The Consulting Manager's Blog (7/12/2009)
Procurement - don't you just love it?
The report by Bill Roots, "Review of arrangements for efficiencies from smarter procurement in local govvernment" looked at how savings can be made from streamlining procurement in local government - although it rather skipped over the existing degree of duplication and overlap of current so-called streamlining initiatives. There is somehow a deep-seated belief in central government in particular that there are massive savings to be made from better, and more aggregated procurement. But of course one wonders just how real these savings are in practice, and how much truth there is in the belief that "bigger is better" - buying on a larger scale necessarily brings savings.
What is emerging is a plethora of "framework agreements" - frameworks where suppliers like ourselves have to put forward large amounts of detail about ourselves in order to be assessed as worthy (or not) to be accepted to the framework - and once there, that only means you may be invited to tender for work in the future. The trouble is that these frameworks are quite exclusive, and have fixed unit costs which remain in force for the duration of the framework. This means that smaller companies (the SMEs that the government, and some councils, are keen to support and encourage) cannot compete. For Buying Solutions' framework for ICT and consultancy services, the limits are set so high that only consortia of already large companies can stand a chance of competing; a recent tender from one of our largest cities sought to exclude companies with a turnover under £5 million (but later relented), and a recent Northern Ireland tender did actually exclude businesses under this threshold. The result is that so many of our new and innovative companies are simply excluded from the competition, so purchasers can choose form only the well-established, and dare I say, less adventurous, companies - and of course this tends to result in higher costs.
The setting of unit costs also works against the desired outcome. First, in the current economic climate, where prices have been falling, the costs within some of the frameworks remain at the level set a year or more ago - and we get the ludicrous situation that a council will purchase through a framework agreement, at say, £500 a day, even though they know that purchasing through open tender they will achieve much lower costs of, say, £300 a day.
It doesn't help that every framework selection process is different - so it takes a good few days of work for suppliers to put together the information which the procurement people are requesting. Ultimately, since suppliers like us are not charities, these costs get passed on to the purchaser in the form of higher fees - which helps neither us nor them.
We have argued for a long time for a supplier equivalent of the "seller's pack" for houses - a "supplier's pack" which contains all the relevant information for the pre-qualification stage of any procurement - the financial evidence that the business is stable and well managed, the professional case studies and evidence that it offers professional services and achieves good customer feedback, and all the necessary environmental, quality, equal opportunities materail which appears in every PQQ (but of course in a different form) . Just think, if we had that, every supplier would prepare it just once, have it validated once, and that woud be it! Instead, we and other suppliers waste time completing endless numbers of framework agreements (we generally have 5 or 6 being bid for at any one time), and the purchasers waste time trying to evaluate the information - obviously this proves a bit taxing as two recently have taken over a year for the purchasers to finalise their selection for their frameworks.