PPP Management

The Israeli missile Barak missile has now finally cleared the procurement process in India, 5 years since it started.  What was the reason fro the delay? Allegations of corruption (  http://www.firstpost.com/india/defence-ministry-clears-procurement-of-barak-missiles-1303271.html  ) In this particular case there was no case to answer. Indian defence procurement has had recent problems with allegations of corruption, the most notable of which has been the recent case of Finmeccanica resulting in the loss of a significant helicopter order $750m that could have led to a further order of $250m.  Not only was the first order cancelled but subsequent investigations into the original deal resulted in the successful prosecution of the Finmeccanica CEO. However, the Finmeccanica story is not the first, in fact it is someway down the list of previous defence procurement scandals within the Indian defence sector with cases stretching back over thirty years. What is really in the article W

Congratulations to BAE Systems on the recent contract with South Korea to upgrade aircraft. "Nothing new!" many will shout; but what is very interesting is the fact that BAE Systems are not the OEM of the aircraft. Yes, BAE Systems are a world leading manufacturer of aerospace vehicles and equipment and yes they provide outstanding support to the armed forces who operate BAE Systems aircraft. This marks a real departure in their strategy of providing services. Upgrading an aircraft system from another OEM. Understanding the different engineering layouts and getting the bill of materials correct will prove to a real challenge, especially as the OEM of the aircraft (who will also have very strong relationships with component suppliers) was beaten in the competition. A great story, which could only have been better was if the work was being undertaken in the UK. Let's hope that this departure for BAE Systems in upgrading other OEMs aircrafts for clients is successful

We've always known that risk in the supply chain is difficult to capture in totality and there has always been unforeseen risk lower down in the supply chain that results in significant problems.  The analysis from +MIT and +David Simchi-Levi. Recognising the impact that problems in low cost component supply can have is important and recognising that the impact can be disproportionally greater than the cost of the item is worthy of note.  Without re-visiting our previous article on managing by clichés this is perhaps worthy of "ruining the ship for a ha'penny of tar". The summary article in +Supply Management also raises the need for mitigation strategy.  The article and the need to manage risk are timely reminders following on from our recent article on the project management problems experienced by the BBC on its DMI project. http://www.supplymanagement.com/news/2013/supply-chain-risk-occurs-in-unexpected-locations-and-components

The revised thresholds requiring OJEU competition have been published.  Slight differences in the values over the published 2 year rates are due to inflation and currency fluctuations. For more information view the following link: http://www.walkermorris.co.uk/business-insights/new-public-procurement-thresholds-1-january-2014-published The link has some interesting points and especially the question of VAT applicability will be raised.  Hopefully the following link will help in identifying the limits: http://www.ojec.com/Threshholds.aspx

The excellent article in Supply Management identifies the costs incurred by government departments for Christmas trees in 2012, http://www.supplymanagement.com/news/2013/50-fold-price-difference-on-government-christmas-trees-0 Some questions fall out from this: "What types of trees did the FCO buy for £750 each?" "What Christmas tree do you get for £15 at the DfT? and was it on public display?" "No detail on the Christmas tree at the Treasury, does this mean the Chancellor has cancelled Christmas? austerity measures?" From our earlier comment on the BBC it would be interesting to see what the expenditure on Christmas trees by the BBC was for 2012.

It would seem that now is the season for airing government procurement and contract management failings: Local government - http://www.supplymanagement.com/news/2013/local-government-not-taking-advantage-of-procurement-advice Central Government - http://www.supplymanagement.com/news/2013/review-of-g4s-and-serco-contracts-reveals-deficiencies-in-key-controls The actions from Messrs Crothers and Hurd will be decisive in improving the performance of procurement and contract management within central and local government.

We've covered this story for the last couple of months and have always said that there were problems in the contract management of the G4S and Serco Ministry of Justice (MoJ) contracts.  The report makes for sorry reading, page 13 is the Executive Summary ( https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/267693/contract-management-review.pdf  ) There are three crucial questions following on from this report and its publications are: What will the government do to resolve the skills shortfalls? Will Serco and G4S be welcomed back in to the government? Despite some contracts being reviewed further, the government exclusion of G4S and Serco from competing for government contracts at present has the door been left open to compensation claims should no fault be found? The following government report heaps yet more worries on the government, 28 contracts reviewed and any shortcomings are not the contractors.  To quote from the report "the most sig

This week has seen widespread coverage of the former BBC Director General, Mark Thompson, being interviewed by MPs on the Public Accounts Committee (PAC) on the failure to deliver the Digital Media Initiative (DMI).  Apart from the detail of the report from PwC what is staggering are the costs associated with this project. Project budget spent - £100m Project failure report - £263k Chief Technology Officer (CTO) salary, who has ben suspended on full pay - £280k This doesn't include the cost of the PAC and the costs associated with bringing Mark Thompson back to the UK.  What must not be forgotten is that all of the money detailed is public money; obtained either through the TV licence fee in the case of the costs listed above or via taxation in the case of the PAC.  Putting aside the gargantuan costs being suffered by the public purse the report has some salient project management reminders. Lack of appropriate oversight. Ineffective governance, risk management and report

The government identifies the preferred bidders to fulfil the tagging contract. http://www.supplymanagement.com/news/2013/capita-awarded-interim-electronic-tagging-contract Check out the bidders: Capita, Buddi, Astrium, Telefonica. So what does this mean? a large outsourcing firm, a niche specialist technology firm, an element of EADS making redundancies in its   satellite business and a giant Spanish telecoms firm. Which one will the government chose and what will be the ramifications for UK taxpayers and businesses? The fall out from the original findings of the tagging issue is now being played out. It should be hoped that for the credibility of the government and the for sake of the tax payers purse that the government was right....

There has been a great deal of coverage in the recent days in the press regarding public sector procurement and shortcomings.  Hopefully the following article will draw a thread through the themes and come to a conclusion that might not be appreciated by the establishment. There are three articles that create a theme.  The first relates to the hesitancy of the public sector to embrace electronic invoicing. The second reports that the Civil Service are failing to effectively contract manage and finally an article about a shortage of contract management skills in the Civil Service. In brief the article will link the articles together and conclude with a hypothesis that links these problems with the Chancellor's autumn statement making yet more savings in government departments and ask whether in light of all this where improvements will come and who will champion the improvement. The first article from the link below identifies a problem with electronic invoicing and how electr

Some really good advice on the article, whose link is below, on managing contracts and relationships with suppliers. http://www.supplymanagement.com/news/2013/making-the-relationship-work Here are some further thoughts: If it is nothing more than an opportunity to use cliches then the following might be as good as a start as one might need: What gets measured gets done .  Set your KPIs that are meaningful to the success of the business ans ensure that they are SMART. I appreciate that this may sound obvious but making sure that you can actually meaningfully measure success is essential; setting a KPI that is not measureable is pointless.  This can also be further explained as " garbage in, garbage out ". It takes two to tango .  The relationship between supplier and buyer is very much a 2 way street; both parties have a vested interest in making the arrangement a success.  Fundamentally, the buyer wants value for money and the  supplier wants repeat business.  Beating the sup

This article in the Daily Telegraph is thought provoking and as relevant to the industry sector as any other sector: http://www.telegraph.co.uk/finance/newsbysector/energy/10503106/UK-missed-chance-of-offshore-wind-jobs.html The significant investment and potential to build a really strong professional knowledge and skills base has been lost due to the failure to ensure an effective supply chain is in place. Time for all to start thinking about the importance of capable supply chains.

Back in the news is the problem with government procurement and time to contract. http://www.supplymanagement.com/news/2013/labour-mp-hillier-attacks-public-procurement-processes Whilst encouraging small and medium size enterprises there are a number of worrying counter points to the political suggestions (it should be noted that only one other country in the article is in Europe and subject to OJEU regulations): Quicker procurement versus the need for due diligence Breaking down bigger contracts versus reducing the supplier base and reducing costs. With government departments struggling to manage contract delivery increasing the number of contracts presents the very real potential to exacerbate the problem. The article raises a very interesting point regarding the ownership of IP.  The government departments should be taking a much more individual and relevant approach to the ownership of IP and when it applies. What is absolutely spot on is the need to improve the compe

Appearing in the Daily Telegraph this article is excellent and offers some great advice on dealing with suppliers. http://www.telegraph.co.uk/sponsored/business/innovation-work/10460804/business-tips-suppliers.html Subjects range from getting others parts of the business involved in the selection process, the need to build relationships with suppliers, the implications of geography on cost and responsiveness and really key to start ups - payment terms.

A fantastic article in today's Telegraph about a new venture breaking in to a market with an established sector leader. http://www.telegraph.co.uk/finance/yourbusiness/10486175/Start-up-rivals-Nestle-with-coffee-capsules.html The article incorporates salient notes on getting on board professionals with the relevant expereince and creating a suitable supply chain strategy that ensures that the supplier-buyer relationship is balanced.  The outcome of these activities and minimising wastage in the manufacturing process has enabled the new entrant to challenge the established players

In the recent PAC meeting of last Monday senior government officials highlighted two distinct and significant problems: 1.  Many government contracts had open book clauses, but few were enacted. 2.  Many government departments lacked the skills, with their current staff, to enforce the open book clauses. There was also some comment about reducing contract duration for more complex contracts.  Whilst this might provide the opportunity to change suppliers it will drive the pricing mechanisms upwards as there is less time to recoup start up costs.  Historically, it has been the latter years where the contracts routine the most profit for the suppliers. http://www.supplymanagement.com/news/2013/only-a-third-of-government-contracts-are-open-book

In no way is this blog politically motivated but the recent Scottish Government's Independence has a number of bold assertions.  I take issue with the comment regarding increasing procurement on conventional defence systems. http://www.supplymanagement.com/news/2013/significant-investment-in-defence-procurement-for-independent-scotland Firstly, how will the Scottish Government create an intelligent customer in order to buy its coastal patrol boats? The UK MoD has spent years and millions evolving its procurement functionality but yet the Scottish Government will develop this within a few years of independence. Remarkable. Mr Salmond would be well served by taking professional advice on procurement practices, especially on EU compliance. The following extract from the article follows on from the identification of shipbuilding on the Clyde as important to the economy. The white paper added that an independent government would ensure its defence budget will “support the procurement of

A recent article has discribed the use of nationally negotiated contracts by police forces as disappointing http://www.supplymanagement.com/news/2013/inquiry-disheartened-and-dismayed-by-police-procurement Should we be surprised? No. Until theses organisations are measured against their usage of national contracts poor uptake will continue. If the CPOs of these forces were measured on the usage of the contracts and the savings delivered then real progress couild be made. Perhaps the Home Office and MoJ should mandate this. Perhaps if the avoidance of these savings are continued to be avoided the forces should be merged and national contracts imposed upon them.  It is after all tax payers money and best value should be a key parameter on contract award criteria.

From the article, link below, the PAC is going to interview senior civil servants on the problems with complex contracts: http://www.independent.co.uk/news/business/news/mps-seek-to-lift-the-veil-on-terms-of-government-outsourcing-deals-8961108.html The finger is being pointed at the complex contracts instigated by contractors  The problem is not with the contractors but with the inability, or unwillingness, by government departments to actively manage the contracts.  Far too many organisations believe that their work is done when the contract is let.  Actually, the work has really only just begun. The Chair of the PAC has the very real opportunity to drive investment in the staff of ministries to ensure that real competencies are imparted.  If the government is to improve the performance of large contracts then real progress has to be made in improving contract managers skills. Lord John Lee of Trafford today criticises the Treasury for restricting the salaries in the Departments ther

The potential for Serco to be banned from future government contracts has serious ramifications for the government if contract re-let's result in services being brought back in-house. http://www.telegraph.co.uk/finance/newsbysector/supportservices/10469118/Fears-over-contracts-as-Serco-loses-out-on-450m-prisons-deal.html Are government departments capable of mobilising services in time to become operational? What are the implications and costs for staff transferred (via TUPE) in to the public sector? Resolution of the investigation in to Serco and G4S needs to be resolved quickly in order to bring certainty to the sector and ensure that the government's contracted services are unaffected. The article in the Telegraph sums the situation up very well and draws out an interesting point on reduced competition and the resultant value for money. http://www.telegraph.co.uk/finance/newsbysector/supportservices/10469062/Even-after-the-Porridge-treatment-dont-underestimate-Sercos-politic

The Welsh government looks to reduce bureaucracy and help SMEs compete for government contracts. http://www.supplymanagement.com/news/2013/welsh-government-to-reduce-bureaucracy-for-suppliers-through-nps Addressing the effectiveness of sole traders and SMEs to compete is extremely noteworthy and highly commendable.  If this is an initiative to award contracts to Welsh companies then all parties would be well served to remind themselves of the main tenet of the OJEU legislation pertinent to open competition.

The very topical issue of supplier performance is perhaps embodied by the current electronic tagging problems that have continued to gain prominence in the press this week. The Telegraph article offers a factual account of the recent admission and mentions contractual interpretation. http://www.telegraph.co.uk/finance/newsbysector/supportservices/10459367/G4S-offers-to-hand-back-24.1m-after-wrongly-billing-for-tagging-contracts.html In this article it is shown that the Supplier, G4S, conducted an independent review on its activities; so it’s not as though they were looking to sweep the issue under the carpet. The following BBC article raises some extremely poignant questions about the capability of the Buyer – The Ministry of Justice and comes very quickly on the back of NAO report criticising government departments on their inability to set robust contracts that they understand. http://www.bbc.co.uk/news/uk-25001800 When selecting the Supplier the Buyer will cert

An article from Supply Management by Tom Alford of PPP Management on target cost pricing http://www.supplymanagement.com/analysis/features/2013/on-target/ We might be biased but this is a great article.  If you think so then you'll appreciate our forthcoming articles on incentivisation and the inextricable links between procurement and contract management

We commented recently on the excellent report by EY on the integration of supply chain and finance functions to bring real value to the organisation. The article below includes quotes by some "big-hitters" about the future of procurement and what procurement really means. http://www.supplymanagement.com/news/2013/procurement-too-narrow-a-term-in-globalised-world/ Recognising the need to take a more strategic view one commentator recognises the very nature of business focusses on short-term views; hence a fundamental paradigm conflict with taking a longer term perspective. We can expect more on the alignment of procurement with organisational value creation.

Previously dogged by supply chain issues and the ability to meet customer demand it sounds that the North American launch of the PS4 has gone better than previous console launches.  The bigger challenge of Europe on 29 November will be the litmus test. http://www.ft.com/cms/s/0/1480e760-4f85-11e3-b06e-00144feabdc0.html?siteedition=uk#axzz2kwQ1Jora

A really great article on finance and supply chain integration.  http://www.ey.com/Publication/vwLUAssets/EY-Partnering-for-performance-the-CFO-and-the-supply-chain/$FILE/EY-Partnering-for-performance-the-CFO-and-the-supply-chain.pdf The article is worthy of a good read and identifies the real benefits to organisations from aligning their finance and supply chain functions: CFOs and supply chain leaders are creating alignment between strategy, finance, tax and operations, unlocking hidden value within the organization and strengthening financial performance. Recognising the true value that supply chain and procurement brings helps financiers understand the value that is added and moves away from the accusation of "knowing the cost of everything and the value of nothing".   Disappointingly it is western Europe left trailing in the wake of Asia and the US in recognising the benefits of an integrated approach.  However, on a positive note the integrated approa

This article strongly implies that a national body could enforce the use of centrally agreed contracts.  http://www.supplymanagement.com/news/2013/council-buyers-urged-to-get-act-together-or-face-heavy-handed-national-strategy/ I thought that the concept of a blanket enforcement had been proven to acknowledge that a one size fits all approach does not work? "Acting as a single intelligent client" means that the needs of Carlisle are the same as Truro, as Hackney.  Perhaps a more regionalised approached through the creation of regional alliances is more effective. The recent comments of Sir Richard Leese of Manchester City Council are perhaps more applicable.

Here's a really good article that is as applicable to every procurement activity published by the NAO! http://www.nao.org.uk/report/memorandum-managing-governments-suppliers/ This is very much worth a read.  There are three great points to take on board: 1.  Scrutiny and ensuring competitiveness. 2.  Suppliers rights to making a fair profit. 3.  Compliance to standards and control. I've commented before on the need for due diligence and making sure that the buyer gets what they want.  Part of the activity in getting what you want is getting it at the right price.  Many years ago government used a Public Sector Comparator as a benchline.  This has changed over the years and is now effectively an "As-is" cost. The Olympics saw the problems with G4S, with the military stepping in to the breach to provide the service, clearly cost (and by default, profit) was the competitive driver.  Cost drivers limit profit and thereby make margins difficult.  As such suppli

Our new website is now live at: http://www.pppmanagement.co.uk/ # It gives a flavour of our professional offering, please feel free to come and visit our site and all feedback very much appreciated. We are very pleased with the website and would like to thank the team from Discerning Digital for an outstanding job.  Ian Patterson the Project Director was incredible and the support the team provided was unbelievable - thank you.

This article regarding Payment by Results (PBR) and its impact on the voluntary sector makes for some interesting reading. http://www.supplymanagement.com/news/2013/payment-by-results-seriously-flawed-says-charity-sector/ Two quotes in particular stand out for me: "Implementing PBR effectively requires intelligent thought and carefully crafted incentives, but many PBR contracts fall well short of this. Crudely designed targets and contracts risk pushing expert voluntary sector providers out of public service provision" and "As PBR proliferates as a payment mechanism, it’s crucial that commissioners seek input from providers and service users on realistic targets and contractual terms at the very start of the process." I recognise that the quotes in the original article could very well be taken out of context but the first quote reinforces the need for the purchasing organisation (who is making the commitment!) to be sure that the offering and the terms a

We have just launched Professional Procurement & Project Management (PP&PM) and would like to thank everyone for their kind words and generous sentiment wishing the business every success.   We will be updating the blog with topical comments on news and developments in the disciplines of procurement and project management. During the coming weeks we will be providing comment and advice on topics including the importance of workscope definition, supplier engagement, incentivisation and the link between effective procurement and successful contract management. We do hope that you will visit the blog to read our articles and see how PP&PM are doing. All our posts will be publicised through Twitter so it would be a great idea that if you are interested in our updates that you follow us on Twitter.   Our website is due to launch very shortly and we are very excited by this fantastic opportunity to bring you more on PP± if there is anything you would