More on the UK Government Lean Sourcing approach – useful, but not a panacea

Last Thursday we started looking at the UK Cabinet Office material on Lean Sourcing that was published recently. It forms in the main a very robust framework for running a major, one-off type procurement exercise, but it doesn’t cover many of the critical success factors for successful procurement. When I think of the key issues that determine success (or failure) in major contracts I’ve been involved with, some “top of the head” points that come to mind are:

- Really understanding supplier capability rather than what they claim to be able to do!

- Commercial structures (pricing, penalties, risk/reward etc. )that promote the right supplier behaviour and reward success.

- Contractual models and contract management provisions  that protect the buyer but are perceived as reasonable and lay the ground for successful  delivery and contract management.

- Understanding true whole-life costs and structuring the tender and evaluation around this.

- Appropriate risk allocation between supplier and buyer (which doesn’t simply mean transferring as much risk as possible).

- Tender evaluation models that support the aims of the procurement, combine price and non-price factor successfully, and identify the “best” supplier(s).

- Use of auctions or “market informed sourcing” (in certain situations) to drive competitive pricing.

You will look in vain for much – or anything – in the Lean Sourcing Standard Operating Procedures (SOPs) documentation to cover topics like these.  It appears that the programme is NOT designed to address these issues; it is focused very much on the SOPs providing a good, tight framework for running the procurement project (relatively) quickly – but of course that doesn’t  mean you will necessarily end up with a successful contract and supplier.

There’s nothing for example on how to design evaluation processes, how to score price, weightings, and so on – the stuff we wrote about 3000 words on recently here  (and that got a lot of reader interest). As that area is probably the biggest source of legal challenges to public procurement, the SOPs clearly don’t remove the danger of challenge even if you follow them to the letter.

In addition, auctions don’t get a mention.  Market and supplier research are covered but focus mainly on what you get through the supplier consultation rather than suggesting you should be doing independent research (so there’s a danger the suppliers just tell you just what they want to promote). Search the SOPs for “risk transfer” and there’s nothing there.

It’s a bit like reading a set of instructions for setting up restaurant. You could write a manual and lay out all the steps involved in a clear fashion. Find your property, install a kitchen, put tables and chairs in dining area, keep it all clean, buy the ingredients, store them safely, meet food hygiene rules, cook meals, serve them promptly to diners...

But if your chef can’t cook, the menu is limited, your prices are too high, and your restaurant is decorated with pictures of old men enjoying their Turkish Bath..  then it isn’t going to work, however diligently you followed the manual.

Remember, the NHS National IT Programme was hailed as a great success initially because Richard Grainger drove the procurement through in record time. (AND he transferred risk to the suppliers  - well, one type of risk anyway). But the speed of the procurement was an irrelevance in the greater scheme of things, looking back at a programme that has wasted years and billions of pounds for both suppliers and the public sector. Indeed, because of the speed, stakeholder buy-in was neglected which proved to be one of the programme’s undoings. I’d rather have a procurement with a successful outcome that takes 180 days than one that delivers a useless contract in 120.

All this sounds very negative, but really I’m not criticising the concept of “lean”, just sounding a note of caution around what this is not. To be positive, there’s much to admire in the material, and a lot of very useful thinking and process. More structure to the procurement process wouldn’t go amiss in many public organisations, and of course reducing the time taken for most procurement exercises is a sensible objective.

But the SOPs are not a panacea, and Lean Sourcing appears to be limited in its scope when we look at the need for  “better public procurement” in the widest sense.  This is perhaps a necessary condition for better public procurement performance, but it certainly isn’t sufficient.

I would therefore hope that Cabinet Office and GPS  don’t think that publication of this document means that they’ve cracked it and their work is done. There’s still lots more to do....

First Voice

  1. Rob:

    I like your analogy Peter – restaurant, cooking, chef etc. Certainly a number of chefs were involved in creating this particular broth. Perhaps, it is simply the local ‘franchise’ of a private restaurant chain…

    But, it also left me wondering which Department might have triggered your thoughts on the pictures of old men enjoying their Turkish bath? There are a few strange folk in the DWP’s Commercial team in Sheffield and Leeds. And there might be a few ‘odd ones’ in MOJ’s procurement team who, having been exposed to judges, might prefer being ‘oiled-up’ and ‘rubbed-down’. Perhaps it’s because the CPO in ERG prefers to wear a skirt at public events…?

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