2 Objectives: To understand: Procurement – what is it? What makes procurement a topical issue in central government?What is the Office of Government Commerce (OGC) and its role?What is the OGC Procurement Cycle?Practice: A procurement skills exercise
4 An Effective Procurement Strategy– why important in the Public Sector? Annual procurement spendPublic sector £125 billion+Central Govt & Agencies £15 billion+Management of procurement and commercial activities -> savingsProgrammes and projects (e.g. OGC Gateway™ method for scrutinising project progress largely involves assessing procurement processes)
5 What is Procurement Good Practice? EconomyGet the price downSavings for front-line servicesEfficiencyBalance whole life cost – fitness for purposeEmbed efficient ways of workingCoordinate public sector procurement
6 What is Procurement Good Practice Cont’d EffectivenessProcure fit-for-purpose goods/servicesPublic/ private partnershipsTreat suppliers fairlyOpen government markets to competitionOtherSustainable procurement practices (e.g. carbon neutral government estate by 2012)Meet EU rules
7 The OGC Established post Gershon Review (1991) A “one stop shop” central procurement organizationPowers to set high performance standards on procurement/project managementMonitor Departmental performanceFacilitate inter-departmental collaborationDevelops relations between public sector buyers and suppliersGovernment Procurement Service (GPS) represents and supports procurement professionals across government.
9 Relationship Management Adequate resources required‘Overhead' in-house resource (estimated 2% contract value)Aspects of contract and relationship management include…
10 Relationship Management PlanningResource considerations (for goods/services) to achieve completion within timescaleProcurement planEffective lines of communicationsContract managerMethods of contract monitoring and reporting
11 \the red and blue exercise A Procurement Skills Exercise
12 Objective:The objective of the exercise is for your group to end up with a positive score
13 Procedure:Each team plays either a red or a blue card in each round by giving it to their team rep (Nicola or Amana)The choice will not be announced until both teams have playedThere will be TEN roundsAfter the FOURTH round – possible conferenceAfter the EIGHT round – possible conferenceThe NINTH and TENTH rounds score double points
14 Scoring: Remember: Group 1 plays Group 2 plays The score is: Group 1 RED+3BLUE-6+6-3Remember:The objective of the exercise is for your group to end up with a positive score.
15 ConclusionDecisions that were dominated by competitive ‘winning’ psychologies were counter productiveAggressive and competitive negotiations were experienced within and between the teamsIt’s very easy to be ‘led astray’
16 Conclusion Maximum score 72 points Lowest risk strategy 36 points each Minimum score -72 pointsTotal points in game is zeroLowest risk strategy 36 points eachTotal points in game is 72Successful negotiation should end in a ‘win-win’ situationToo aggressive - the negotiation could failToo passive – does not achieve best value
18 Goals What do you want to get out of the negotiation? What do you think the other person wants?
19 Relationships What is the history of the relationship? Could or should this history impact the negotiation?Will there be any hidden issues that may influence the negotiation?How will you handle these?
20 Trades What do you and the other person have that you can trade? What do you each have that the other wants?What are you each comfortable giving away?
21 AlternativesIf you don’t reach agreement with the other person, what alternatives do you have?Are these good or bad?How much does it matter if you do not reach agreement?Does failure to reach an agreement cut you out of future opportunities? And what alternatives might the other person have?
22 Style is keyFor a negotiation to be 'win-win', both parties should feel positive about the negotiation once it's over.Displays of emotion are inappropriate because they undermine the rational basis of the negotiation and because they bring a manipulative aspect to them.
23 Successful negotiation The negotiation itself is a careful exploration of your position and the other person’s position.The goal is finding a mutually acceptable compromise that gives you both as much of what you want as possible.In an ideal situation, you will find that the other person wants what you are prepared to trade, and that you are prepared to give what the other person wants.
24 Successful negotiation If this is not the case and one person must give wayIt is fair for this person to try to negotiate some form of compensation for doing so – the scale of this compensation will often depend on the many of the factors we discussed above.Ultimately, both sides should feel comfortable with the final solution if the agreement is to be considered win-win.
25 Successful negotiation Only consider win-lose negotiation if you don't need to have an ongoing relationship with the other partyHaving lost, they are unlikely to want to work with you again.Equally, you should expect that if they need to fulfill some part of a deal in which you have "won," they may be uncooperative and legalistic about the way they do this.Reputation is at risk