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Public procurement must be based on honesty, transparency and proportionality – and be consistent with wider objectives

Tuesday April 23rd, 2013

Public procurement plays a vital role across the public sector – without it there would be no public services. Purchasing goods, commodities and services is as fundamental to the public sector as it is to every business. No modern organisation produces all that it consumes; and many have neither the capacity nor the expertise to undertake every professional, technical or operational role themselves. They have to procure goods and services from third parties.

However, public procurement can and indeed should be more than simply the purchasing of such services and goods. It should be, and increasingly is, seen as a strategic activity capable of enabling public bodies to secure wider social, economic, environmental and sometimes purely political goals. Indeed, the Social Value Act places a duty on local authorities to procure social value in addition to value for money, services and goods.

John Tizard

John Tizard

 

Inevitably, the quality and effectiveness of procurement varies greatly across the public sector, as does its prime purpose. And of course, there are often variations of prime purpose within a single organisation for very good and understandable reasons. 

It is also the case that the linkage between strategic commissioning, commissioning and procurement varies enormously across the public sector – and again, often within the same organisation. These are different activities and should not be conflated or confused. Procurement is but one of the many means by which commissioning decisions can be implemented, and it is important that this is understood and the relationships between them and between those responsible for their implementation are clear and transparent. A failure to properly articulate this distinction means that providers and other stakeholders are unlikely to understand what is happening; who is responsible; and who to relate to. And the outcomes for the public will be poorer too.

Public bodies use specific procurement exercises to achieve different goals. Some have a series of overarching policy objectives for what they see as the key deliverables from procurement. In such cases, they should make these objectives widely available in an accessible and jargon-free form so that potential providers, staff, service users and the wider community know what to expect. Consequently, staff and politicians can then be held to account through such transparency – provided there is also transparency of actual performance.

Typically, public bodies will determine tenders on the basis of a weighted combination of: price; quality; outcomes and/or outputs; the track record of bidders; their robustness; the technical solution in the case of services; and increasingly, on wider issues such as employment conditions, diversity, sustainability, local employment and supply chains … and much more.

It is vital that these selection criteria are published at the outset of the procurement process and that the procuring body is explicit as to how it will test and weight each criterion. It is also essential that the procuring body is absolutely honest about these factors. Procurement is almost always honest in terms of probity but doesn’t always manage to convey clearly what is wanted and on what terms.

All too often, anecdotally one hears that providers feel that whatever selection criteria have been announced in advance and in the tender documentation, price or some other criterion has dominated the decision on which provider to select. This is wrong and short-sighted – but it does happen.

Equally, public bodies sometimes state that they wish to award contracts ‘all other things being equal’ and ‘whilst still being within the procurement regulations’ to specific types of provider – for example charities, employee-led co-operatives, social enterprises and SMEs. If so, then they should ensure that this is what they actually do, and that the stated objective is not simply a public relations exercise spinning a commitment which there was never any genuine intention to honour.

There is also a need for public sector procurement processes and contract terms to align with procuring organisations’ stated objectives. For example, long, complex and expensive procurement processes may well deter many smaller providers from bidding. The procurement process needs to be proportionate to the size of contract on offer – one size does not, in this case, fit all. Likewise, it is plain dishonest to state that charities and SMEs are the preferred providers if the size of the contract, the payment terms (e.g. payment by results), risk involved and operational complexity can only ever be met by large-scale corporates. 

If a public body wishes smaller providers to be part of a supply chain managed by larger prime contractors and to be well treated in terms of risk transfer, price and payment, then that body must state this clearly when it invites tenders, as well as: adopting selection criteria to test prime bidders’ competence, values and approaches; incentivising the right behaviours; and holding the primes to account for their performance throughout the length of the contract. Failure to adopt such practice whilst still claiming the policy objective is dishonest, with such behaviours inevitably leading to very disappointed potential SME and third sector providers, a breakdown in trust, an understandable reluctance to bid for future contracts, and a reduction in choice.

If public procurers get it right, they can make an enormous difference and add huge value to their organisations, enhancing performance and reputation and creating social value. Getting it wrong as outlined above has a very damaging impact – fostering disappointment, anger and cynicism, reducing trust and undermining the profession.

Executing procurement properly is not easy, especially given political pressures and ‘spin’ and the demand to cuts costs and make major savings. Done ‘any which way’, procurement will invariably generate short and long term savings for the public sector, but the profession must also ensure that this is not at the cost of misleading potential providers or reducing the choice or long term quality of services.

Honesty, transparency, proportionality and consistency – of objectives, processes, behaviours, performance and outcomes: this is what will build reputations, ensure choice and serve the public well in the longer term.

 

John Tizard

Online: www.johntizard.com

Twitter: @johntizard

Linked In: John Tizard

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