Saturday 28 August 2010

The Idiocies of Public Sector Procurement

As the Coalition looks to make more savings, public sector organisations maybe forced to send more work to private companies. However as more public services get pushed out to private contractors the Coalition ought to be aware of the inefficient way in which many contracts are procured. Recently David Cameron mentioned in Manchester that one tenderer spent £6 million on just trying to win the business from the government. Seeing as many of these companies only source of income is public sector contracts, the costs of assembling tenders and winning business only ends up getting charged back to the public sector in one way or another. Whilst public sector organisations should spend some funds on ensuring they select the right contractor, there are still huge efficiency savings that could be made.


Current public procurement usually goes through a two stage process. Initially a small pre-tender is sent out to fish out those companies clearly unsuitable for the contract. Very wise except the pre-tender usually consists of the same or very similar questions every time. For your average public sector tenderer, this means completing similar forms and questions for something like 200 public sector organisation a year. It also results in public bodies having to waste time and money on repeatedly assessing the same answers from the same companies.


Once through to final tender stage, companies aiming to get a leading edge spend huge amounts of money on graphics, glossy folders and document formatting for their tender submission. I witnessed a photographer being hired at £500 a day to take pictures in the hope that it shows that they have knowledge of the local area. In fact it only shows that the company can send out a photographer at £500 day. Again, seeing as all the income of these companies comes from the public sector contracts, the cost of these “tendering luxuries” that don’t actually indicate the quality of service that could be provided will usually end up being charged back to the public sector, one way or another. Why not just have a basic template for all tenders, in a Word Document and save on the out of context pretty pictures.


Other general inefficiencies include sending the tender out on paper so you have get someone to type it up again (more time and money wasted) and vague questions which only leaves the tenderer having to waste time trying to decipher it. In one tender I witnessed, all the questions were virtually repeated twice, leaving tenderers wasting time rephrasing the same pitches. In another, questions more applicable for building contracts were put into a public health services contract.


Even in the attempt to save money on the process the result is wasting even more. One council wanted ten copies of each document. The cost of printing and cost of postage may be saved by the council, but as I have explained the cost of this will find its way back to the public sector one way or another. Isn’t it time all tender submissions were made for free via email or the internet rather than via expensive plus couriers at £100 a delivery.


The tendering process does force providers to offer the most cost efficient service possible but unfortunately it’s often impossible to compare prices because of huge differences in the quality of service on the table. Bidders often copy and paste answers, and half-truths are put in or rushed out. The professionals within the businesses that actually know what they are talking about are too busy running the business to have time to answer the questions properly. For that to end, why can’t references be used from other current contracts more. That would mean that they would already know what service is being provided and whether it was up to scratch. Admittedly it might put off new entrees into the service, but this would be accounted for in another way.


One of the more interesting scenarios is when the incumbents’ employees are liable for TUPE – a transfer to the winning company under the same employment terms, however often the tender documents do not provide with details of how many staff are liable for this transfer, and what their salaries are. Thus how is it possible to budget it into the financial model of a contract and come up with a realistic price for running the service.


Of course those who think that personal relations don’t matter, think again e.g. find the wife of someone sacked by the company earlier in the year on the procurement board, and you won’t win.


Other brilliancies include sending out a tender with an award date only a few days before the start of the contract, i.e. no time to mobilise the contract. In this case it’s extremely obvious that they are happy with the current contractor, so why put your public procurement staff and other contractors through the process of tender when it’s obvious that the incumbent will win.


Of course the council will often go for the cheapest bid offer, which often makes sense, until a company like, actually lets mention no names, keeps on putting in bids at very small margins, and then doesn’t have enough income to deliver on the contracts a few years later. If a company does go belly up think of the cost of procuring hundreds if not thousands of contracts again. Talk of large companies, many do present a consistent brand, logo and font size in their tenders, but in reality consist of a conglomeration of previously merged smaller companies with different management styles and business cultures.


Having won the contract the relationship between the two organisations has to be managed well to get value for money. For example I was once on a project to survey some street lighting, and was asked to ensure that I failed the equipment so that we would get more work to write a report of how to replace it.


I’ve acted as whistleblower however I hope that now many within the industry will happy to be saved from the latest round of tick boxing, repetitive procedures and question deciphering. Already Phillip Green who was brought in to analysis efficiency saving is on record on recommending centralised procurement processes. Reducing the overheads for tenderering will save funds on both sides allowing private companies to focus on providing quality public services and will increase value for money.

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