Leadership: How UK governments nurture their suppliers through uncertainty
Ohio sent out a rushed email asking vendors to volunteer a 15% cut. Ohio should have taken a moment to read the UK’s well thought-out Procurement Policy Note empowering public buyers to support suppliers and transition with them to the post Covid-19 new normal.
Last week I reported on the Ohio Department of Administrative Services poor attempt to bully its 1,400 vendors into a 15% cut on their contracts. I argued that this was an ethically questionable, legally risky and fiscally poor course of action and proposed that instead of demanding cuts, Ohio should have engaged in a dialogue built on empathy.
Like so many other times, a better course of action was already in the public domain. The UK Government published PPN 04/20 entitled “Procurement Policy Note — Recovery and Transition from COVID-19” to follow up on a earlier note that laid out how government procurement staff can maintain cashflow with vendors who struggle with Covid-19. The idea was simple: encourage contract managers to spot struggling vendors, process payments quickly, even pay upfront if that helps a vendor. The business goal was also clear: to keep the supply chain on which government depends alive and extend other business support crisis measures to governments business relationships.
Ohio, see how buyers in the UK starts by looking after their supply chain, instead of threatening them?
But the Government also took a step further, looking into how to migrate their supply chain out of recovery. In a nutshell, what it says is this: think carefully how you move out of this supportive crisis regime. First, keep looking out for suppliers in need. Just because you checked once doesn’t mean that their circumstances haven’t changed. Second, look at whether post Covid-19 your needs have changed and if that is the case, work together with the supplier to plan what is needed. If you come to the conclusion that you need to terminate the contract, that is ok.
Treat others like you want to be treated
The UK government is not giving its staff carte blanche to throw money at vendors here. Instead, it is treating the nation’s contract managers as professionals who can make sound judgement about their government’s needs and the needs of their vendors. This is completely logical, public procurement is all about nurturing good working relationships.
PPN 04/20 tells public contract managers not to err on the side of caution, but to act decisively and reconcile differences later. This makes all the sense in the world since it also reflects the imbalance of power in favor of government: it has all kinds of means of auditing and enforcement at its disposal.
Trust is not simply a feeling, but a practice. PPN 04/20 demands transparency. Suppliers who receive support use open book accounting. They cannot make profits on upfront payments and must demonstrate that staff and sub-contractors are paid fully and quickly. It is required that a comprehensive record is kept of decisions and reasoning for future scrutiny.
The core deliverable of this guideline is a Transition Plan, agreed upon by buyer and provider and covering reconciling accounts as well as assessing whether services are needed or need rejigging in a new normal. This provides an exceptional opportunity to not just cut costs, but improve public services.