A Vision for Effective and Sustainable Procurement in The UK Fire and Rescue Service
James Jones, Chairman FIA | FIRESA Council, Managing Director Vimpex Limited
The recently signed Terms of Reference exchanged between the Fire Industry Association (FIA) and the National Fire Chiefs Council (NFCC) acknowledging the value and importance of the Fire Commercial Transformation Programme (FCTP) is an excellent example of how far the operational equipment supply sector and the NFCC (formally CFOA) have come in terms of collaborative work.
Cooperation between the public and private sector in today’s fire procurement landscape is vital to ensure a healthy, dynamic, competitive and sustainable supply base for operational firefighting and rescue equipment.
Communication between customer and supplier within a truly equitable two way partnership is what modern business relationships are built on and the FCTP group espouses that ethos.
The FCTP is delivering important benefits to both parties; the most valuable of which is offering both suppliers and customers alike an insightful exposure of the challenges each face.
The recently let National Collaborative PPE Framework is regularly discussed at FCTP meetings and is cited as an example of successful centralised procurement run in a transparent and highly professional way. No one would argue against the proficiency, ethical methodology and delivery of this national procurement.
One Winner Takes All?
The National Collaborative PPE tender was a single supplier, one winner takes all contract. The FCTP regard large centralised, single source contracts as very effective, introducing standardisation, reducing duplication and offering Fire and Rescue Services efficient, effective and compliant routes to market. They can encourage innovation, maximise efficiencies and by virtue of the fact that they are so huge, invite competition from several high quality competitors and potentially encourage new market entrants. Where this approach is appropriate it ensures that the public sector body concludes with a weighted decision delivering an excellent combination of quality, performance and price with predictable costs for the duration of the contract - but will this approach be suitable for all national procurement?
Recent discussions within the FCTP have provided some clarity on this matter. The FCTP see this approach (one winner takes all) as the exception rather than the rule, particularly for the ‘Operational Equipment’ category of expenditure. The FCTP is aware of the very niche supply base operating in this category of expenditure. If a ‘one winner takes all’ approach is likely to have a negative impact on future competition and/or have a detrimental impact on innovation then this approach would not be suitable. This can be evidenced through multi-supplier national procurement framework exercises coordinated through the FCTP including but not limited to; Emergency Response Vehicles, Smoke Alarms and RPE (Breathing Apparatus).
However, for some procurements a single supplier framework/contract approach has been deemed suitable by the FCTP. For example, in the ICT category they are exploring the creation of standard specifications for items such as laptops, desktops, monitors and other commoditised ICT equipment. The intention would be to aggregate their requirements and award to a single supplier. They maintain that this approach would not impact future competition or innovation in the ICT supply market but will offer Fire and Rescue Services efficiencies through economies of scale.
The procurement strategy which is completed in advance of any significant procurement exercise will fully consider the risks and benefits of different approaches. In addition, part of the NFCC/Supply Sector collaborative approach includes pre-market engagement (consultation with suppliers) which will help in defining the final strategy.
From a supplier perspective, there is frankly somewhat greater scepticism concerning the implementation of single supplier contracts, the general view being that they carry significant risk in damage to the market and in the longer term offer poorer value to the buyer and the public purse. We believe that the on-going requirements for a healthy and efficient supply market that delivers product innovation is best served by multiple supplier frameworks as opposed to single supplier contracts.
The Problem with Procurement
Whilst many Fire and Rescue Services have invested and professionalised their procurement departments over the past decade or so, there are still examples of poor procurement practice and under invested functions. The size of some Fire & Rescue Services is a factor as it’s difficult to justify dedicated professional procurement resource with a relatively small level of expenditure, particularly with the budget constraints Fire and Rescue Services are currently operating within. This is all the more reason for Fire and Rescue Services to work in collaboration with each other, sharing resources and increasing their buying power. This is completely different to a decade ago when there were less stringent budgetary constraints which perhaps contributed to a culture of disparate, confusing and in many cases questionable buying practices and behaviours by some customers and suppliers.
This is not to say that the culture of buying in the FRSs is broken. Indeed there has been a noticeable change in the approach to procurement - particularly over the last three or four years. There are many cases of excellent procurement with well-run trials and appraisals of equipment being carried out prior to purchase either as individual services or as part of a regional or national collaborative procurement exercise.
Cases of poor buying do though continue and informal conversations with the sector at events such as fire conferences unearth some concerning and often less professional buying practices:
Tender Timing - Buyers need to consider the time at which tenders are issued and how long suppliers have to respond. Buyers also need to ensure they are available to respond to clarification requests whilst the tender is out. Where possible buyers should avoid issuing tenders in school holiday season (Summer/Christmas) and if this is completely unavoidable, include a longer tender period. The cost of tender preparation and process for businesses is high at the best of times and when Human Resources are stretched due to holiday periods, it escalates. If buyers issue tenders without due consideration for the timing and duration then it is possible that suppliers will decline to respond, reducing the level of competition and/or leading to the quality of tender returns being non-optimal due to insufficient time.
Dodgy Deadlines – We’ve heard of at least one large tender for vehicles being advertised when it was absolutely clear that the preferred bidder had pre-ordered chassis in readiness for guaranteed success. The other bidders had absolutely no chance of meeting the delivery deadlines as chassis alone would not have been delivered in time, let alone the vehicle builds.
Empty Boxes – There is a lack of robust and timely decision-making and willingness/authority to release budgets early enough in the budgetary year. Suppliers are routinely asked to send ‘empty boxes’ so that goods can be booked in prior to delivery if products have been ordered so late that they cannot be produced in time. Not only is this practice seriously disruptive to suppliers - creating inefficiencies in production and increasing costs – it could also constitute false accounting
Failed/Cancelled Tenders – So frequently are tenders or buying exercises cancelled or declared void. This results in a significant waste of time and resource for all involved. The reason often cited is ‘no product or supplier met the specification or standards required’. Surely the procurement team should have been aware of the market prior to advertisement? In some cases, it has been suggested that a cancelled tender can be caused by a preferred supplier not being able to deliver in time. It’s vital that Fire & Rescue Services engage with the market prior to issuing a tender (pre-market engagement). This will provide at least a level of certainty that the specifications or standards required can be met by the market and will avoid wasted effort on behalf of both buyers and suppliers.
Duplicate Frameworks – Didn’t qualify, failed to win or the procurement team opted not to offer the contract through the ‘official’ framework? Competing and duplicate frameworks are probably the most costly of all poor procurement practices – buyers and suppliers need to do everything they can to discourage this practice. A new PPE contract is currently being contended which is in direct competition with the recently let Collaborative PPE contract. Whilst in this instance it might serve to lessen the impact on those businesses that lost the one winner takes all SE contract, the argument for the SE and the elaborate and costly way it was run was to deliver savings both on eventual price but also bid costs. Another large contract will all but eradicate those bid savings on both sides.
The Cure
There is no doubt that things have to change: FRSs have been embarrassed by several recent cases of poor tendering and lack of collaboration causing waste and, worse still, being challenged in court. Bad buying means some are paying significantly more than their neighbour for certain goods and in some cases there are cries of blatant cronyism.
Dodgy, old fashioned buying and preferential treatment of incumbent and existing suppliers is something that all involved in the FCTP wholly reject.
This assertion is balanced by acknowledgment that ‘people buy from people’ and that there must be space in modern procurement - particularly the purchasing of technical equipment - for early supplier engagement. The use of the private sector in helping to form tender specifications, commercial terms and procurement strategy in general is vital if we are achieve true long term value and sustainability of supply.
How then to mend the culture and practices that still exist whilst safeguarding a competitive and dynamic supply sector? Complete overhaul and sweeping change and a drive to complete centralised procurement is not the answer. In fact, decimation of the sector and high stakes bidding could breed just the kind of environment of sharp and potentially corrupt practice we reject. Beware The Law of Unintended Consequences and unforeseen side effects….
Frameworks
There is emerging consensus that frameworks could still hold the answer for many of the issues discussed above. There is still however much cynicism with respect to frameworks and the way that some are run and administered. Duplication of frameworks and poorly run examples abound and this would have to be looked at and rectified. Fire Chiefs would have to be heavily encouraged to utilise official frameworks if both suppliers and the FRSs signed up to the principle of single national frameworks for each product type or category. For this to work, there must be thorough technical and commercial assessment of products and services prior to award onto the frameworks with associated early supplier engagement to ensure realistic specifications, transparency, propriety, best value and sustainable supply. From the point of view of technical trials and specification setting, any emerging Product Evaluation / Research and Development function in the NFCC has an important part to play in this.
Debate has been had on the concept of ‘Dynamic Purchasing Systems’ (DPS) - frameworks which would both allow suppliers to join the framework midterm and to allow for removal of bad suppliers through poor delivery, quality or worsening financial performance.
Joint Responsibility
Whilst it is not the FRSs or any public body’s responsibility to prop up failing or poor suppliers, the macroeconomic argument says it must be in the government’s interest to ensure that the FRS supply sector remains strong and dynamic thus supporting multiple high quality and competitive suppliers.
Today UK Fire Sector Suppliers are counted globally as leaders in their field. Most of the traditional supply base consists of trusted and respected players. Weakening these domestic suppliers by reducing their ability to prosper in their home market will affect their ability to compete internationally on the global stage. User references are everything in this sector; a business’s home market has to be strong in order to provide opportunities for growth via export. Just look at other large fire markets globally. They are made up of several financially strong suppliers enjoying a healthy domestic market. Those that have seen their domestic supply base weaken have inadvertently let in imported products and contributed to the growth and success of overseas competition.
We should not mistakenly weaken our domestic suppliers to such a level that means they can’t export and we open our own home market to stronger entrants from overseas.
There are significant headwinds facing the UK fire supply sector, the major factors being the post-Grenfell fall out and the biggest of all economic challenges – Brexit. The FCTP, NFCC, Home Office and Suppliers have a joint responsibility to ensure our UK sector survives these headwinds whilst ensuring that procurement is managed in such a way that ensures collaboration and consolidation of procurement work but also allows for multiple quality suppliers to prosper. The use of single national frameworks with, where appropriate, multiple suppliers to choose from could yet be the best cure.