An SME Perspective on Master Vendor Frameworks

We are delighted to welcome this post from Peter Rowlins, Group Chief Executive, Methods Group – a UK-based SME. While these are not necessarily the views of Spend Matters, we do think this is a worthwhile contribution to the debate.

I have enjoyed reading Peter Smith’s recent articles. Looking at the current issues that are being discussed with regards to master vendor frameworks, managed supply agreements and neutral or managed vendors, it is perhaps worth giving an SME's perspective.

One observation I might make is that the review undertaken in 2011 by Philip Green of Government Purchasing was possibly the least helpful commentary I can remember. This was a ‘cartoon’ approach to a difficult and complex subject. The level of insight achieved was very low - yes a Ferrari will cost more than a Ford Fiesta and government procurement is tricky, often not done well and suppliers do take the mickey if allowed to. The only useful observation seemed to be that government could buy commoditised products and services more often - yes, do buy the Ford Fiesta if you reasonably can.

Unfortunately the outcome of the Green review has been that government has tried to centralise a huge amount of its buying, but in the process has entirely confused the laudable intention to aggregate demand with the very unhelpful intent to aggregate supply. If the government is to achieve best value from purchasing it can do so by buying certain products and services in a collective and coherent fashion: buying eggs by the dozen, rather than individually, usually makes sense. However, only ever buying from one supplier for a protracted period of time restricts the market, puts other suppliers out of business, and leads to monopolistic behaviour, and ultimately very poor value. Finally, over time, purchaser and supplier inevitably develop an unhealthily close relationship. Taken together, these factors achieve exactly the opposite of what was intended.

An important and related issue is that you do rely on the purchaser understanding what it is buying, another area where government continues to fall very short, with limited market knowledge and no understanding of market dynamics.

Good Practice

I believe that value is achieved by competitive tension, real competition and encouraging innovation. G Cloud is a prime example where the government has succeeded in fostering an open market, with a level playing field. Competition is in the safe hands of the people who need the service - the customer who really understands what they need, bought within a prescribed framework with agreed terms -- easy. G Cloud provides a wide range of choice, from both large and small suppliers, and innovation is widely encouraged - not only by the constant renewal of the framework but also by encouraging suppliers to put a wide range of services on the G Cloud catalogue. This is a great example of how many other government services could be bought. Market abuse or domination is impossible -- contracts tend to be time-limited, and buyers can swap suppliers in and out quickly. Quite simply there is too much available market choice for any one supplier to be able to create a dominant position, such as was described in the Public Administration Select Committee report "A Recipe for Rip Offs." That could never happen with G Cloud.

Bad Practice

Bad practice is enshrined in that very analogue and anachronistic approach of using a master vendor or exclusive frameworks, with often a very limited supply base. Having a ‘master vendor’ or ‘prime contractor’ is possibly the worst possible arrangement, the result of lazy and poorly informed procurement practice, where administrative control takes priority over value and competition. One of the arguments in favour of master vendors or a prime is that the master vendor manages a wide and varied supply chain that no customer could realistically manage. This is obviously a fallacy as G Cloud has shown. Customers can make very sensible and informed decisions, without the need for an administrative intermediary. G-cloud is competitive for the simple reason that there are lots of suppliers, period: competition and innovation are therefore an integral part of the offering. Another frequently-touted argument in favour of awarding control over a huge public market to a single private company is that the problem is so complex that the public sector simply couldn't possibly manage without them. This is the reason we have such complex legacy IT environments in government now: it hasn't been in the interest of large, ‘prime’ suppliers to simplify them. If they did, then anyone could manage the environment, and they would be out of business.

For SMEs, the main reason a master vendor is the worst possible outcome is that the new intermediary removes the access to your customer on which your ability to provide a quality offering depends. There are other reasons, of course, these include: poor payment by master vendors and various behaviours that result from their commercial incentive to be anti-competitive, such as stealing people and ideas, imposing onerous contractual terms and ensuring that a customer never gets close. Master vendors are placed by government in positions where they are effectively able to quash the competition, and kill any of their innovation. I don't think that this is good for government, especially now as we really do need much greater levels of innovation to get better services for less money at all levels.

How do SMEs obtain a level playing field with government work?

As a supplier to government with over 25 years’ experience, I have seen a wide variety of different purchasing and enabling arrangements. Undoubtedly the best way for any supplier to work with a customer (and vice versa) is to be allowed direct engagement - not only to discuss requirements, but also delivery and ongoing quality assurance.

The G Cloud concept is an SME's dream - in fact it should be the dream of all good suppliers. If you want to succeed in G Cloud you have to work hard and get to know your client. Work rarely comes your way without having to put the effort in. That said, if you target your customers, get to know their real needs and you have a well priced offering, you are in the game. Our experience is that an open, frequently renewable framework like G Cloud with set terms and agreed services should be a template for delivery of most services to government.

Let's apply the G Cloud commercial principles much more widely than they are applied at the moment. This will enhance competition and drive so much better value than any centralised controlled procurement ever could. G Cloud isn’t a silver bullet for all buying - but it is the best approach that government could take to many things it buys, including its commodities and services in the technology space. If it applies well to the fast-moving technology market, why not elsewhere too?

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First Voice

  1. Nick @ Market Dojo:

    Interesting to read the views of a fan of G-Cloud / CloudStore / Digital Marketplace or whatever it’s called now!

    Our listing on G-Cloud actually makes us less competitive than if you bought from us directly and that’s due to the commission that is deducted from our revenue, as well as the monthly overheads of managing the MISO accounts.

    However I can see it offering benefits to purchasers by prescribing non-SaaS providers into a transparent pricing model (and even those who say they are SaaS but don’t have a public tiered pricing model nor a 100% single-instance, multi-tenanted self-sign-up on-demand platform).

    G-Cloud also leaves itself open for abuse. It can be tempting for public sector bodies to interpret a G-Cloud listing to something that loosely fits their needs, thereby circumnavigating a proper procurement exercise, when in fact it isn’t at all appropriate. Who is auditing this kind of behaviour?

    In some respects it can reduce competition. Instead of the opportuntity being publicly announced on TED, Contracts Finder and so on, the buyer can simply draft up a call-off to their preferred provider on C-Cloud and be done with it. The rest of the market has been closed out. Who’s to say that it was even the most competitive offer on the table? There could have been other, more competitive and more appropriate listings on G-Cloud, yet the buyer has no obligation to consider them.

    That said, it is a good tool to at least make buyers aware of who is out there, what prices are on the table, and to provide a less bureaucratic method to purchase.

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