West Coast Rail Franchise – the latest procurement fiasco
Posted by Tim Williams on October 3, 2012
At midnight last night the Department of Transport released the following announcement:
Transport Secretary, Patrick McLoughlin, said “I have had to cancel the competition for the running of the West Coast franchise because of deeply regrettable and completely unacceptable mistakes made by my department in the way it managed the process.”
Any of us who tender for public contracts are only too fully aware of the sometimes less than perfect award criteria and a decision making process that owes more to being able to write a creative tender, stuffed with ISO standards, Prince2, ITIL and other accreditations, rather than a process that identifys the most suitable supplier, but how can things go so wrong with such a high profile decision?
The whole competition is going to be re-run, costing 10’s of millions for the taxpayer including the re-imbursement of the four suppliers’ bid costs of around £40 million.
Interestingly the Transport Secretary also said, “The flaws uncovered relate to the way the procurement was conducted by department officials. An announcement will be made later today concerning the suspension of staff while an investigation takes place.”
The Permanent Secretary to the DfT, Philip Rutnam, added, “The errors exposed by our investigation are deeply concerning. They show a lack of good process and a lack of proper quality assurance”.
Not unusually though it took the threat of a legal challenge to get the contracting authority, in this case the DfT, to take a proper look at their procurement process and admit that they had got it wrong. Why is it that contracting authorities too often close ranks and refuse to consider the possibility that maybe they didn’t get things quite right?
My company, Millstream, has been involved in two tenders in the last 12 months where the award decision has been challenged and the contracting authority has been forced to admit it made mistakes and then re-run the tender. This is hopelessly inefficient and wasteful, both for the candidates and the contracting authorities. We’ve been involved in many more where the process has been badly flawed and candidates have been unfairly excluded and I am convinced that the final decision has not delivered value for money for the taxpayer.
Ironically it seems that the threat of a legal challenge is making procurement officers, rely more and more on very objective marking schemes, which set out in great detail how marks are going to be awarded. The criteria frequently rely on international standards, or standard methodologies as these are easier to specify than the softer issues such as customer satisfaction, or other qualitative or aesthetic aspects. All too often the use of these criteria remove almost all discretion from the procurement officer and if the allocation of scores hasn’t been done very carefully it will frequently result in the ‘wrong’ decision.
I often use the analogy of buying a car using this same process. You have an idea of what you’re looking for and what your budget is going to be, but before you go around to the showrooms you draw up a list of criteria, such as price, fuel economy, number of seats, boot space, perhaps even full life costs such as servicing, etc. You allocate marks to each of these criteria and then go to each of the showrooms. All of the cars that you are interested in will fulfil most, if not all, of the criteria, so the difference between them often comes down to price, or perhaps criteria that aren’t really that important, or even understandable to you, such as brake horsepower. Once you have completed your completely fair and objective evaluation, the result is that you should buy the Skoda, while you actually prefer the BMW, or the Lexus. The reason for this ‘wrong result’ is that you didn’t design the criteria in a way that truly reflected your needs and didn’t allow yourself enough discretion. Of course, as a private individual you don’t have to stick rigidly to these imperfect criteria, recognising that while they were useful, you hadn’t allocated marks for comfort, or image, or quality of engineering (‘Sounds like a Golf’) and so after consideration you buy the car that you want.
Public procurement in the UK, in fact in Europe, needs to take a step back from this rigid, objective decision making process and design procurement procedures that utilise the expertise of the people who will be using the equipment or services to exercise discretion in determining what best fits their needs. I can hear the chorus of ‘the European Directives don’t allow us this discretion,’ but that’s not the case, the Regulations themselves specify quality as well as aesthetic and functional characteristics, as two of the permissible criteria.
Let’s get better at specifying what is actually important when buying a product or service and allow procurement officers more discretion to choose the best when they can actually see the candidates in front of them. We’ll see fewer procurement staff suspended for making flawed decisions, but more importantly we’ll see less waste and better public services as a result.