Housing Technology interviewed CJC Procurement about the opportunities and pitfalls of the IT and business procurement processes.
What is ‘value for money’ in IT procurement?
Well, for starters, value for money is not simply savings; it’s far more complex and yet far simpler. Value for money in IT procurement is the demonstrable improvement made in the delivery of the organisation’s objectives which is another way of saying don’t count the percentage discount or the pennies ‘saved’ in choosing supplier X over supplier Y. Instead, measure the improvement in business processes, the amount of resource released from manual processes now automated, the amount of time the supplier now spends directly supporting your digital skills initiatives, and the contribution your new IT is making to your overall business objectives.
Does OJEU actually apply to IT procurement in the housing sector or can you ‘work around’ it to save costs?
Let’s put this point to bed once and for all. Yes. 100 per cent. Absolutely. The social housing sector is covered by the Public Contracts Regulations. This has been the case since the 2006 regulations and nothing changed under the 2015 regime.
Working around OJEU is one of the most common procurement questions I’ve ever been asked. It’s like asking an accountant whether you really must file your accounts? We all need to get over this. OJEU is not the big and scary thing it’s painted to be. Yes, there are rules and processes and you need professional support from procurement, just as you enjoy from your finance team at year end.
The Public Contracts Regulations 2015 (the OJEU rules) prescribe rules and procedures. They are tools and there are ways and means to apply them and practice makes perfect. You have to have a few under your belt to know how they work. Frameworks are ‘OJEU compliant’ as they themselves have been procured via OJEU. G-Cloud is compliant because it is ultimately a Framework Agreement. The spirit of the rules apply below the threshold, but are less onerous.
When I hear the question ‘how do we avoid OJEU?’, in my head I tend to hear ‘I don’t really know what I want so I don’t want to go through a process to highlight that to everyone’. Don’t worry, good procurement folk will help you every step of the way; don’t fight it, embrace it. No one saves any cost by short-changing a procurement process; the benefits are in delivering an appropriate contract with the right supplier based on the right relationship, manged through to delivery and conclusion. Consider this – the OJEU timescales are as much about you preparing to manage the outcome as they are in acquiring the contract.
How well served is the housing sector with IT procurement resources?
In my view, poorly. Some housing providers have reasonable teams and some have IT-focused category managers which is great, but many more have small ‘procurement’ teams of two or three people and yet more still have no in-house procurement support at all.
It’s now 2017. Procurement is not about shopping. It’s not about the tender process. Modern procurement is increasingly about the facilitation of end-to-end business value. Procurement needs to continue to modernise, but this sector needs to wake-up to procurement and demand more from it.
Do IT suppliers exploit their customers because they know their switching costs are so high?
Some do, and I don’t blame them. Let’s not forget that suppliers are in business to make money. They are legally obliged to do so for their shareholders. There’s nothing wrong with that, it’s just the way it is.
Proper procurement will arm the buyer with information to deal with this, an awareness of the market and the market conditions, an awareness of the respective powers of the supplier and the buyer, and the options and opportunities to change the factors in play to the buyer’s advantage. Every buy/supply relationship has an appropriate mix of tactics to make the best of it for all parties concerned – as I said, procurement isn’t just shopping.
During these time of cost cutting, are IT suppliers offering the best VfM and/or sharing the pain of cost cutting?
At the moment, cutting IT budgets is the last thing I would do. I would use technology to reduce the overall operating costs of the business. The sector is awash with digital transformation, mainly targeted at this outcome, but some are also trying to shave a few pounds from their IT bills while not focusing on reducing operating costs by millions through investment. Sometimes you need an ‘invest to save’ strategy and a strategic view is required – one of the reasons I champion the CIOs on every executive team!
That said, I would encourage everyone to open their next meeting with their key suppliers with the question ‘how can we help you reduce your costs and/or your cost of supporting us?’. Even more interesting would be whether or not the feedback you received was genuinely welcomed and acted on by your management teams.
When acquiring new IT services, what should you consider to ensure they remain future proof?
Don’t worry about the future. Far too many times I’ve seen so much focus on protecting against the future that in reality no progress is made because you’re constantly waiting for the next step along the roadmap of the chosen technology.
Pick a sensible point in time, make the best decisions you can at that point, and execute those decisions as quickly as you can. Then sweat that decision for a couple of years, reassess and adjust, and focus on the business improvements delivered during those years, and not on the risk (well, certainty) that technology might move on during that period.
When do you need a dedicated procurement system or are Excel and Word sufficient?
No procurement function should still be reliant on Excel. Mandating e-sourcing and e-procurement was originally tabled many years ago, but in recognition that so much of the public sector is so far behind, this has been postponed time and time again. There are cost-effective solutions and they should be used.
Nor should this be limited to simply e-tendering. We should all be aspiring to have P2P and automated spend analysis tools, not just a fancy tender box! However, I suspect even where ERP has been fully deployed, Excel will always have a place though!
What about bulk or joint procurement opportunities with similar organisations?
Collaboration is a huge opportunity for this sector. In my view, there should be much more joint working and collaboration because the housing sector doesn’t have competition in its conventional sense. I agree this is challenging and there are always politics involved, internally as much as with prospective partners, but the sector is missing a trick, especially with regard to the cost of switching suppliers, as mentioned above.
In one sentence, what advice would you give Housing Technology’s readers to immediately improve their value from IT procurement?
Establish who your critical, strategic suppliers really are and talk to them today about your business objectives and ask them to tell you all about theirs too, as relationships really matter.
Chris Cliffe is director of CJC Procurement.