People & Skills
Risk Aversion in the Public Sector – The Buyer’s View

We are delighted to publish this guest post from Dan Warnock, Category Manager for Home Group, a social enterprise that provides general needs housing, supported housing services, and home ownership options aimed at helping some of society’s most vulnerable people take control of their own lives. Dan writes this post having read with interest our posts on risk aversion here and here

Peter recently wrote a couple of articles on risk aversion amongst public sector procurers, making some very good points, and I felt that I could offer a view from the coalface.

The number one reason (or ‘excuse’ depending on your point of view) for not taking risks are the Public Contract Regulations. These are a set of one-size-is-supposed-to-fit-all European rules that are intended to support the Single Market by enforcing competition and limiting bad practices. They dictate the processes to be followed, the timescales required, the information made available to tenderers, the questions that can be asked, and so on. The complexity of these is a huge growth area for expensive lawyers, so you can imagine what its like for a procurer for whom training is not even mandatory.

The Regulations also set out the remedies available to wronged tenderers through the Courts, which can include:

  • Amending the contract, or cancelling it altogether
  • Damages (loss of profits, interest, legal fees etc)
  • Fines (which are unlimited)

It doesn’t have to be one or the other – all of these can be levied against a contracting authority for a single breach of the Regulations. Needless to say, any buyer that finds themselves on the wrong end of a judgement will probably find their employment being reconsidered. And that’s without mentioning the inevitable long hours and stresses of being taken through such a process.

The intention is clearly to prevent bad practice or outright corruption. However, there is one important omission from the remedies section of the Regulations – and that is motivation. When a tenderer brings an action against the contracting authority the one question they never need to ask is ‘Why’. The rules make no distinction between outright corruption, incompetence, or an honest mistake.

Hands up anyone who’s never made a mistake.

Anyone? No? Ok then.

Most people are not that incompetent at their jobs, and they’re certainly not corrupt. The most likely cause of a procurement being subject to legal challenge is from a mistake.

For those of us who are more interested in the legal side of things, it looks even worse, simply due to uncertainties in the legislation. There have been a number of cases where the contracting authority had good reason to believe they were following the law correctly, and yet still ended up on the losing side simply because the judge interpreted the legislation in a different way (this has even happened to the EU Commission – the body that wrote the legislation in the first place!).

So what we end up with is a process which is followed rigorously, with constant legal input and oversight, by employees who would rather stop and check everything twice, and rethink every avenue of uncertainty.

What about the reverse? What incentives do we have to take risks? Sure, often the procurement team has savings targets to meet, but if they’re not met then nothing really happens. And we’re certainly not going to try and exceed them – bonuses are rare in the public sector. If you do your job, all to the good. If you do your job fantastically, the chances are that very few people outside the procurement team will even notice.

It is possible to do the job better while remaining within the Regulations, and there are some people out there doing it. But for most people, this requires support and training. I don’t know about you, but I’m yet to find a training course on ‘how to be more commercial’. The few that you find are generally a) expensive and b) many, many miles away. And yet I’m inundated with invitations to courses on the Regulations and their recent developments, lots of them for free and locally based. Guess which ones are more likely to be attended.

Don’t get me wrong, I’m fully aware there are a few dinosaurs out there that won’t even think about changing the way they do things without being forced to. The fact remains though, that we as a profession are trained, incentivised and expected to just follow the rules. The question shouldn’t be ‘why are public sector procurers so risk averse?’, it should be ‘why are people so surprised by the fact that they are?’.