Why scrap shipbuilding strategy? Improved outcomes starts with open communications and transparency

“That project was awarded to the Seaspan’s Vancouver Shipyard. The briefing assigned no blame but suggested there were improvements the B.C.-based shipbuilder could make . . . “Vancouver Shipyards needed to find skilled staff, establish capability to increase design work and learn how to use new facilities,” the briefing material said.” – CBC News, November 25th, 2015

As I read the above excerpt from a recent newspaper article in which it was reported that costs related to the national shipbuilding procurement strategy (NSPS) had “ballooned” by the billions of dollars, it would be reasonable to wonder what happened?

Was there a breakdown in communication, or a lack of understanding relating to what was and was not actually possible, that led to the project coming in at 181 percent over budget?

Simply put, in formulating its “procurement strategy” through which partners such as Seaspan were engaged, were the government and its industry partners too eager to make a move in a particular direction? Did they make key decisions before they had a true handle on either the scope of the project, or its eventual cost?

Once again, and coming in at 181 percent over expected budget, one could be excused for thinking that this was the case. To a certain degree – at least in relation to the last paragraph, this would be a fair conclusion.

But does it bring us any closer to a real understanding of why it happened, and more importantly, how we can prevent it from happening again in the future?

In this regard, I would like to refer to an Ottawa Citizen article by former ADM MAT Alan Williams.

According to Williams, the government should scrap its plan – in fact the entire NSPS strategy, in favor of a return to the way things had been done in the past. Specifically, utilize DND personnel to write the statements of requirements that will achieve the needed balance between effectively describing the military’s needs while, enabling the private sector to bid a fixed or certain price.

While Williams’ approach may at first glance, seem reasonable, there are some problematic gaps in terms of what he is recommending.

To start – and this should come as no surprise to anyone who has read my blog or, attended my seminars, it is virtually impossible to reliably establish a set requirement without taking into account that both our needs and/or the product or service offering of the vendor will inevitably evolve over time.

Beta Versus VHS

Think about what I am saying from the standpoint of an everyday situation.

Many of you will likely remember when both Beta and VHS first came out.

They were clearly different formats that were not interchangeable. This meant that when you chose one over the other, you were in reality locked in to that choice.

However, and before making your final decision of which technology to buy, you likely did some research into the differences between the two, in an effort to determine which format would best suit your needs both now and in the future. In short, you made your decision based upon the best information that was available at that time.

Shipbuilding Options

What happened to everyone who chose Beta?

In choosing Beta, did you make a bad decision? Did you make a mistake?

Perhaps you can take solace in the fact that even VHS was eventually replaced by newer and more advanced technology.

The point is this; wouldn’t it have made sense to pursue a certain course of action today, while keeping your options open for the future relative to any unforeseen changes in the market?

For example, what if you purchased your Beta system from the vendor, with the understanding that you could trade in the unit and exchange your library of movies at a future date, and do so at a preferred price?

I realize that this is an overly simplistic example, but it does effectively illustrate my point regarding the problems with locking in both the buyer and vendor into a set course of action. Particularly when it involves complex technologies and long term contracts that can span years and even decades.

Now I do not want you to misinterpret by position regarding the Williams suggestion as an indication that I am fully supportive of the NSPS approach. It clearly has its shortcomings. This being said, I do believe that the NSPS strategy has its strong points, and is therefore good for Canada.

For example, it does facilitate government intervention with regard to creating a sustainable supply chain. The NSPS strategy also stimulates economic activity and opportunities, that would otherwise have been missed under the transactional model that Williams is proposing.

What this means is that rather than trying to tighten specifications and hold vendor feet to the proverbial flame, we need to work towards creating a more consultative and collaborative engagement mechanism between government and private industry.

Once again, this is something that is not possible under the ever elusive certainty model that Williams is proposing.

While Williams and perhaps even the Central Agencies want us to think that they operate in a world of absolutes in which there is a high degree of certainty in costs and outcomes, nothing can be further from the truth. The fact is, there is no such thing as absolutes – especially when it comes to building new aircraft, new warships or for that matter any complex acquisitions for which either new supply chains must be established or, an economic activity created.

Now at this point, some might be inclined to point to LCC analysis models as a solution to the problem. While there is no doubt that LCC analysis will enable management to understand the total cost of ownership, it is not a cost prediction tool.

A more reasonable approach to addressing budget overruns is to accept the fact that with complex initiatives, absolutes do not exist until after the fact. It is the immutable 20-20 hindsight rule of the procurement world.

Within this context, it would make far more sense to openly say that we do not know what the exact cost and benefit will be at this time however, it would be reasonable to establish a target of say $30 billion in cost, and $50 billion in potential benefits.

As we progress further through the process we are, at set time intervals, committed to establishing a communication and reporting discipline involving all stakeholders. It is at these points of open engagement that we will be able to gain more certainty regarding costs as well as the related economic and industrial benefits. In short, the present information vacuum that exists between project announcement and the revelation of a 181 percent budget overrun will be eliminated, and with it the shock leading to a futile exercise in finger pointing, and what went wrong lamentations.

What I am really talking about is managing a collaborative process as opposed to executing an adversarial transaction.

If the government really wants to achieve a different outcome, then they have to move beyond the adversarial matrix of a transactional orientation in which the buyer’s role is limited to project monitoring and contract enforcement.

Shipbuilding transparency2

This means that they will have to adopt a radically different yet undeniably proven mindset, that is based on a collaborative approach that drives ongoing alignment with project goals, and open communication.

The real question this raises is whether or not TBS, PSPC, IC and Program owners are ready to become relational in their thinking and approach.

How Do You Source A High Performing Business Relationship? by Andy Akrouche

Now that we have in my previous post, identified what a high performance relationship actually is, the next question is how do you find one?  Or perhaps the better word would be “establish” one?

“The contract must become a platform to manage inevitable change, not pursue certainty based on the original deal.” – Ian Mack. Director General Major Project Delivery (Land & Sea), Canadian Department of National Defence

The “Relational” Ties That Bind

Establishing a collaborative high performing relationship requires a different sourcing process, as one cannot use the prescriptive or familiar procurement mechanisms to source a dynamic business relationship.

This becomes particularly important as it relates to Futuresourcing projects.

With Futuresourcing projects, where neither the client nor the vendor has constructed, built or delivered the required capability, past work experience cannot be solely relied upon or used as a selection criteria.

In sourcing dynamic relationships, a closer examination of the vendor’s strategy and core capabilities are paramount to determining the likelihood of the ultimate success of the relationship.

In this context, all projects should be viewed with this fresh look of uncertainty, especially given the fact that the vast majority have failed to deliver the expected results.

Beyond these needed checks and balances, the sourcing process about which I will be talking today, advocates an intense industry analysis and engagement before and during the actual procurement, as well as post procurement.  This sourcing process also involves the application of advanced analytical tools to objectively assess and evaluate the fit between a vendor’s strategy, core capabilities and the initiative’s strategic objectives in relation to the expected outcome.

With high performing relationships, collaboration is born out of common purpose and intent, and must therefore be a product of strategic fit.  The advanced analytical tools associated with my SRS relational model are used to determine the veracity of the “strategic fit” between the client and vendor.  This “fit” as I call it is critical for establishing the framework for the Relationship Charter about which I will be talking at great length in an upcoming post.

I think that it is important to note at this point that irrespective of where you presently are in terms of your current contract management lifecycle, it is never too late to introduce the relationship-based model.  That being said, the sooner in your process that the model is used, the more effective your relationship management framework interms of achieving all the benefits delivered by the relational model.

business teamwork - business men making a puzzle

Within the context of the above, the following 4-Step process will enable you to reliably source and establish high performing relationships.

Step 1 – Creating the BRF Framework

In 2003, and based on our team’s extensive experience to that point in time, we established Benefits Realization Factors (BRF®) as a means of defining the variables or key factors that must be enabled to achieve success relative to the expected outcome.

Not to be confused with Key Performance Indicators (KPIs), which need to be defined jointly with your selected partner at a later stage, a BRF® to a procurement initiative outcome is much like a Critical Success Factor (CSF) to project management and risk factor in risk management.

It is a factor without which the desired benefits associated with an acquisition or delivery cannot be harvested.  In this context I am certain that almost all procurement professionals can recall at least one initiative where despite the success of one or two success factors the expected outcome in terms of the overall initiative was never realized.

Step 2 – Industry Analysis

I have often been asked about the advanced analytical tools that I have used to understand an industry and assess the strategic fit between potential partners.

The fundamental idea behind the use of these tools is to introduce Competitive Analysis and Competitive Intelligence gathering  within a procurement framework prior to the actual procurement itself.  These tools ultimately  enhance both the insight and the understanding of specific industries and organizations within those industries, as it relates to identifying the critical points of strategic fit relative to achieving an expected or desired outcome.

In essence, and as an initial step, by understanding an industry as opposed to an individual company, you will be in a better position to compare all competitive bidder capabilities by a single standard that truly aligns with your contracting goals.

Or to put it another way, to really understand individual company capabilities you must first understand what their specific industry is doing as a whole.  This is of course where the importance of strategic grouping comes into play.

A strategic group is a concept used in strategic management that groups companies within an industry that have similar business models or similar combinations of strategies.

My Strategic Group Analysis (SGA) aims to identify organizations with similar strategic characteristics, following similar strategies, or competing on a somewhat similar basis.

The Industry Analysis phase will also provide added insight needed in your procurement strategy, enabling you to determine if your expected outcomes and BRFs can be achieved.

This second step establishes the preliminary alignment between your objectives and industry capabilities, that will enable you to intelligently engage the targeted industry.

Step 3 – Strategy and Industry Engagement

One of the critical issues engulfing the procurement regimes particularly in the public sector, is what is referred to as industry engagement.  For many years the government had simply relied on defining their requirements and then taking them to market in the hope that a vendor, any vendor would be able to step forward and deliver to contract specifications.

The problem with this approach is that it abdicates buyer responsibility in terms of the successful delivery of the required product or service.   In essence the government would ask for “A” and then rely on imposing legal terminology and financial penalties as a means of enforcing the desired outcome.

History has clearly demonstrated that this approach in both the public and private sectors has failed to produce successful outcomes.

With Steps 1 and 2, we have addressed this issue.

Based on your newly gained insight of the industry, rather than raising the defined requirement flag in the hope that a vendor – any vendor, will salute it, you are now able to develop a strategy that focuses on two key elements.

The first being the Business arrangement framework which includes a description of your strategic objectives, and the resulting alignment with target industry capabilities.  From this, the profile for an ideal business arrangement that encompasses the actual relationship itself, as well as the corresponding service and financial management framework will emerge.

Once you know what you require in a high performing relationship partner or partners, the second element, which  is a description of the procurement process itself, can be mapped out and acted upon.

It is important to note that this initial connecting point with the target industry, is part of a ongoing engagement process that will continue to provide intelligence to what will become the joint governance team, throughout the duration of the relationship.  I will talk about joint governance in greater detail in my next post when I review the process to “operationalize” the Relationship Charter.

In the meantime, we are now ready to move on to the fourth and final step in sourcing a high performing relationship.

Step 4 – Vendor Selection

In sourcing high performing relationships, vendor selection is based primarily on the following four components:

  1. A business proposal that describes the general approach and strategy for meeting known deliverables and immediate or short term goals along, with any technical, HR and management plans that may be required in the immediate future as seen and determined by the bidder;
  2. Strategic Fit Assessment – As mentioned earlier in this post, this is a process that uses advanced analytical tools to objectively quantify the fit between a corporate strategy and core capabilities, with BRFs. The assessment output is what we call a Relationship Certainty Score and is carried out by an independent team of qualified professionals and academic personnel in strategy, finance and business operations.
  3. Relationship charter components and Joint Governance team qualifications. The Relationship Charter (components of which are covered in prior posts, and will be revisited in my next post on Operationalizing the Relationship Charter) is introduced as a Straw model template format during the procurement process. Finalized at the negotiation phase of the procurement – it is one of the few things that will require phase based negation in the relational approach.
  4. Open book Framework, which is the financial evaluation of vendors proposed financial terms and management metrics. As I mentioned in a previous post, the OBF is a pricing model based on actual cost accounting with dynamic constructs and incentives depending on the type of activities involved during the relationship lifecycle.
  5. Last but not least, and before any transition can take place, operationalizing the relationship charter is critical as it empowers stakeholders to work in teams as a cohesive single unit. This collaborative cohesion is at the heart of any high performing strategic relationship, and it is the Charter platform that provides the parties with the ability to effectively and successfully address problem areas as they arise, as opposed to being avoided.  This Charter platform also provides the insight into the relationship elements that enable the delivery of improved outcomes and, the intelligence across the value chain to better leverage change as a strategic advantage as opposed to being viewed as an undesired and unanticipated risk.  As a result, there will be a resiliency to the relationship in times of inevitable change that will ensure an effective shared response, and ultimately a successful outcome.

As previously indicated, in the next post I will go into greater detail regarding how to operationalize the Relationship Charter.  However, the key take away from today’s post can be found in the following response from a senior private sector executive when he was asked why relationship-based models work:

Successful private sector organizations attribute their success to close customer intimacy where they learn and work with their clients to produce the next generation products and services – the Relationship based model is the systematic approach that delivers customer intimacy”.

Register for our next Seminar – November 18 – 19, 2014 Toronto, Ontario

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Andy Seminar Banner Fall 2014

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The (Real) Art of the Deal by Andy Akrouche

With everyone from deal architects to premier transaction firms embracing a “Relationship” mantra when it comes to complex contracting and outsourcing, the true meaning of the word is being lost in a sea of good intentions.  Or to put it another way, just because you say the word relationship, or incorporate it into your negotiation process, does not mean you have a relationship with your trading partners.  This is especially true when you continue to view doing business through a transactional lens.

Relational . . . more than a catch phrase

Relational . . . more than a catch phrase

The fact is that 70% of all long-term outsourcing, futuresourcing and PPP initiatives underperform or fail because they are structured as a deal or a transaction as opposed to a strategic relationship between key stakeholders.  Whatever name you give it, a transaction or a deal is still a deal.

So what is The “REAL” Art of the Deal?  Quite simply it is knowing when something isn’t a deal or a transaction.

At this point I would like to emphasize the fact that I am not against deals or transactions.  There is definitely a place for them.  However, the mistake we frequently make is to erroneously apply a deal or transactional mentality to what is supposed to be a dynamic business arrangement.

What is a deal or a transaction?

A deal or a transaction is an instance of buying or selling something, such as closing on your house, getting a new mortgage, withdrawing money from an ATM machine.  In a transaction like the ones previously described, there is no flexibility, no need to interact and absolutely no changes allowed.  This of course works well in these instances.  After all, what interaction is really required after you get your money from the ATM machine?  It is a done deal!

Complex business relationships or dynamic business arrangements are not as cut and dried, as a deal is never done – even after the ink dries on the contract.

Change both within and outside of the complex or dynamic relationship is inevitable.  Whether it be the result of Political, Economic, Social, Technological or Legal otherwise known as “PESTL” variables, the fact remains that change will happen.  In this light, attempting to respond to said changes within the framework of a transaction arrangement is as the Department of Defence’s Ian Mack put it, tantamount to trying to “achieve certainty based on the initial deal.”  It just doesn’t work.  Hence the reason why 70% of all outsourcing, futuresourcing and PPP initiatives miss the mark!

Despite this dubious track record, legal firms and financial advisers are still trying to manage both the anticipated and unanticipated risks associated with complex business relationships within the confining framework of a deal or transactional structure.  By doing so, they are attempting to “legislate” change and its associated risk rather than recognize and adapt to it.

This is not a true relational approach.

So what do I mean by a relational approach?

When I first developed the relational model more than 20 years ago, I in essence redefined what complex business relationships actually entail.

If you have had the opportunity to attend one of my many seminars or workshops or, have had the chance to read my book, you will already know that I define a relationship in a business context as being a continuous, process-centric interaction involving an infinite number of deals or transactions.

From this standpoint, the focus is not solely on contractual metrics such as timelines, financial obligations and service level quality, but on the establishment of a Relationship Charter within which each of these critical areas is jointly managed.

Consisting of three parts: Shared Mission and Purpose, Joint Governance, and the SRS Open book financial management framework, the Relationship Charter is based on six foundational principles, which are as follows:

  • Act of Relating – and this is where “relational” comes from.  Connecting and linking in a naturally complementary way
  • Mutuality – Having the same or similar view or output each to the other
  • Respect – Recognizing each other’s needs, requirements, contributions, abilities, qualities and achievements
  • Innovations – Use of combined strength and synergies to deliver improved outcomes
  • Continuous Alignment – Making necessary adjustments to improve and achieve relationship objectives
  • Empowerment – Introduction of Joint management structures and processes at the strategic and operational levels to manage the realization of relationship objectives.

My book Relationships First: The New Relationship Paradigm in Contracting provides an introduction to what is needed to source and manage relationships vs deals or transactions.  Coupled with the SRS Complex Outsourcing Body of Knowledge COBOK™, you will have everything you need to establish high performing complex business relationships.

In the meantime, I would exercise due caution when you hear phrases like “negotiating to Yes” and “negotiating to We” as they reflect the “old” as opposed to “Real” Art of the Deal.

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Move of IT buying to SSC lays the foundation for getting the job done right! By Andy Akrouche

“By moving away from each department independently managing these activities, there are opportunities to drive economies of scale, achieve savings for taxpayers and improve services,” the budget reads. “Moving forward, the government will explore further whole-of-government approaches to reduce costs in the area of procurement of end-user devices and associated support services.”

The above is an excerpt from a April 5th article by Jordan Press (Federal IT agency tasked with hardware procurement duties) in which the writer reported on the government’s decision to mandate Shared Services Canada with the task of procuring end-use hardware and software for “workers in the 43 federal agencies is serves, along with a handful of parliamentary watchdogs and other federal agencies.”  In total, 106 federal organizations’ IT spend will be managed by SSC.

In and of itself this isn’t really news.  In fact anyone who has been actively involved in and with the public sector will likely tell you that the government’s decision to transfer IT acquisition responsibility to the SSC as opposed to creating a new agency to buy hardware was a when as opposed to an if scenario.  Besides being the defacto ICT Agency for the Federal Government, putting IT purchasing under the SSC immediately presents the opportunity to move away from centralized procurement vehicles such as Standing Offers which, over the years, has proven to be ineffective on many levels.

For example under the old standing offer model, departments were usually forced to do their own sourcing of hardware and support services.  For the vendors who went through an at times lengthy and costly process just to make the list, revenue opportunities were limited to localized relationships that rarely justified the effort in terms of financial return and business growth.  In other words standing offers were little more than bulletin boards for unrealized opportunities for vendors, while splintering the supply stream for the government into an at times unmanageable spend morass.

In this regard I have to tip my hat to Mr. Flaherty, in that this decision has finally laid the foundation for getting the job done right!

All this being said I think it is important to recognize right off the bat that when it comes to hardware, you are for all intents and purposes acquiring a fully managed service.  After all no one really buys hardware anymore do they?  This lesson was learned by the BC government who, in outsourcing all of their end user computing services to IBM, concluded that it is better to approach IT acquisition from the standpoint of it being a service rather than a purchase of hard assets.

Within this context, the real question becomes one of support.  How do you support departmental needs through the provision of a fully managed service to enable the introduction of new applications and support more sophisticated end user expectations?

In an attempt to both understand and address this question, the majority of federal government departments as well as agencies like CIOB, PWGSC and the DND have expended considerable cycles doing everything from analyzing countless studies from firms such as Gartner, to engaging consulting firms – including ours – in an effort to get a handle on driving innovation and savings with the intended outcome being improved productivity.  Once again, with the decision to move the IT acquisition function to the SSC, it appears that a major obstacle to achieving these objectives has been removed.

However, and as promising as the news is, for the government to harvest the benefits of this move there must also be a change in how technology is viewed.  Specifically, there must be a concentrated and deliberate transition towards a more agile and dynamic user environment.  In other words, and looking beyond what will likely be a significant human resource transformation, the government must see their IT agenda as an exercise in building and managing relationships.

In 2002, I personally lead a team of IT and procurement specialists from both the public and the private sector in which we worked together to establish a relational governance structure for the Province of Ontario.  The success of the program speaks for itself, as do the results of a benchmark study conducted by the CRA a year after they adopted the same model.

There is of course no reason why the present day government cannot realize similar results as it relates to savings (the CRA program for example showed at 25% reduction in acquisition costs), as well as dramatically improved productivity levels across the board.

It is with this firm understanding of the potential benefits associated with the recent decision that the following questions have to be asked (and answered);

  • Is SSC going to outsource the service, and if so what model of outsourcing should they use? We know that the traditional models have proven to be ineffective.
  • How will the SSC address the challenges associated with the aggregation of demand that has traditionally led to a shrinking supply base?  Historically, aggregation has almost always led to diminished competition and escalating costs. What is the strategy here?
  • As opposed to protecting SMEs, how do we facilitate or stimulate SME participation and growth as an important partner in the transition to a more agile and dynamic user environment.  After all, Initiatives like this should not be done at the expense of SME sustainability and development – if we do we all lose in the end.

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Foundations for Intelligent Automation of the Contracting Process

Back in the late nineties when I first embarked on designing an intelligent procurement system which leveraged advanced algorithms to effectively engage and select the best possible suppliers within a matter of seconds, the core principle of my approach was that it had to have a solid basis in a manual system in which there was inherent process efficiencies.  In short, if the manual framework did not make sense, then there was no point in automating the process – a kind of garbage in, garbage out mindset.

Focusing on Indirect Material Spend, and in particular Maintenance, Repair and Operations “MRO” products, we ultimately introduced a production system into the Department of National Defence that saved the “DND” significant sums of money over a 7 year period.

However, extending the same framework to more complicated acquisitions calls for a major adjustment which takes into account the diverse variables associated with the negotiation process.  For this reason, the Strategic Relationship Negotiation Methodology or Process “SRNP” created by Strategic Relationships Sourcing Inc. “SRS” is an important document in that it serves as the blueprint for transforming complex procurement automation from a static library of contractual legal terms to a practical application of best value parameters based on real-life, expert purchasing experience.

Developed several years ago, the SRNP was structured around the negotiation of 6 complex real-world acquisitions which reflect both an actual and practical process.  This is an important point when you consider the words of the former CIO for the US Federal Government Karen Evans who, during a recent roundtable discussion, made the statement that “products” (re technology), does “not replace skill sets.”

Evans, who oversaw more than $70 billion in IT acquisitions by the US Government during her tenure added “vendors have to change their business models” focusing on the critical areas of “quality of service and reliability of data.”  The SNRP paper accomplishes this feat while laying a solid foundation for the automation of negotiating complex acquisitions.

You can review the paper in depth through this blog’s SlideShare Viewer below:

Please note that the PI Inquisitive Eye will be airing a special segment in late November reviewing the above paper including the practical application of the principles associated with the Strategic Relationship Negotiation Process.

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Defense Secretary Gates Calls for Procurement Reform…and He Puts Competitive Bidding at the Forefront of the Pentagon’s New Priorities

The following excerpt has been reprinted electronically with permission from the the Reverse Auction Research Center Blog.  Use the following link to access the post in its entirety: Procurement Reform.

Big news out of the Pentagon has Robert Gates, The Secretary of Defense, has issued a new report calling for big changes – fundamental changes – in the way the military does business (and it is big, big business – over $400 billion annually!). Secretary Gates and Ashton Carter – who is the Undersecretary of Defense for Acquisition, Technology and Logistics – have just issued a 23-point memorandum, outlining a plan for reforming the DoD (Department of Defense) and its acquisition processes.

According to reports, here are five principles that will drive the DoD’s procurement reform.

Once again use the following LINK to access the Reverse Auction Research Center Blog for additional details.

My Commentary:

What is interesting about this most recent announcement regarding procurement reform is that military spending has been a longstanding concern on both sides of the 49th parallel.

Regarding the U.S. I can recall writing a story back in August 2007 titled “DoD procurement practice then and now: A public versus private sector comparison (Part 1)” which focused on a 1999 report that analyzed the differences between private and public sector commodity buying practices as it related to DoD procurement.

With the benefit of hindsight the piece still holds its relevance today, especially since it talks about the challenges faced by the report’s authors in gaining good intelligence from a reluctant military community in terms of overcoming both operational as well as political concerns.  The latter of course was tied directly to an “expectation that their findings would portray DoD personnel in an unfavorable light,” a fear which according to the authors’ was actually fueled by the “leadership within the DoD itself.”

In Canada, the fact that a detailed spend analysis spanning a 7 year period indicated that the Department of National Defence generally paid a 157% premium over going market prices for Indirect Material goods, was also a source of similar concern.

It is a safe bet that coupled the sound bite anecdotal stories by an all too eager press with an appetite to sometimes fan the scandal and controversy flame does little to assuage said fears.  Nor do I imagine that today’s world relative to access in a practical sense would be much different than it was in 2007.

This being said inefficiencies in public sector procurement relating to the contracting process is not confined to the DoD.  Issues regarding inefficiencies across the board have even prompted calls for privatizing the entire government’s procurement practice, as illustrated in a 1995 article by Dr. Ronald D. Utt, Ph.D.

In my October 26th, 2007 post “Can present day PWGSC woes be traced back to a 1995 article on the General Services Administration in the U.S.?” I discussed at length Dr. Utt’s suggestion that the General Services Administration “GSA” should be privatized through an employee buyout – an interesting thought to be certain.

Citing the principle behind the GSA’s creation in 1949 whereby the centralization of the buying mechanism could achieve significant savings through “specialization and economies of scale,” Utt maintained that “any cost advantages from the government’s vast buying power was more thD. Utt, an offset by bureaucratic inefficiencies and rigidities.

The good Doctor then went on to say “that the resulting problems are a characteristic of “any government monopoly,” that attempts to do “what is often done better and cheaper by leaner more flexible” organizations.  If taken on face value, this appears to be a reasonable and prudent evolution in his thought process.”

However, and while the abandon versus repair proposition from Utt is interesting and perhaps even thought-provoking, it is one that is seriously flawed in that “government is not a corporation and therefore has different priorities and imperatives to meet when procuring goods and services.”

I am of course talking about the general acknowledgment that public sector procurement also takes into account socio-economic implications including the importance of developing key  business sectors or industries.  In Canada examples of a key sector or industry might include the SME/minority-owned business community, or Canadian-based manufacturing sectors such as shipbuilding where job creation and local community financial stability are additional factors that need to be taken into consideration.

The point here is that while reform is necessary, it cannot be achieved through a myopic strategy that fails to take into account the unique realities associated with government procurement objectives that include both internal as well as external mutual interests.

As reported in my July 26th, 2010 post “Procurement ombudsman says Federal buying policy unwittingly helping to create monopolies,” the announcement by the procurement ombudsman Shahid Minto, that the Fed’s policies back in 2005 had “unwittingly” helped to create monopolies gives testimony to the truth of this statement.

In short, move towards implementing reforms that take into account the true diversity and complexity of government purchasing.

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