The G4S Olympic contract debacle certainly brought supplier relationship management (SRM) back into the spotlight during this year’s silly season.
It seems to me there was a failure to comprehensively (and repeatedly) assess the contractor’s capacity and capability to deliver what was (re-negotiated) in the contract. Perhaps there was a mindset that presumed a contract provides assurance of success.
A survey by Vantage Partners in 2009 demonstrated up to 46 per cent of the value expected from a contract leaks away between the time the contract is awarded and the implementation of the agreement. Just the other day, I was talking to a colleague who had recently taken up an assignment in the oil and gas sector, and found himself having to tackle value leakage in the form of supplier on-time-in-full (OTIF) performance running at a lowly 31 per cent. This level of post-contract performance failure is tolerated by many organisations, but SRM can provide the framework for eliminating such lamentable performance.
Now that the London Games are over and the run to year-end begins, you can almost hear the rustle of SRM manuals being thumbed and risk policies being dusted off by procurement organisations in all sectors keen to ensure they don’t have their own G4S-equivalent contract likely to bring them nasty surprises.
A renewed focus on risk, supplier capability and capacity, as well as value improvement can emerge from lessons learned from outside the organisation, and procurement leaders should be looking to use the G4S story to engage stakeholders in other functions on the importance of managing the all important post-contract phase of any significant supplier agreement.
Procurement leaders frequently profess a wish to raise their organisation’s game in SRM, citing lack of resources and support from stakeholders. Now would be a good time to take the game to those stakeholders and use the example of G4S to re-energise your SRM programme.
☛ David Atkinson is founder and managing director of Four Pillars