By Caroline Boot, NZ Procurement and Probity Services, and Clever Buying.
When the buck stops at you for council spending and the consequences of poor procurement decisions could cost you your job and your reputation, it’s natural to want to take control.
After all, the way your council spends its ratepayers’ money, is most likely a massive part of what you will be judged on, come the next election cycle.
So why do probity auditors strongly discourage elected members and senior managers from getting deeply involved in procurement? Here are four important reasons.
Conflicts of interest
Almost every senior, experienced business person will have strong networks in their local communities. If you’re well-known and well connected, this can contribute strongly to your election or appointment suitability for a council role. Especially if you are an elected member, your future depends on maintaining support from ratepayers.
If you’re based in provincial New Zealand, the chances that you know or have some connection to a local supplier, whether professional or personal – are high. Even if you believe this would never influence a procurement decision when you’re wearing a council hat, members within your community may not see it that way. Especially if they are unsuccessful, despite seeing themselves as a perfect fit for the contract your council is awarding.
The advice of the Office of the Auditor-General is clear: perceived and potential conflicts may be equally as, or even more, dangerous, than actual conflicts. Although many conflicts of interest can be managed effectively using advanced methods, such as pre-determined anchored scales, the optics are critical.
A challenge to a procurement process – even if successfully defended with full exoneration for council – can be costly and cause major delays to contract awards.
Are you trained and qualified?
While many experienced business people have undertaken procurement in their business careers, public sector procurement is not only a complex skill, but has changed markedly over the past few years.
If you are not familiar with sensitivity testing to explore the inter-related dynamics between price and non-price weightings alongside scoring distribution; if you have not gained experience in quantified risk assessment as the foundation of procurement planning; and if you are not fully familiar with Government Procurement Rules and Auditor-General Procurement Guidelines, then beware.
Getting trained and qualified in current best procurement practice requires intensive study and workplace experience, under direct supervision of a qualified procurement assessor. Even experienced procurement professionals take one or two years to get qualified, with both theory and practical components in their journey.
What’s more, procurement here is markedly different in many ways from other countries. This means that those with pure off-shore experience and qualifications have a duty to up-skill to ensure they follow our accepted and compliant practices.
If you’re lucky enough to have procurement professionals on your team who have qualified in the past five years, then they are the best people to work through the processes that underpin effective procurement planning and implementation, including developing RFT documentation that’s fit-for purpose, running tendering processes, and convening tender evaluation moderations to reach the recommendations for the preferred tenderer.
Having the time
Effective procurement processes usually take several months to work through, starting with defining scope and verifying budget, undertaking market analysis and investigating risks and opportunities – with a specific focus on those that are under suppliers’ control.
That form of risk and opportunity analysis is the key driver of identifying what qualities of suppliers will drive the best value, both for the capital costs and for the life of the asset.
Without that insight put into planning, procurement processes frequently default to legacy selection tools, which almost always get dominated by the cheapest price. And we all are tired of the bombardment of projects going over budget and timelines, because these factors have driven poor selection decisions.
To have effective involvement in procurement decisions, tender evaluators need the insight that comes from this analysis. Ideally, evaluators are the main people who undertake this procurement planning – after all – they have the experience and subject matter expertise to know what will drive good outcomes.
However, at the very least, senior managers or a tenders subcommittee should review and approve the Procurement Plan. From there, your procurement team should develop the RFT documents and run the procurement process, using subject matter experts for reviews and employing best procurement practice for decisions like determining the scoring scale and weightings.
A foot in both camps
This is a classic and ongoing dilemma for councillors in so many areas of local government. It’s the classic ‘governance vs. management’ divide that must be respected to ensure sound processes are followed and there is proper independence in establishing and reviewing those processes.
You have to choose. Public sector procurement, more than almost every other area of responsibility for elected members and senior managers in local government, demands independence.
You rely on expert advice based on analysis, specialist knowledge and recommendations from your lawyers, your accountants and your financial team before signing off on critical decisions that protect and manage the assets that you take responsibility for on behalf of the community you serve.
As an elected member, your job is to ensure your professionals are qualified and equipped to give you the best professional advice. Procurement is no different.
The procurement expertise that you engage should be carefully chosen. Procurement using public funds is not simple.
It’s not just ‘buying stuff’! And, most importantly, it’s not your money.
As an elected member or senior manager, you have a fiduciary responsibility to review, even at a high level, the rationale underpinning the recommendations for contract award.
First, you’ll need to decide, as part of your Long Term Plan, what your priority capital projects are, what maintenance activities are critical, and how those can be accommodated within your budgets.
To have an appropriate influence on procurement processes at any level, elected members and senior managers should also know some fundamentals, like:
• How does the Procurement Lifecycle work?
• What probity requirements should I be aware of when making decisions about public money? (Conflict of interest management is frequently neglected for elected members, with embarrassing and sometimes career-limiting future consequences).
• How do the Government Principles of Procurement and Government Procurement Rules impact us?
• What should be included in a sound procurement plan?
• How do the main supplier selection methods work, and when does it make sense to use each one?
• How should scoring be carried out, and what are the processes for moderation and benchmarking of tender scores?
• How should your procurement teams best deal with the promises made in the winning tender and make sure those are delivered through contract implementation?
Council procurement is a skilled occupation, which can be a minefield if not handled properly. The landscape is changing, too – where procurement was once a minor add-on to responsibilities of council’s consulting engineers, it’s now the wheelhouse of trained and qualified procurement professionals.
If you have the right level of governance overview and general knowledge of current good practice in procurement processes, and you engage qualified procurement experts to cover the nuts and bolt of sound procurement processes, you’ll be able to reassure your ratepayers that their funds are spent wisely and fairly.
For more about procurement training for councillors and senior managers, or accessing qualified specialist expertise on your procurement projects, contact Caroline at caroline.boot@nzprocurement.com, 021 722 005.