Is there a shortage of commercial leadership? (Update)

I am struck that in several, perhaps many, parts of the UK public services there has been a shortage of commercial leadership. This is no surprise of course - government is not about commerce - despite some people's efforts to make it so. Government cannot pick and choose who it serves, it must be transparent, open and accountable, and it is about producing social outcomes not just financial ones. So for all these reasons, in my view, public services are not the same as commercial ones.

 

That said, the public services do enter into commercial arrangements where they have  to negotiate value for money contracts with suppliers. I do worry that sometimes this has not been done as well as it might. In short, I fear that our local and national government have been stuffed by some rather canny operators in the commercial world.

 

It seems to me that some public service leaders have treated transparent procurement as a proxy to commercial negotiations. But they are not the same. Negotiating a contract with a supplier after they have won the procurement competition is not the same as negotiating with them before...

 

I know - I am painting things in black and white here - and being deliberately provocative. But I came across a story the other morning which left me sad and fed up. I attended a seminar hosted by Civil Service World and sponsored by Hewlett Packard on the 'Digital Dividend'. (It was a very good event - so thanks to the organisers.) In the networking time I spoke to a young chap from a large government department who explained to me he had recently developed a macro for a commonly used spreadsheet in his organisation that would save a lot of people a lot of time. But then he found out that if his department were to use this - they would have to pay the outsourced IT contractor about £15k every time they used it. You see - there was a clause in the contract... So this small innovation (and you know how much I like small creative ideas) was squashed from the outset.

 

So this got me thinking - how much commercial leadership is there in the public services. Given the current austerity measures - I would propose that we need a lot more of this kind of leadership.

 

What do you think?

What does commercial leadership mean for you - what skills (apart from negotiating skills of course) need to be well honed?

 

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Just spotted this interesting and related article:

 

http://www.supplymanagement.com/news/2009/nao-slams-government-purchasing-capability/

9 November 2009 | Jake Kanter

"Significant weaknesses" in procurement skills are jeopardising value for money on major projects, according to the UK's National Audit Office (NAO).

The spending watchdog's latest report, Commercial skills for complex government projects, said the public sector lacked commercial capability in areas including contract management, commissioning and risk management....

Achieving excellent procurement (Update)

How do you know if your procurement / purchasing function is doing a better job than (say) this time last year – how do you measure success? How do you know if the service is VFM? 

I ask the question because:

• most procurement processes frustrate me to bits – in recent days, I have even had a friend in the same business tell me that she is losing the will to live after having written x bids over recent weeks. (You may have already read my – hopefully humorous – rant about the excesses of procurement in my field  - click here if you haven’t)
• I have been offered a complementary place at a forthcoming conference on public sector procurement (see here) for which I am most grateful. The least I thought I could do was do some further thinking about the subject – hence this blog post
• the influence, scope and size of procurement in the public services is set to grow even further – especially of Sir Philip Green has his way (see here for the main story). Government services must practice excellent: efficient, effective & economic procurement as a consequence.
• it isn’t just suppliers who lose sleep and hair over procurement so do the clients want to source a particular service. I know of several instances of where a client wants Z but because of the procurement process enforced upon them, they get Y. And from the work I did years ago supporting a firm which developed systems for the Ministry of Defence – I know that the end user (be it frontline member of the armed forces in that case or a citizen / customer in many other cases) just does not get a look in, usually.

So what is to be done? I offer this checklist below as my ‘starter for ten’ attempt at what I would expect to see evidence of in an excellent procurement function. Please feel free to add more points or make the case to tweak or even delete some of my suggestions. I have written this without any reference to any published standards (of which their might be legion!) 

For me, an ideal procurement function would: 

1. Have systems in place to understand and respond to trends in client satisfaction with its services
2. Have established a productive way of listening to feedback from suppliers / bidders (successful and unsuccessful) involved in the procurement processes they manage
3. Benchmark their processes with other procurement functions, both inside and outside their industry or sector, to look for ways to improve what they do
4. Collect the information and be transparent about all the resources spent on procurement processes: by the function themselves, the client who wishes to source a supplier and (radical idea perhaps) all the bidders. (It is a standard clause that clients do not pay for the effort that goes into writing bids. Fair enough. But that resource has to be paid for some how.) This overall data would also be a crude measure of how ‘elegant’ a procurement process is.
5. Have developed an easy to grasp method for measuring whether the cost benefit analysis of the procurement processes are improving or worsening.
6. Have practices in place to ensure that the ‘voice of the customer’ – the end user, citizen or frontline person who will be the final recipient of the new service / product being sourced – is evident at every stage of the procurement process and is heard loudly & clearly.
7. Make efforts to connect people together across the supply chain so that the procurement function does not attain disproportionate power by being the sole knowledge holder and (more crucially) that procurement is done ‘whole system aware’ (see here for further information about this).
8. Although it is harder, always look for ways to procure on outcomes or overall objectives rather than outputs or processes. (All too often, I see tender documents that specify what I know to be a less than satisfactory ‘going through the motion’ type process which will be lucky to achieve any lasting outcomes. Magic can happen if suppliers are given the scope to propose a process that may be outside the prescribed ‘usual’ way of doing things but which will still achieve the desired for outcomes.)
9. Run procurement processes in ways that inspire potential suppliers to be innovative and think of ways to achieve the desired outcomes with more efficiency and effectiveness.
10. Have accrediting procedures which do not involve the uploading of numerous policies and strategies but merely state that the winning bidder will be expected (then) to show that they have these in place.
11. Have established shrewd ways of sorting the bidders into ‘wheat and chaff’ involving (perhaps radically) asking the bidders to state what questions or measures they would pose to the other bidders to help achieve this result.
12. Led strategically, mindful of the key purpose of procurement within the overall strategy of the host organisation.  

I probably could go on!  

But what do you think? Do you agree with the points above? Would you add any more? Would you subtract some of the points above?

-----------------

Just spotted this interesting and related article: 

http://www.supplymanagement.com/news/2009/nao-slams-government-purchasing-capability/

9 November 2009 | Jake Kanter

"Significant weaknesses" in procurement skills are jeopardising value for money on major projects, according to the UK's National Audit Office (NAO).

The spending watchdog's latest report, Commercial skills for complex government projects, said the public sector lacked commercial capability in areas including contract management, commissioning and risk management....