Procurement: Reality and openness all round is what is needed now

The recent report for the Improvement and Development Agency, The Future Shape of Local Authorities' Workforces, based on interviews with chief executives, recognises the reality of job reductions in local government. It confirms that the directly employed workforce is likely to reduce in size over the next three years as transactional support services are re-engineered and outsourced, or placed into collaborative shared service arrangements.

Similar reality now needs to be applied to the procurement of outsourcing contracts still seen by many local authorities as a way of avoiding job losses locally. Every local authority, even small district councils, seeks a solution involving the establishment of a business centre in their area as a base to grow jobs. Local politicians, who find the prospect of job losses difficult to deal with no matter how realistic, even encourage contractors to set job creation targets over the term of the contract. At a time when the IDeA report recognises that this process will reduce workforces only a company with exponential growth characteristics has any realistic chance of creating new jobs. Also many of the major contractors already have their business centre infrastructure in place and will now seek to consolidate this rather than grow it further. Consequently, to continue with this approach to procurement relationships will inevitably end in political disappointment and acrimony.

The nine month procurement process is very costly and every company entering the race wants to win no matter how publicly they justify losing if not selected! Promises of job creation, service improvement, capital investment in IT or in local regeneration projects and even the construction of a brand new business centre as part of the deal are sought and given in the heat of procurement. If this is also linked with an unrealistically low contracted price over the term of the contract, take it from me you have the cocktail for the making of a real problem. A loss making contract is bad news for all parties including the staff and inevitably the relationship will suffer. There is clear evidence that regretfully, such deals have soured the market and acted as a deterrent to others embracing the concept of outsourcing.

What is now required is far deeper investigation by a local authority of its potential partner and its style of doing business before entering into a contract. It has always amazed me that so few ask to meet the group directors of the business face to face. It is they that set the ethos of the organisation and it is important to understand their approach to business. How many local authorities look into the financial stability of their partner and its ability to make the investment proposed or the terms offered? Equally, there needs to be greater understanding of the financial model that sits behind any deal and companies should be encouraged to go "open book" on pricing. It is not good procurement, as many have found to their cost, if your partner is budgeting for a loss in the early years of a contract or worse still, over the life of a contract! It is worth remembering that as the partner in a long term relationship your reputation is on the line as well. Trust and reality is a two way process.