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A path to better public sector supplier performance
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A consistent framework and strategic approach are helping the public sector to meet the challenges of supplier performance management, says Andy Quincey, former Group Commercial Director at DEFRA and Commercial Director at TfL.
If the public sector is to achieve its remit of delivering services to citizens and providing value for the taxpayer, the procurement function must play its part. Successful provision of services and cost savings requires effective supplier relationship management.
But uncertainty surrounding the nature and timeline of work coming through to suppliers, particularly within large-scale infrastructure projects, makes efficiency and effectiveness very difficult to achieve.
On the other side of this issue, identifying who is responsible for supplier performance within public sector organizations or their procurement departments can be difficult. This individual or group of individuals may differ depending on commercial and operational contract management.
Creating an operational framework
Once a contract is signed, a framework or set of rules should demonstrate how the contract is supposed to operate.
The operational framework should be about delivering within that framework – for example, if something is completed on time.
If there is something within the contract which is open to interpretation, or a risk that materializes for which a response must be agreed, commercial input is needed.
Supplier performance management undertaken by operational and commercial functions is not the only procurement point of contact for suppliers, however. A strategic relationship with multiple contracts at the same supplier is also needed to oversee SRM. Clearer roles and understanding are needed at all points.
Taking such an approach would also ensure that KPIs within contracts are not just transactional but strategic.
Progress in supplier performance management
Public sector organizations have come a long way in meeting the strategic challenge. For example, when I was at Transport for London (TfL) the organization began undertaking a simple, quarterly survey of its contract managers — who are overseeing many contracts with lots of KPIs — to open a dialogue with suppliers and develop effective SRM. An annual ‘voice of the supplier’ event also enabled TfL to strengthen supplier relationships.
At the central government level, the Cabinet Office set up the Strategic Supplier Partner Program in 2015 to improve strategic supplier management across government. Over the past 18 months, the performance of five business-to-consumer suppliers across government has greatly improved, having a positive effect on 15 public services.
Supplier performance has definitely improved across the public sector and lessons learned have been shared by individual commercial directors.
A strategic view on supplier performance
The ability to take a strategic view across a business becomes very difficult if different parts of the organization take different approaches to setting KPIs and managing contracts.
Having a consistent approach to contract management is crucial. This does not mean creating a one-size-fits-all set of KPIs but instead trying to put them into a consistent framework.
During my time at TfL, KPIs were established in ‘zones’ such as health and safety, innovation and responsible procurement that came under a strategic ‘umbrella’. A suite of KPIs under each zone can be selected for each contract to help deliver the outcome. This is a process to establish the overall business perception of supplier performance management.
Effectively managing suppliers post-award also means making sure public sector organizations stick to their part of the bargain: providing the right resources, managing the whole cycle, paying on time, and so on. The more issues of their own that public sector organizations solve, the stronger mutual trust becomes.
They must also manage the needs of their many stakeholders. The procurement function should focus on being clear on what is not valuable, and what value means for different stakeholder groups.
A structure should be in place through which procurement can communicate with different stakeholders and build an effective relationship.
OJEU: a tool to improve procurement and supplier relationships
Building an effective supplier relationship requires the public sector to engage with suppliers across the market at different stages of the procurement process.
There are lots of points in the process to talk to suppliers within the Official Journal of the European Union (OJEU) process, particularly when issuing Prior Information Notices (PINs).
The notion that OJEU regulations are a barrier to progress is something of a myth. They should just be seen as good procurement, which is based on the principles of equality of treatment, transparency, mutual recognition and proportionality.
The principles of the regulations are left to interpretation and development of rules have presented some procurement challenges, but these have been addressed through regulation changes. Things are getting better.
Many private sector organisations have cumbersome procurement processes and are on a constant journey of improvement. So OJEU should not be seen as a completely separate matter to what the private sector goes through, but as a tool to improve procurement and supplier relationships in the public sector.
Having a consistent approach to contract management is crucial. This does not mean creating a one-size-fits-all set of KPIs but instead trying to put them into a consistent framework.
Creating effective supplier management
For good supplier management to be in place, commercial functions need to understand how to manage their suppliers before they go out to market.
They don’t need to be concerned about talking to suppliers before they have issued a PIN — it’s not discriminatory. There is a time and place where they can’t talk to suppliers, but they should always engage early on to set up a post-contract supplier management process.
It’s clear that there has been a sea change in public sector procurement in the last five or six years — greater understanding of supplier intelligence, improved category management and dialogue with the marketplace.
Long may it continue.
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