News focus: Managing politics in procurement

Will Green is news editor of Supply Management
9 December 2014

Secretary of state Eric Pickles felt the need to intervene in Tower Hamlets’ procurement. Will Green reports on the implications for the profession.

A government-ordered inspection by PwC at Tower Hamlets Council has stirred up a hornets’ nest of allegations around procurement and other areas, which has resulted in direct intervention by secretary of state for communities and local government Eric Pickles. In a letter to the authority, Pickles outlined his intention to install three commissioners to perform a number of functions, including around the award of grants and sale of property, where the council was found to be “failing to comply with its best-value duty”.

Improvement needed 

While PwC found no evidence the council was failing in this regard in relation to procurement, Pickles’ letter said his “provisional view is that there are real and serious risks that such failures are occurring or might occur”. He says the council should draw up and implement an action plan to “achieve improvements in its processes and practices for entering into contracts”.

In relation to a contract to provide care services, the PwC report says: “It appears members and the mayor have sought to influence the ongoing procurement process in relation to this contract, at least by instructing officers to pause the process. In addition, an officer has asserted that the mayor sought to influence a shortlist of bidders, which the mayor has denied. If the officer’s assertion accurately reflects the events then the involvement of the mayor in an ongoing procurement in this manner would appear to be inconsistent with the relevant requirements of the constitution and the procurement procedures.”

Mayor of Tower Hamlets Lutfur Rahman has responded to the letter by calling Pickles’ proposed measures “excessive and disproportionate to the evidence and issues identified in the PwC report”.

Concerning contracts and procurement he says: “The PwC report acknowledges that we have good mechanisms in place already for identifying improvements and therefore the direction is unnecessary.”

Julie Welsh, former head of procurement and business support at Renfrewshire Council, says buyers must remain firm if they find themselves in the middle of such sticky situations, as there are “clear roles and responsibilities for officers, which are linked to operational duties; and elected members, which are linked to policy direction”.

“Buyers need to be fully aware of the difference between the two roles, and be prepared to have difficult discussions with elected members if there is any confusion,” she says. “The buyer must always protect the council from risk, and ensure that elected members understand the huge risk involved in attempting to influence any public sector procurement exercise.”

For Andy Davies, director of the London Universities Purchasing Consortium, it is a matter of educating politicians. “This is a sensitive issue for many politicians,” he says. “It’s important that procurement professionals make sure political representatives understand the regulatory process and the rationale behind it. It means that recommendations for the award of contracts are made on the basis of ‘it’s either our winning bidder, or make no award’.

“Politicians need to understand they have no power to award to, for example, the second or third-placed bidder in the competition. Some see this as fettering their powers as elected representatives and don’t like it.”

Local preference

Ken Cole, director of projects and practice at SPS Consultancy Services, who spent eight years as a councillor at a London borough, says he believes the vast majority of political interference to be misguided attempts to support the local economy. “It’s local councillors trying to recommend local businesses to people and trying to do someone a favour,” he says. “It’s not in any respect corrupt. It’s well intentioned but misguided. Obviously you can’t do it, but it doesn’t stop people doing it.”

Cole also believes some elected members feel they are able to ‘do’ procurement. “There are some members who fancy themselves as dab hands – ‘everyone can do procurement’ – who think they can do the job better than officers,” he says.

For the Society of Procurement Officers in Local Government the issue is black and white. Chairman Liz Welton, who is also assistant director of procurement at Coventry City Council, says: “In some authorities, members ask for reports before contracts are awarded, whereas some delegate that responsibility to directors and ask for involvement in the pre-contract stage where they can influence the future direction of services and required outcomes.

“Under the Public Contract Regulations 2006, authorities are required to be open, fair and transparent and once the evaluation criteria have been set, the only decision members can make is whether they award the contract or not.”

However, David Loseby, procurement director at Arriva in mainland Europe, who has spent time working in the public sector, believes political influence to be far more subtle.

“The reality of the matter is politicians will choose to pick out the points they wish to emphasise,” he says. “It’s more in terms of the other things that get influenced – how the requirements get written; how the service is described. There are different ways in which it can be influenced. It’s not in the procurement process, it’s outside.”

Loseby says he has been in situations where reports he has prepared have resulted in outcomes he did not agree with, following input from politicians.

He says procurement professionals have the option to report decisions they do not agree with to legal departments, though this can have negative consequences for working relationships.

Davies warns the new EU procurement directives will allow wider grounds on which to exclude suppliers, and politicians must not be allowed to exploit this.

“There will be more scope to take previous experience of a supplier’s performance into account, but this still needs to be done in a structured way by the professionals, in full observance of transparency, fair and equal treatment and non-discrimination,” he says. “Politicians must not simply use their office to disqualify suppliers and, by process of elimination, increase the chances of favoured suppliers.”

Policy drivers

Welsh believes good working relationships are key, and buyers should “understand any council policy drivers which may affect their procurement strategies”.

“I believe that elected members have a key role in ensuring that procurement is used to drive policy in order to ensure maximum social, economic and environmental benefits from any procurement strategy,” she says. “Purchasers need buy-in and support from elected members to achieve this. Successful public sector procurement requires a strong relationship between buyers and elected members.”

Cole says buyers who find themselves under direct influence should report it up the line, and ultimately the chief executive should get involved. Faced with a meeting where politicians are seeking to influence a tender, Cole recommends: “I would listen to what they have to say and then explain what can and can’t happen.” If this doesn’t work, “they have to report it to their line management”.

Loseby says ultimately, buyers have to judge each situation on its merits, but be prepared to “walk away” from a role if they find themselves compromised on a regular basis.

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