A Green view of government procurement

11 October 2010
Peter Smith, director of Procurement ExcellenceAt last – the Green report has appeared. Interesting that there was lots of coverage, interviews and so on from first thing this morning, but it wasn’t published till 3.30pm...I wonder why? Last-minute rewrites? And how come Robert Peston at the BBC got it hours before Supply Management did? Anyway, it is a mixed bag. His six “clear reasons why government conducts its business so inefficiently” are excellent: accurate and inarguable. But at the risk of sounding jaded and/or arrogant (or maybe just very old), I can honestly say there is not a single procurement idea here that I have not read about in a previous report (Gershon, OEP etc); is already being implemented to my knowledge; or has been tried and failed. But there is no harm I suppose in getting these things out into the open again. The property elements are more interesting, although I would need to ask someone more informed than I am whether there is much that is new. But the potential for savings seems genuine in that area (and, of course, the OGC group that has now moved to BIS have done good work already over the past few years in this field). In some areas, I would argue Green is simply wrong in his assumptions. There is no recognition that different spend categories have different economy of scale characteristics. In his world, bigger is always better. For instance, hotel rooms form an interesting example of a market where the biggest buyers often don’t get the best deal. I can buy a single room at the last minute (if the hotel has availability) on a marginal pricing basis, cheaper than you can book 50 rooms at the same hotel. Actually, the quoted figures of £77 to £117 per room for London hotels look very impressive to me. (Has Sir Philip ever stayed in a £77 a night room in London? Not a great experience.) And I can’t for the life of me see what the “scandal” is around coffee costing 95p in one government office and £1.40 in another. Perhaps the size/quality/subsidy varies? Is that a bad thing? Should we have the “approved government coffee standard” at the “centrally negotiated government coffee price”?  Very Stalinist.... He’s also either misunderstood some processes or just gone for statements that will make good headlines. Please don’t have a go at procurement cards (which have saved the public sector millions) without understanding how they work and the pros and cons of various P2P transactional processes.  And it is simply not true that their use in government “is not monitored”. I would also need to see the detailed evidence to be persuaded that some of the quoted price comparisons (£8 to £73 a box for paper) are truly like for like. The detail isn’t really there in the report to have full confidence in the examples given. The IT contract examples sound like very poor practice, but the detail isn’t given so you are left feeling “yes, but what about...”. And the common theme of control and standardisation comes through; but an air traffic control system, benefits or passport platform, and an office desktop network all need very different IT services and service levels. I do agree that there can and should be more standardisation, but I’m not sure that simplifying the issues to this bullet point level really helps the debate. There is also no recognition of the potential practical difficulties of setting up and running large central functions (including procurement) without getting into all the negatives of centralisation – bureaucracy, distance from the users, lack of flexibility and pace of action. The history of centralised government organisations is – let us say – mixed. Anyone remember Crown Suppliers? HMSO? I can just imagine the headlines in a few years’ time: “New Labour government to abolish hotel booking quango – 500 people to lose jobs but minister says staff can get better prices themselves on Expedia.” In other cases, the law of unintended consequences has come home to roost. Going back to travel, why do so many civil servants stay in London hotels? Because government staff were moved out to Newcastle, Leeds, Merseyside as part of cost saving relocation exercises under previous initiatives such as the Lyons review. But the head office, and ministers, stayed in London. So people are constantly shuttling up and down the motorways and railway lines. Even relatively small organisations such as OGC, centre of excellence for procurement, has offices in Norwich and Liverpool as well as London, and a large travel bill. Videoconferencing – yes of course, but you need to make such a culture change work by first putting it into ministers’ and permanent secretaries’ offices. In my experience, those are the very people who want “Bill and Sara in my office – now please!” So Bill and Sara book the hotel rooms, and sit on a train for hours, just in case the cry goes out from the minister’s office once she’s read their report. A final interesting point – in his interview with Robert Peston on the BBC, Green made a big thing of the government leveraging its credit rating and increasing payment terms for suppliers from as little as five days to 30 days or more – as I’m sure he’s done with his suppliers. I happen to agree with him on this; better payment terms were implemented for suppliers during the recession without any negotiation of reduced prices. If the public sector pushed out payment terms by 30 days, then that would (almost unbelievably) reduce the public sector borrowing requirement by around £15 billion over the first full year. But there is no mention of his ideas on this in the report – maybe that was seen as too controversial and upsetting to the CBI, FSB and so on? I’ll no doubt go into some of these issues in more detail on my blog over the next few days; this are just initial impressions. And at least there are no spurious savings estimates; but I wonder whether the coalition has created a rod for its own back. Will all this have been ‘sorted out’ by 2015? We’ll see.
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