Procurement Process

No PO No Pay is often thought of a means to "train" suppliers providing them with a somewhat negative incentive to comply with their customer's purchase to pay processes. "No PO No Pay No Exceptions" - I've said it myself - but in practice not only does it not work, it's directing effort in the wrong direction.

MEAT or the Most Economically Advantageous Tender has always been one of the assessment criteria upon which contracts could be awarded under EU procurement law. But no longer – soon it will be the only option. A slightly refined version of old MEAT, new MEAT will encourage evaluation of the bids offering the best price-quality ratio. This change is described by Jennifer Robinson as just one of many changes to EU procurement law that collectively represent a complete overhaul, the biggest change in public procurement law in 10 years.

On 8 October 2013 the Aswad Composite Mills factory, in Gazipur, outside Dhaka in Bangladesh burnt down. Seven workers were killed and a further fifty were injured in the fire. As newspaper reports state, the fire came soon after eleven hundred workers had been killed in a blaze at the Rana Plaza factory, a tragedy which led to more than ninety High Street retailers reaching an accord to ensure fire and safety inspections at their suppliers’ premises. The Aswad Composite Mills were not amongst those to be inspected because they were not perceived to be in the direct supply chain of the Western retailers.

I thought of these tragedies when reading the draft Directive on public procurement regarding use of “life cycle costs” in assessment procedures. I am aware of the possibility of bathos in that sentence – I was reflecting on the very real human cost of supply chain decisions the further one looks back through the tiers.

It’s astonishing! At a time when we have Sarbanes Oxley and a culture of control, in the climate of transparency and scrutiny and a fetishistic focus on finance – how is it that fraudsters have been able to get away with a more than 50% increase in procurement related theft? But it’s not that astonishing really. A cursory glance at the procurement practices and purchase to pay processes in any organization will reveal opportunities to defraud and while we should never forget that it is the fraudster that’s to blame, the responsibility is shared with the executives who choose to turn a blind eye and underinvest in proper P2P.

A couple of months ago I was looking at a pre-qualification questionnaire (PQQ) issued by a London Borough. It contained something that I had not seen before – a mandatory requirement for two references to be sent directly to the authority, by the referees, as part of the PQQ  submission. Failure to persuade a customer to do this meant automatic exclusion for the potential supplier from any further participation. I assumed that the buyer had experienced a brainstorm but then it happened again with a different local authority from a different part of the country.

There are lots of reasons to do e-procurement but most of the stated reasons are not the real reason at all. Indeed, most of the reasons stated for implementing e-procurement are impossible to deliver. But there is one very good reason to implement e-procurement and oddly, the functionality that delivers it is usually not available from the e-procurement vendors.