Banning political campaigns with public funds - it's because it's not your money

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The government has told public bodies that they can't use procurement as a tool of political campaigning. There has been the predictable outcry from those who want to use public money to promote a geopolitical agenda, usually wrapped up in the now almost meaningless word "ethical":

“The Government’s decision to ban councils and other public bodies from divesting from trade or investments they regard as unethical is an attack on local democracy.

“People have the right to elect local representatives able to make decisions free of central government political control. That includes withdrawal of investments or procurement on ethical and human rights grounds."

I'm afraid not. For the very simple reason that it's not your money, it's not there for you to conduct political campaigns. In the case of the budgets for local government, NHS Trusts and other public bodies the money is there to deliver the services for which those organisations exist none of which is remotely connected to foreign policy. To use that money - at a cost to local people - to seek to change the policies of a government far, far away is truly unethical unlike the make-believe 'unethical' of the political campaigners.

And for those pension funds that these supposedly 'ethical' campaigners want to use for political purposes - that's completely unethical if not downright immoral. It really, really isn't your money - it's the pensions of millions of public servants and you've no right at all to compromise those people's future wellbeing for the sake of your political campaigns.

So the government is absolutely right to take it very seriously when local councils or other public bodies seek to prosecute their foreign policy using public money - especially when it runs counter to that government's foreign policy and to treaty obligations in respect of international trade.

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Procurement and local protectionism - how 'progressive' procurement will make communities poorer

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Writing in New Start (the house journal of the Centre for Local Economic Studies, CLES) Matthew Jackson, the Centre's associate director sets out his argument for using local government procurement to do something other than securing the best price and quality for the goods or services procured. Matthew wants local protectionism:

For me, there is too much about using local government procurement to achieve efficiencies and to mitigate the impact of the cuts as opposed to advocating a progressive new future around local government procurement being used for local economic and social benefit.

This is, essentially, consultant-speak speak for finding ways round the strictures placed on procurement by the EU and Westminster governments. Rather than the commissioning and procurement process being about securing efficient and effective public services, Matthew wants to stretch its purpose to encompass the usual litany of 'progressive' politics:

Procurement should not be a narrow corporate function restricted to local government, nor is localism its primary concern. It sits at the heart of what we want and need from our public services in the future.  Of course it needs to focus on efficiencies, but effectiveness in supporting growth, addressing poverty and inequality and creating great places is the real prize.

The problem here is that these things often conflict - so which gets priority.  If using a large multinational guarantees quality and a lower price does that get the nod over the less reliable and higher cost local supplier? Matthew doesn't answer this question except to suggest that somehow we rig the procurement process.

There should therefore be a defined understanding of the key considerations of what an effective purchase is, regardless of whether it is being undertaken by central government, local government, an NHS Trust or a private business. Of course cost should be a key factor, but so should providing a great future role for our public services, as well as fairness, equality, and the opportunity to create local employment and develop local businesses.

Sadly these weasel words will infect local government leaderships, they'll cluck around the wise words of Matthew and his ilk and they'll fail to realise that the losers in all this are the very local people CLES claim their protectionist model will help.

The only way in which the model can work is for procurement costs to be higher than they would be in a system driven by seeking to maximise efficiency. And that means one of two things - either fewer services delivered to local people because more money has gone on procuring those services than was needed. Or higher taxes meaning that local people have less money to spend.

All this talk of 'fairness' and 'social benefit' coming from local protection is, quite simply, a deception typical of 'progressive' policy-making. The real result is worse government, fewer services and higher taxes.

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In which I explain something about public procurement to Eoin Clarke

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The ever passionate and often completely wrong Eoin Clarke has uncovered dark truths about the relationship between Monitor, the NHS regulator and McKinsey, a leading consultancy firm. As readers here will know, I’m no fan of public procurement (here and here and here)  processes and am prepared to accept that some established suppliers can and do muddy the waters of process. However, in this case there is absolutely no evidence of impropriety – by supplier or contractor. Eoin has made his soup from the thinnest of stock!

Let’s look at the allegations and claims:

1, McKinsey has earned (at least Eoin accepts they did some work) £468,000 from the NHS since May 2010. Note that Eoin hasn’t asked whether this leading consultancy business did any work for the NHS prior to May 2010. I’m prepared to bet that it has done. However, it does not seem to me that paying consultants 0.0005% of the total NHS budget for advice on management and strategy is a terrible thing.

                                           

2. Officials at Monitor accepted hospitality and what Eoin calls “trinkets” from McKinsey – a trip to the opera, a seat at a black tie dinner and attending a summer drinks reception. Apparently this practice blurs “...the lines between government and private contractor and should be discouraged especially where a health watchdog is concerned.” There is no suggestion that officials of Monitor acted improperly by taking this hospitality or even that it might have influenced decisions on the appointment of external consulting contractors.

3. McKinsey “...improperly used private channels...to discuss several commissioning decisions.” This consisted of the firm seeking feedback after the tender decision because they hadn’t got the business. It may be news to Eoin but providing feedback to unsuccessful bidders is normal – and good – business practice. And it is also normal for this to be done verbally.

4. Eoin appears also to have a problem with McKinsey asking for something and not being given it – “McKinsey also harried Monitor to prematurely divulge the granting of NHS Trust status decisions...but to be fair to Monitor they sent a fairly curt reply.” So there you go – a consultant asks for information prematurely and isn’t given the information. Anyone got a clue what Monitor has done wrong there?

5. Our feisty investigator gets closer to pay dirt with using private channels to pitch for business – “They canvassed Monitor officials to have an input into decisions over how to deal with Heatherwood &Wrexham Park Trust... This in the end was accepted and McKinsey went on to have an input in the decision to close Heatherwood and flog the land.” When you look at the e-mails Eoin claims for private pitching, one is the sort of e-mail many businesses would send existing contacts and another says:

“Can someone get back to us about this tender?”

So it wasn’t a private deal – indeed the e-mail traffic suggests that there was a tender process since McKinsey refers to being “shortlisted” and to a formal ITT number. In other words Monitor conducted a proper process to appoint advisors for a given project.

6. Apparently hosting (at no cost to the taxpayer) foreign delegations is wrong because “...UK government officials are possibly inadvertently aiding McKinsey's solicitation of business in France, and de facto advancing McKinsey's financial gain.” Shouldn’t the British government be keen to showcase the wonders of the NHS (we know from Eoin just how much better it is than any other health system) and to support British firms in getting foreign business?

7. And finally Eoin complains because McKinsey asked Monitor for a reference. It’s pretty clear that Eoin has never completed a public sector “pre-qualification questionnaire” since that would require at least two (and in one awful case I recall, six) references. And the expectation is that these references will be public sector references from places where the bidder has delivered a contract. Again this is normal and proper business practice.

It seems to me that Eoin Clarke, in his enthusiasm to castigate the current government, has turned what appears to be normal business practice into something of a scandal. There is nothing in the e-mails to suggest that Monitor has acted improperly in tendering for and appointing consultants or other contractors. Indeed, all Eoin can do is call for “clearer boundaries” despite the evidence here that Monitor’s officers – regardless of the relationship with McKinsey – have resisted any requests from the firm that might compromise the procurement process.

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A moment of rage at public procurement...

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The Arts Council. Tender for a freelance contract asks for:

Three years of accounts
Bank reference
Equal Opportunities Policy
Diversity Policy
Health & Safety Policy
Environment & Sustainability Policy
Three different types of insurance

...and they say this is 'accessible' tendering!

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Public procurement and framework contracts - inefficient, anti-competitive and expensive

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In public sector procurement we have got used now to the system of “framework contracts”:

A ‘framework agreement’ is an agreement between one or more contracting authorities and one or more economic operators, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged.

In layman’s terms a framework agreement limits the market from which the public body procures its goods or services in a given time period. Rather than a long-winded procurement process for each contract, the public body can “call off” for each purchase from the organisations in the framework. Nobody else can bid.

And these frameworks are used for multi-billion pound contracts:

Willmott Dixon, Morgan Sindall, Mansell and Thomas Vale have all been appointed to a regional framework worth up to £3 billion.

The companies were chosen by Birmingham Council to work on projects secured through the Constructing West Midlands Framework.

The quartet will work on the four-year framework covering work costing more than £500,000-a-year.

The framework has the potential to be extended to eight years and is available to all public sector bodies in the West Midlands.

So there you are – a small group of construction businesses have been given the exclusive right to bid for £3 billion in public contracts. During that time no other organisations can bid for that work – the councils involved have granted to those in the framework a degree of protection that should not apply, is anti-competitive and cannot possibly represent value for taxpayers’ money.

These contracts are done for reasons of procurement efficiency and administrative convenience. They cut out smaller contractors – the ones for whom £500,000 is a big contract but who do not have the financial elbow to get chosen for a large framework. Yet nothing is done. There is no outcry when the DWP carves up valuable contracts for delivering the Work Programme between fewer than 20 organisations – a process that allows BEST, A4e and others the opportunity to further extend their market dominance. Mostly at the expense of smaller, regional and local providers.

Framework agreements are now standard practice and the numbers of businesses on frameworks gets smaller and smaller. One “pre-qualification questionnaire” (PQQ) run by Leeds City Council to procure a framework for redundancy support across Yorkshire was explicit in seeking to limit the tender to just six organisations from which five would be selected to form the framework.

This is an example – increasingly common with large authorities like Leeds and Manchester – of the use of the PQQ as a shortlisting device rather than as a means of established whether an organisation is qualified and has the capacity to deliver. This is an abuse of the process and misrepresents the PQQ – it is not pre-qualification but a two-stage tender process. Again it is designed for reasons of administrative convenience and procurement efficiency rather than for reasons of good purchasing practice.

If there is one area in desperate need of reform, that is ill-managed and run for producer interests rather than for the good use of taxpayers’ money, it is the system of public procurement overseen by the Office for Government Commerce and implemented by local authorities, government departments and quangos up and down the country. It may not be corrupt but it is certainly anti-competitive, wasteful and produces overpriced and inflexible contracts.

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Tenders, framework agreements and suicide-bidding - how public procurement isn't working

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We can expect that – for many reasons not least the need to drive out costs in public administration – there will be renewed attention given to the processes of public procurement. After all if more provision is to be outsourced we need to know that the process by which suppliers are selected is fair, transparent and delivering value. I’m not sure we’re in such a position for three reasons – the tender process is over-complex, public agencies are relying on framework agreements rather than open market procurement and these problems are encouraging market distorting practices such as suicide-bidding.

Anyone involved with seeking business from public bodies will be familiar with the complexities of tendering – here’s just one cry of pain at the onerous requirements in the process:

Reading through the documents today was a jaw-dropping insight into the dream world of public sector morons.

Method statements, framework agreements, key performance indicators, robust performance management systems, equality and diversity policies, performance evaluations, environmental advancement, partnership milestones, sustainable procurement narratives, race and gender statements, service quality monitoring, volume forecasting, operational delivery reviews, governance structure audits, outcomes recording methods, business continuity plans, and contingency planning systems.

All of the above must be installed before we are even allowed to see the work we may be able to bid for, if approved. And, of course, there is no guarantee - by their own admission - that it will be of any quality.

Here we have a classic example of procurement processes seeking to capture every regulatory nuance – to the point where most suppliers and especially smaller suppliers simply give up and go away. And this process is intended simply to create the “framework” from which the public body can procure the services it requires. It is a process intended to limit the competitive environment by excluding those who fail to ‘tick the boxes’.

However, framework agreements are becoming a bigger problem than this – we are seeing them used as market control mechanisms. Rather than allowing any business that qualifies to bid, these agreements are setting limits on the number of qualifying firms. In one recent example, Leeds City Council (on behalf of a consortium of Yorkshire authorities) sought to procure a framework of businesses to provide outsourcing and redundancy support – the framework limited the number of suppliers to just five from the hundreds of possible providers of these services. There is no doubt in my mind that this process is anti-competitive and should be stopped. We should either have a tender process or a prequalification process, combining the two through a framework system compromises the market and acts only to provide procurement convenience rather than public benefit.

Given the nature of this complexities and the creation of a deliberately limited pool of competitors (protected for the duration of the framework agreement from new market entrants and, in effect, behaving as an oligopoly) the market response throws up some problems – not least what has been dubbed ‘suicide-bidding’:

Although EU law allows businesses to reject abnormally low bids, it does not define ‘abnormally low’, which has lead to disputes with bidders.

Paul Dooley, director of estate regeneration at Poplar Harca, said the association decided to act after receiving several low bids, including some of up to 20 per cent lower than the average. He said: ‘We feel that without a clause in the contract we could be subject to contractors making a challenge.’

The move follows concern in the sector about ‘suicide-bidding’, in which companies bid at amounts that do not cover the cost of their work. This can lead to poor quality service and to firms seeking contract loopholes to charge clients extra.

With complicated tendering processes, combined (and ever larger) contracts, longer contract periods, the temptation is to go for business at a low price and back your managers – and lawyers – to be better than public sector managers and lawyers. After all, it’s pretty difficult to get out from under a six volume contract on the basis of work being ‘not quite good enough’, a little slow or snag-ridden.

The process of public procurement is a minefield but one where Councillors tend to doze off – it’s not exactly sexy politics after all! We should be paying more attention to these processes. I started to complete a pre-qualification questionnaire for some work with Manchester City Council (or rather to get on a framework to be allowed to bid for some work) – the nature of the questionnaire was such that even the mid-sized organisation on whose behalf I was applying decided the requirements were too onerous.

Not only did Manchester require written policies on equalities, health & safety, environment, sustainability & climate change to be submitted (along with three years of accounts, bank references, nine public sector referees and insurance documents) but asked for detailed information about the implementation of these policies. Now Manchester may be the worst authority in this respect but sadly other large authorities – Leeds, Bradford, Liverpool – are little better.

Procurement departments are now pressured to deliver significant savings while maintaining standards of service delivery. And these departments will also be responding to new procurement environments resulting from the Localism Act. To deliver on price, quality and continuous improvement and to support new providers emerging in local communities, procurement systems need to be freed from these requirements linked to other policy requirements and to be encouraged to widen rather than narrow the market. We cannot continue with the too complex, anti-competitive, market distorting approaches that currently dominate public procurement.

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How to prevent small business getting public contracts the Manchester City Council way

I know, dear reader, that you love the great city of Manchester. I know that my criticisms of that city's civic leadership have focused on their budgetary incompetence but today I want to use their procurement processes to show just how anti-business - or rather anti-small business - Manchester City Council has become.

I spent quite a lot of today - on top of a previous frustrating day - trying to complete a 'pre-qualification questionnaire' for a research and analysis 'framework' contract. Now it seems to me that this sort of contract - in essence an approved list of research, evaluation, intelligence and analysis providers - is an area where there are a multitude of smaller providers, one man bands, partnerships and social enterprises. Manchester however has clearly decided that these smaller providers are beneath them for they require the following documents:

• Two years of audited accounts - bit tricky for a start-up business, maybe a couple of recently redundant council officers just starting out!
• Insurance documents showing £10m public liability, £5m employee liability and £2million professional indemnity - that's a grands worth of insurance just to bid!
• Signed and dated policies covering equal opportunities, quality, health & safety, environmental and sustainability
• Three testimonials and three public sector references for work done for each lot - if you're bidding for all the lots on offer that's nine testimonials and nine public sector references
• Certificates, qualifications and profiles of all the people who have worked on the projects referred to in the testimonials

And in the City council's PQQ documents there's a whole sector on "sustainability" (bear in mind this is a tender process for research and consultancy rather than supplying products, digging roads or such) including such gems as:

Please summarise how you minimise the environmental impact of your work activities, including any procedures for life cycle analysis of the procurement, use and disposal of products.

And:

What environmental objectives and targets have your organisation set against which performance is measured? Where appropriate, please state your current top three objectives and their relevance to your industry.

We're talking here about small consultancies providing research expertise - these sort of questions are simply not appropriate nor to they contribute anything to making Manchester City Council more sustainable - whatever that means. It does, however, get even better:

Please summarise how your business can help the city support the Council’s Sustainable Procurement Policy’s key objectives? A copy of the Sustainability Policy can be found here: www.manchester.gov.uk

And:

Please detail your willingness to work with the city council to contribute to the city’s Climate Change Action Plan target to reduce the city’s CO2 by 41% by 2020. A copy of Manchester’s Climate Change Action Plan can be found here: www.manchesterclimate.com

This approach to procurement - adding in spurious idiocies about "sustainable procurement" and "climate change" that might make some sort of sense in the buying of gas supplies, building materials or road construction but just put off small suppliers of consultancy and research.

Councils and other public sector bodies talk a great deal about opening up procurement, about supporting small business and the voluntary sector in the procurement process and about local purchasing strategies. This one PQQ demonstrates to me that - in Manchester's case - this is just talk. The procurement process merely suits the bureaucrat and the big business, it prevents innovation, discourages small and start up business and excludes new entrants through the use of frameworks and approved lists.

But then, why am I surprised? It is Manchester City Council after all and we know they can't manage their way out from a wet paper bag!


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Government procurement incompetence - a reminder

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Sebastian James has published his review of education capital financing and has this to say:

In summary, I have found that the system of capital allocation and spending which has developed over at least the last decade has frequently resulted in poor use of resources, a bureaucratic system for providers and Local Authorities and a mixed – and at times poor - outcome for both parents and children.

And:

I believe that there are some very significant opportunities to increase the amount of schools regeneration that we can undertake for any given sum of money. To give you a flavour of this, the consensus view from our workshops was that as much as 30% of the total money spent could be saved and this is borne out by our initial pilot project in Doncaster.

I'm pretty confident that a similar review of NHS capital funding, housing PFI schemes and leisure investment strategies would show the same degree of waste and mismanagement. The was Labour's central strategy for capital investment - Brown's big idea - and it will cost us very dearly.

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