How much do we think public sector procurement costs us?
Discussion
Public sector procurement rules... In theory a laudable thing. After all, rules to protect taxpayer money from corruption and ensure maximum value really should be a great benefit to us, shouldn't they?
Yet whilst I'm sure they must work at times, over the years I've seen all sorts of insane wastefulness committed in their name!
In the private sector, a company might review their use of a product from time to time, decide it's still the best value for them and carry on using it. In the public sector, however, that's not good enough. After a certain period of time, you have to go back out to competitive tender regardless of how well a solution is working. Okay, in theory that should ensure ongoing good value, but there seems to be no consideration given to the potential risks inherent in any migration away from a tried and tested solution towards an unknown alternative. How can anyone think it sensible to take on an unnecessary project that might cost millions just because the new bidder came in a few grand cheaper than the incumbent?
That's before even thinking about the number of suppliers who just can't be bothered bidding for public sector contracts as it's just not worth the hassle! We don't get the best products for our tax money, we just get those provided by vendors with the patience to put up with the process!
This is by no means just a UK problem. I've seen it in multiple countries, and we're far better than some, but in general I just don't understand how any of our governments managed to let such well meaning legislation become so inflexible, illogical and overbearing?
Yet whilst I'm sure they must work at times, over the years I've seen all sorts of insane wastefulness committed in their name!
In the private sector, a company might review their use of a product from time to time, decide it's still the best value for them and carry on using it. In the public sector, however, that's not good enough. After a certain period of time, you have to go back out to competitive tender regardless of how well a solution is working. Okay, in theory that should ensure ongoing good value, but there seems to be no consideration given to the potential risks inherent in any migration away from a tried and tested solution towards an unknown alternative. How can anyone think it sensible to take on an unnecessary project that might cost millions just because the new bidder came in a few grand cheaper than the incumbent?
That's before even thinking about the number of suppliers who just can't be bothered bidding for public sector contracts as it's just not worth the hassle! We don't get the best products for our tax money, we just get those provided by vendors with the patience to put up with the process!
This is by no means just a UK problem. I've seen it in multiple countries, and we're far better than some, but in general I just don't understand how any of our governments managed to let such well meaning legislation become so inflexible, illogical and overbearing?
Most legislation is inflexible, illogical and overbearing because it is a reaction to a specific set of circumstances which is applied to all other circumstances.
If it's any consolation the private sector is rife with such inflexible, illogical and overbearing rules as well. The main difference being companies can go bust.
If it's any consolation the private sector is rife with such inflexible, illogical and overbearing rules as well. The main difference being companies can go bust.
Price isn’t the only category which is scored during a tender evaluation.
If someone is bidding regularly for large contracts they will have Bid teams who are experienced in jumping through the various hoops that public procurement requires.
Btw it’s supposedly all for the benefit of SMEs
If someone is bidding regularly for large contracts they will have Bid teams who are experienced in jumping through the various hoops that public procurement requires.
Btw it’s supposedly all for the benefit of SMEs
In my experience the actual cost of the item is not the problem it's the effort required to source , order and to acquire it which is the real problem.
The reason why is a lack of investment but also a lack of incentive to change, the private sector has continuous incentive to change, the public sector does not unless someone kicks their ass from way above and tells them to.
In terms of what the total cost of public sector procurement inefficiency costs us? it's in the tens of billions a year.
The reason why is a lack of investment but also a lack of incentive to change, the private sector has continuous incentive to change, the public sector does not unless someone kicks their ass from way above and tells them to.
In terms of what the total cost of public sector procurement inefficiency costs us? it's in the tens of billions a year.
t we now supply the exact same goods and services but only via a main contractor. So they get the exact same but with 20-30% margin.Countdown said:
Price isn’t the only category which is scored during a tender evaluation.
If someone is bidding regularly for large contracts they will have Bid teams who are experienced in jumping through the various hoops that public procurement requires.
Btw it’s supposedly all for the benefit of SMEs
I agree it's not the only category evaluated, but in my experience many of them tend to set a pass mark in their assessment, and then have to pick the cheapest of those who've reached that score. If someone is bidding regularly for large contracts they will have Bid teams who are experienced in jumping through the various hoops that public procurement requires.
Btw it’s supposedly all for the benefit of SMEs
You could easily get a situation where a challenger might score a few percent less than a proven incumbent that the customer actually wants to keep working with, but they have to move over to the challenger because they've undercut the incumbent by a fraction of a percent, which is almost inevitably going to get swallowed up in the first few days of implementation anyway!
In my experience -having worked for both large and small vendors - that just forces a battle to the bottom where, far from helping SMEs, it just hands everything to the big players who can afford to take the hit because they've got better economies of scale and can more easily wait things out until they get something of a stranglehold on a sector anyway because there aren't any SMEs left in a position to compete with them.
MYOB said:
Bill said:
OTOH look at COVID PPE procurement to see how bad it could be.
Not quite. The usual procurement rules were not applied for COVID related contracts. This should be used as an argument for the benefit of procurement rules. when there was a global panic and clearly the NHS/PHE were worried about supplies, would you in the department of health had greenlit just cutting out a chunk of rules to try to speed things up (accepting that there clearly would be various elements of corruption etc) because the outcome was more important or just doggedly stick to 'the rules' no matter what happened?
Carl_VivaEspana said:
In my experience the actual cost of the item is not the problem it's the effort required to source , order and to acquire it which is the real problem.
The reason why is a lack of investment but also a lack of incentive to change, the private sector has continuous incentive to change, the public sector does not unless someone kicks their ass from way above and tells them to.
In terms of what the total cost of public sector procurement inefficiency costs us? it's in the tens of billions a year.
I know that you're one of PHs polymaths - an expert on everything - but you might have to help me by illustrating where you get the "tens of billions a year" from.The reason why is a lack of investment but also a lack of incentive to change, the private sector has continuous incentive to change, the public sector does not unless someone kicks their ass from way above and tells them to.
In terms of what the total cost of public sector procurement inefficiency costs us? it's in the tens of billions a year.
In the early 1990s, I was on a team looking at buying Hymac out of administration. They were still making excavators then, and supplying spare parts.
We could see that there was a 88% premium added to the cost of parts when supplying the MoD.
Somehow I don't think they have got much better. The MoD was the first target Dominic Cummings identified for needing improvement.
The public sector school of negotiation seems to consist of the phrase, "well, if that's how much it costs..."
We could see that there was a 88% premium added to the cost of parts when supplying the MoD.
Somehow I don't think they have got much better. The MoD was the first target Dominic Cummings identified for needing improvement.
The public sector school of negotiation seems to consist of the phrase, "well, if that's how much it costs..."
MYOB said:
I didn’t suggest one way or another, whether it was correct or not to bypass the procurement rules. I was simply highlighting why it can be argued that we need procurement rules. Let’s not turn this into a Covid thread.
There is only one winner in a procurement case. Many losers so of course there will be many disgruntled bidders out there.
I fully agree that there should be procurement rules. They should be logical though! There is only one winner in a procurement case. Many losers so of course there will be many disgruntled bidders out there.
In particular, surely there should be more recognition of the value of keeping an incumbent supplier in place if they're still meeting the requirements of the contract?
Consider any major IT solution. If you change it, you introduce massive expense and risk. People have to be trained on new systems and potentially TUPed to new employers, new integrations have to be put in place and so forth, and that's just assuming the new solution actually works! Anyone remember Horizon?
Kermit power said:
MYOB said:
I didn’t suggest one way or another, whether it was correct or not to bypass the procurement rules. I was simply highlighting why it can be argued that we need procurement rules. Let’s not turn this into a Covid thread.
There is only one winner in a procurement case. Many losers so of course there will be many disgruntled bidders out there.
I fully agree that there should be procurement rules. They should be logical though! There is only one winner in a procurement case. Many losers so of course there will be many disgruntled bidders out there.
In particular, surely there should be more recognition of the value of keeping an incumbent supplier in place if they're still meeting the requirements of the contract?
Consider any major IT solution. If you change it, you introduce massive expense and risk. People have to be trained on new systems and potentially TUPed to new employers, new integrations have to be put in place and so forth, and that's just assuming the new solution actually works! Anyone remember Horizon?
I work in the public sector, but north as closely to procurement as I did.
Out large American ledger system isn't great, with deliverables constantly over sold and under delivered. Every attempt to reduce cost (by rejigging licences or user requirements) just sees our relationship satisfaction team adjust some hypothetical discount so we end up paying the same.
Anyway, we considered migrating to a competitor, and the cost of change was very much factored in.
It was quickly obvious the cost would outweigh any benefit. So we thew a few more million to try and knock the rough edges off of what we have.
However you can't just bod a contract with a period of "forever". There would be challenges from competitors.
I would also be interested in hearing what alternatives people propose?
Like democracy, public bidding is the worst system apart from every other system?
Edit secret bidding but open to anyone who meets relevant criteria.
Out large American ledger system isn't great, with deliverables constantly over sold and under delivered. Every attempt to reduce cost (by rejigging licences or user requirements) just sees our relationship satisfaction team adjust some hypothetical discount so we end up paying the same.
Anyway, we considered migrating to a competitor, and the cost of change was very much factored in.
It was quickly obvious the cost would outweigh any benefit. So we thew a few more million to try and knock the rough edges off of what we have.
However you can't just bod a contract with a period of "forever". There would be challenges from competitors.
I would also be interested in hearing what alternatives people propose?
Like democracy, public bidding is the worst system apart from every other system?
Edit secret bidding but open to anyone who meets relevant criteria.
I have generally avoided public sector like the plague, but was on a bid on behalf of a big solution integrator years ago.
We could have saved them ~85% of the cost of a specific product, where government spend would be a lot of £millions a year. All they had to do was award the whole of UK gov for that product to a single supplier. Apparently the responsible government minister insisted each government department could choose their own product from a "marketplace" of approved suppliers. Thus guaranteeing they overpay by around 6.6x, as no supplier could get the volume discount with smatterings of small clusters of product, and there being no guaranteed sale also created a cost to even be at the table with the potential for zero return.
This was repeated across the entire procurement cycle. Dread to think what they could have saved.
Muppets.
I'd also like to see some preference for UK based companies, and heavily score against companies where all the profits leave the UK to be taxed elsewhere, or where they staff projects entirely from offshore.
We could have saved them ~85% of the cost of a specific product, where government spend would be a lot of £millions a year. All they had to do was award the whole of UK gov for that product to a single supplier. Apparently the responsible government minister insisted each government department could choose their own product from a "marketplace" of approved suppliers. Thus guaranteeing they overpay by around 6.6x, as no supplier could get the volume discount with smatterings of small clusters of product, and there being no guaranteed sale also created a cost to even be at the table with the potential for zero return.
This was repeated across the entire procurement cycle. Dread to think what they could have saved.
Muppets.
I'd also like to see some preference for UK based companies, and heavily score against companies where all the profits leave the UK to be taxed elsewhere, or where they staff projects entirely from offshore.
I spent a few years on procurement for equipment, hard and soft FM for the MoD. Sometimes the contracts were a bit lacking allowing winning bidders to extract more than should have been paid. However, this pails into insignificance as to the monopoly of some bidders/contractors especially in Defence Equipment, the price the MoD, hence Government hence taxpayers i.e you, being charged was eyewatering, it was always seen as the MoD spending too much but it really was private industry being greedy.
spookly said:
I have generally avoided public sector like the plague, but was on a bid on behalf of a big solution integrator years ago.
We could have saved them ~85% of the cost of a specific product, where government spend would be a lot of £millions a year. All they had to do was award the whole of UK gov for that product to a single supplier. Apparently the responsible government minister insisted each government department could choose their own product from a "marketplace" of approved suppliers. Thus guaranteeing they overpay by around 6.6x, as no supplier could get the volume discount with smatterings of small clusters of product, and there being no guaranteed sale also created a cost to even be at the table with the potential for zero return.
This was repeated across the entire procurement cycle. Dread to think what they could have saved.
Muppets.
I'd also like to see some preference for UK based companies, and heavily score against companies where all the profits leave the UK to be taxed elsewhere, or where they staff projects entirely from offshore.
Re. single supplier. Eggs and baskets? If that supplier tanks, and the Govt. can’t get their hands on whatever product/service is needed, they (Govt.) would be criticised for not having a resilient supply chain “to save money”.We could have saved them ~85% of the cost of a specific product, where government spend would be a lot of £millions a year. All they had to do was award the whole of UK gov for that product to a single supplier. Apparently the responsible government minister insisted each government department could choose their own product from a "marketplace" of approved suppliers. Thus guaranteeing they overpay by around 6.6x, as no supplier could get the volume discount with smatterings of small clusters of product, and there being no guaranteed sale also created a cost to even be at the table with the potential for zero return.
This was repeated across the entire procurement cycle. Dread to think what they could have saved.
Muppets.
I'd also like to see some preference for UK based companies, and heavily score against companies where all the profits leave the UK to be taxed elsewhere, or where they staff projects entirely from offshore.
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