Risk Aversion in Public Procurement – Why and What Can Be Done?

Over at Public Spend Forum (PSF) Europe, we have been getting into the issue of risk aversion amongst public sector procurement professionals. It came up when we recently assembled a group of procurement leaders from different parts of the public sector to kick-off the PSF Best Practices Exchange – more on that to come. But the issue of attitudes to risk was high on the agenda. No-one wants kamikaze buyers, who ignore EU and national regulations, or local procurement policies, but there is still a feeling that too many procurement staff and organisations play it safe.

We wrote about it here, and suggested that “we want procurement people to have a little bit of creativity, some commercial sense, and of course good understanding of the rules in order to know what is allowable and what is clearly not”.

We then suggested some of the reasons why people feel this way. Some people are naturally risk averse or have just slipped into that mode. That may be a personality thing or, to be quite frank, driven by no more than laziness; the desire for a quiet and simple life.

Some don’t have the capability to do much more than follow the rules, and sometimes it is a leadership issue: “if direction comes down from the top, from the Procurement Director or even more senior sources, then more junior staff will respond to that. So individuals who might be inclined to be less risk averse are sucked into that type of behaviour and approach. If leaders reward staff for following the rules, for staying out of trouble, rather than for creative and commercial problem solving, then a certain type of behaviour will follow”.

We are going to look at how this might be addressed in a further article, but in the meantime we also had an excellent guest article from Dan Warnock, who works for a leading housing association / charity. He talks about how it feels to be in the middle of this, and takes aim at the EU regulations as part of the problem.

“For those of us who are more interested in the legal side of things, it looks even worse, simply due to uncertainties in the legislation. There have been a number of cases where the contracting authority had good reason to believe they were following the law correctly, and yet still ended up on the losing side simply because the judge interpreted the legislation in a different way (this has even happened to the EU Commission – the body that wrote the legislation in the first place!)”

He talks about other aspects too, such as training, but of course the UK may have the opportunity to look at re-drafting public procurement legislation, assuming Brexit goes ahead. Should we address this issue? No-one wants to lose the principles of fair treatment, openness and so on that guard against corruption and guarantee to give any potential provider a chance of winning public business.

But has the balance tilted too far in terms of the potential punishment, even if it is an honest mistake by the buyer? Would changing that encourage some (sensible) procurement risk taking, to the commercial benefit of the taxpayer and citizen? Stay tuned for more discussion.

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First Voice

  1. alun@marketdojo:

    Our first grant was to develop our tool to help the public sector with the focus on mini competitions in frameworks. We took the opportunity to develop a linear and logical scoring mechanism to go alongside our eAuction engine.

    However, what we found that in many cases was that the public sector potential client had been very attached to their current scoring systems. One such time, even when it was pointed out that their current scoring methodologies presented potential issues with challenges, we were told that we would have more chance of developing their scoring mechanism in our platform then them changing how they work.

    Due to the potential risks there seems little appetite for change [sometimes] unless it is driven from the top.

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