Are you a Predator? And what’s that got to do with apprenticeships and public procurement?

So, what’s your business? Are you a Predator or a Producer?  (I think I’d like to be a predator – it sounds sort of sexy and cool... like the Red-Tailed Eagle we saw about 10 feet away in a park in Philadelphia last month, enjoying a (dead) squirrel...)

But as an organisation, do you invest in apprenticeships, train your staff, spend lots on research and development?  Or do you exploit child labour in Bangladesh, acquire firms then drain their pension funds, knock down the factories and sell the land for development as lap-dancing clubs and casinos?

I’m talking of course about Ed Milliband’s speech at the UK’s Labour party conference last week.  He divided firms into good firms (producers) and bad firms (predators) and said the good should be rewarded somehow by Government, and that somehow, the values of the UK people weren’t being reflected by ... who exactly wasn’t clear.

But hang on a minute, Labour were in power until 2010. And wasn’t it Labour who loosened the laws on casinos? And presided over a huge growth in lap-dancing establishments, all-day drinking, de-regulation of financial services...? They’re just examples – my point is that criticising the way the UK has gone over the last 10 years is a bit risky when it was your party in charge for 9 of them. But his general themes, that capitalism hasn’t always worked well, that many bosses have been overpaid, and  big business hasn’t always acted in the public interest , will I think resonate with many despite the hostile press coverage (and see some of our thoughts here).

However, few businesses in practice are all good or all bad. Private equity firms have undoubtedly saved some failing businesses, and often take a longer-term perspective than quoted firms, driven by their half or even quarterly results. And another firm might offer lots of apprenticeships, but have a Board who pay themselves disgusting amounts of money and eventually kill off the business. Or produce fat-filled fast food junk.

Getting back to our core Spend Matters business – there are some key points that we need to keep making in terms of public sector procurement. Firstly, the more you try and distinguish between “good” and “bad” firms, and reward them through the public procurement process, the more subjectivity you’ll introduce into procurement, and that has dangers of leading in time to poorer value for money and increased corruption. And secondly, requiring firms to jump through hoops in order to win public contracts only benefits the big, incumbent type players who know how to play the game, as we’ve noted before.

Let’s say Government decided to go to market for someone to run a website on public procurement.  I happen to think we would be pretty good at that and would offer excellent value for money of course!  But Spend Matters isn’t big enough to take on apprentices or sponsor university research programmes – we wouldn’t tick all the boxes. Supply Management might be just about big enough, and Reed Elsevier or the Guardian Media Group certainly are. So the small firm stands no chance once you start introducing these barriers; and that’s what they are, barriers.

It’s also a fallacy that getting government suppliers to offer a few apprenticeships is going to solve all our economic and social problems.   I’d have more admiration actually if any politician was pushing for a more radical approach. Could public procurement look at the salary of suppliers’ top executives? Could we construct an argument that says those firms where the top people cream off huge salaries and bonuses cannot in the long term offer the best value?

I’d rather a really radical approach like that rather than playing around at the edges with issues such as apprenticeships. But I suspect that would fall foul of EU procurement rules, and as Labour are still in love with the European ideal (which is strange, as it hardly seems to be benefitting the “working class” of Europe very much these days) I can’t see them challenging that.

So in the context of public procurement, we may see a lot of fuss around peripheral issues like apprenticeships, but without any real pressure for significant change.

Voices (3)

  1. Gurn Blenston:

    It does concern me that on the one hand we quibble over the salaries of some civil servants on the basis that they are paid more than the PM (and Will Hutton is right, this yard stick is a complete nonsense) and yet we seem not to care that vendor’s public sector account managers are frequently paid far more than the highest paid civil servants. And their salaries are totally derived for the amount of revenue they can extract from the public purse.

    We should care about remuneration in our supply chain.

  2. Dan:

    But issues like board-level pay is matter for the shareholders of that company – after all, they approve the appointment of these people (in theory). If government started looking at these issues as part of procurement, wouldn’t there be complaints that they were riding roughshod over the rights of the shareholders?

  3. Fred Smith:

    Well said. As the FT pointed out recently, “…some behaviours are morally or socially more desirable than others, even if they are all legal. It would be odd to disagree with this. It is evidently true of individuals: not all are equally honest, collegial, or friendly, any more than they are equally smart or productive. The same applies to business.”

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