Losing Vendor Litigation (Part 4): Belt with suspenders purchasing

Posted on August 11, 2011

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You may very well be right but . . . we followed the proper bid procedure so that is  all that matters.

Executive Director, Chief Information Officer Branch, Treasury Board of Canada Secretariat e-mail response to question regarding unrealistic Way Forward savings forecast

I have on many an occasion written about the above referenced e-mail I had received from who was then one of the central gatekeepers for the taxpayer money that was being paid to launch the listing and then sinking ship that was known has the Canadian Government’s Way Forward initiative.

Besides being surprised that someone in a senior position would put such a statement in writing in the form of an e-mail response, the “I am just following orders” tone is even more disturbing.  Especially from someone in a position of authority and quite frankly great responsibility.

Faceless Leadership?

For those who may wish to delve deeper into Canada’s Way Forward story, check out my June 24th post A stroll down the Way Forward memory lane . . . good thing I have the movie rights!  However, and relating to today’s post and the Losing Vendor Litigation series in general, I want to examine the genesis for what I refer to has the belt with suspenders mindset in which logic and/or reason becomes a secondary part of the public sector purchasing equation.

Now some may at this point say that the disconnect in terms of making sound purchasing decisions is a procedural issue that is largely tied to the bureaucratic nature of government.  To a certain extent, they would be right in that the adherence to the principles of a level playing – at least as the government tries to define it, has led to the establishment of so many arbitrary guidelines that the majority of purchasing people are reduced to little more than perfunctory paper pushers.

I know this because after addressing audiences from all parts of the public sector around the globe, there is a universal and harmonious buyers lament that they could be doing a better job if they were not shackled by regulatory considerations that prevent them from making best value decisions.  This stifling of professional integrity which forces the buyer to follow a set of inexplicable rules versus their good conscience and expertise has over time either chased public servants to the private sector or, reduced them to little more than time clock punchers as a means of surviving the tedium of regimental edicts from on high.

Let’s face it, the public sector is hardly the bastion for creative, outside the box thinking.

Government Buyers: Trying to do more than . . . punch a clock

It is I believe this latter point, that has contributed to the “huge amount of added cost” to which Colin Cram had made reference to in a white paper based on an April 2010 Roundtable on transparency.  Specifically, the 30 plus year public sector veteran cited the everyday reality of procurement people being more interested in “protecting themselves versus delivering real value.”

The question that then needs to be answered is quite simply this . . . what has created the environment that has led to a self-preservation first, best value second procurement practice?

While there are perhaps any number of reasons that converge into the inefficient morass that is the public sector tendering process which contributes to amongst other things the rise in contract award disputes, there are two key linchpin elements that are in my estimation at the heart of the matter.

First, is what I often refer to as the cross-pollination factor or what the former Executive Director from the Treasury Board Secretariat called the Interchange program – especially involving senior executive placements.  This to the uninitiated is the practice whereby the public sector taps into the purported expertise in the private sector through the “employment” of personnel on either a contract or full-time employment basis.

Driven in large part by the New Public Management or NPM concept that was popular in the late 1990s, where there was a belief that the public sector needed to conduct its business in a fashion that was similar to that of the private sector, many professionals from the latter realms were as a September 2006 article reported “parachuted” into positions of great influence.

Also referred to as the high flyers from private technology and consulting firms, whose engagement centered around an effort to introduce or add the “specialized knowledge and expertise” that most federal workers apparently lacked, the practice was later denounced as being a way to enter the public service through the back door and in the process bypassing rigid hiring rules.  Of course the fallout from this practice had far reaching negative consequences that persist to this day.

I am talking about the elitist attitudes at the senior levels, and reflected in a CPO Roundtable discussion in 2007 in which private sector executives from companies such as Danone and Nestle expressed the belief that the best people to run a purchasing department are those who do not have a purchasing background.  Check out my February 8th post for further details regarding the CPO Agenda discussion @ According to study conducted over three decades buyers warrant little consideration in terms of value to the organization.

The perpetuation of this flawed view through the cross-pollination process that saw senior executives make the move to high ranking government positions has proven to be toxic to the public sector.  This is due to the fact that it has undermined the kind of proactive, creative thinking that is necessary to maintaining a dynamically effective tendering process that adapts to the way in which the real-world actually operates relative to achieving a best value outcome.

It is in this context that the e-mail comment by the Executive Director from the Treasury Board Secretariat now makes sense, especially since the individual spent a good part of his career in the employ of IBM.  In essence, and rather than perhaps speaking to me directly, the individual was instead doing nothing more than towing the company line . . . a line ironically, in which he likely had a creative influence.

The problem with the condescending nature associated with this executive mindset is that it leads to the cover-your-behind, robotic adherence to processes that do little more than provide justification for poor decision-making on the front lines.  This leads to very real and negative consequences as it forces the myopic application of a single standard across all areas of spend, even when such a practice is clearly detrimental.

Back in early 2000, I had started my research into the existence of commodity characteristics in an effort to determine how emerging Internet-based solutions could be used to drive increased savings.

While you can read the July 4th, 2007 post Dangerous Supply Chain Myths (Part 7): Enabling Technology regarding the full details of my research and the corresponding findings, which in another ironic twist was actually funded by the Government of Canada’s SR&ED program, the short story is that certain commodities are not conducive to a long-term contractual buying arrangement or standing offer.  (Note: You can also use the following Acres of Diamonds white paper link for actual examples relating to this conclusion, including graphs.)

However, the combination of senior management’s lack of confidence in its front line buyers leading to the strict and unwarranted adherence to an inflexible tendering process that emphasizes obedience over best value decision-making is why for example the DND paid on average 157% over going market rates for Indirect MRO parts.  Now you know how a $5 hammer ends up costing taxpayers $400.

The overriding problem here is that like the quarterback on a football team or a pitcher in baseball, both of whom control the tempo and in many instances the outcome of a game, until buyers in the public sector are no longer manacled by rigid and nonsensical guidelines that inhibit professional development and competency, vendors are likely going to continue to maintain a cynical view of the public sector procurement process and conduct themselves accordingly.

Cynical Vendors?

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