The good, the bad and the ugly of public sector procurement

Procuring technology in the public sector at the moment is a bit of a nightmare. The days of 'nobody ever got fired for hiring IBM' are long gone and digital decision makers are faced with a market that is practically changing every 24 hours. CIOs used to be able to spend 18 months engaging with suppliers about what they wanted to implement and then another three to five years building it, with the view to use it for another five to ten years. This just doesn't fly anymore. Procuring with this model in this day and age would leave users with technology that was so out of date that it would barely bring any benefit.

Instead, buyers are now faced with a diverse supplier base that is both on premise and in the cloud, they are being asked to introduce new innovation every other day and they are being told to work with SMEs. This complexity combined with the traditional requirements of public sector procurement, which is notoriously long-winded and heavily bureaucratic, is leaving many dumbfounded and quite frankly in a bit of a mess.

Chris Haynes is all too familiar with these challenges having worked his way through both local government and central government in the UK, where he had stints running technology functions for the deputy prime minister, the Cabinet Office and the Department for Work & Pensions. He now owns his own company, Hough Fold, advising companies on how best to work with government. Speaking at an Ovum public sector insights conference recently in London, Haynes ran through some useful tips for those that are struggling with these demands – and although some of them might seem obvious, it's surprising how often you see buyers going wrong on this front and I think they serve as a useful reminder.

Haynes put the tips into three lots – the good, the bad and the ugly – so I figured I would keep the same running order...

The Good

Do your own contract negotiations – Haynes argued (rather awkwardly, given that the conference was filled with procurement bods) that it is the buyer and the decision maker that should be carrying out the negotiations with suppliers, rather than it being farmed off to a procurement team that doesn't really understand what the problems are that need solving. He said:

“It's you that's the customer, you know what you want. Sometimes procurement teams have a habit of doing what the requirement says and not what you want.”

You are not big enough for some of your suppliers – Remember this, said Haynes. This point is particularly important to local government, health services and other organisations associated with the public sector, but equally don't have the weight of central government.

“It sounds great to say I'm talking to IBM or I'm talking to Oracle, but think about the size of your organisation in these situations. I'm not saying you can't use those, but you could be somebody wagging the tail of a dragon."

Prepare for the negotiations – You think this would be the first thing that anyone spending taxpayer money on technology would do, but Haynes argued that buyers need to concentrate and prepare properly for the negotiations. No only this, CIOs and digital decision makers must stop acting like negotiations are an exercise in tripping suppliers up, he said. Quite right. Haynes stated that negotiations are about getting to an end result and not about slapping suppliers about. Buyers should also take all unnecessary complication out of the deal, even if it is tempting to include it, because this will only end up giving you a headache and costing you money down the line. If you can do without it, do without it.

“Be clear on what your true objectives are and try and keep it really focused. If it is about savings, be explicit. Don't wrap it up in something about transformations when it's about saving money.”

Use SMEs where you can – This is a double edged sword (which we will address later on), but Haynes believes that the public sector should be using smaller businesses for technology procurement where possible. However, this isn't necessarily because the big vendors can't do what the SME can, or even that the SME is better, it's largely to provide a reality check about what some people are actually paying for a similar piece of kit. However, if buyers want to work with SMEs then they have to be willing to change their practices too and not expect to treat them the same as the large suppliers. For example, government teams should look at introducing interim payments to support an SME's cash flow.

“If you are genuinely are interested in using SMEs then you have to think outside the box about interim payments for pieces of work and not think that they can work for 10 months before they get paid. I've been working with one SME that has been working with the Department for Work & Pensions for 12 months now and they haven't received a penny yet. They are a quarter of a million pounds down now. “

The Bad

Remember, your negotiation is your successor's problem – This is absolutely critical when working in the public sector, given that most information is made public and every horrible detail about what goes wrong is shared. So, always remember that what you negotiate with your supplier, somebody down the line is going probably picking up the tab.

“It might be you [dealing with problems down the line], but in many cases it will be somebody else and you will be damned by history. Which idiot negotiated that? Think about those things. Make sure you involve the right stakeholders. No supplier comes into a greenfield situation, so if you have problems get it through to them that these are the problems they are going to land in. Don't mislead the future partner, they get really upset about that.”

SMEs aren't a silver bullet – It was interesting to hear Haynes speak on this issue, as most of the rhetoric surrounding the use of SMEs in the public sector is that they are here to save the day and to force those horrible old suppliers to own up to their mistakes. However, Haynes warned that they have their own set of problems...

“The first thing to think about is that they might not be very good, that's why they are SMEs – they have never grown. They are in a very niche market place. They are new. In that sense it's a window of opportunity, but don't forget that SMEs can be crap.”

The Ugly

Everyone knows best – As you can imagine in the world of politics and government, everyone has an opinion and everyone thinks they know the answer. Haynes warned that those dealing with suppliers, will also have to deal with a number of people internally.

“You have got to learn how to deal with interference in the process, from politicians, people advising you, from people who know better. You have got to be prepared to be as stringent with your internal stakeholders as the people you are negotiating with. You have got to deal with gifted amateurs.”

Strategic vs commodity – When you're procuring technology, try and understand what is going to make a strategic difference to your organisation – stuff that you should fight for and spend time on. Equally, things that are essential but not strategic shouldn't take up time and money. Buy what you need and get on with it. Haynes put it well:

“Don't treat commodities as strategic assets – for god sake, it's a piece of tin. When you are buying PCs they are tin, with boards in them, they are not some strategic asset for the future. Don't start making out it's the end of the world if one is 4 centimetres bigger than another one. But more importantly, don't treat strategic assets as a commodity. If you really want high skilled development work, don't treat as something you can just buy off a framework.”

You're nice, I'll buy from you (mistake) – Don't confuse a nice executive from a supplier with the right product for your organisation, warned Haynes. Base all of your buying decisions on what is going to help to solve your problems and which vendor is best for the job.

“Remember to judge on facts and not on gut instinct and personality. A lot of these decisions are based on who you like and who you don't like, you may not like the guy from BT, but their offering might be the best. That's happened to me so many times. If they rub you up too much go back to them and say you would rather deal with somebody else. You are the customer.”

Suppliers play hardball – Just as it's good for digital decision makers to remember that what they procure now will be somebody's problem in the future, equally somebody else's previous negotiation is now your problem. Haynes advised that where possible, try and create 'jagged edge contracts', which allow you to rip a piece of a contract away, allowing you to do a piece of work with somebody else. This may also help you transition away from certain suppliers.

“If you are in a really awkward situation the best people to speak to are lawyers, if it means crawling over those things to break certain parts of the contract, then do it.”

Verdict

As I said earlier, those procuring technology in the public sector will likely be trying to do some or all of this already. But I liked Haynes' list and I think it provides a succinct reminder of all the difficulties involved and how those buying goods can try and get the best deal for themselves.

However, it wasn't all doom and gloom. Haynes finished by saying:

“It can be a lot of fun. It can be fun finding local companies, finding great companies, redefining relationships with traditional suppliers. I am a little bit opposed to this notion of because they are there there is something wrong with them, try to redefine them. Get them to change their attitudes. You scratch my back and I'll scratch yours.”