Many times we hear complaints that public services used by a business are low in quality and not what the firm was expecting or hoping for. The complaints sound very strange because the procuring department and its team have been found celebrating their “achievement” of getting low priced service contracts several times.
In reality, purchasing a cheap deal does not necessarily mean obtaining the best one. A personal example of a domestic situation will help in understanding the above comment. Suppose, you go to your local market and purchased a shirt at a low price instead of buying an expensive shirt from a reliable seller. The cheap shirt after some washes will start to fray and may need to be replaced, while the shirt that is a “better buy” remains wearable for a longer period of time.
The same theory is applicable to government services. They offer the temptation of a “cheap” costing service that has no guarantee of quality consistency. Such poor procurement should be avoided at all costs.
Even after a decade of its demise, the custom of Compulsory Committee Tendering (CCT) still dictates a major portion of the modern public procurement methods. Price is still the overbearing factor in tender evaluations and also in the outlook of politicians and procurement officers, especially in the local system. Moreover, the media challenges and most often, criticizes if public procurement contracts are not given to the lowest bidder. This needs to stop.
The Social Value Act wants the public systems to take the social effect of contracts into consideration. As John Tizard of Government Opportunities previously argued, the main purpose of this essential Act is changing the culture and the behavior. It is not about simply making more rules and guidelines for bureaucrats to abide by.
However, even in the absence of motivation of the latest Social Value Act, the best and most thriving public sector organizations (there are several examples of superior public service procurements) have shown the significance of increasing public value when dealing.
This demands a particular attitude and a certain set of skills for senior managers, procurement teams and politicians, which include:
- A clear foundation for a certain contracting solution instead of an “in-house” or government partnership model.
- Clarity of the results needed from the services contracted.
- Clarity of the broad-based economic and social targets being sought.
- An extensive evaluation of all the service alternatives instead of rushing automatically to outsourcing or committing to a business or a third sector. If contracting is chosen as an approach, decision should be made on the basis if the terms and the type of company.
- Complete information about the market.
- An understanding is needed of the procurement options that can be purchased in an extremely competitive market with the resources available.
- A proper understanding is needed about the amount of investment necessary for the service as well as how the provider and/or client will finance this.
- An appreciation of the financial, commercial as well as the value drivers of possible public bidders, third sectors and businesses. Using this understanding of the change in service quality if employers do cut employee conditions or and/or shrink profit margins.
- Understanding of recent service costs comprising of re-investment requirements and overheads.
The list is incomprehensive and every public organization should adopt what suits them, but a few approaches should remain.
Due to budget pressures, many public sector bodies are making a serious mistake of becoming cost-conscious instead of focusing on social and service value. This approach has to discontinue otherwise, we will regret it later when not enough money will be available to mend the damage.
