The ill-informed fail to recognise that occasions arise where there is no precedence for a solution.

Introduction

One special challenge facing Clinical Commissioning Groups right now (June 2013) is the policy being ‘driven’ by people from the healthcare sector. Defining value for money includes facets of clinical, financial and social value. The intangibles and qualitative aspects – and how to measure them – doesn’t make it easy.  CCGs now raise many procurement issues where a robust audit and review can deliver benefits that directly relate to community benefits and Value for Money. The changes, explained below, also raise other significant considerations, not least the potential conflict of interests for doctors and consultants.

Clinical Commissioning Groups (CCGs)

In 2010 there was a White Paper, “Equity and Excellence: Liberating the NHS”.

Subsequently, the Health & Social Care Act, 2012, created the CCGs of which there are 211. They are now accountable for commissioning and buying Health and Care Services including:

*        Elective hospital care

*        Rehabilitation care

*        Urgent and emergency care

*        Most community health services

*        Mental health and learning disability services.

Procurement Issues

This paper focuses on procurement issues, recognising that procurement cannot be the sole consideration.  Nevertheless, if procurement actions are insufficiently robust, not only will service charges drain financial funding of the NHS, but community care will deteriorate.

Formal Contracts

A Wolverhampton City CCG report[1] at Item 3.1 states, “An agreement has been reached with RWT for a management service for bookings as well as to ensure monitoring of the service and quality reporting. An SLA has been put in place. In addition formal contract is being created for the service currently provided as initial procurement resulted in service being run with no contract in place. An agreement was reached to continue with the planned re-procurement of the service dependant (sic) on procurement capacity going forward.”

If we were invited to provide a view, what points would such a report’s item raise?  For example:

Agreement reached

Does this mean that there is now a formal contract in place with RWT that carefully sets out the respective obligations of the parties? If invited to extrapolate the logic for all CCGs it could raise the next question. “Prior to the existing of CCGs how many ‘arrangements’ existed between the Primary Care Trusts (PCTs) and providers, but no formal contract was in place?” Returning to the CCGs more generally, the next question is “Whose contract terms and conditions will apply in future?” There is a danger that the supplier’s terms and conditions will be accepted, thereby potentially exposing the NHS to financial claims for non-performance and the risk that some suppliers will be dramatically under-insured.

SLA

It is professional practice to have a SLA in place. It raises serious concerns for all CCGs regarding their plans for effective contract management. We would welcome all CCGs presenting their comprehensive contract management plans and the resourcing strategy. Then the next piece of the logic could be raised which is, “What provision is there in the contract for the recovery of damages for non-performance?” Our prediction is that this provision will be lacking in many contracts. If the history of contract performance in the PCT context was probed the obvious question would be, “What is the total amount of damages claimed by PCTs from non-performing service providers?” A more fundamental question would be, “Does anyone know?”

No formal contract in place

There are additional considerations here, in addition to those raised above. If there is no formal contract in place between the NHS and a supplier does it matter? YES, and Value for Money will raise its head. The cost of external services is an issue for the NHS at a time when budgets are being seriously challenged. There are NHS Tariffs for specific services and one measure of Value for Money has been the discount offered by service providers. Whilst this is positive thinking the logic is flawed. A review could be initiated to probe how many PCT contracts with third parties, have real time cost data to demonstrate that service providers are recovering generally incurred costs, overheads and making a reasonable return on their investment. There are four questions that could put to CCGs:

• “How many of your contracts require the service provider to give you a cost breakdown?”
• “Does your contract provide for ‘Open Book’?”
• “Does your contract provide for a ‘Right of Audit’/”
• “Who has the accountability for obtaining and reviewing the financial performance of service providers?”

Procurement capacity going forward

There is a heavily qualified comment in the Wolverhampton report referenced above that the re-procurement of services is dependent on procurement capacity going forward. Herein, lies a matter for all CCGs, we suspect. Among the concerns would be the ability and resources of CCGs to motivate (the transfer of PCT contracts to CCG) contracts (when they exist). The novation of contracts is not a simple matter. The first consideration is, “For what length of period will the new contract be for?” There is, for example, a huge difference between a 4 year term contract and an annual contract. The procurement capacity going forward will require, supply market research, negotiation resources, legal and financial inputs, clinical guidance and so on. Most procurement operations are under resourced and unable to adequately define its resource requirements with any degree of certainty.

Equality, Impact Assessment (EQIA)

It is essential that a CCG has a commissioning policy that underpins the CCG priority setting for allocating resources. The NHS Central Midlands Commissioning Support Unit[2] has devised an ethical framework. They point out that “The proper strategic application of resources will ensure that scare (sic) healthcare resources are distributed fairly across the population for which the CCGs are responsible.” Quite so! There is, in consequence, an onus upon procurement at the Pre-Qualification and/or Tender stage to probe the service provider’s compliance with Equality practices. It is one thing to produce a ‘Tick Box’ for completion but quite another to audit the existence (or otherwise) of Equality compliance at the service provider. It is another example of where a contract manager has a relevant role to play in the continuing scenario. The detail of whether the policy affects one group or more favourably than another on the basis of race; ethnic origins; nationality; gender; culture; religion or belief; sexual orientation; age; disability has a profound impact on service provision.

Complaints by service users

It is inevitable and predictable that service users will make complaints. Procurement specialists must convince themselves that the service provider has a credible complaint procedure in place and that the procedure is audited from time to time. It is equally inevitable and predictable that complaints will be received by CCGs. They may delegate the complaint handling and investigation to a commissioning support unit (CSU). This raises the fact that CSUs are not legal entities in their own right and cannot be Data Controllers as defined by the Data Protection Act. Procurement have a major role to play in ensuring that contracts adequately provide for complaints handling, including service providers keeping accurate records of the treatment provided and the broad way in which service users have been handled.

Doctor’s conflicts of interest

The Guardian[3] has shone a light into a potentially dark corner of future CCG operation. It points out that overall 426 (36%) of the 1,179 family doctors on a board of the 211 CCGs in England have an interest in for-profit firms, including those providing common NHS services such as diagnostics, minor surgery and out-of-hours GP care. These findings are attributed to an investigation by the British Medical Journal. The Guardian asserts that six of the eight GPs on the Board of Blackpool CCG have an interest in Fylde Coast Medical Services, the local out-of-hours provider. There are relevant matters for procurement specialists who must ascertain in respect of contracts awarded to third parties:

• The ownership and directors of the service provider
• The financial performance of the service provider
• How the doctors declare conflicts of interest
• The risks arising from conflicts of interests.

The authors predict that conflicts of interest will become a political issue and, in the future, raise ethical questions about the doctors and Consultant determining CCG strategy, policies and operating procedures.

The final word on this topic can be provided by Southern Derbyshire CCG[4] who say “The important things to remember are that:

• A perception of wrongdoing, impaired judgement or undue influence can be as detrimental as many of them actually occurring
• If in doubt, it is better to assume a conflict of interest and mange it appropriately, rather than ignore it
• For a conflict to exist, financial gain is not necessary.

Due diligence

Procurement requires the application of due diligence to fully understand, for example, the background of organisations who tender for work. This logic applies to the future engagement, by CCGs, of service providers. There will be operators who work nationally, others regionally and others who operate in a specific city. The operators will include registered charities, large corporate groups intent on dominating the market, and small-medium enterprises (SMEs). In the North West, as an example, there is a service provider who manages 40 General Practitioners practices. As an indication of future potential considerations for CCGs, the Office of Fair Trading issued an invitation to comment regarding some proposed agreements between the service provider and Liverpool PCT and NHS Sefton to respectively operate 22 existing GP practices in Merseyside. There is no allegation of wrongdoing.

Stakeholders

World-class procurement decisions will be significantly influenced by stakeholders. There are complex stakeholder groups with whom to engage, including, GP member practices, CCGs with whom the applicant has collaborative commissioning arrangements, upper tier or unitary local authorities, LINKS or (shadow) local Health Watch and patient groups, NHS providers, other health professionals and commissioning support services. The process for engaging these groups and giving cognisance to their views could lead to a bewildering bureaucratic nightmare. Many questions could be asked of the groups. “How satisfied or dissatisfied are you with the way in which your CCG has engaged with you?” “To what extent do you agree or disagree that the CCG has listened to your view?” “Overall, how would you rate your working relationship with the CCG?” Stakeholders have an influential and strategic direction influence on CCGs. There is a key role for procurement specialists to allow stakeholders to impact on contracting strategies.

The Voluntary Sector

The voluntary sector will, we predict, play an increasingly influential role in the life of CCGs. The British Red Cross is a case in point. For example, a new service has been launched in Exeter, namely the ‘home from hospital service’. It is a six month pilot providing valuable short-term care and support in home for people after an accident or illness. The voluntary sector presents a unique challenge to procurement specialists who do not fully understand the role of ‘not for profit’ organisations. Fundamental research is required to effectively engage with national and regional charities, local charities, local community organisations, social enterprises and mutuals.

Summary

The ill-informed fail to recognise that occasions arise where there is no precedence for a solution. Government policy, making innovative changes to a national institution such as the NHS, challenges those who are immersed in institutions. How do they adopt a dispassionate stance, when, in some cases, their futures are threatened? The CCGs are a classic example of a policy change impacting on the ability of procurement to respond to a radically changed provision of clinical services. There are now powerful forces at work whenever changes are proposed to the NHS, including politicians, budget management, selfish interests and capitalist interests.

It could be argued that the stakeholders; the general public, will be the ultimate arbiters of success or failure of the CCGs.

Dr Brian Farrington and Stephen Ashcroft can be reached at www.brianfarrington.com and LinkedIn connections, and you can follow him on Twitter

We explain below our approach to mentoring and detail specifically what we would propose to achieve as outcomes (we are happy to accept accountabilities for performance) from our activities.  The proposed intangible – and tangible, financial – outcomes include:

•             Financial goals including specific income and earnings

•             Enhance writing skills and marketing/tendering collateral

•             Enhance business and contractual knowledge and skills

•             Develop a measurable integrated business development plan

•             Enhance customer engagement skills

•             Increase income streams from existing customers, specific minimum income and earnings

Our Approach

At Brian Farrington Ltd (BFL), we work against the Kirkpatrick Model to ensure that maximum impact is gained in developing your business development competencies and organisation’s business goals.

We have invested heavily in better understanding how to optimise the effectiveness of learning. By ‘learning’ we mean acquiring new knowledge, behaviors, skills, values, preferences or understanding, and may involve synthesising different types of information.  Identifying this ‘how’ of learning informs our approach to embedding learning and the tools we use to optimise effectiveness.

For successful learning, please see the diagram below, there are four main factors in play.

They are as follows:

I.            Wanting to learn is important. When people really want something, they usually get it sooner or later (whether or not it’s good for them!).  A key element of the resonance of our approach to enhancing learning is the mentoring skills of our procurement coaching. We support you in achieving your business goals by working together to transfer this key characteristic to your programme. The ability to engage and influence is a key tool to embedding learning.

II.            Learning by doing Learning by doing is how most people learn, including by trial and error, practice, and learning from mistakes. Academics refer to this as ‘experiential learning’. We can plan in episodes of each of these into the programme. A good example is for our procurement coach to accompany you on one or more actual appointments with an identified prospect, having previously agreed a meeting strategy and tactics.

III.           Learning through feedback: ‘other people’s reactions’ is the most frequent reply about how people account for having developed positive feelings. Ignore our feelings about learning at our peril! Feedback comes from all directions including internal and external stakeholders, learning resources and the proposed mentor. It takes courage and awareness to accept that everyone is supporting you to achieve your busienss goals. A good example would be the feedback on performance can be provided to hone your customer engagement, listening and questioning and proposal-making competencies.

IV.          ‘Making sense’ of what has been learned. It is often said that the important step in this area is ‘getting my head round it’. It’s tempting to use the word ‘understanding’ for this, but it’s not the best word. The problem with ‘understanding’ is lack of a shared view of what the word really means. More appropriate is the word digesting for the ‘making sense of it’ dimension of learning. This facet of learning reinforces the need for regular and consistent exploration of business development competencies, rather than a ‘big-bang approach’.

Next steps

You already know (many of) the things that will make you more successful and help to achieve the intangible and tangible, financial outcomes. They’re not complex. They’re not mysteries. Things like regularly keeping in touch with prospects and customers. Things like regularly going out and networking (if that’s a strategy that is included in the measurable integrated marketing plan). Or regularly getting up on stage to present, regularly writing blog posts and articles. The secret – if there is one – is consistency. It’s doing these simple things week in, week out. Success in business development is not determined by big, one-off, complex new strategies. Our approach will be to work with you to iteratively develop your competencies through small actions consistently implemented – aligned with achieving your organisation’s business goals.

Pick up the phone, drop an email  – We look forward to hearing from you to figure out the best way of supporting you to achieve your business goals.

Contact details:

Stephen Ashcroft BEng MSc MCIPS

Procurement Coach

01744 20698

s.ashcroft@brianfarrington.com

@procurechange

tinyurl.com/sashcroft

QUALITY POLICY: Introduction

We, Brian Farrington Ltd,  have provided our management consultancy and bespoke training services to a large number of national and international organisations.  These include the private and public sectors of the economy.  Our aim is straightforward, namely, to enhance existing performance via whatever methods are appropriate. Our core business is focused upon Materials Management, Procurement, Purchasing, Logistics and Supply Chain Management.  We recognise that whilst these terms are capable of definition, they are used in many different contexts, throughout the world.  In broad terms, our assignments typically exist for 50 – 100 days but we also provide support for extended periods, including Interim Management. We believe in a skill transfer, from our consultants, to a client’s staff.  Our client base is blue chip, reputable and not infrequently, market leaders.  As such, they have the choice to use the worlds’ leading consultancy houses. The fact that they use our management consultancy and bespoke training services bears testimony to our range of skills and the way we conduct business.

Our company was formed in 1978.  We have identified our core business and that is where we singularly operate.  Our consultants are hand picked and all have very extensive operational experience.  They have held senior posts and therefore approach all our assignments from a position of strength. We have practical solutions which can be implemented and, we promise our clients, not to get involved in endless theorising and pontification.  Our clients get results!  That is what consultants must deliver. Our consultants have international experience, including, Europe, Southern Africa, Far East, Middle East, North America (USA and Canada). The largest individual contract advised on was £1.6 billion. Internal figures show that, annually, we regularly advise on contracts with an aggregate value in excess of £1 billion.  This is a very exacting onus which we are happy to accept.

The Quality Management System operated by Brian Farrington Ltd is designed to satisfy the requirements of BS EN ISO 9001:2008 Quality Management Systems requirements of our management consultancy and bespoke training services.

Implementation of the system requires the full co-operation and involvement of all staff employed and sub-contractors (when used) of the company. They are encouraged to develop the quality of our management consultancy and bespoke training services required to allow client satisfaction to be retained and, wherever possible, improved.

The Managing Director of the company formally accepts the introduction and implementation of the system as a positive means of Quality development and sustainability by the Company.

Wednesday 24th April 8:00am – 11:00am

Howard Worth Accountants, Drake House, Gadbrook Park, Northwich, CW9 7RA

Pricing decisions and negotiation skills are pre-eminent business considerations. Their application is one of the key business differentiators. Our speakers have extensive business experience in procurement, supply chain management and business negotiations. This will be a very practical seminar, highlighted with actual business examples from a range of business sectors. There will be opportunities to engage with the speakers both during the seminar and, later, in private.

Dr Farrington has a Ph.D. in Pricing Decisions and has international experience advising clients on pricing strategies and negotiating contracts with their clients. Mr Ashcroft, has a specialist sales and procurement background and has recently advised a Financial Institution in New York. They work on the buy-side and sell-side of businesses helping clients submit quotations and tenders. They also evaluate quotation and tender responses. Their current work includes advising CCGs in the Health Sector, Auckland Castle Trust, the Department of Work and Pensions, an international manufacturer of specialist engineering equipment, two Local Authorities and an environmental management organisation.

Both speakers have an international reputation for very interesting and relevant inputs that are challenging, provocative and of great assistance to organisations contemplating their future business strategies.

Attendance to this short, sharp breakfast event is free:  Book here. Over 40 businesses have signed up so far (according to the lovely people at Howard Worth marketing department)  - join us?

Procurement and Accounting putting on a stimulating event  – Did we mention there are bacon rolls on arrival?

A good starting point for Clinical Commissioning Groups* (CCG’s) is to consider ‘value’ through the following 6 questions of commissioning (please note this is not an exhaustive list!) Considering these 6 simple questions will improve the approach to servive provider and supplier engagements. By the way if you have any to add, please provide your suggestions in the comments below. So, with a little help from our ‘grey-haired’ team you can vastly improve the value from your service providers.

What are the CCG’s doing about value?  6 questions to ask:
1. How robust are the audit trails with service providers?

2.What is the (current!) contractual relationship in place with the PCTs (and what are the transition plans)?

3. To what degree are current(!) service specifications being met?

4. Are performance monitoring and overall contract management processes ‘robust’ and in place?

5. Is EQIA compliance of service providers being achieved? Equality Impact Assessment is a process designed to ensure that a policy, project or, in this case, service provider does not discriminate against any disadvantaged or vulnerable people.

6. Can a thorough assessment of value from all aspects (financial, clinical and social) be provided?
Not forgeting the recent impact of the Social Value Act.

To receive a detailed checklist about identifying and enhancing CCG ‘value’ from service providers please get into touch and we’ll email it over.

*What is a CCG?

CCG’s are groups of GPs that are responsible for designing local health services In England. They will do this be commissioning or buying health and care services including elective hospital care, rehabilitation care, urgent and emergency care and most community health services.

The OIG Audit report AV-2013-006, issued Nov 1, 2012 in regard to the Metropolitan Washington Airports Authority (MWAA) is compelling reading. Any alert organisation will ask a rhetorical question, “Could this be happening to us?” Some will find it impossible to answer. There are many reasons why this will be so, including:

1)      an absence of procurement risk modelling

2)      reliance of trust in procurement and stakeholders that they ask acting in a professional manner

3)      a total reluctance to expose deficiencies in performance and non-compliance with financial and other controls

4)      professional arrogance “we know everything and have nothing to learn.”

5)      corruption.

The MWAA report uncovers some dark corners that are worthy of professional comment.

a)      “MWAA’s contracting policies and practices do not encourage competition”

There is a damning comment in the report “These weaknesses are exacerbated by ineffective contract management and oversight and a lack of adequate procurement integrity policies to ensure impartiality when awarding and administering contracts.”

In our consulting experience we have encountered many situations where competition is not encouraged. In fact we can go further. Competition has been discouraged. Why?

• Corruptive practices
• Unable to effectively manage change processes
• Blocking by production/finance/quality/directors
• Monetary savings unwelcome “we must spend the budget”

b)      “We identified some MWAA Board members and senior officials, such as Vice Presidents, who engaged in questionable contracting practices, compromising MWAA’s contracting policies and internal controls for procurement.”

This highlights the corporate culture that many organisations would do well to consider.

We have encountered situations where:

i.          Strategies have been overridden for personal gain

ii.          Contracting guidelines have been ‘waived’ for convenience

iii.           Financial authorisation limits have knowingly been exceeded

c)      “However, we identified cases in which MWAA’s Board of Directors did not issue formal solicitations for contracts or involve the Procurement and Contracts Department until the contracts were ready to be awarded.”

We find it astonishing that we are now in 2013 and Procurement remains, in some organisations, relegated to a passive, administrative role. It is equally astonishing that so called professionals are happy with their lot in these environments! A significant, relevant question on a procurement audit is, “What is the value of purchases that is not subject to the control of procurement?”

d)      “MWAA issued out-of-scope contract actions over $200,000 – including contract modifications and task orders – without Board approval.”

The report points out that the expansion and renovation of the Dallas Airport main terminal, an $8 million contract awarded in 1989, has grown by 1,700 per cent to a total value of $147 million. The general point here, for the project community, is the ease of simply extending work packages to the incumbent contractor, rather than entering into a tender competition. As a side consideration to contract price increases, we have recently completed an audit where a price increase of 758.68% was accepted without challenge.

e)      “MWAA allowed work to begin prior to contract award dates – that is, before the contracting officer completed and signed the contract documents.”

The report states that “of the 709 contracts MWAA awarded between January 2009 and June 2011, contractors started work on 27 per cent before their official award dates. For example, MWAA paid one contractor $572 per hour to attend a 5-hour Board meeting on January 6, 2010 – during which the Board of Directors approved the selection of the contractor.”

Comment is superfluous, other than to cite another example where an MWAA Board member requested that a consultant firm proceed with work on a sole source contract 58 days before MWAA’s Procurement and Contracts Manager gave his required approval for the award.

f)       “MWAA’s financial disclosure process has also lacked the rigor needed to ensure employees fully report conflicts of interest that damage the Authority’s credibility.”

The report lists gifts that were accepted, including:

• Two tickets to the 2009 Super Bowl, associated travel, and accommodations in Tampa, FL, valued at almost $5000
• Four trips to golf tournaments, including one trip to the 2009 US Open Golf Tournament in Long Island, NY.

The report cites that another key area of concern is the lack of requirements to ensure all contracting officers …………….. certify that they do not have personal financial interests in the contracts they award and administer. This is an obvious area of risk that unquestionably exists in many organisations.

Summary

This is an informative, high quality audit report. At the very least it should prompt our more alert readers to consider what is actually happening in their own organisation. Brian Farrington Ltd has PROCURISK^Ò, a modelling tool that can be purchased by organisations to probe their exposure to varied forms of risk. We welcome opening discussions with you to explain its benefits.

Please call us on +44 (0)1744 20698 for more information.

Many of our clients are now forecasting budgets and headcount in order to meet their business objectives for the year ahead.  Has your current team got the right people with the right skills to meet the challenges you face?

We will work with you and advise you on your competency requirements, ensuring that your procurement plans match your timescale and budget proposals and targets.

About Us

We’re a minimum fuss specialist procurement consultancy. We provide high quality ‘grey-haired’ procurement consultants, across the UK. Our approach is refreshingly simple:

• We agree timescales with you upfront.

• We guarantee to deliver against those timescales.

• Our pricing is straightforward – no hidden fees, no surprises.

• Our consultants are knowledgeable and straight talking.

Please contact me on 01744 20698 to talk through your plans, and if you want to start immediately, you can brief me on your requirements and I’ll provide you with details of our proposed team members and approach within 48 hours.

Season’s Greetings!

Stephen Ashcroft

s.ashcroft@brianfarrington.com

@procurechange

We have a continuing research project into Bribery & Fraud, specifically when the circumstances involve procurement and other staff with a supplier(s). This research has led us to a report on “Investigation into bribery and fraud at RailCorp (Australian report by ICAC – First Report). Some highlights are shown below.

1. The report principally concerns the corrupt conduct of Mr Allan Michael Blackstock a RailCorp employee responsible for allocating welding work and Mr Youssef Madrajat the director of Precision Wirefeed Welding Pty Ltd.
2. Mr Blackstock had allocated almost all welding work in his region since January 2004 to Precision.
3. Mr Blackstock awarded the work to Precision, knowing that in doing so he would benefit financially through receipt of payments from Precision. Those payments, which were organised and paid by Mr Madrajat, totalled in excess of $1.3 million between 2004 and 2007. Both were involved in submitting false invoices.
4. When Mr Blackstock gave evidence he was evasive. Initially, he denied all allegations put to him, but changed his evidence when he realised that the commission had significant evidence against him. He cannot be regarded as a witness of truth.
5. Inclusion of Precision on the list of established welders was one of the first critical steps undertaken by Mr Blackstovk to organise work for Precision. At that time, the company had been newly created, had no work history and no employees.
6. Mr Madrajat and Mr Blackstock colluded to produce at least six false invoices and claimed for work never performed by Precision.
7. Mr Blackstock was aware proper safety tests were not being done, did not insist that they should occur, and did not report it to anyone in RailCorp. This is another indication of the adverse effect on his duties caused by Mr Blackstock’s considerable conflict of interest in relation to his management of Precision.
8. From 1 January 2004 to September 2007, RailCorp paid $4,288,521 to Precision for services claimed to have been provided. Out of this sum Precision paid its employees and the costs of running the business, such as maintenance of equipment, rental of premises and the purchase of consumables. This accounted for less than half the money paid to Precision. Mr Blackstock and Mr Madrajat were the principal beneficiaries of the rest.
9. One direct outcome of the conduct over several years by Mr Blackstock was that his financial wealth increased substantially.
10. During the period he was receiving substantial amounts of cash, Mr Blackstock significantly increased his discretionary expenditure on his lifestyle. His gambling alone demonstrated that he was able and willing to lose a lot of cash as he knew more would be forthcoming. His purchase of the investment property and the holiday unit indicate that he did not consider there was any realistic prospect of RailCorp finding out about his receipt of secret commission s and bringing it to an end.
11. Chapter 6 of the Report sets out the findings of fact and corrupt conduct.

Brian Farrington Limited comments on the above

These comments are presented in the same numbering sequence as earlier. The comments we make are intended to alert other organisations to the risk of bribery and fraud taking place within their procurement and contract award processes.

1. The report is factual and very informative.
2. This raises a strategic question regarding the vast majority of work being placed with one supplier. It emphasises the need for internal audit to conduct regular reviews of such decisions.
3. This focusses attention on closed loop situations where one individual or department can award work, confirm receipt and appropriate quality, and sign-off invoices.
4. This emphasises the need to gather irrefutable evidence prior to facing employees with allegations of wrong doing. Obviously, if criminal proceedings are to take place there are investigations and evidence gathering processes to be complied with.
5. This is a massive consideration! How do suppliers get on an authorised list? Who keeps appropriate records of pre-qualification information and its robustness?
6. This emphasises an internal weakness in invoice payment authorisation processes.
7. The quality of Health & Safety tests and management is a very serious issue, leaving organisations and individuals potentially open to prosecution.
8. This emphasises the need to understand the cost drivers and profit. It raises the obvious question regarding the availability of such information in organisations.
9. Who examines the life style of buyers in your organisation?
10. Note the comment on gambling and investments in property. It raises the issue of whistleblowing and the confidence people have in reporting situations where they have serious doubts about current practices in their organisation.

Professional colleagues should review their practices and ask a simple question –

“Could this happen in our organisation?”

“The ability to make good ‘people’ decisions is today’s most enduring source of competitive advantage. Decisions at the time of recruiting senior talent cast the longest shadow of all.”    QUITE!!

Allegedly, the fees for the DG post were £157,000 plus VAT. If this recruitment process were to be interrogated, it warrants the following questions:

1. Who awarded the contract to Egon Zehnder? The extent and involvement of HR should be probed, as should their engagement, or lack of it, with procurement.
2. What role did the Department of Culture, Media & Sport play, if any? It may be borne in mind that DCMS appointed Egon Zehnder to recruit the Chairperson of the BBC Trust, Lord Patten. He is incidentally, a non-executive director of Russell Reynolds Associates, Headhunters.
3. Who wrote and signed off the person specification, setting out the specific personal qualities and depth of experience required?
4. Who determined the recruitment process? If it was the headhunters, why didn’t the BBC HR Department do it?
5. Were advance payments made to Egon Zehnder (remembering the ship for St Helena case)?
6. Assuming the figure of £157,000 is accurate, who has asked for a breakdown? Do we have

•     per diem fees for the consultants?
•     what overheads were allowed?
•     what expenses were paid, including interviewees travel & hotels?
•     what profit did Egon Zehnder make from the deal?

7. What specific Contract Terms & Conditions were agreed with Egon Zehnder?

The answers to the above would be informative. There is, of course, a lessons learned for any organisation engaging headhunters. They usually insist on an up-front payment on retention and typically this is non-refundable. Their operations are cloaked in secrecy, as they use varied tactics to identify candidates, having accessed their ‘knowledge garden’. Would we be expecting too much to assert that a competent HR Director should be capable of finding senior staff for an organisation? We also observe, through our experience, that procurement are excluded from the process to appoint headhunters. Would a reason be that they would ask too many awkward questions.

Finally, returning to the BBC fees of allegedly £157,000, at £1000 per diem it equates to 157 person days – who has the audited time expended, data sheets, to clearly demonstrate that under English Common Law, Unjust Enrichment has not occurred? We are not alleging it did, simply asking who can demonstrate it didn’t.

Here is a sample of what we have found checking invoices of customers:

1. Provided the invoice value was within 10% of the contract value – pay it!
2. Duplicated invoices paid
3. A buyer submitting false invoices from a company owned by his family
4. Invoices paid from solicitors and consultants for Lump Sums and no detail of services provided
5. Erroneous VAT numbers on invoices
6. Travel expenses unchecked or verified from an IT supplier
7. Closed loop scenarios
8. Buyer and stores personnel authorising invoices but goods never received
9. Prices entered in pencil on invoice
10. Invoices for which there was no Purchase Order – quite often expenditure authorised by Directors.

A pertinent risk question is “Who last audited your accounts payable process and convinced themselves that false invoices had not, and would not be paid?” Our Procurisk^Ò will assist in scrutinising risk in this process and could avoid £ millions of losses.