The Eighth Day of Christmas – Paying a “Fair” Price for Raw Materials?

Dear Leader,

I can understand the annoyance that you and your Council colleagues felt this morning when you could not get into the car park because of the protesters outside the council office.  I wanted to give you the background to this, and why the meeting was disrupted.

You have probably seen some of the ongoing protests from farmers about milk prices. They claim that they are being forced out of the business by unrealistically low prices that do not even reflect the cost of production. Up to now, much of the focus has been on the retailers –a little ironic perhaps given some of them actually pay pretty good prices for their milk.

But now the farmers are looking at some of the commercial buyers of milk, including local councils, catering firms, food manufacturers and so on. Because our council uses competitive tendering methods to source our annual milk requirement, we are being accused of “driving down the price”.

I’m not sure what else we can do though . The price we pay was agreed following a tendering process and indeed we are bound to by competition and procurement regulations to buy in an open manner. I can assure you that all we have done is a very standard procurement process – we didn’t even use a reverse auction in this case. We could conceivably set a minimum price, but then how would we decide on our suppliers, as I assume we would have many offers if we were willing to pay a price higher than the true market. And if we cannot rely on the market to set prices, the whole basis of public procurement falls. We cannot just unilaterally decide what is a “fair” price to pay!

Having said all that, I do understand that you and the other councillors were not impressed at the abuse you suffered at the hands of the milkmaids this morning. Who would have guessed that such sweet looking girls knew such language! And I’m very sorry about the “manure” and your new shoes. I think the cows were obviously a little stressed about finding themselves being milked in the centre of Camberley.

We will keep an eye on the situation and very happy to discuss further. I’m happy to meet any farmers’ representatives also if you think that might be useful.

Tim

Head of Procurement

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