01 Dec 2011 Fear, loathing and radical thinking in the world of procurement
“I hate procurement people!” Not what I was expecting to hear at a round table event this morning that gathered together some of the great and good in the procurement world – well the UK procurement world at least. But what was interesting was that this self-loathing comment was by no means the most radical remark.
The breakfast event, held in London, was hosted by Xchanging, the procurement outsourcing people, and was expertly facilitated by Peter Smith of Spend Matters fame. I found it fascinating. I often delve so deeply into purchasing process, finance and technology matters that I lose touch with what is going on in the world of procurement and I was delighted and reassured to hear refreshing commonality between the thinking amongst hard core procurement professionals and the thinking of their finance counterparts. The need for an holistic approach to procurement to ensure that procurement saving KPIs don’t conflict with working capital KPIs; finance and procurement need to align more closely and supply chain finance should be examined more seriously.
It wasn’t all positive. We’re in unparalleled tough economic times and, as Peter explained, while within large organizations the CPO can argue that procurement isn’t part of the problem but part of the solution – that message falls on deaf ears in less enlightened businesses and government departments and we’re seeing less investment in proper procurement in some areas. The gap between the leaders and the laggards is getting bigger, there is still far too few good procurement people and there is genuine fear that good procurement practice is being discarded in the short-sighted focus on cost. But discarding good procurement practice isn’t necessarily a bad thing is it? The attendees at this round table didn’t seem to think so.
Throwing away the procurement rule book
One of the big problems in the procurement world, especially in public sector, is the great difficulty in changing incumbent suppliers for large contracts. Huge government IT contracts for example, are difficult if not impossible to shift. For potential bidders, the cost of acquisition of these large contracts can be impossibly expensive and time consuming. The small number of IT service providers that run the majority of large government IT contracts aren’t cartels but they look very like cartels. At a time when governments want to support SMEs, why not think the unthinkable and throw away the rule book? Instead of issuing complex and expensive PQQs and RFIs, why not just appoint a few suppliers. Just appoint them. Don’t just lower the bar – throw the bar away.
By itself, this idea hasn’t a hope. It’s too simplistic, it introduces ludicrous risk and last but not least it would be illegal. But it’s not entirely without merit and most important of all, it makes you think, maybe there is a better way.