Favourite Articles of 2016: Trade-offs in Public Procurement

By Peter Smith posted 01-03-2017 12:28

  
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Politicians, and indeed many senior executives, hate to admit that life lacks certainty and is absolutely full of trade-offs. Perhaps it is a general human trait; we like certainty, to feel in control. We like to think we can address any problem and come up with a solution that closes off that problem forever.

But in reality, life is not like that. Uncertainty and variability surrounds everything we do, and every time we address one issue or just carry out any activity, there will be consequences – some expected and some unforeseen. We move house to reduce the stress of our commute – and find the schools aren’t as good and we miss that great little neighbourhood restaurant or pub more than we expected.

We see this all the time in the public procurement space. Politicians, senior executives and sometimes even our own colleagues in senior procurement roles are all at times guilty or presenting this simplistic, linear view that says “here is a problem, and here is how we will solve it. End of story”. Except it very rarely is the end of the story.

Our argument is that few issues are as clear cut as that. That means often, we will address one problem and another pops up, because of the trade-offs inherent in many decisions. So wouldn’t it be better to acknowledge those to begin with? That does not mean we don’t take action; but if we acknowledge the trade-offs, then we would be better placed to address them and perhaps minimise any risks or potential negatives arising from them.

So what are the regular and common trade-offs we see in public procurement, not always recognised but always present? We’re not claiming this to be an exhaustive list, but here are five interesting cases that we came up with quickly. We’re going to come back and look at each of these in more detail in future articles.

Rigour versus speed – we need to simplify public procurement, shorten the time taken to run procurement exercises, reduce the cost for bidders and buyers. Yes of course, that all sounds great. But the potential trade off there is a loss of rigour in the process, that might lead to other issues (from increased corruption risk to poorer value for money).

Policy goals versus value for money – we want to support SMEs (small firms), apprenticeships, sustainability, employment, innovation or any other “policy through procurement” goals. It is not unreasonable to seek to use public money to support policy goals – but the potential trade-off around pursuing this goals is poorer value for money and indeed a more onerous process for all parties involved.

Commerciality versus fraud and corruption – we want procurement people to be more “commercial”, to drive better deals, to negotiate with suppliers. it’s easy to understand this goal – but the more “flexibility” we give buyers, the easier it is for corruption to creep into the system. Yes, my brother-in-law’s firm was not the winning bidder initially, but after some negotiation, they reduced their price to just below the previous best bid …

Openness versus tried and tested – we want to encourage new suppliers with innovative solutions. But what if they can’t actually meet the requirements of the contract? what if the new ideas don’t work? Another trade-off there.

Leverage and aggregation versus the needs of the customer – there is a belief that bigger is better, that larger contracts and centralised procurement and negotiation will drive lower prices and better deals. But what does this do in terms of the needs of individual users, budget holders or buying organisations?

These are some key examples of the sort of trade-offs we face all the time in public procurement. There are no easy answers here, to be honest; but we will do much better in the long-run if we acknowledge the tricky issues rather than pretending that there are easy solutions.

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