The implications of two recent headlines appear to have escaped the procurement profession’s attention. One news story was the UK government expects to save more than £5 billion this year after a round of “tough contract negotiations” with suppliers. The other was that according to the National Fraud Authority, procurement fraud is costing the public sector £2.3 billion.
According to Cabinet Office minister Francis Maude, the savings have been achieved as a result of “tough contract negotiations”, relationships with Whitehall top-tier suppliers have strengthened as a result and those that have not reduced prices will not have their contracts renewed. Maude was quoted as saying “some of the contracts we inherited were an embarrassment to our suppliers. They were quite rich contracts”.
Have I missed something here? Given these suppliers have won tenders following an intense and transparent competition I am therefore intrigued as to how savings (the government expects £140 million extra from contract renegotiation this year) can be wiped off the contracted prices. Presumably post-tender negotiations have achieved these results. If so, I didn’t know that the rules had been relaxed.
Also, if you can reduce costs following a competitive tender exercise by such an amount then surely the tender process must be in disrepute. Why not just send in the “tough contract negotiators” for all our public sector needs? Are the named suppliers aware the consequences of the announcement are that there is now a public perception that they are ‘rip-off merchants’ and must be avoided at all costs? If the figures are correct then surely they must be publicly shamed and put on the same footing as bankers.
Similarly, when the public sector is operating under such tight rules and unsuccessful suppliers are actively being encouraged to sue as a consequence of unfair treatment, how is it possible to be fraudulently robbing the taxpayers by £2.3 billion – £1.4 billion of which is attributed to central government?
Both stories place public tendering in disrepute and there is obviously no reason to continue with any of it. All major procurement projects should be undertaken by “tough contract negotiators” and those suppliers who are not up to dealing with negotiators on this level should immediately train their sales staff or go out of business.
Finally, why is it when anyone saves a million, no one takes any notice any longer? Is this possibly the reason why “billion” is the new buzz word in the world of politics and business?
* Trevor Black is managing director at Blackwolds Consultancy