More than 8,600 contracts worth a total of £18bn were awarded within the first six months of the pandemic. As a generational challenge, the UK Government were warranted in undertaking such a rapid and widespread procurement program. Despite possessing this mandate, many have suggested that the process has been fraught with inefficiency.
Problems in procurement?
Repeated accusations of wasteful procurement have been levelled at the Government. To ensure that goods could be obtained at scale and with speed, it invoked legislation which authorised the direct award of contracts to suppliers providing there were genuine reasons for extreme urgency. The unprecedented nature of the pandemic means that it would be wrong to suggest that the law was improperly used. Despite this, it does appear that the Government became victim to some of the risks associated with direct award, namely opacity, conflicts of interest, bias and inadequate due diligence.
Ordering £122m of unused surgical PPE, awarding large commissions to foreign intermediaries and allowing orders to be executed with zero competition, indicates a deficit in knowledge and business logic, and has wasted public money whilst concurrently increasing the time taken to order important equipment.
Given the issues previously detailed, it’s imperative that the Government leverages new technology to optimise its procurement processes. Not only would this assist with the realisation of timely procurement, it would also prevent many of the issues associated with direct procurement.
Making use of technology
COVID-19 has presented the ideal time to introduce a digital marketplace, providing greater value, choice and efficiency for the UK Government as the buyer. Marketplaces protect against overspend by bringing buyers and sellers together to transact at an ideal price that is transparent and reasonable to all parties. After this trade has been enacted, it is displayed as a discovered price, which is then fed back into the market. Such price transparency provides buyers with greater awareness of supplier options, driving competitive forces among suppliers and allowing for large purchasers to create scale advantages. Digital marketplaces also provide quicker throughput times as a result of exceptional logistics and IT capabilities.
We’ve also witnessed the progression within several sectors from inefficient ‘analogue’ processes to ‘digital trading’, which provide increases in efficiency, greater inclusion, broader distribution channels, velocity of trading and speed of transaction. These digital platforms also provide a verifiable audit trail, reducing back office costs while meeting enhanced regulatory and compliance requirements.
The financial sector has historically been a leader in electronic trading and processing, but other industries such as insurance, logistics, commodities and procurement have fast caught up and are now benefiting from this transition.
Advice for implementation
Government should commission this already deployed new technology to realise the goal of efficient procurement at the lowest possible cost. These systems must be made to specification, to allow for use in different departments, rather than adopting a one size fits all approach.
There are several different models that should be considered. These include auction programmes for direct access with variants of auction methodologies involving regular but defined auction timeframes, request for quote marketplace systems, and full interactive markets. Data science algorithms can further increase the decision-making efficiency in many proposed cases. Underlying this is the primary goal of bringing buyers and sellers together in a transparent, yet efficient way whilst minimising transaction costs. A focus on UK-based suppliers, willing to produce at a market price, could be a first step, before carrying out a broader search internationally.
The exceptional circumstances of the pandemic resulted in the Government falling victim to risks associated with direct procurement. Through leveraging digital marketplace technology, it would be able to ensure items are procured both quickly and at a low cost. Investment must be made into auction technology and digital marketplaces, overlain with AI in the form of data science to improve decision making. UK technology companies, having already implemented these platforms, stand ready to assist.
Garry Jones is CEO of Perfect Channel