Tensions in UK Public Sector Procurement

I recently ran a day long seminar on Category Management for 23 public sector buyers from a wide range of organisations (on behalf of BIPSolutions).

It was an opportunity to take the temperature of public sector buyers – but naturally we should not assume it is totally representative.

First, I have noticed a couple of quite predictable trends in public sector commissioning following the Comprehensive Spending Review by the coalition government. Firstly the overall level of tenders being advertised seems to be lower than previous years – reflecting an anticipated drop in public sector spending. Secondly, some authorities appear to be spending budget in this financial year, with the clear expectation that there is no point in keeping it for next year - and that there will be no money to spend next year. An example is a council who are looking to arrange 18 one day training courses between January and March 2011 – clearly spending money while they still have it.

My delegates reported extensive pressure on budgets and costs. In some cases this accounted for their presence on the seminar – their authorities were looking to reduce spend by introducing category management. However they were also looking to reduce headcount in procurement, which is very contrary to the approach needed for good category management – rather than fewer people you tend need at least the same number of higher skilled staff (probably more). Given that one authority was looking to introduce category management with only 3 procurement people, they will be lucky to get the sort of improved quality and reduced costs that can be achieved.

There was a lively debate about the priorities for public sector commissioning – one view point was that we are going to be focussed only on lowest price. Another viewpoint was that with authority budgets under pressure there was unlikely to be money available for local economic development, inclusion and sustainability projects and these are potentially going to be pushed down to suppliers in the form of the “Economically Advantageous” element of tenders.

All of this highlighted the continuing tension in public procurement between meeting the EU required objectives of open and fair competition, whilst ensuring Value for Money. Category Management whilst capable of achieving good VFM, may be seen as restricting (managing) competition and therefore clashing with the open and fair agenda. And meanwhile it is likely that procurement will be trying to do more with less (or to be more precise fewer). The case for investment in procurement is understood by the Buyers, but there was a general feeling that it was not an argument that at the moment was going to cut ice. However there was a general feeling that their organisations had good and strong management – which is reassuring in a time of great change and turbulence.

Unusual Key Performance Metrics

The writer Terry Pratchett has a word – Substition. It is the opposite of superstition. Superstition is things that everyone thinks work, but in reality don’t – like crossing your fingers for luck. Substition is things that no one thinks work, but in reality do.

I’ve just been reading Moneyball by Michael Lewis, which to me is about substation. He writes about a baseball team, the Oakland A’s, who in the early part of this century were successful on a very modest budget because they had developed metrics for measuring the worth of a player that were different to everyone else’s. Rather than focussing on the outputs, they were focussing on the process. Players who did the right things at affordable prices, rather than the stars. Rather than RBIs (runs batted in) they evaluated players on their ability to get to first base (i.e. not get out). I suppose in football terms it is like picking players who have a good record of winning corners or drawing fouls rather than scoring goals – the goals will come from the corners if you get enough of them. In cricket maybe it would be bowlers who bowl very few no balls in 20-20 rather than take a lot of wickets.

Terry Pratchett also coined the word “narrativium” for the fact that sometimes the world seems to be driven by a good story rather than anything else. People love a good story, and in business and in sport, we are sometimes guilty of wanting to believe the story rather than the facts. Indeed in Moneyball there are times when the “good story” element dominates over the business lessons.

I’ve read a couple of Michael Lewis’s books – Liars Poker, the New New Thing – and he is always extremely readable although you should always remember that he is writing as a journalist rather than an academic. His books make you see the world in a slightly different way, and make you think about what else you might be missing.

In this case it has made me think a couple of things about business in general. Firstly, I wonder whether there might be novel metrics in business that we could use that would better track business success rather than the traditional ones of turnover, return on assets. Rather than customer satisfaction, perhaps ease of doing business? I don’t know. If anyone has any ideas, I would be most interested. The key point from Moneyball is that these should be measurable so that they can be proven, rather than just a “gut feel”. My first thought is that there is a huge (and sometimes contradictory) set of knowledge held by Business Schools and Academia, that most small businesses just don’t know about. How do we get it out there to where it can be used?

The other thought was to wonder about the superstitions and substitions of business. What are they? What are the things that work, though no one thinks they are important, and what are the things that everyone does but don’t actually work? Again, any thoughts and ideas gratefully received.

OECD Trade and Innovation: Chemicals Sector

The OECD has just published a report on the linkage between Trade and Innovation in the Chemical Sector. You can read it here. I was one of the contributors to this study, along with Dr. Harry Ziman of PHS consulting.

I hope you find it interesting.

Business of Social Media

At the SME Conference North West on Thursday, we had a very interesting presentation from Chi Chi Ekweozor of realfresh.tv in Manchester about the increasing use of social media in business. At the end of that I asked the audience, mainly smes, how many of them used various social media. Bearing in mind that it is a bit difficult to be accurate counting hands when you are standing at a podium chairing a conference, I think the split was roughly;
- had a website - 90%
- had a blog 40%
- used Twitter 30% (that is just a few fewer hands than for a blog).

I found that very interesting. Like many people of my generation I find Twitter somewhat alien, and struggle to find a business purpose apart from customer service. A Blog I can understand more as a sort of informal newsletter. What this showed me is that Twitter use is already higher than I imagined, and there is a possibility that it is already more imbedded in business than is clear to the late majority/laggards of the business world.

Certainly it makes me think again about the use of Twitter. And I think you should too.

I am wondering about Twitter as an interactive tool. Would it have been useful to have had a Twitter feed at the conference? Could we have got feedback on what was going well, what was overstaying its welcome? (nothing I think, but how to be sure). Could I have taken questions that way? What about use in training courses?

September/October 2010 open courses

Apologies for the lack of updates - September is full of unmissable deadelines.

There is a also number of open training courses, run by BIPS Solutions and presented by me.
The next is two sessions in Leeds on Wednesday 22nd September in Leeds, the first 2 modules of the SME engagment programme - 1. Understanding the Tender Notice, and 2. What I need to tender. You can add one or both, and there are 2 more modules to come on 30th September 3. PQQs, and 4. Effective Tender writing. These 2 modules are also due to be run on 28th September in Manchester, but not by me.

Then there is the SME National conference, at which I shall act as master of ceremonies, on Thursdsay 23rd September - see below.

On 7th October I shall be running a half day procurement training module in Solihull for Business Link (through BIP solutions).

Then starting 17th October I shall be running the Advanced Purchasing event in Amsterdam. This is a 5 day event which as the title indicates aims to cover some of the newest and most advanced topics in Purchasing.

November and December should have include open courses in London and Kuala Lumpur, but I shall list those when they are confirmed.

The Supply conference North West 23rd September

I will be acting as Master of Ceremonies at the Supply Conference North West on September 23rd at the Hilton Deansgate in Manchester. I have not been there yet, and am looking forward to finding out what it is like.

I shall also be giving a short session on best practices in tendering and tender evaluation, in which I hope to use some examples from a couple of tender evaluation processses I am involved in for UKTI in September.

Full details are here. Not a flattering photo if you don't know me.

More courses are being arranged and I shall list them in the next couple of days.

OPEC

Apologies for the lack of entries. It is tremendously busy at the moment. Much of which I am not able to write about.

What I can talk about though is that I recently had the opportunity to visit OPEC in Vienna. A very interesting event, and there were 3 key messages that they put out.
First, they are not a Cartel
Second, $70 a barrel is a reasonable price for oil, and
Third, better that countries set the price of oil than the British Army

Interesting key messages. Their argument on Cartels is that this is an association of willing participants. There are oil producers not involved (such as the USA which does not export), who are free to set their own prices. Any OPEC member is also free to disregard anything agreed and go their own way with no consequence. They do not set prices as such.

The price for oil is not going down to $25 again in the near future, and if they have their way not at all. The world recession was caused by banks, not the price of oil so they feel confident that they can leave it at $70. The price anyway is set by traders and speculators, who were the ones who drove it up to $150 - not OPEC. This relatively high price will allow them to invest in extraction capacity for the next 20 years.

Finally, as the USA seems to line up to attack BP over the Gulf of Mexico oil disaster and the Lockerbie bomber and Libya, it is worth remembering why the comments about the British Army were so forcefully made. BP of course used to be Anglo-Iranian oil, and was implicated in the establishment of the Shah of Iran and the overthrow of a democratic government. The UK has in the past 100 years had some role in overseeing most of the OPEC members, and as far as oil goes we ran them as pretty much client states. The UK and other western powers did dictate the price of oil, and backed it up by force of arms. This still rankles. Well naturally. I believe the UK spy is a stock villain on Iranian tv to this day. It may not suit us, but you can understand their point of view that it is their economic asset, and how it is used should be determined by the owners of that asset not by the users through use of force. Those days are long gone, despite what people think about the invasion of Iraq, but the worry is still there. We have many bridges to build to overcome that history (which is largely forgotten in the west).

And in the meantime, I suggest we put a lot of resources into alternative energy. In purchasing terms it is never a good idea to be beholden to a key supplier with a grudge.