Squaring patriotism with best value

3 September 2003
More news

04 September 2003

Decisions for public-sector purchasers are becoming more complex as they face renewed calls to support UK suppliers. Robin Parker reports

The days of organisations seeing purchasers as their pen-pushers might be over, but few would argue that the profession is yet in a position where it can directly influence the corporate agenda.

Procurement professionals are increasingly being asked to look beyond the core value they bring - managing spend in such a way that provides value for money - to support wider company objectives such as corporate social responsibility or a brand overhaul.

But toeing the line can leave purchasers in a quandary, particularly in the public sector where they are the stewards of taxpayers' money. On the one hand, the organisation's goals are clearly paramount and whenever they are asked to base their decisions on anything other than value for money, it is in a purchaser's professional interests to do so. If these objectives make the organisation a more attractive client, then they could ultimately create more value.

On the other, if procurement is considered more strategic than ever, should the function, which has a longer-term view of spend than most parts of an organisation, not be trusted to do what it believes is best?

Two new initiatives in the public sector call upon purchasers to find new ways of supporting UK suppliers. There is a call to redefine contracts on environmental, ethical, and, to some extent, patriotic, terms by offering a lifeline to British suppliers.

As our news story (page 9) shows, the Department for Environment, Food and Rural Affairs (Defra) is looking at how to change the procurement of public-sector food and catering services to make the ailing British farming industry more sustainable.

Sourcing the food for schools, hospitals and government canteens is increasingly likely to be based on such emotional issues as the environment, animal welfare and supporting British farmers and smaller distributors.

Meanwhile, Patricia Hewitt, the trade and industry secretary, is under pressure to protect the UK's manufacturing base by giving firms, particularly smaller companies, earlier access to more detailed contracts, so they can position themselves better to win work.

Andy Scott, director of international competitiveness at the Confederation of British Industry, says: "Only by giving them more information up front and ensuring greater transparency and consistency in how the customer deals with them can they be prepared for any changes."

The schemes are important because of the UK manufacturing base's long documented decline. In recent weeks, engineering firm Alstom has slashed its workforce, vacuum cleaner maker Dyson has outsourced more jobs and United Milk, the biggest domestic milk processor, has gone into administration.

In the interests of maintaining relationships, the buyer has to want to see the supplier stay afloat. Yet purchasers are not charity workers. They are also hamstrung by the European Union's tough competition laws, which prevent them from explicitly offering a leg-up to British firms.

But the new initiatives offer ways around this - demanding more "fresh" produce in a food contract, for instance, suggests a leaning to local suppliers. Such measures can conflict with the basic value-for-money proposition.

The CBI and TUC's model for improving the procurement process comes from the defence sector. The joint defence industrial policy has long given due consideration for UK manufacturers' capacity to deliver on a wider range of criteria.

Hewitt will have to bear in mind whether a strategy devised to improve the procurement of a sector characterised by high-value, long-term contracts should be extended to all parts of the public sector. Should the same criteria be applied to, say, buying health supplies as for the manufacture of trains?

When the defence industry's chief customer changed its definition of a competitive bid, the strategy was further complicated by parts of the increasingly fraught supply base assuming they too could dictate terms.

Inviting accusations of reviving the traditional "cosy" relationship between the Ministry of Defence and manufacturers, BAE Systems called the MoD's bluff last year and demanded to become its prime contractor.

The old "level playing field" argument was brought into play as BAE claimed that guaranteed government work would help it to compete better abroad. The MoD rejected the argument on the grounds that the playing field would be anything but "level".

The prime objectives of the new schemes - to offer more open and consistent access to British firms - are admirable. But purchasers who want to ensure the BAE argument is not resurrected elsewhere in the public sector face a tough balancing of loyalties: to their organisation and to their peers.

The smartest ones will find a solution that pleases both.

SMsep2003

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