Big suppliers get closer to Government – good move or more indirect discrimination?

We published a bit of a polemic the other day about capitalism and the role procurement plays in (often unwittingly) making markets less competitive.

And then we spotted this - a note on the UK Cabinet Office website about the "Commercial Interchange Programme Pilot", where staff from big suppliers having the chance to spend time inside Government departments (and vice versa). The pilot commenced in May with "secondments into government for a period of three to twelve months".

"The concept of a commercial interchange programme was formed at the strategic supplier summit during December 2010. Subsequently a number of organisations volunteered to join the pilot programme. These include; Accenture, Atos, BT, Deloitte, Fujitsu, Serco, Steria, Vodafone, Xerox".

Despite the nature of that list of global giants, the programme is, according to the Cabinet Office, NOT only open to large existing suppliers.

"The programme welcomes volunteers from those commercial organisations that would like to benefit from the interchange ..."

But let's think about this - the opportunity cost for the firm of putting a bright mid level manager through this is at least £50K .  If your revenue is £1 billion, and annual profit £100M+, that's a drop in the ocean. If you turn over £2 million, that £50K could be half your annual profit gone and your top salesman / consultant / ops manager out of action for 6 months.

There are some sensible comments in the note around potential conflicts of interest and potential for preferential treatment in particular. But at the heart of it is an opportunity for firms, who already win a major proportion of government work, to get even closer to their clients, understand better what is going on, who the key players are, and, perhaps, work out how to bid for contracts even better next time round. They will also no doubt treat their civil service guests very nicely while they're working with them - who knows what benefits that might have one day.

Is there a bit of quid pro quo here? A benefit for these big firms in return for whatever they coughed up during the negotiations with major suppliers that Cabinet Office claimed saved £800 million? That could be the driver for this - effectively, it may have been a concession to the suppliers as part of the negotiation process.

It's easy to see why the government doesn't want this scheme to cost the taxpayer anything, and therefore funding it for smaller suppliers is probably out of the question. And it certainly has merits as an aid to good collaborative working with key suppliers.

But it is, I'm afraid, just another example of accidental bias against small, non-incumbent firms, and favouritism towards what we might term "the usual suspects". And that all contributes ultimately towards building the barriers to vibrant competition.

Voices (11)

  1. BJkson212:

    interesting exchange of views around this… clearly a very emotive topic. But let’s be objective about what’s being said… I think to varying degrees each view stated here has elements of truth. Huhh? is right in saying that IT projects have had a poor delivery track record in government and that things need to change. Final Furlong is also right in saying that there needs to be close control over who can participate so as to avoid inappropriate behaviours. Steve Bagge is probably right in saying that the route to market for other smaller companies may well be via partnering with a large company (due to size and sheer number of SMEs) and that this is the most likely reason for the programme.
    Clearly there is no one-size-fits-all answer…. I do have some sympathy for the Government in these situations though as it seems whatever they do, people will find a way to criticise it. Am interested to hear alternative suggestions?

  2. esd:

    to quote sir bernard gray on the desi show
    Two other thoughts strike me
    about the show. First, the agility,
    innovation and determination
    of our Small and Medium-sized
    Enterprises shone through.
    The MOD often finds it hard to
    work with smaller companies:
    our scale, timetables and
    bureaucracy do not sit easily
    with the fragile and rapidly
    moving fortunes of many
    smaller firms. We also do not
    understand the challenges many
    small companies face because
    these issues are alien to us.
    Driving cash flow, for example,
    is a critical issue for all small
    companies, yet it is something
    we find hard to factor into our
    consideration. We must find
    ways to allow these companies
    to grow. Some of them will
    be the great oaks of the 21st
    century.

  3. Sam Unkim:

    The real problem is not Suppliers getting to close to Government.
    Its MPs and Ministers using their positions to line up lucrative directorships, This just seems to make it easier for them to bury their snouts quicker.

  4. huhh?:

    And this isn’t supposed to introduce bias in which suppliers are selected in the future?????

    This is total tosh, smacks of opening up the UK government like they do in the US. Government by plc anybody.

    They should be increasing the gap between government and big plc – not integrating them..

    We shouldn’t be shocked when these orgs start hoovering up contracts in the future in supposed “open” competitions.

    1. Steve Bagge:

      How naive. I wish people would start treating the whole SME debate in a more logical way… noone ever seems to clearly articulate what SMEs can and cannot realistically do for government. I completely agree that SMEs should be given more opportunity to win govt business but let’s be realistic about what this business is. SMEs can provide innovative new solutions but are people seriously saying that they can be expected to deliver nationwide, secure, business critical systems for govt and shoulder the delivery risk of them going wrong? Could Jo Bloggs IT Ltd with 24 staff deliver a national benefits system? deliver border security? keep our armed forces operational? collect £397bn tax revenue per yr? etc etc etc. I think not. Areas like hardware, productivity software, maybe even ERP are potential areas for SMEs but not highly secure enterprise systems where a large slice of govt IT budget is spent. The problem is, most people (this sadly includes Govt ministers and officials) have no concept of what these are or how complex they are, their IT knowledge limited to what they use at work or home on their desktops/laptops. Also, current Govt terms and conditions have contractual terms like “unlimited liability” which could put an SME out of business in a trice if they slip up. Do people realise this?
      The reason I think large companies are being offered these secondment roles is precisely so that Govt can get them onside with an inclusive approach so that suppliers’ tenders include SMEs in their delivery scope enabling them to enter the market at lower risk.
      I’m sorry but “They should be increasing the gap between government and big plc – not integrating them..” is short sighted, ill-informed, emotional nonsense.
      (These are my own views not those of the large company – which employs 20,000+ UK citizens by the way – for which I work).

      1. Final Furlong:

        Are you the same Steve Bagge whose role is (according to a particular website) “Central Government Business Development Executive at IBM (UK) Ltd”? If so, I’ll try my best not to be too shocked at your views.

        ‘Huhh’ didn’t mention SMEs – but large suppliers – like, erm, IBM.

        I’ve always held the view that buyers should get close to their key suppliers (“get inside their shorts” so to speak). Never been a great fan of allowing dominant suppliers to get into the shorts of ‘developing’ buyers.

        I imagine many of the top procurement experts would share this view, unless, of course, they’ve been ill-informed, being far too emotional, or simply myopic.

      2. huhh?:

        IBM Dude – Just the super snooty response I would expect from an IBM exec! If I paraphrase what you said. “We’re big. Government spends big. Therefore we should be awarded all the contracts” Great logic.

        Based on your logic, your industry should have a perfect delivery record on large IT projects, shouldn’t it? I mean they should cost what you say they should cost? And deliver on time? As you’re so big, so brim full of expertise and so damn smart?

        Let’s look at the evidence, shall we? Excerpt from 2007 report:

        • 105 outsourced public sector ICT projects with significant cost overruns, delays and
        terminations.
        • Total value of contracts is £29.5 billion.
        • Cost overruns totaled £9.0 billion.
        • 57% of contracts experienced cost overruns.
        • The average percentage cost overrun is 30.5%.
        • 33% of contracts suffered major delays.
        • 30% of contracts were terminated.
        • 12.5% of Strategic Service Delivery Partnerships have failed.

        Full report here:

        http://www.european-services-strategy.org.uk/news/2007/ict-contract-chaos/105-ict-contracts.pdf

        Bang-up job you’re doing Mr IBM! Maybe it’s time government looked at other ways of doing things??

  5. Watcher of the Skies:

    Looking forward to reading the report on the set-up of this; undoubedly including a comprehensive study of past supplier/project performance, cost:benefit analysis, commercial risk assessment, and the long-term effects of operational dependency on a small number of corporates.

    I’m guessing we’ll be waiting some time for all of that. Send these muppets back to school.

  6. Final Furlong:

    Perhaps it’s a way in which large suppliers can say to directly to Ministers (and the most senior of civil servants) “Ah, now we can see why so many delivery programmes end up being so expensive and end up being complete disasters…” when they observe for themselves how initiatives are forever stumbling their way through the fumbling civil service….

  7. Dan:

    No-one would bat an eyelid if this happened in the private sector, so it depends on what you want. More commercial behaviour from Government, with (hopefully) better value for money? Or better results for the wider economy with all the inefficiency that goes with it?

    This is just from the point of view of encouraging ‘vibrant competition’, but Government also wants to use procurement to drive sustainability, equalities, innovation and market creation, employment etc. I don’t think anyone has yet come up with the ideal way to balance all these requirements, with procurement bods caught in the middle.

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