Whether you like Richard Branson or not, and as someone who fondly remembers Tubular Bells and his Virgin mail order ads in NME from when I was growing up, I have to admit that I, like all of us who work in local government, should be very grateful to him this week.
Had it not been for his persistence and his PR skills, the fiasco that was the West Coast Mainline franchise tender exercise may have lain hidden until, presumably, several years hence when it would have all unravelled. But what has this got to do with local government?
As someone who has spent much of my career working with local authorities and other public sector bodies on major procurements, I think the answer is that it has rather a lot to do with local government. Many of the worrying revelations that are coming out about how the procurement process was run mirror some of the trends which we are seeing in local government procurement and there must be something of a feeling of ‘there but for the grace of God….’
When the news leaked out last week, my first thoughts, as a consultant and financial adviser, were ‘who did they use as financial advisers? No-one, it seems. As part of the ‘austerity’ measures they wanted to do more in house, although they did use technical and legal advisers. At a minimum cost of £40m, that may turn out to be not the best of decisions. With the caveat that I am, of course, speculating and relying only on press reports which may prove to be inaccurate, it seems incredulous that a complex model which is key to the evaluation may not have been properly audited. All of the accounting firms and other specialist financial advisers have expert model auditors who make sure that these things work as they are intended. That is what we do as a day job. I do understand the pressure on budgets and the desire not to be seen spending money on consultants, but, when used properly, we really do have expertise that, in the long run, will save you money and reduce risk on these complex procurements.
The second point which has real relevance to local authority procurement comes from comments made about the tender process itself. Apparently, from the article in this weekend’s Sunday Times, the bids really did arrive in a truck. DfT had asked for so much information. Now I agree that these are complex bids and there needs to be a lot of detailed analysis and supporting evidence provided for what is being bid. But this included, for example, demonstrating that the bidders knew how to operate trains. You would hope that if they get to the stage of being shortlisted for such a contract, the client would be pretty satisfied that they had this core competence.
Bidding costs companies a huge amount of money, which has to be recovered somehow. Running tender exercises costs the public sector a huge amount of money, which has to be found from increasingly constrained budgets. Not only that, but the more information is asked for and the more complex the contract and the evaluation, the more chance there is of something important being missed.
It really is difficult for local authority lawyers and procurement specialists – managing risk and the threat of challenge really does push you to want to ask for everything ‘just in case’. What the West Coast exercise has shown is that volume and complexity, mixed with austerity can backfire quite spectacularly. Caveat emptor.