Cram and Hughes on public sector procurement

As we mentioned last week, Jon Hughes and Colin Cram had the dubious honour and privilege to appear before the UK Government’s  Public Administration Select Committee last week to talk about public sector procurement. I’ve watched it now, so we’ll have a couple of posts with a summary of events and then some of my personal comments.

Bernard Jenkin MP is the chair and he kicks off.

Does the government have a clear strategy for transforming  public procurement? Is it the right one?.

Jon Hughes-  the answer is clear, no. Does have a strategy in part, not in totality. Government Procurement Service is influencing just 4% of total third party spend. Are there pockets of good practice? Yes. but there is an absence of clear leadership, clear accountability.

Colin Cram – there are “desperate attempts to patch up a flawed design”.  We need agreed objectives, to understand the spend, design organisation. We should have an integrated, coherent procurement organisation. Break down silos. There is huge commonality across the whole public sector. (Stop hitting the table Colin, it’s annoying).  He’s holding forth about his centralised procurement model. Are centrally negotiated contracts more efficient? Yes, he says, but should also look at strategies.  Aggregate spend for whole of public sector. Not just about savings, need to look at security of supply chain.

MP asks about need for flexibility with central models – also need a tension, users need to be able to go elsewhere, otherwise suppliers will form cartel?

Cram does a swerve worthy of an MP and says but we already have cartels. It is easier to have cartels when procurement is fragmented  - he broke cartels 20 years ago.

Hughes now – structure is one of 4 big levers. Debate about centralisation – prefer to use word consolidation not centralisation.  Can’t centralise everything, can consolidate. What would be a fit for purpose structural change that would consolidate spend? £100B spend within the M25. Could we consolidate across NHS Trusts? Yes. Local authorities? Yes. But sector has a poor record on hubs, centralisation.  How do we do this? Various options.

Bernard Jenkin, the Chair – don’t we need to talk more about leadership and skills. If everyone did their job well, regardless of structure, wouldn’t we be better off? Great point.

Hughes says leadership, accountability is the no. 1 lever of his four.  Don’t have the concerted focus. Crothers is not really CPO for government, he is CPO for part of Whitehall. No clear plans for most of public sector.  Bring about change by leaders taking accountability for what they’re doing.

Jenkin points out that the levers don’t exist by statute– fundamental problem. Hughes gets trapped a bit by tricky question – do we need change in legislation to drive better procurement? Neither Hughes nor I are quite sure what Jenkin means by that?

So… we’ll come back to part 2 of the debate tomorrow, when the hearing got onto EU directives and skills.  But Cram’s idea of a central buying organisation for the entire public sector needs tackling head-on. It is absolutely mad, impractical, unrealistic… and I would bet the mortgage it will never happen. It distracts attention away from more important issues as well.

Over the last couple of years, Cram has established himself as a bit of a spokesman for the profession. That’s fine, we’re all entitled to do that if we can pull it off. And I like him personally, and his heart is in the right place (personally and professionally).

But he’s now doing the profession a disservice with some of his ideas. So we need to point out that he doesn’t speak for many of us and frankly, in some areas, he is simply wrong and is promoting ideas that are borderline crazy.  But I’ll come back and give a full explanation for why the centralised model can’t and won’t work sometime soon – and maybe I’ll send that to the committee too.

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Comments

  • Sam Unkim:

    Should we all get behind John’s four CPO’s model ( God knows the NHS needs it ) and let Colin’s plan be revisted from that plateau ?

  • David Atkinson:

    Peter,

    The structure and the system are massively important – more so than individual leadership. Improving skills and leadership competence will never be enough. As John Seddon has said on many an occasion, doing more of the wrong things right is no recipe for transformation. You have to do the right things right.

    And as Jon Hughes’ Future Purchasing’s report on public sector procurement argues, practices, and the structures that go with them, need to fundamentally change.

    Is there any video/audio from the session?

  • Jon Hughes:

    Crude, simplistic centralisation is plain wrong. Having spent the last couple of decades arguing strongly that structural change is only one of four major levers – and the last one that anyone should come to – it is potentially very worrying if there is any attempt to pursue this without the other levers being properly in play.

    Firstly, transformational change never happens bottom-up through the procurement community – it only happens top-down when senior executives and the business leaders who really control spend decisions and organisational reconfiguration decide that it is worth pursuing for proper business and service transformation reasons. That is why leadership and accountability is first. Secondly you need to know what performance improvement you’re going to secure by doing it, and which processes and capabilities you are going to strengthen to achieve it. Thirdly, you need the capacity, calibre and competence to deliver it. Fourthly and lastly you can then evaluate the structural options that may be part of this.

    The M25 example was only for illustration. Doubtless a business case can be created to support it in part, or entirety, or indeed not to touch it at all. There are at least ten structural options available that could be considered.

    It’s interesting to reflect on why the PASC has kicked off another inquiry into public procurement. If you’re optimistic it’s because there is a strong belief that more and faster transformation can deliver very significant benefits central to government policy. That is certainly where I come from, but it should be driven forward, not in centralisation terms, into Whitehall, but with say the Department of Health or local authorities creating their own strategy, properly backed by their leaders and constituencies. If you’re pessimistic, it’s because there is a dissatisfaction with the operating model, weak leadership and minimal progress. Attention that can drive change for good … or bad.

    There is a link to the video off the Home Page on http://www.futurepurchasing.com.

    Also, Peter, Bill Crothers and Sally Collier went in before us to the PASC for what I think was a private session. It would be interesting to know what lines of inquiry were pursued.

  • Guy Allen:

    There is another reason why mass centralisation would be ineffective, even if it could be pulled off. Lets take one simple example, desktop purchases. If you had one buying agency they would be the biggest customer by far. They would be bigger than the next biggest purchaser by at least a factor of ten.

    This means

    a) their costs would have to be fully loaded, no buying at the margin here

    b) because of their dominance, the Government specifications would be waht we all get, potentially stifling innovation and creativity (thats the Lada argument in anycase

    c) Only massive companies could realistically bid. Winning or losing the contract would be such an event it would swing the companies fortunes too much in both directions. Feast or famine

    d) consequently, over time, competition would be further reduced

  • colin cram:

    For a better understanding of what I am proposing, read the Guardian’s Public Leaders Network tomorrow (Thursday). The PASC did not explore the models in any detail and Guy’s concerns could easily be handled by my model – which is arguably more than they are at present.

    I prefer the word ‘integration’ to ‘centralisation’.

  • Final Furlong:

    Read your article. Just as you said as the PASC, it’s a model that worked well (well, it worked well for you) 30 years ago.

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