Buying in public sector organizations is commonly a fixed process with mandatory directives, which stipulate that for the majority of purchases, they must use a tendering process. Further negotiations are permitted for a few specific circumstances.
Whilst this enforced tendering does have a basis in logic as it can encourage open competition along with clear audit trails on supplier selection; however, imposing a rule where one-size fits all, can create significant financial implications; for example, in recent years in the UK, there have been a number of reported procurement errors in the NHS, DWP, MOD and HMRC. All of which have wasted billions of pounds of the UK taxpayers money for zero gain.
Fixed tendering procurement processes can also have an impact on relationships with suppliers, as companies who issue a tender can choose to fix the results by not providing enough details, thereby putting new suppliers, at a distinct disadvantage to the incumbent supplier, who will have insider knowledge.
Conversely, in some cases where a past supplier has been working well, the forcing of re-tendering every x years, may force the buying organization to have to select a new supplier. This can have a discouraging effect on suppliers, as it does not reward their past success, or, work towards building up long-term relationships.
Furthermore, the reputation of any company can be at risk, if it takes a hit from poorly performing suppliers, yet fixed tendering processes so often focus only on finding the lowest cost. There is then, in many cases, an unstated idealistic assumption that low cost and high quality/service will go together.
Fortunately, some parts of the public sector are finally catching up with the private sector and beginning to capitalize on the growing key principle of seeing suppliers not as adversaries, but as collaborative partners who can work together to explore how to reduce cost, whilst, at the same time improving quality and service.
A collaborative approach is jointly beneficial, as buyers and sellers are mutually dependent on each other. However, too often the reality is a fractured “us vs them” approach.
Fundamentally, procurement is actually, all about, business relationships, and where, as with any relationship, there has to be “trust”.
Trust, is, however, an all too rare quality in business; indeed, the reality of lack of trust, is today, alive and well inside many of public and private sector organizations where power plays and turf wars are instead the common practice. However, cooperative styles of working will always fail when they become overwhelmed by a prevailing antagonist style.
Understanding people and change
Change, is rarely automatic, (even when the people in charge of the process know there is room for improvement) because, inertia is a fatal flaw in many organizations. This is typically caused by poor managers surrounded with a weak team who are unwilling to put their heads above the parapet and challenge the status quo.They remain content that how they do things is the “only one way”. They will become intolerant and dismissive of suggestions and ideas towards making continuous improvements and finding better ways, as this involves them in taking personal risk.
Meanwhile, those few innovative managers who are bogged down by such pervasive inertia driven and closed management styles regularly choose to move on; for as is often said, people leave managers, not companies. So what is left, are the “status quo” protective and noninnovative managers.
Additionally, it is proven best practice that staff and organizations will all benefit by having in-depth skills in one key function and also crucially have, (what is commonly lacking), cross-functional expertise.When training, my own first supply chain rule is to “win the home games first”. This simply means companies should fix their internal structural and relationship issues first, and after this, look to improve the other relationships (with their suppliers and customers).
It is surely irrational to manage interdependent and interlocking processes as if they are completely independent of each other. We really must join them together and; join up all of the thinking.
People, process, and structure create any organizational system. Therefore, to change a system’s behavior, people must change the processes and structures. If people will not encourage and support change and improvements, then the only thing to do is to change the people; sad, simple but true.
For a fuller comparison of public/tendering and private/negotiation practices please see: https://www.linkedin.com/pulse/tendering-only-one-best-way-buy-stuart-emmett-msc-cranfield-ba-hons-?trk=mp-reader-card