Too many national eggs in too few baskets


CarillionThe news reports predicting the collapse of Carillion and attempting to determine if the Government will intervene to prevent the collapse reveals a very clear set of issues that are very pertinent, coming so close to Micro Business Day on Friday 12th January. The size and diversity of Government suppliers is consistent with the demands that this Government and its Labour predecessor made towards charities. There have been many calls on the charitable sector for charities to scale up. This is a demand made by people who misunderstand the benefits of diversity. It is claimed to make it easier for Civil Servants and Ministers to manage relationships with the suppliers and for the charities/SMEs to increase their prospects of securing contracts. Even as a micro business as my current employer was until a couple of years ago, our ability to maintain numerous relationships with our own various suppliers was a challenge. However what made that challenge most acute for us was not the number of suppliers, but the fact that we represented an almost insignificant company for them to relate to directly. Many of the companies we wished to speak to directly demanded we speak to them via distributors, which doubled or even quadrupled the amount of time and number of conversations needed when problems or questions arose. The more powerful and self important agencies become, the greater the risk that they want to be feted and treated as if they are more important than their competitors. Almost every business in the UK would welcome the chance to supply Central Government with services or products, because of the scale of the Government’s buying power. Yet Governments, both local and national are often difficult clients to satisfy for many reasons so it is far from a simple decision. When the Government decides to place most of its orders with a small number of suppliers two things happen. The first is that these limited relationships become subject to deep suspicion from those outside the relationships as far too much time is spent with a select and exclusive group of companies, who translate to people and then when donations to political parties and honours get mixed in, the whole thing begins to smell like Bovine excrement. Secondly access to the procurement teams is denied to companies that may well have more to offer and better value or lower cost solutions for the same problem because they are seen as a challenge to these ‘special’ relationships. This means that the public are potentially denied the best solutions. Thirdly the problem is compounded when some of the companies outside of the special relationships begin to promote their loss leader offers and the risk is that the only way in is for people to do the work at rates that lead to workers being paid at damaging rates of pay. Fourthly most businesses which achieve large contracts then have to turn to their own suppliers and sub contractors to help deliver on the promise. This happens in many settings, not just for Government contracts. The risk at this point is of the wrong solution being delivered and for middle people or senior executives to earn obscenely large sums at the expense of both the workers and the clients. Finally we have the occasional story like that of Carillion where something goes wrong. If there were numerous companies at the table, when the company began to lose its way, the company would be allowed to fail. However in the case of Carillion and in the charity sector Kids Company, rather than risk the big name failing and leave the Government looking bad, Ministers like Chris Grayling in the case of Carillion and Oliver Letwin in the case of Kids Company hand over even more contracts such as HS2 or funds in the hope that the company is able to sustain itself. This simply makes the final failure something so big and so bad that there are few locations unaffected. Carillion employs thousands of sub contractors. If they were all working for the Government directly, this problem would be a small affair. As things stand the issue is a huge one and worthy of the many newspaper headlines. However in order to get avoid this problem depends on the Government changing its way of procuring services.

About ianchisnall

I am passionate about the need for public policies to be made accessible to everyone, especially those who want to improve the wellbeing of their communities. I am particularly interested in issues related to crime and policing as well as health services and strategic planning.
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