Out in the Cold

Wednesday, May 13th, 2015

 

A cold freeze on the way!

Outsource and be damned – A political hot potato

Our research is never ending, not only to keep up with procurement developments but to share information with you fellow professionals. We promise not to mention the general election but you will recall that more than one political party has mentioned outsourcing.

Here is a Canadian experience:

The Auditor General of Ontario released a special report in April 2015 “Winter Highway Maintenance.” The findings will send the proverbial shivers up your spine. Some extracts from the report are:

“When private-sector contractors assume the responsibility for providing what may be an essential service to the public – where their work can impact, in this case, road conditions for driver safety – the expectation is that contractors step up and deliver. Our work at regional offices in contract areas throughout Ontario found that it is now taking much longer to return highways to a safer state after a snowfall than prior to the introduction of performance-based contracts, and the amount of salt, sand and anti-icing liquid used declined substantially.”

“However, as the overriding criterion used by the Ministry to award contracts was the lowest bid, there was an obvious incentive for contractors to maximise their equipment and use of winter treatment materials.”

“Shift to performance-based contracts – “The contractor, not the awarder of the contract, performs the patrols to determine what’s needed, and plans and manages all the work. In other words, rather than being told in the contract what means to use to get the end results, the contractor decides how to deliver the end result.”

“After the performance-based contracts were introduced, winter maintenance service levels across the province decreased, leading in some cases to hazardous driving conditions. This created significant safety concerns ……”

“Contractor patrollers monitor road and weather conditions to decide when to deploy plows and spreaders and what treatment material should be used. Under the original contracts, contractor’s hours of operation had to include patrolling all their area highways at least once a day in winter. Under the performance-based contract the patrolling were far different. The only requirement for contractors was to “be aware of road and weather conditions.”

“We found that the Ministry failed to supply most of its staff with necessary monitoring tools … We also found that Ministry training for co-ordinators was basic and minimal.”

“In one contract area, anti-icing-liquid used over the winter season was nearly eliminated, going from an average of 3.2 million litres under the original contract to 9500 litres in the first year of the performance-based contract.”

There is a lot more where this comes from! It really is a superb example of expert outsourcing specialist service providers running rings around the public sector. It causes, in our mind naïveté. Penalty damages in many instances were waived – defeating their contractual purpose. Let’s all have a Polo mint should we?

The audit report, yet again raises perennial public sector procurement issues – why do they never go away?

  • lack of contract management
  • inadequate contracts
  • buying on price
  • buying naïveté
  • contractors more in control of the situation than buying organisation
  • inadequate attention to supply chain risks
  • dealing with contractual non-performance
  • attention to the detail of cost drivers.

If you need help with your procurement, why not give us a call. Contact Ray Gambell on +44 (0)1744 20698 or email me on r.gambell@brianfarrington.com