Ministry of Defence privatization plans: Setting up stakeholders for failure or success? by Andy Akrouche

We are all familiar with quotes such as “Insanity is doing the same thing over and over again but expecting different results.”

Even though the announcement that the Ministry of Defence’s plans to privatize its troubled procurement process would be scrapped has been anticipated for the past couple of weeks, when news of the initiative’s demise had finally materialized it was nonetheless noteworthy.  Especially with its detractors whose refrain “I told you so,” could be heard clear across the Atlantic.

Click here to check out Relationships First, to find out what MoD could have done differently . . .

Click here to check out Relationships First, to fund out what MoD could have done differently . . .

While I am not one to echo those same sentiments, it should probably come as no surprise to anyone, especially those who have attended my seminars or read my book, that I am all for outsourcing.  However, I am also a strong believer that the public sector cannot simply outsource its responsibility and accountability for the delivery of a service it is legally mandated to deliver.  Nor do I believe that it can successfully transfer and wash their hands of the associated risks of its duties to a private entity.

Within this context, the outsourcing of these complex business processes to the private sector can work if they are structured as a partnership, and in a manner that maximizes shared insight and learning on an ongoing basis.  This is especially true when it comes to establishing the criteria by which success will be measured and modified both now and throughout the life of the relationship.

Unfortunately, and as experience has shown us time and again, said partnerships cannot be borne out of a strategy that is designed around a transactional mindset that is myopically focused on circumstances in the here and now only.

Nowhere is this precept more critical than it is when an organization attempts to outsource the purchasing process.

Procurement affects the whole operation.  It is the place where if you apply a change in one area, it will almost certainly have to varying degrees, a dramatic impact on all areas of the organization.  As a result, you have to be extremely careful not to misconstrue your objectives and misinterpret the corresponding results.

For example, realizing a lower cost on a particular product is not tantamount to realizing an improved collective or enterprise-wide outcome.  In fact, it could mean arriving at a worse outcome for the very same stakeholders you are attempting to satisfy.  After all, a gain in one area should not be achieved at the expense of another area of the program.

This is another key point, in that a “disconnect” of this nature – particularly when it extends to include an external partner – will ultimately come back to hurt the entire program and nullify the anticipated benefit.  I call this the unintended consequence factor.

In the case of MoD, the desire to address the known challenges with the procurement process is laudable.   However, and by relying on the same broken procurement regime to both analyze and source the new arrangement in the hope that it will deliver a different result, is where the program went wrong.

A new more adaptive approach is needed, that takes into account not only the factors that are known today as well as identifying any unknowns through a proper industry analysis, but maintains a relational ability to recognize and respond to future changes.

What do I mean by a relational ability?  Quite simply, it means that all stakeholders are a party to both the understanding and establishment of the collective goals and outcomes of the relationship.  The only way to accomplish this is through an effective engagement mechanism that focuses on the selection of partners based on strategic fit.  Specifically, you must select those partners who are able to work with you to deliver your known set of deliverables and, are also strategically positioned to work with you to manage the known unknown variables that will invariably crop up up down the road.

I completely agree that MoD should retain advisors that can help them innovative/renovate their process.  But they need to properly source the relationships that are necessary to fix the present procurement function within the government, instead of simply outsourcing their problems and a set of arbitrary objectives that will likely set their third-party partner up for failure rather than success.

In short, they have to build their capability and capacity to source relationships as opposed to transactions or deals.

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