Last year, the Irish government bought a state-of-the-art digital printer, one of the most advanced pieces of machinery of its type in the world. Unfortunately, once it arrived in Dublin it became clear that there was a problem. Sadly, the printer was simply too large to fit into the building where it was due to be housed. Which goes to show it isn’t always the highly technical aspects of a specification that can cause problems – sometimes, it is the basics, like the height of your printer!
That story comes from my book, being published by Penguin Business this month. As I did my research for Bad Buying – How organisations waste billions through failures frauds and f*ups, something quickly became obvious. Drawing on my own 35 years of experience, plus published articles, court and audit reports and so on, I realised that there was absolutely no shortage of case studies that illustrated Bad Buying!
Frankly, I didn’t have to dig particularly deeply for fascinating and disturbing stories. In fact, the book could have focused on just the public (government) sector in any major country such as the US or the UK, or even on one area within that. I suspected that the health service in the UK or the military in most major countries had more than enough stories for a Lord of the Rings-length volume of procurement failures. And that’s even before we consider what has happened during the pandemic.
But I wanted some balance in the book, so it features case studies from all around the world and from the private, public and third sectors (that is, charities – who do seem to have their fair share of interesting fraud cases, incidentally). And I should stress that the book is not aimed purely at procurement /acquisition / buying professionals. Rather, it is (I hope) an enjoyable, useful and interesting read for anyone in business or public service, and anyone simply interested in how organisations spend their money – and our money, in the case of governments.
There were issues that seemed particularly relevant to government buying in terms of the root causes of procurement failure and fraud. I’d highlight the following, and I’m going to cover each at more length over the next few weeks.
- A lack of market understanding, often leading to limited or non-existent competition. Public sector organisations (along with large private sector firms, it should be said) have taken actions in the past 20 years or so that have made many major supply markets less competitive. They have created a rod for their own backs, with well-intentioned strategies that have transferred power into the hands of suppliers. That includes increasing the barriers to entry for new and innovative firms. In some cases, buyers have also taken to heart the iconic phrase from the great movie, Field of Dreams; “build it and they will come.” In the case of procurement, that translates to “do no research, just specify it and someone will be able to deliver it.” Unfortunately, there are plenty of examples (including some in my book) to show that is not true in government procurement. Remember, this was a film, and it was about ghosts, which don’t exist. It was not a guide for spending taxpayers’ money.
- Buyers show commercial naivety – “believing the supplier,” as one of my chapters is headed, sometimes allied with weak negotiation skills. This is an issue with politicians in particular, but even senior procurement professionals are not immune. Even today, we see Ministers, their political advisers or public servants buying ‘snake oil’ from too many suppliers of consulting services, technology, virus testing kits, PPE, and so on.
- Poor management of risk is common, including both a lack of focus on major risks and, in other cases, inappropriate risk aversion. At a strategic level, there is a tendency in the public sector to think that by passing work to a supplier, risk has been transferred. But when a problem hits the front pages or the top Twitter hashtags, it becomes clear that the buyer retains much of the real risk! And even for more day-to-day risk management, the government sector has too often combined risk aversion where that is inappropriate (buying from the ‘safe’ usual suspects and a lack of willingness to use different/new/innovative firms) with missing the real risks arising from major suppliers (e.g. Carillion going under in the UK).
- There is an openness to fraud and corruption, exacerbated by ‘box ticking’ which disguises weak processes. A classic example of this is the process by which public servants in many organizations have to record hospitality or gifts in some sort of register. But recording something does not make it right! Clear routes for gaining permission in advance should be the norm. The private sector tends to have more clarity here and the best firms tend to just say “no.” But there are many other types of fraud and corruption, often where the victim organization has weak or non-existent processes and policies in the relevant areas.
That was a brief run-through of some significant Bad Buying issues in government I’ve identified. In future articles I’ll look at each of those topics in more detail, but in the meantime, do check out the availability of the book (or eBook) wherever you’re based.