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The Moral Government Procurement Maze

28th Jun 2012
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I was recently asked to tender for a top team strategy day for a Central Government agency.   Having submitted my proposal in double quick time, I was pleased to learn that I had a 25% chance of getting the work, as only four companies had applied. 

Imagine my surprise today to learn that my time in submitting the proposal was effectively wasted, and that I never had a chance of getting the work.  Here is an extract of the e-mail from the HR manager who requested the proposal:

"There were 4 potential providers for this piece of work.  We felt all would have delivered the objectives.  So it came down to price.  One of the providers it undertakes a lot of work for the MOD and others in the Public Sector.  Therefore they have tendered on the basis that they will do this free of charge"

Whilst this is perfectly legal, it would appear that my only choice if I wanted to have a chance of gaining the contract would have been to pay the agency money for the privilege of doing the work ! :-(  I’m not sure this is going to help small businesses to recover from the recession.  The Department for Business, Innovation and Skills has provided some guidance over help for small businesses seeking to work with Government at BACKING SMALL BUSINESSES.  I am writing to Vince Cable to request some clarification. If any readers here would like to add their name to this letter I'd be interested to hear from you.

What do others think about the morals of offering such inducements to secure Government contracts?   Should the Government and public sector be indulging in this ‘ebay procurement technique’, driving small businesses to effectively ‘pay to work’?

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By alisonrbcm
28th Jun 2012 18:27

I’m not sure I understand the inducement – inducement to get what in the future? Offering to do some work free of charge is a choice they have. It can’t impact the decision made on any future tenders.

The reason for the suppliers decision is unknown. Yet it may have something to do with the other work they’re doing and therefore it might make the most (common) sense for them to facilitate the session.

My concern is with a system that forces public sector organisations to tender - when their private sector counterparts will have been able to make the decision to utilise an organisation that knows them and who they know, without raising the hope of other organisations. If this is the case here then the supplier is being forced by the ‘rules’ to offer to do the work free in order to ensure they continue to serve their customer. In other words it might not be an inducement for future work but a penalty for past work. (I might be wrong but it’s certainly a different interpretation.)

As a procurement professional and small business I still ‘wince’ when I read that small businesses are being given more access to tender for public sector work. In reality what that does is increase expectations of SME’s, increases the number of organisations tendering (I appreciate not in this instance), increases the criteria for selection used, increases the workload and certainly increases the number of unhappy unsuccessful tenderers to deal with at the end.

I don’t know the solution but certainly know it’s the likes of your potential clients that have the hardest job trying to work within rules that have been set up to delivery transparency and equality but often work against logic and sense!

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By Peter Cook
28th Jun 2012 19:07

Dear Alison,

Thanks for your comprehensive response.

My wider reading of the detail behind this is that the company is a larger consultancy, wanting to 'lock out' new entrants by offering to deliver this work for free.  I tend to agree with many of the points you raise about the problems raised by insiting that tenders are used.  Other people have written to me telling me that the NHS issued a tender for a piece of work worth £500 and wasted a lot of time in consequence etc.

I guess the question relates to the ethics of using inducements like this to make the tendering process a farce.  It's perfectly legal I guess but I wonder if it is 'decent'?   It smacks of a desperate measure to erect barriers to entry by a larger player in the face of regulations designed to open up a closed market to greater levels of competition and innovation.

Another commentator wrote to me privately to say:

"I wonder if the act of supplying services for free could be constituted as a bribe and you might want to quote the Bribery Act 2010 when you write to Mr Cable.  After all, simply holding the event will give the hosting company an opportunity for free marketing".

Peter

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By Peter Cook
30th Jun 2012 11:00

I'm not sure if I understood your headline correctly - are you suggesting that they might be getting this contract because they had performed poorly before and that this is somehow a 'penalty'.  I guess I'd be shocked but maybe not surprised if this was the case.

Peter 

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By alisonrbcm
01st Jul 2012 10:50

It's a self imposed penalty. You implied the supplier was taking the action in order for them to maximise the opportunity of getting future work. I wondered if they had made the choice simply because they felt it was the only thing to do in order to bring to a close other work they'd started.

If you've worked with a client for some time and then they say they have to tender and you might not get the work and it's something that brings together everything you'd worked on for the last x months/years you might feel you had to offer to do it for £0 in order to finish what you started.  

 

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By Peter Cook
01st Jul 2012 11:21

They probably felt that they had to do it in order to penetrate the new agency.  I agree it is classic Michael Porter stuff - erect barriers to entry. Still feels a little iffy imho.

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