Ian Burdon, who recently entered the ranks of the private sector, and has held a number of key executive positions within the Scottish Government including being at the helm of the eProcurement Scotland initiative as it’s Program Manager and chief champion, joined me earlier today on the PI Inquisitive Eye from the UK.
Ian provided his expert view on why the majority of public sector initiatives fail to produce the expected results, as well as what needs to be done to reverse the morale crushing, financially debilitating trend of public sector automation disappointments.
Here is the interview excerpt which will be aired as part of a special on government automation early next month.
Prior to the broadcast, Ian provided the following responses to the questions that were posed during this morning’s live interview. It should be noted that as is the case with all live interviews, the direction of the questioning did in fact venture into other pertinent areas and so I would encourage you to use the following as an adjunct to the actual TV interview.
Opening Comments (April 27th PI Inquisitive Eye Broadcast)
As most of my listeners are already aware, I have been covering public sector procurement extensively for quite some time. From the excitement of reporting on one of those rare examples of a successful eProcurement initiative in the public sector . . . I am of course talking about the Commonwealth of Virginia’s eVA Program, and the challenges of so many others such as the Canadian Government’s failed Way Forward misstep to writing a paper on the $650 million disaster of the Veterans’ Health Administration 7 year Oracle/JD Edwards odyssey, it is safe to say that I sometimes feel that I have seen enough to know that I have seen too much. Of course I never lose my enthusiasm for the sector as it is always ripe with exciting and often times controversial happenings. This is ideal fodder for any writer.
In fact at times, covering public sector procurement is tantamount to the entertainment media covering Charlie Sheen’s latest endeavors. There is never any shortage of material.
This being said, and like an oasis to a thirsty man lost in the dessert I stand up and take due notice of those rare success that do come up from time to time. Besides eVA, one such initiative which interestingly enough is of the 200/2001 vintage, is eProcurement Scotland.
Against the backdrop of failed programs that have usually cost taxpayers tens if not hundreds of millions of dollars I could not help but openly wonder why Scotland as well as an eVA have beat the proverbial odds to deliver sustainable results in both efficiencies and savings. Well with today’s guest we will wonder no more.
Joining me this morning from the UK is Ian Burdon, who prior to recently joining the private sector, has held a number of key executive positions within the Scottish Government including being at the helm of the eProcurement Scotland initiative as it’s Program Manager and chief champion.
Ian will provide us with his expert view on why the majority of public sector initiatives fail to produce the expected results, as well as what needs to be done to reverse the morale crushing, financially debilitating trend of public sector automation disappointments.
Segment 1 (A Formula for Success)
Host Comment: Okay Ian, let’s get right to it . . .
- Why do so many public sector eProcurement or automation initiatives fail to produce the expected results?
At heart it is because eProcurement is treated as a technology implementation when it is really a fundamental business change issue. That means that people are applying an incomplete tactical tool-set to try and fix what is really a strategic problem and hence there are false expectations built in at the beginning. These false expectations have a symbiotic relationship with what is therefore the wrong business case.
In a more generic sense the same is true with automation initiatives. Everyone knows that you should automate a bad process but we go right along and do it all the time. In the case of the interface with procurement this is particularly a problem with finance processes.
Host Comment: was this something you realized early in your involvement?
Yes. Put yourself back in 2000 when the hype around eProcurement was at its height. Back then in almost any business magazine and in presentations at conferences you would find the most outrageous claims being made about the savings possibilities and claims of 70, 75 or 80% savings were reported everywhere.
What Steve Murray and I noticed very quickly was that there was almost no empirical basis for these claims in the public arena. When you tried to look behind them and ask 70% of what? Measured how? By whom? Against what benchmark? then you quickly hit a concrete wall. We weren’t the first to notice this but we were in a minority I think.
When we did manage to get behind the figures the interesting thing is that the claimed savings were not generated directly by the implementation of eProcurement; what was actually happening was that people were being forced to look at their existing procurement processes and behaviors and make substantive changes. These changes were then locked in and made sustainable by the implementation of the system. So we were – and are – dealing with a correlation between eProcurement and savings rather than a direct causal link. The real key to savings is procurement reform. If you will we should not be looking for technology led change we need to look for change led technology.
This fitted in nicely with parallel work going on –of which we were part- which was looking at the practice of procurement in the Scottish public sector as a whole and which was identifying deep structural issues. The leap which we made was to realize that eProcurement was part of the larger tool-set needed to address the structural issues and could also be, in part, a Trojan Horse for larger scale reform
So we did eProcurement as part of a strategic response to a structural issue.
Host Comment: Based on reports, your involvement with ePS began with the early research (with Steve Murray) that ultimately led to the recommendation to go ahead with a Scottish national eProcurement program. From late 2000 through 2001 you were the lead client in the competition to appoint a provider and from Nov. 2001 you were the program sponsor and director.
- Right off the bat, it appears that your role rapidly evolved or perhaps even expanded from the research stage to becoming the program director. Can you provide us with some perspective on why the changes in responsibility occurred as they did and whether or not this was a key element that can and/or should be replicated in similar programs with other governments?
Well the project was based out of the Procurement division and I was the manager there with lead responsibility reporting in to the then Director of Procurement. My background is in legal services but I had previously implemented small scale IT systems and also had undertaken an international Fellowship in 1997 looking at the possibility of automating the process of registration of titles to land and built a pilot of that. So when I was asked if I wanted to take on the lead role in the implementation of eProcurement I took a deep breath and said yes since it was an obvious evolution in responsibility.
I should also say that my view is that in Government, at least in the UK, there is too great a divide between the creation of a policy and accountability for delivery of outcomes. It is too easy for officials to generate ideas without having to get their hands dirty with the delivery of outcomes. In this particular case Steve and I together with the then Director Nick Bowd knew better than anyone what we were trying to achieve and why, so it seemed natural for me to accept the accountability.
It’s worth mentioning by the way that I came out of legal services with a background in law and mediaeval theology and philosophy, Steve was an experienced systems analyst and Nick was a Chartered Accountant who learned his trade in procurement and sourcing at IBM so none of us was encumbered by procurement baggage and I suspect that is an important factor in how we approached things.
- Fast forward to 2005, and in particular your giving oral evidence regarding the Efficient Government Technical Notes for the Minister of Finance relating to Public Sector Reform. Why was your participation in this process important relative to the eProcurement Scotland initiative?
An interesting question – I had forgotten about that. That was important for a number of reasons but the key one is that it indicates the level of interest and involvement in what we were doing. It was at Ministerial level and in the broader context of looking to control government third party expenditure; it also kept us in the eye of our target audience and provided Ministerial level “top cover” during the early days of implementation.
- You were also an active member with the Public Procurement Reform Board on an ongoing basis. How important was this board to the ongoing success of the eProcurement Scotland program and is this also a mechanism by which a program can remain on track especially as it relates to bringing together the interests of various stakeholders at the departmental and perhaps even central government level?
OK; I wasn’t a member of that Board which was at Chief Executive level but I did attend some meetings in my capacity of Head of eProcurement to report on progress and occasionally to seek support.
The main remit of the PPRB is the overall process of procurement reform in the Scottish public sector which had been first identified back in 200 but which really kicked off in March 2006 when John McClelland published his review of public procurement in Scotland. When there was a change in political administration in May 2007 the incoming Finance Minister, John Swinney, chose to chair that board personally as a mark of how important the subject was regarded.
As I said, the board brings together Local Government, Health, Universities and Central Government at Chief Executive level under Ministerial chairmanship so it is hugely important.
- Now I have to tell you that in 2009 I wrote a white paper in which I pointed to the fact that the NHS spent close to $4 billion US on the creation of ideas and that only a relatively small percentage – approximately $224 million US was actually spent on “spreading the innovations down to the patient level.” Does this surprise you? If yes or no, please elaborate?
Right: I can only speak generally about Health as it isn’t my area of expertise. Also, you have to remember that with the recreation of the Scottish Parliament in May 1999, Health was one of the areas for which accountability was devolved from London to Edinburgh so the NHS in Scotland is distinct from the NHS in England and Wales. Also I want to say immediately that some of the issues I’m going to mention are well known to my former colleagues in the NHS in Scotland and they are taking substantial steps towards addressing them.
I think that implicit in your question are three areas:
Patient care is usually the domain of clinicians and I’m not going to go there today. So let’s think about procurement and systems.
Purchasing and procurement issues had been raised by Auditors in 2001 in a hard-hitting report which says it all better than I can. It was by Audit Scotland and titled “In Good Supply” and is still available online if anyone has a historical interest
My general comments about Health systems procurement are not that much different, if at all, from my comments on systems procurement generally.
As I recall in your paper you commented that the private sector had not fared much better than the public sector and I think that is probably correct – we just don’t hear so much about private sector failures although I have some horror stories from personal correspondence. In any event I think that there is a widespread problem at work: those designing and championing the solutions don’t understand the real problems and those who do know the real problems don’t get anywhere near the specification of the solutions. Oftentimes the champions of the systems also have a commercial interest in being awarded the contract to implement which does not help!
I take it as axiomatic that one should not try and identify a solution without first being clear on what the real problem is. I also think that one should not specify solutions anyway – one should specify the problem and the desired outcome and let the bidders propose how they would solve the problem.
And some of the problems are not capable of being resolved without some fundamental changes in process and in the capabilities of the current generation of systems. For example I think you commented on the number of paper invoices still being generated in the NHS and the inefficiencies which this brings. I agree but – and it is a big but – billing systems are hard coded to generate invoices, tax codes may require to see them and accounts payable systems are hard coded to expect them (as are Finance Directors). So we have to look at the expectations of standard accounting practices and the assumptions inherent in billing and accounts payable systems as well as the day to day process. This is not insuperable of course but it takes more thought than merely putting in place some software and then wondering why there has been no improvement.
2) there is a problem with the prefix “e” because it suggests that the issues and solutions are technological and they are not; they are structural and behavioural. I think that the first thing that one should do with any text which is suffused with the prefix “e” should have that prefix stripped out. If the text then makes no sense then it is unlikely to make any more sense with the “e”s reinserted. Now, there is a much deeper sociological issue here about the extent to which our attitudes and behaviours are determined by the expectations of one technology – paper – and the degree to which this is an obstacle in truly grasping the opportunities of a new technology. Suffice to say that this is the reason why, when Steve and I spelled eProcurement, we always used a small “e” and a big “P”.
3) for some reason public sector bodies have been suckered into buying ERP systems. Nobody is ever fired for buying an ERP system but oftentimes they should be.
4) Going back to Health, there are some massive cost issues which are procurement issues and which are not really being grasped, for example the costs of clinical and pharmaceutical supplies. For the benefit of any lawyers who are listening I am not about to impute any illegality in the pricing of clinical supplies and pharmaceuticals and it would be quite wrong for any listener to draw that inference; but to an outsider it can often appear that there is a lack of competitive pressure on pricing – for example between branded goods and generics. This is not a systems problem but a system can lock in place better pricing from preferred or contracted suppliers or a presumption of generics over branded items. Small “e”, big “P”
5) Don’t underestimate the effects of initiative overload on overstretched people who are tired of being kicked.
6) IT Directors tend to be bigger beasts than procurement directors and very often do their own purchasing and procurement with limited professional procurement input.
- Another problem that I had cited in the white paper highlighted the fact that similar to a poorly conceived and executed eProcurement initiative, taking no action is also a cost proposition. Specifically, that procurement processes within the National Health Service had not changed in any meaningful way for 60 years, and as a result they were leaving a potential $3.07 billion US on the table relative to savings. Does this surprise you, if yes or no, please elaborate?
Probably covered above, but one general problem in the UK, at least in 2001, was that many people in procurement positions were low in the food chain in organisations and in any event possibly had more of a background in stores and logistics than procurement so there was a major skills issue to be addressed. Also they often did not have an organisation wide span of control – for example pharmaceuticals and IT were often outside of their sphere of influence. This is changing.
- Given the NHS example above, which as demonstrated by the VHA fiasco, as well as so many other programs, why is there a reluctance to move or change? Is this one of the big obstacles to the adoption of newer and more effective strategies?
- How would you propose that the NHS problem, as well as other problems of adoption be addressed?
- What have you personally learned in fulfilling the responsibilities of your role at the helm of a successful government procurement initiative?
My personal journey has been from a program management mindset to a leadership mindset and all which that entails. If I were to summarize, my approach when I was heading eProcurement Scotland was to try and balance long term strategy with tactical pragmatism and couple this with a great deal of patience. I think that an underlying philosophical skepticism coupled with some well-timed opportunism helped!
Let me expand a little. I think that it is too often forgotten that the whole point of public service is to serve the public. A public service role should either be directly interacting with the public or in a role which clearly supports that; public service is a means to an end and not an end in itself. Obviously there are many aspects and consequences of this but it is the touchstone against which things should be tested.
- Knowing what you know now . . . yes the hindsight is 20/20 axiom comes into play here, what do government organizations need to do to succeed in automating and improving public sector procurement practices relative to driving maximum savings and service levels?
I hope that this is implicit in what I have said already. Overwhelmingly the main thing is to understand your business and your problems before investing in shiny toys. In the case of eProcurement, unless you are a very small organisation, then you should be looking at a strategic business case for eProcurement which enables savings from parallel business change rather than hoping that eProcurement is a siler bullet that will solve your fiscal problems.
I think also that procurement is not just about savings; it is about relationship between buyer and supplier and the strategic dimensions of that.
For example if you go down the eAuctions route and hammer suppliers on price every time then, when there are problems or restrictions in the market, you may find that, because your relationship is based solely on price then you are not favoured. If all your deals are cut-throat you may find that one day it is your throat which is cut.
With approximately 1 to 2 minutes remaining in the live broadcast I will ask you to provide any other thoughts you might have, including any additional coordinates. Thank you.
Where to begin? I think I only have three more areas which it occurs to me that we haven’t touched on: the first is the importance of suppliers; the second is a problem with the concept of a “marketplace” and the third is the issue of aggregation of demand in the public sector. In some respects they are interlinked so let me touch on them briefly.
If an outcome which you want is savings (which can be defined in a number of ways) then it is important that you carry your suppliers with you. If you expect your suppliers to offer you savings then you must offer them some matching benefit either in the form of a reduction to their costs or, for example, in improved cashflow for them. What you should not do is increase their costs or increase the complexity of their interaction with you and then expect or demand benefits. Procurement is about relationships and eProcurement is no different. I think that public sector finances, public sector procurement practices and local economic wealth generation are linked at a deep level and eProcurement is a good place to start thinking strategically about this.
The notion of a market place is that you gather together a whole bunch of suppliers on the promise that the buyers will come. This usually does not work – or at least not quickly enough to repay the investment of building the market place. It makes much more sense to start where you are, with the relationship which you already have with your suppliers and work with them as regards content and processes.
Since many of those suppliers will be common suppliers to the public sector either locally, regionally or nationally, it makes sense to look at the possibility of aggregating demand and processes and guaranteeing that demand by locking the contracts into place in a common purchasing front end. You have to be careful of diseconomies of scale or inadvertently creating dominant suppliers in the market but that does not count against the general proposition. That front end should, I think, be independent of any individual buying organisation’s finance system.