Now that the UK has invoked Article 50, the Great Repeal Bill will enshrine all current EU law into English law, allowing Civil Servants (one hopes in partnership with industry) to review which laws work well and which are superfluous to a post EU-United Kingdom.
One such law under review will be the EU Directive on Public Procurement. Commissioned in the 1960s, the directive aims to create a level playing field, drive transparency and fairness, create competition, professionalise buyers and reduce red tape.
However, a recent article in the Economist, which reviewed public procurement from all 28 EU nations in areas as varied as tanks to toilet rolls, found a reality far away from this vision of procurement utopia. In its analysis it was found that 30% of tenders received just one bid, with the median number of bids received being just three. The theory being that a tender short of bids is more open to supplier collusion and is likely not to deliver value to European taxpayers.
In some ways, this legislation epitomises why 52% voted leave in the UK's June '16 referendum. While hard to argue against a policy born out of the desire to root out corruption and drive collaboration, innovation and partnership; it can be viewed as adding bureaucracy, resulting in a process so complex that only the largest elite companies can support it.
Through Brexit the UK has a fabulous opportunity, regardless of your political assertions, to combine the best of the EU and the best of British common sense and diplomacy. This opportunity seems too good to waste and I can't help thinking that releasing some of the shackles of bureaucracy and providing buyers with the tools to do their job would be a good start.
What about travel?
Now that the Brexit starting gun has been fired, I thought it would be fascinating to take a UK travel lens to the points raised in the Economist article, and I'm sorry to report that I've found an equally sorry story.
Of the procurements analysed (across 2016), 11% received just one bid and the median number of bids was also three. In over 50% of cases the incumbent retained the bid which, while in itself is not an issue, when viewed alongside the fact that 56% of the tenders received three bids or less, raises more of a concern. After all, it is hard to argue against the fact that the best way to ensure value for money, good service and innovation is through credible competition.
So what of the goals of the EU directive?
1) Create a level playing field
Government policy is that by 2020, one in every three pounds will be spent with small to medium enterprise (SME) suppliers. But bidder status is not always captured and even when it is, there is no scoring benefit applied. Larger suppliers would argue that they spend a lot of money with SMEs too and that, regardless of size, Government should have the best suppliers possible. All said, given the high ratio of online businesses requiring few staff, scaling up should not be seen as a barrier and the innovation from SME suppliers should certainly be given a chance.
The government needs to gain traction among suppliers both large and small as competition is dwindling with recent merger and acquisition activity amongst high profile government suppliers — as a result of which, some TMCs no longer class as SMEs.
2) Drive transparency, fairness and competition
Of the travel bids analysed, 92% of spend and 56% of contracts were won by just four suppliers.
There were very few cases of any meaningful market engagement to 'excite' the market prior to the bid being released. Where they do, it's often just to communicate an already decided upon process rather than to validate and shape the approach to be palatable to suppliers. Buyers seem reluctant to engage with industry for fear of accusation of collusion and leaving them at risk of legal challenge.
90% of TMCs surveyed consider the public sector to be less profitable than private sector. Some would argue this is perfectly reasonable given the size of business available. TMCs, though, talk of the narrow profit margins and poorly written RFPs containing little or no data - creating undue risk. For many TMCs, it's a leap of faith they are not willing to take.
Almost 70% of TMCs feel that as a non-incumbent they are less likely to win a bid. This is born out in the analysis which shows that the incumbent is far more likely to retain business. Also, it's worth noting that in public sector procurement, previous performance rarely has any bearing on the end result.
3) Professionalise buyers and reduce red tape
Over 50% of TMCs felt that public sector buyers were more organised than their private sector counterparts. Although over 60% said they were less knowledgeable about travel. I observed numerous examples of timelines being extended and TMCs bemoaned the short lead in periods (although it should be noted this is not exclusively a public sector trait).
Future steps
Buyers bemoan how they are hamstrung by current regulations but there are areas in their control which could see more bidders encouraged to come to the table, driving additional competition and contributing to the SME agenda.
- Conduct meaningful market engagement BEFORE your strategy is finalised
- Recognise that diseconomies of scale are a factor, particularly if the size and/or complexity of consolidated spend reduces your likely number of bidders. Consider the 'sweet spot' (see below).
- Recognise that 'you can only squeeze the lemon of transaction fee' so much — conducting a 'should cost' analysis should tell you how much
- The next level of savings are achieved through applying more strategic procurement levers such as total cost of ownership and demand management techniques
- Suppliers are open to co-destiny agreements if the bid allows them to articulate as such through variants.
- De-risk the bids; provide more information to allow bidders to fairly price the business. Ensure that potential bidders have as much information as incumbents.
Suppliers too have a part to play here.
- Take a fresh look at public sector procurement. Make your voice heard if you feel a process unfairly advantages an incumbent.
- Make it clear what you don't like about a bid and articulate your reasons you have no bid if that is your approach. This is the only way this sector can get better.
The process is designed to remove subjectivity and thus the likelihood of corruption and collusion. However, this has created a culture of buyers who come across as 'box tickers' appearing to have little technical knowledge of the service being brought and buying on transactional price above everything else and in fear of engaging with industry. Highly qualified procurement practitioners utilising only the most basic procurement tactics of 'consolidate, leverage and execute' to the detriment of overall value being received.
Public sector needs to work extensively with industry to find out what it is about this sector which disinterests many suppliers. The Government's 'one in three' and mystery shopper programs are an excellent start but needs to be backed up with actions.
My hope is that the government do take this opportunity and, with almost £2bn of annual travel and meeting spend, that the travel industry can be part of shaping the future direction of public sector procurement in a post EU United Kingdom.