Not so Mitie; more procurement antics hit the press

Another supplier has fallen foul of the "beating up sub-contractors is bad" mood that has swept the UK media recently (Serco, Royal Mail..)   Now it is Mitie, the facilities management firm, who were featured in yesterday's Telegraph for asking suppliers to pay for some sort of 'preferred supplier' status.  Firms that worked for a company that Mitie acquired were apparently promised help from the procurement department to sell into the Mitie group more widely.

MITIE’s procurers called for a “one-off payment of £10,000 in order to become a MITIE preferred supplier”, emails seen by the Telegraph show.

The suppliers affected had previously worked for Dalkia Technical Facilities, which Mitie acquired for £130m last year.

The CEO initially denied all knowledge of it , but later the Corporate Affairs director admitted that it had happened, that "we are completely shocked" and that all money would be refunded.

“We were an SME [small and medium-sized enterprise] once and know what it’s like to manage cash flow. We are not people that would want to do that to SMEs", said the CEO.

I have to say I've met a few Mitie people and I got a good feeling about the company, and they did seem to be a genuinely values driven organisation.  So this looks like an overly 'keen' procurement initiative.  It would have been interesting to be a fly on the wall yesterday when the Chief Exec had her chat with whoever had this bright idea....

Does this really step over the line of acceptable practice? I think it does on two counts; one ethical and one business related.   Firstly, it does not feel appropriate to ask for money from suppliers without any clear  linkage to business ; if the report is true, demanding cash just to have the possibility of doing business or more business with you does not feel good at all.

Secondly, suppliers should be chosen on the grounds of how much value they can bring to the buying organisation; not how much dosh they're prepared to give as an up front payment.  If that payment does guarantee business, you can be very sure the provider will make their margin back somewhere, either in prices or in quality / service.  And if a supplier did pay, and no business was forthcoming; well, we're back to ethics, and that potential situation sounds dangerously close to something quite unpleasant.

More generally, this media interest appears to be is a whole new dynamic for any company who is a major supplier to Government (and perhaps more widely).   The media and the public are effectively taking an interest in Government contractrors' supply chains and how they manage them.

And holding firms to account for good business practice is potentially good news.   But we need to distinguish between the acceptable and the unacceptable. The same Telegraph article also talks about Mitie receiving rebates from suppliers.  Well, end of year volume rebates have their positives and negatives, but they are clearly an acceptable tool in the procurement armoury.  There is nothing unethical about them as long as they are agreed up front and implemented according to that agreement.

So the media and the public needs to be educated to understand the difference between acceptable commercial practice and what steps over the line.  I haven't seen anything from CIPS on these issues since this kicked off; is there something the Institute should be doing to draw this distinction to wider public attention?

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