Procurement
February 8, 2013

Using right tools wrongly

In the March 2012 edition I wrote about the pernicious Public Works and Government Services Canada’s (PWGSC) practice, when issuing standing offers, of ranking suppliers of professional services and giving the “winner” first choice access to contracts based on the lowest per diem rate.

It escapes me why PWGSC uses and glorifies this approach, and why the Treasury Board exacerbates the problem by making the use of these misguided PWGSC standing offers mandatory across government. As I noted, “[a] less expensive contractor that takes longer to produce may easily cost more than a more expensive professional who produces faster and better.” Consider the lower quality, slower delivery and higher internal costs.

PWGSC puts these standing offers in place with no vested interest in the results of their use. I am not aware of performance evaluations and pay bonuses in PWGSC based on whether this approach actually saves anyone any money. One wonders whether PWGSC even has any good measures of what the ostensible savings are. Rather, there are public relations benefits to saying that the government is buying from the “lowest priced” suppliers.

Perhaps TBS seeks the same thing? But the problem remains: those shoes are not made for walking since results are sacrificed to appearances. The Board has the defence against criticism with the argument that it has set “good” rules but that departments apply them badly.

A departmental official told me that he liked the PWGSC approach because, having identified a need, the department did not have to pay any attention to the eventual total price of a contract. Should anyone examine files and conclude that money had been poorly spent, the department had a ready-made defence: “This was not our fault. PWGSC put those approaches in place, and TBS says we have to use them.”

Overall, it is not obvious that anyone really cares what the total price paid is, and whether the work could have been done better, faster and/or at less total cost using another approach.

An option would be to rank service providers based on a fixed price for specific service results. Instead of asking job description writers to bid their per diem rates, the government would rank them on a fixed price to prepare a complete job description. Who could argue, then, if all of the business goes to the consultant who has bid $400 per description, and none to the others who all bid more?

Who indeed! Likely all the managers that were forced by their procurement group, PWGSC and the Board to give their business to that lowest priced supplier.

And what can possibly be wrong with knowing exactly what you will pay for a specific completed product? In fact, just about everything. A service provider working under a too-short time frame (to permit that fixed price) will hurry the work and cut corners, leading to lower quality, more client time in managing the contract and fixing the problems, and the possibility that the “result” will be so bad that the client has to start all over again.

In fact, such an approach is arguably contrary to policy, which requires buyers to consider the complete cost of each procurement and not just the initial contract value. Still, PWGSC continues the practice – and the Board accepts it – of encouraging, if not actually sanctioning, the likely contravention of its own rule.

These are two approaches with the same risks of higher total prices paid, lower quality, slower delivery, and higher internal costs. That said, low per diems and fixed prices are legitimate and effective ways to contract in the right circumstances. You need excellent knowledge of exactly what work is to be done and how long it will take, as well as knowledge of the service provider to ensure success.

Also, you must have the ability to determine that any one service provider that meets those characteristics is in effect the equivalent of any and all others so that low price does become the true differentiator.

The problems occur when such valid processes are developed and applied for the wrong reasons and in the wrong circumstances, by perhaps inexperienced or poorly-led people who follow process blindly without thinking through what is actually the most appropriate approach to achieve the best results. Procurement for results becomes replaced by procurement by rote and process.

Good procurement takes good people using the right tools at the right time in the right way. Procurement people are – or should be – paid to think. If a process will not work – or works imperfectly – change it. Results for your clients must trump cosmetic safety for the system.

 

John Read provides procurement consulting services to public sector clients. He served for almost 15 years in the Public Works procurement arena.

About this author

0 comments

There are no comments for this post yet.

Be the first to comment. Click here.

Procurement
 
By June 2017, the Public Engagement Team at the Privy Council...
 
We are excited to share with you the May/June issue of...
 
Over the past decade, major Canadian procurement projects have encountered increasing...
 
We are excited to announce that the October issue of Canadian...
 
Does your organization have a very narrow view of what digital...
 
In the last few years, we’ve seen various federal governments warning...
 
In this special episode of CGE Radio, your host John Jones...
 
Commodity Management (the official term for life-cycle asset management of goods...
 
Risk is always present in any undertaking, no matter the size...
 
The North Atlantic Treaty Organization, with its 28 independent member countries...
 
Strategic Procurement, recognized in recent years for its promotion of intelligent...
 
Even as talks between the government and federal workers affected problems...
 
The largest effort in 20 years to seek public input on...
 
July 27 was pay day some federal public workers that finally...
 
The government has to move quickly in replacing its fleet of...
 
The Liberal government is taking steps to rein in the National...
 
Canada is severely in need of a maritime vessel that can...
 
By Jason Zhang  The best way to cost effectively manage the retention...
 
Veterans Affairs Canada is not adequately managing the drug component of...
 
Some public servants will have to request their departments for emergency...
 
A research project at that explores the design and feasibility of...
 
The facility of a top-secret military communications group in Borden, Ontario...
 
While Dwight D. Eisenhower’s famous remark that “Plans are nothing, planning...
 
OMX , known for disrupting supply chain management primarily in the defence...
 
It took me more than 20 years in the public service...
 
I have often written about what to me are the unusual...
 
The release of the Defence Procurement Strategy (DPS) in February 2014...
 
It is amazing how much information goes back and forth between...
 
In April 2014 the Environics Institute and the Institute on Governance...
 
The president of the Treasury Board gave a speech in November...
 
Last month I supported the argument that if a received bid...
 
Roy Wiseman’s blog, “In defence of direct negotiation,” on the CGE...
 
As difficult as they may be to accept, we all know...
 
When the government introduced the Defence Procurement Strategy in February, it...
 
I used to be responsible for managing the s9 delegation file,...
 
Last spring the government adjusted its approach to defence procurement, creating...
 
From time to time, the popular media jump on examples of...
 
The early May annual workshop of the Canadian Institute of Procurement...
 
Ten years ago I was as member of the Parliamentary Secretary’s...
 
Benjamin Franklin said that “in this world nothing can be said...
 
“This is urgent,” the poobah said. “If you don’t put this...
 
Last month I wrote about accountability for procurement. I like this...
 
A procurement is designed to deliver specified results to a client....
 
Kudos to the President of the Treasury Board for announcing that,...
 
At the May 2013 Canadian Institute for Procurement and Materiel Management...
 
You’re in a crunch to meet a looming deadline. A couple...
 
How often have you seen buyers use years or months as...
 
As the organization in National Defence responsible for procurement and management...
 
In my time the almost automatic response to austerity was to...
 
Government supply chains, in defence and elsewhere, are increasingly becoming interconnected...
 
A year since my last article on defence procurement, positive change...
 
Public Works has started a project that tries to fix an...
 
In the March edition, I put forward three stories about process...
 
My previous articles have talked about process and results-driven procurement, and...
 
Good procurement takes good people using the right tools at the...
 
When I retired there was no one to whom I could...
 
Canada’s new Chief of the Defence Staff has been mandated to...
 
Over the past 40 years federal procurement has incorporated many measures...
 
Preparing a detailed procurement manual for a client is like trying...
 
…well, maybe not – but there is a link. Governments must...
 
Purchasing card (P-card) systems provide decreased costs per transaction, higher purchasing...
 
Are you going to the IPAC annual conference in St. John’s...
 
Procurement is a strategic issue in the public sector. The expenditures...
 
What constitutes excellence in public procurement? How is it measured? You...
 
Every jurisdiction has a public procurement policy. In its simplest form,...
 
Government executives are responsible for ensuring the integrity of the procurement...
 
There is defence procurement, and then there is Defence Procurement. The...
 
We all know the story, the one about the high-risk project...
 
How do you know what you don’t know? How do you...
 
With few exceptions, public spending rightfully requires competition and due diligence...
 
We all know the music and the steps that go with...
 
Procurement today is often like buying horses from Thomas Hobson in...
 
Don’t pay for what you can get for free. We’ve heard...
 
Our fascination with the future has long roots. Back in the...
 
Once upon a time, the King was looking for a really...
 
Like any small part that runs our cars, procurement is largely...
 
Many policy organizations have learned from sad experience that the best...
 
Effective public procurement can be “make or break” in developing countries...
 
Anyone who has been told by a doctor to lose weight...
 
When he was younger, our son liked to play with Rubik’s...
 
Sore losers: we all know they like to involve their lawyers...
 
The New West Partnership (NWP) cements the West as an economic...
 
Canada’s shipbuilding industry is now on the cusp of resurgence thanks...
 
In most democracies public procurement is expected to be fair, transparent...
 
In 2005, an Ontario government-sponsored task force generated a number of...
 
Recent high profile troubles at e-health operations in both Ontario and...
 
New ways to incorporate value into projects are maximizing the value...
 
The next time you hear someone argue that government procurement has...
 
Some title Some author
Some excerpt
By June 2017, the Public Engagement Team at the Privy Council...