How powerful is “embarrassment” as a procurement negotiation tactic?

The UK Government's new Crown Commercial Representatives (CCRs) broke cover last week - well, Bill Crothers did in the form of some Supply Management comments. The CCRs are going to provide some over-arching 'supplier relationship management' to the top 50 or so suppliers to Whitehall (the central Government Departments).

Crothers is an ex-Accenture Partner (not in the procurement area I believe) but is now the Home Office Commercial Director as well as one of the newly appointed CCRs. There wasn't much of a clue in the comments in terms of the role going forward, which still has many unanswered questions; principally, just how will the CCRs 'add value' above and beyond what Departments will be doing through normal engagement with the top suppliers?

But Crothers was interesting when it came to commenting on the negotiations with the top suppliers that have delivered huge savings (according to the Minister, Francis Maude). We've commented before, pretty favorably generally, on the initiative, although we've also pointed out that not a single supplier has issued any sort of profit warning since the negotiations. Anyway, Crothers says that 'embarrassment' was used a a negotiating tactic.

"In some ways, it was a negotiation of embarrassment, in that  Francis Maude took a position that we were not trading anything. This was not us negotiating in a traditional sense, in that we’ll give a contract extension in return for (better terms)...  when (the government) was acting as a single customer, and you looked at the margin that was being enjoyed and then compared that margin to some smaller private sector clients…you would then say, ‘this does not seem fair – do you understand that?’ The conversation was transparent and they would say, ‘oh, ok, we understand’, and then make a contribution,” Crothers said.

I'm not sure about that. I own shares in Serco, Balfour Beatty and Carillon (we're not talking big money here...) in my personal pension scheme, and I'd be pretty annoyed if they offered up significant margin on the back of "being embarrassed". And just how does the Government know the margin that suppliers are making on "smaller private sector clients"? And might that not reflect the fact that Government is expensive (and a pain) to deal with?

But it does highlight the difficulty Government negotiators have in this sort of situation; the normal levers we would use in the private sector; threatening to cancel contracts, promising more future business and so on, just aren't feasible in the public.

To be fair, Crothers also talked about, "asking suppliers if there were aspects of the contract specification that were increasing costs unnecessarily. Such ideas could be “quite mundane” such as reducing the number of printers supplied per person".

Obviously sensible conversations to have and I'm sure would lead to feasible cost saving opportunities.

So how much of the apparent success of the initiative was down to embarrassment? I guess we won't know that, or how robust the claimed savings really are, until National Audit Office takes a good look... and we wait with interest to find out more about how the CCRs are going to make an ongoing contribution.

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Voices (2)

  1. Andrew F Smith:

    If achieving these “substantial” savings were as easy as Mr Crothers suggests, then it makes the previous deals looks pretty poor. Using some degree of “embarrassment” as a tactic is pretty much Negotiation 101 and I sincerely hope as a UK taxpayer that more developed techniques were also used to create a real ‘step change’ in the commercials. Otherwise we might now see contacts that were previously pretty poor, now marginally better but still fairly poor (compared to what others achieve). Like Final Furlong, I look forward to seeing the audited outcomes in the near future in order to properly judge how successful the approach has really been.

  2. Final Furlong:

    I would like to see the NAO interogate (investigate?) and confirm these £800m in savings.

    There have been instances where Departments have announced savings – often based upon the historical (hysterical?) OGC value for money model – which the NAO subsequently downgraded to a fraction of what was declared. Remember NAO’s review of DfES ‘Commercial’ savings? (£500m tumbled down to approx £90m, I’m told.)

    Example. As one time, it was identified that EDS delivered more than 50% of ICT contracts across Central Government (by value) – is it possible that they could demonstrate how these savings would be secured (not just identified) across such a diverse range of contracts, including their existing structured PFI deals?

    Perhaps colleagues in Cabinet Office would be brave enough to put pen to paper and share the best practices that they deployed in these negotiations? Many public bodies might want to implement similar initiatives across their top twenty suppliers and such guidance would be invaluable.

    It would be a shame if no-one could actually express in any great detail how and where these savings were achieved, and share any related outputs with other buyers. Now that would be very embarrassing.

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