Procurement Best Practices

Shoppers and investors were taken by surprise when Tesco announced a £250m black hole in their profits last month. Tesco’s suppliers, however, were not. The supermarket, the second-largest retailer in the world, has been under pressure for some time. Shoppers are increasingly turning their backs on the big weekly grocery shop in favour of home delivery services, discount rivals Aldi and Lidl and local convenience stores. These trends have hit sales at Tesco’s big out-of-town supermarkets and its market share has declined significantly in the past year. Profit warnings led to the resignation of the Chief Executive, Philip Clarke, in July. The honeymoon for his replacement, Dave Lewis, didn’t last long. In the first few days he was confronted by a whistler blower who warned that Finance were incorrectly booking payments received from suppliers related to in-store promotions. Unfortunately Dave Lewis’s misery didn’t stop there. Recently, Tesco announced that its profits had been overstated by £263m, more than have been initially estimated and not long after, the Serious Fraud Office (SFO) confirmed that it is carrying out a criminal investigation.

For my sins, I have been looking at the NHS Procurement Atlas of Variation – Metadata, the opening two paragraphs of which read: The NHS Procurement Atlas of Variation has been developed to deliver greater transparency by comparing the prices paid by different trusts for the same types of products. This will allow trusts and their suppliers to understand where better value is available and then act on this information to reduce costs (my emphasis). Discontent with the Atlas has been well documented and I don’t need to rehearse those arguments here. What surprised me was that, even now, after all of the improvements in public procurement in recent years, the DoH could issue a procurement policy document that treated price, value and cost as synonyms and expect to be taken seriously. This is an antediluvian notion, that procurement is about securing the best (usually lowest) price and nothing else. It is not.