. 

If you are in public sector procurement, you should get along to Procurex - they are free for you.  Next one is 21st March 2017 in Birmingham, then 20th April back at Olympia.

The CIPS event is full incidentally, and next one is 21st February 2017 also in Birmingham.

Hope to see you at one of these.

@pawa51

Training Courses: CIPS Introduction to Public Sector Procurement and Applying EU Public Procurement Processes

On behalf of CIPS I am running two courses in November at the de Vere Venues Devonport House Hotel in Greenwich (shown above, during a promotion for the movie Thor: The Dark World - incidentally I was staying there at that time.  It is one of my favourite hotels.  My son tells me the movie is good too).

The courses are Introduction to Public Sector Procurement on Tuesday 8th November 2016, and Applying EU Public Procurement Processes on Wednesday 9th November 2016.

The titles are a bit long but do rather pass the Ronseal test of doing exactly what it says on the tin.

Ideally you should do day 1 before day 2, but it is not totally essential.  I think that the Introduction course is getting rather full but there is more space on the Applying EU processes course.

They are going to run again next year (no doubt updated a little), but not until 17/18 May 2017, in Manchester.

Local Government Procurement Expo

I shall be talking at LGPE at Olympia (London) on Wednesday 2nd November 2016.  The event is run by BIP Solutions, and I shall be mainly giving a series of talks in the Supplier Training Zone.

The event is free for Public Sector Delegates, and as always there are a bunch of key note speeches that I shall miss because I am doing my sessions.  First up is Malcolm Harrison, Chief Executive of the Crown Commercial Service - which should be interesting.

The ever interesting Eddie Regan will be talking about Procurement post Brexit - which I would love to hear if I wasn't covering a session for him.

Hope to see you there. 

Marmite and Brexit

So the great "Marmite dispute" between Unilever and Tesco is over, but what did we learn?

There is a "Remain" analysis here at the Independent , an over from the FT here, and a Brexit analysis here at the Sun.

There is an interesting analysis that shows both sides suffered reputational damage (Marketing Week), but that of course is what promotional budgets are there for.

What we can be clear about is that this negotiation will be going on between Unilever and ASDA (and Morrisons etc.) and between P&G and Tesco (and ASDA, Morrisons etc.).  In fact they go on all the time.  This particular spat was very nicely timed for me because I had just been discussing with delegates a hypothetical similar battle between Tesco and Coca-Cola.

Unilever will be trying to maintain their profit margin, which is about 10%.  Tesco will be doing the same on a profit margin of about 1.7% (which is way down from the 5% or so it was earlier in the decade).  So on the face if it Unilever has lots of room to deal with material cost rises caused by the falling pound/euro exchange rate.  But why should it?  It's stock price will be in part based on the strong margins, so accepting lower margins would be a doubly whammy. 

Tesco of course in this cannot afford to absorb 15% price rises, and gets to look like the good guy looking after customer interests.

This negotiation between the 2 will go on all the time - it is just rather public this time, though interestingly the resolution is not as public as the spat.

Over time prices will rise - the weak pound means that imported raw materials will increase in costs, and products Unilever makes overseas will cost more when imported (they have no reason to reduce their internal transfer price and reduce profits elsewhere).  The public will pay more. 

Another factor is that the big discount competitors (Aldi, Lidl, Netto) are European and so their own brand products (if made in the EU) will also cost more in sterling.  Despite the competition, all the supermarkets have an interest in prices going up, none can afford to absorb the exchange rate impact, and none of their suppliers will do so either.  The size and speed of the drop means that currency hedging will only have limited some of the impact, and only for a limited time.

So what is the impact?  Sterling has fallen about 15%, but in any manufactured goods the cost of materials is only part of the total cost (maybe half or two thirds) so if products are made in the UK we might expect prices to go up 7.5% or 10%, and if imported 15%. 

In addition petrol and diesel prices should rise because oil is priced in dollars. Luckily (in a way) most of the pump price is tax and so the increase will not be 15% or anything like that.

Overall some commentators who know supermarkets are saying prices will on average rise by about 5%, which is low compared to the drop in sterling.  Efficiencies, competition, UK costs and other factors will keep it low.  Inflation will rise - for a year.  Assuming that there no further drops in sterling then this will be a spike in inflation unrelated to consumption and demand, which is why the Bank of England seem rather relaxed about it.

What does it mean for Buyers?  It means overseas products will be more expensive.  And that I wish I had bought my Euros for next month's holiday in France a month ago rather than waiting.  And bizarrely, I might be taking my own wine to France!

New Selection Questionnaire (SQ) to replace PQQ

So in England & Wales the Pooh sticks have finally emerged under the bridge, and we have guidance on replacing the traditional public sector Pre-Qualification Questionnaire (PQQ) with something that is compliant with the European Single Procurement Document (ESPD).

Note that in Scotland the ESPD has been in use for months, and guess what - is not the same as the new SQ form for use in England (and at least in part in Northern Ireland and Wales).

Guidance is available at www.gov.uk in Procurement Policy Note 8/16, replacing PPN 03/15.

So what are the changes?
Well in brief it is in 3 parts, and you cannot change the first 2 at all - and the 3rd must be "proportionate".  Suppliers can re-submit previously completed SQs as they will have all the same information - they can also do  this by submitting a ESPD and referring to that.
There is clarity that you should use a PQQ for works projects above the OJEU threshold for supply of goods, and below the OJEU threshold for Works (it was not clear before) - and that for this you should use PAS91.

Few more odds and ends too.
Generally I think it could have been a bit simpler, but is a step forward.  Of course not being the same as Scotland is a step back.

In terms of Brexit, leaving aside the ESPD compliance I don't think it will have any impact.  Happy for others to clarify if it does

Introduction to Public Procurement - Manchester 4th October 2016

Finally got a few days without either courses or (looming) deadlines, so have found time to report that I am stepping in for Eddie Regan at BIP Solutions to run the Introduction to Public Procurement course in Manchester on 4th October 2016.  It is pretty full, and after that the next ones are in Edinburgh in November and London in December, for which normal service will be resumed and Eddie will be the presenter.

Busy busy busy

Hope you are all enjoying the summer.  I'm still working through my pile of material writing, interspersed with training delivery.  September might be a bit quieter than August.  Or not.

Anyway, most of the courses are in-house, but we are getting close to the annual IChemE Engineering Procurement course which I am running in Rugby on Wednesday 28th September 2016.

Booking and details are here. http://www.icheme.org/procurement

CIPS and Brexit

CIPS have issued their first guidance on Procurement and Brexit.

TLDR version is don't panic, but do use the standard risk processes to start looking at risks in the immediate, near and further future.

Obviously exchange rates are one of the large initial risks.  After that it is sensible to look at your contracts and supply arrangements and then prioritise where you want to focus your attention.  You may even be able to get a better deal.  You never know.

Brexit and Public Procurement

So now the United Kingdom of Great Britain and Northern Ireland has voted to leave the European Union, what will change in our Public Procurement?

In the short term, nothing much.  What do I mean by the short term?  Well at least two years, which is how long it will take Article 50 to be applied to allow us to leave.  Bearing in mind the politics, than probably means at least 2 and a half years so 2019.  Some commentators are saying 2020 would be more realistic, but who knows? 

What will happen then?  A lot will depend on what happens in the intervening time.  Will the UK stay together or break up?  Which could lead to quite different procurement regimes in the 4 major countries (which are at the moment only a bit different).

It is likely that whatever else happens England (largest country in the UK) will be pulling out of the EU procurement rules, so what will happen in England?

Well again, possibly not a lot for a while.  The UK is a signatory to the World Trade Organisation Government Procurement Agreement which underpins much of the EU procurement regulations.  Given that outside of the EU we will probably use the WTO in redeveloping our trading relationships with other countries, it is fairly unlikely that we shall pull out of that agreement (at least not quickly).

The WTO GPA sets in place a series of rules for procurement above a certain value or threshold, which is the same as the one in the EU regulations.  So thresholds and processes will remain in place, but might be amended.

There would be no ability to appeal to the European Court of Justice as EU procurement directives would not apply (unless that is part of our settlement in leaving).

Could we have a Buy British or Buy English campaign?  Probably not because it would clash with the WTO GPA, and anyhow could have negative consequences on Value for Money (if the foreign providers do not provide better VfM we would not contract with them).

Things like the European Single Procurement Document (ESPD) that came in in April 2016 but still has not actually surfaced, may change some time in the future.

So lots or uncertainty, but given that we need rules for public procurement to avoid corruption and to obtain value for Money, and that we are already signed up to rules for this, and that changing public procurement policy is unlikely to be top of the agenda for a post Brexit country, I think we shall only be seeing small changes for the next 5 years or so.  After that, who knows?  As they say, a week is a long time in politics - let alone 5 years.  In the meantime PCR 2015 stays in place.

So there is still a point in going to EU Procurement training (well, I would say that wouldn't I?)  as nothing is going to change for a few years.  After that, then I am sure we will have new public procurement training to clarify the new rules as and when they emerge.

P4H - 13th July 2016 Birmingham NEC

I shall be presenting the Supplier Training Zone at P4H, the leading Procurement event supporting Operational productivity in the NHS run by BIP Solutions.  Which is a bit of a mouthful, but does describe what it is about.

It is free to the Public Sector, and £95 for private sector - but hopefully the training sessions alone compensate for that (not necessarily mine, of course - there are 3 other training zones as well).  The sessions I am running are not only applicable to the NHS, so there would be value in popping along if you supply other Public sector bodies too.

Hope to see you there.

Training course: Applying EU Procurement Processes, Manchester, 30th June 2016

This is the second of 2 single days from CIPS covering the fundamentals of Public sector procurement in the EU.  Which on that date we still will be, though we might not be some time later.  Whatever happens in the referendum though these regulations will be with us for the next few years.

It does help if you have attended the first of these days, but it is not essential - particularly if you have some experience. 

In this course we look in more detail at some of the less usual procurement processes, such as Innovation Partnerships, and flesh out a bit more of the surrounding requirements we outlined in day 1.

You can do both days in a row or spread them out to suit yourself.

Full details are here.

Hope to see you at one or the other - or even both.

Training Course: CIPS Introduction to Public Procurement, Manchester, 29th June 2016

This is the one day Introduction to Public Procurement, covering all the basics.  Venue is the Radisson Blu at Manchester airport which is fairly easy to get to (there is a bus station, train station and it is just off the motorway).

People have liked it so far, so hope to see you there.

IChemE What Engineers need to know about contracts 21/22 June 2016

I shall be running this course in London - full details are here.

This does not go into the full details of the different IChemE forms of contract - that is a different course, but does give an introduction to contracts for Engineers and others who require an overview.

Hope to see you there.

Which savings? How do we prioritise?

Last week I was in Germany, working for a multi-national engineering manufacturing company.  Great place and great people.  The Procurement Manager took us out to dinner, and I took the opportunity to ask him what his major problems were.  He took a few seconds to think (a sensible man), and then described his situation.

All the business units have to make savings - everyone is clear about that (although margins and profits are up across the board).  However he is locked into his approach.  Effectively there is a triple lock;
1. Price reductions
2. Working capital reductions
3. Zero inflation.

All laudable goals, but of course the interaction of them leaves him very little room to manoeuvre with suppliers.  A contractor cannot be award for good performance on a 3 year contract with a say 0.5% increase, regardless of the changes in their input costs.  Higher stock levels and fewer deliveries or longer lead times cannot be used to incentivise the agreement.

To make things even worse, the product mix is highly variable and unpredictable and sales are not located on site.  So if they sell in the EU working capital can go down when the manufactured item is invoiced to the customer.  If the customer is in China and terms are DDP, then it will only leave stock (accounts) 5 weeks after it has been dispatched from the factory when it arrives at the customer.  The procurement department has no input to that, but of course has to deal with the WIP issues.

Tricky.

So the Manager has to achieve all of his targets both individually and collectively, and there can be no trade off.  He was very unhappy when I raised the sort of tricks that business managers often use to make those targets - he is going to do it properly.  I am sure he will, but it is a situation where a little more flexibility might actually help achieve the overall targets.  In particular I worry that Quality is at risk if they have to switch to new suppliers rather than stay with established ones simply in order to gain lower prices.

For me, the Referendum is over...

I've voted.  Postal vote means an early vote.
I was always quite clear on my position, and I can't imagine it changing any time before the referendum.
Whichever way you vote, I hope that you do.

But for me, now I just have to wait for the result.

Brexit and Public Procurement

I've been meaning to mention the impact of possible Brexit on Public Procurement, but just haven't had the time.  And it looks like Pinsent Masons have covered most of what I wanted to say - here linked on the excellent Spend Matters blog.

In short, if we stay nothing changes.  If we leave, nothing changes - at least not for quite a while.  And even then it might not.  We are signed up to the WTO Government Procurement Agreement, which is the basis of quite a lot of the EU Procurement directive, and therefore our procurement regulations.  Deciding what whether we would leave that agreement, and if so what we would change will probably not be top the the government's agenda post Brexit.

As Pinsent Masons have pointed out, rather than reducing bureaucracy the Government seems quite keen on adding things on top of the directive (with good intentions) so we might end up with more regulation rather than less.

Any how over the next 5 years, I would not expect to see a lot of change.  After that?  Who knows.

Retention discounts, or the dangers of loss leading bids

I went to a very interesting evening at the University of Bradford School of Management Knowledge Transfer Network, which featured featured Nigel Greenwood of Simply Customer talking about the Customer Journey, and Martin Haley talking about segmentation.

Martin mentioned the old Marketing rule of thumb that it costs 6 times as much to win a customer as to retain one.  And that triggered a few thoughts about procurement.

The costs of bidding for business are considerable, whether it is a formal tender process or a more traditional business to business relationship of meetings and negotiation.  Having won a contract, obviously the business has to perform well in order to retain it, but assuming it does then there is and advantage to both sides if the relationship continues.

My question is whether Procurement think about this sufficiently, and whether we put enough emphasis on squeezing prices in return for extending contracts.  Obviously it saves procurement time and money in avoiding a new bidding process, but there are a few processes going on that we might not think about in sufficient detail.

The cost of sales is obviously shared across all potential customers that suppliers target, but if we are already contracted then the cost of sales to us should be lower.  Perhaps not by a factor of 6, but certainly by 2 or 3.  Do the pries charged during the extension reflect that?

In addition we can think about the well known experience learning curve (or Boston Learning curve) which has been demonstrated back to the days of the Model T Ford.  The more units made, or the more times we carry out a service the more efficient we get.  The relationship is a log-log one, so is commonly portrayed as a curve where every time we double cumulative production the cost per unit goes down by a certain amount.  This obviously does not happen without some effort on the part of the Supplier, but is an indication that longer contracts become particularly attractive to suppliers as set up costs are written off and experience learning reduces the cost of delivery.

Taking this into account, some suppliers will initially submit a loss leading price assuming that profits will come later in the contract.  If we start targeting those savings then the supplier risks making less money than anticipated - hence the phrase that loss leading leads to a loss!

When considering the end of a contract, it is common to more or less roll over the existing price - maybe taking into account variables such as inflation and raw material costs.  Should we be looking instead to have price reductions taking into account the reduced price of sales AND experiential learning. 

There is no such thing as a free lunch, and we might see that initial prices rise if we want to share in the future efficiency savings - but it is something we probably should think about a bit harder.

The price of oil - a case for investing in training

This week I am due to be in Dubai presenting courses on Procurement and Supply Chain Management.  Instead I am at home writing material for the Chartered Institute of Procurement & Supply, which in some ways suits as it is nice to have a few days in a row to write rather than clutching hours here and there.

So far this year we have cancelled 5 weeks worth of courses in or for the Middle east, which is not surprisingly dominated by the oil and gas industry.  The dramatic fall in the price of oil (currently about $41/barrel down from over $100) has meant a massive cut in spending on training across the ME and in particular the oil and gas sector.

Now I have a vested interest in this because I work as a trainer, but I think we should make the case that training in procurement and supply (above other things) should be protected because it should pay for itself.

The usual argument is that when there is a financial shock it is sensible to cut back on discretionary spend - don't spend money unless you have to.  And I don't argue with that. 

However Procurement in the oil and gas industries in recent years has been focussed on Quality, delivery, availability, effectiveness and other non-price issues.  The high price of oil, and the relatively high margins it gave, meant that Price was not the dominant issue.  Now we are in a different environment.

Now Safety and Quality are things that cannot be comprised in process industries, but we can pivot to put far greater emphasis on price and cost rather than issues such as flexibility or efficiency.  That does require a change within the organisation, and a change in emphasis for the Procurement team and Suppliers.

In some situations that may mean a focus on partnership and joint cost reduction.  In others it may moving to a much more adversarial relationship than before.  The trick is in deciding where and when.

Which is where training comes in.  Training is not just about learning new things.  It is also where we can go back to basics and build up again in a new pattern.  It is where we can challenge established ideas and established ways of thinking.  It is where we can learn from others and test new concepts in a risk free (or low risk) environment.  In good training it is where we can plan how we are going to deliver in this new world.

In short a Procurement and Supply Chain training course could, and perhaps should, allow delegates to come away to save ten or more times the cost of the training.  At the least delegates should come away with some plans to save the cost of the event within a tight timescale (perhaps 3 months).  Those savings will then repeat over coming months adding multiples to the overall cost reduction.

The Return on Investment on Procurement training is high anyway, but when you need to save a lot of money in a hurry it is even better.  Particularly if it allows you to avoid making "savings" that will in the end cost more through lost production.

OK, you can say that I am self-serving in making this argument, but I think it makes sense.  In a losing football team you need to stop conceding goals.  You don't do that by getting rid of the Goalkeeper.

Procurex South - 20th April 2016

Wednesday this week is Procurex South at London Olympia.  Sadly I am not going to be there, instead I shall be at the computer working on training materials.  But I am sure that it is going to be a useful and interesting day.  And my colleague Eddie Regan will be in the Efficiency and Savings Zone, and he is always good value.  Well actually it is free, but trust me Eddie is worth paying money for. 

Procurex North - promo video

The event was great as usual - but I've been very busy since then developing and delivering a range of courses for CIPS. 

Procurex is of course BIPS - confusing I know.
I can be glimpsed in the video of the Procurex North event at about 2 minutes and 55 secs - see here.

Hope to see you there next time.

Procurex North 8th March 2016 in Manchester

Hope to see you there.  I have a rather full dance card of presentations. I  hope not to overrun.  I shall be in the Supplier Training Zone from 1pm (and a few other odds and ends before that)

Tesco - late payment scandal

So Tesco have been rapped on the knuckles for late payment - see BBC here.

Almost a year ago I was writing about this here. 

Let's be clear - this was a deliberate breaking of agreed contracts by a large customer taking advantage of smaller suppliers.  Tesco are claiming they are undertaking "reorganising, refocusing and retraining our teams".  This is disengenous.  They knew exactly what they were doing, and they did it as a deliberate policy.  If they are serious about the apologies they need to sack the managers responsible immediately - all the way up to the board.  Don't pretend they have already gone, or did not know what was going on.  Fraud is a hard word but what else do you call signing contracts you have no intention of honouring?

People could have (and may have) lost jobs and businesses so that Tesco managers could claim inflated profits and cashflow, and falsely claim bonuses.  Those bonuses must be recovered, and the victim businesses compensated.

In the end the accouting scandal of which this is part might cost Tesco £500m in fines.  Was it worth it?

Procurex North: Manchester 8th March 2016

Apologies for the lack of posting, but I have been rather busy on a number of rather interesting training programmes that I hope to be able to tell you about later.  They should be continuing throughout this year (and maybe next) so I do hope to get clearance from the client.

One thing I can mention though is that I shall once again be presenting at Procurex North in Manchester on 8th March 2016.  I shall be running one of the training zones (not sure which one yet), but more importantly Sally Collier Chief Executive of the Crown Commercial Service will be giving one of the key note speeches.  I'll forgive you if you listen to her rather than me.

Hope to see you there.