Procurement outsourcing deals at Thames Water and City of London; will they work?

There have been a couple of big procurement outsourcing stories recently. I hesitated to write about the Thames Water contract as I had a small personal interest (see end of post). But I was interested to see Dave Henshall at Purchasing Practice’s take on it, as he picked up on the fact that the winning bidder, Efficio, had previously been working at Thames Water, leading a procurement transformation project.

I wouldn’t be as critical as Dave, but there are two other points of note. One is that this is a big strategic move for Efficio, who have built a good reputation as a provider of procurement consulting services, often in the category management space. Actually taking staff on via TUPE and becoming a genuine outsourcer with £500 million annual spend under management will bring new challenges I'm sure, but they could become another strong player in that market.

The second point is the strategy behind the deal. Ian Bolger, the impressive CPO at Thames talked about having “a first rate strategic sourcing consultancy embedded into our core business, combined with our existing staff expertise and business knowledge”, which sounds fine. But I was struck by the quote from his MD, Steve Shine, who said;

“It will give us access “on-tap” to high quality consultancy support, which combined with our own staff gives me the best of both worlds...”

I would see some warning signs in that; is he confused as to the difference between consulting and outsourcing? And they’re not his ‘own staff’ anymore, they’re Efficio’s, which does fundamentally alter the relationship.  If his perception is that nothing much has really changed, then there may be issues ahead. But let's see how it all goes.

The other news featured the City of London and Accenture. As the Guardian says:

The five year deal will see technology firm Accenture deliver a new central City of London procurement service, which will be created to undertake all procurement and procure-to-pay functions.

The shared-service type operation will be delivered by a joint team from City and Accenture, while the consulting firm can make £12.5 million if they hit all the targets, including savings of £30 million over the 5 years.  But at the end of the five years “the main thing is for us to be able to run the service ourselves and have a world class procurement service in place”, says Chris Bilsland, CFO for the Corporation.

I’m always nervous about any arrangement where accountability is at all unclear, which feels like the case here. And I hope the City have a really robust savings methodology in place if that is a driver for the Accenture payment.  I’m not convinced this is outsourcing really – it sounds like a major consulting assignment basically, perhaps dressed up as something different because consulting is out of fashion in the public sector. But the biggest unknown here is how the two teams will work together. The Accenture culture is very different to that you find in most local authorities (which is what the Corporation essentially is.) Perhaps I’m just in a pessimistic mood, but I can see some potential for conflict here.

Declaration of interest; I did a small (couple of days) amount of consulting work for one of the unsuccessful bidders in connection with the Thames contract. Not exactly the best commercial for my services, is it?!  I do have other successes I can tell you about though....

Voices (3)

  1. Charlotte Good:

    Couldn’t agree more with your comment on the Accenture deal. CoL is priding itself on its ‘sustainable procurement strategy’ which focuses heavily on buying local and buying green. Accenture’s proposition is probably to save money from getting the best (cheapest) deal and buying from massive global providers – totally opposites and it is astonishing that nobody in senior management at CoL has detected the culture clash. The results will be significant resistance from staff and eventually disengagement and loss of trust in senior management. The only winner is Accenture.

  2. Final Furlong:

    One should never outsource a problem.

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