Is Government Buying Wisely?

Being part of the European ‘nanny state’ must have its advantages, although I can’t quite think of even one at this time. Most definitely government travel buying, or for that matter any kind of state procurement, is not one. The conditions, deadlines, red tape, mandatory declarations and disclosures are such that the likelihood of a smart or mutually worthwhile deal is small.
Until I got involved in the process, I have always been perplexed as to why, if there are so many procedures and rules, government projects always end up costing much more than the original contract. In the United Kingdom, you only have to look at the Channel Tunnel, the Millennium Dome and Wembley Sport Stadium as examples of this. Why is this, I thought, and then I got involved in a major UK government travel tender myself and saw what I think could be the key contributors to cost and timing failures. I will share my experience and subsequent assumptions with you but I must state at the outset that these are my own personal thoughts and not those of the company I worked for at the time.

If you are a private company you can set your own tender schedule and process. In government, you cannot. There is a strict procedure in relation to timelines, disclosure, format and bidder selection you must keep to. On the surface this might seem highly laudable but in actuality it becomes restrictive, eliminates flexibility and costly in unnecessary administration and process. It also works on the basis that you know exactly what you want to buy as this has to be declared and published at the outset. Unfortunately, such is the size, mix and variety of such contracts that this essential is unknown and is probably a part of why the business is out to bid in the first place.

So what are these restrictions I am talking about? Here are some of the key ones as I perceive them:

1/ you have to publish all details of the contract and bid process in advance across European and give all equal opportunity to bid. You cannot be seen as individually selective or discriminatory in any way even if you are wasting your time or that of bidders who stand no chance of success.

2/ At this stage you must declare exactly what you are putting out to tender and you cannot easily change it even if you do not really know if it is accurate or not.

3/ the system seems to prevent any informal or individual dialogue with potential suppliers without giving everyone equal opportunity so there is no way building understanding, knowledge or relationships in order to improve/modify the brief.

4/ Everything has to be done by the book on a ‘one size fits all’ basis even though these contracts are some of the most diverse one is ever likely to come across.

5/ Government bodies seem incapable of aportioning or sharing out costs and savings amongst themselves which means that pricing is a nightmare and the potential of negotiating a fair and equitable financial package is minimized.

If you put some or all the above together you end up in a no win situation as the buyer has had to follow an entirely unhelpful process ending up with an oversimplified deal full of loopholes. The seller has to find some way of picking up the pieces while making a profit and minimising negative exposure.

At the beginning of this piece I mentioned that, in my eyes, most government contracts end up costing far more than the original contract agreement. I personally think it may be as a result of my point in the previous paragraph. What can end up happening is that the supplier goes in at a rock bottom unit price but then builds in a whole raft of necessary caveats in case the core buyer RFP is wrong ,which of course it is. The buyer is not able to hold contingency funds or apportion out costs internally so they have no way of dealing with it. The end result is that the government has an embarrassing overspend and the supplier makes their money out of charging caveats built in for ‘out of scope’ activities.

I write this for two reasons. Firstly I think it is wrong that any government should have to ignore sound commercial tactics and hog tie itself with bureaucracy when buying. Secondly, as a tax payer, it is my money they are wasting.This post was syndicated from the blog of former managing director of HRG UK Mike Platt.