STOCKTON, CALIFORNIA by Colin Cram

The bankruptcy of Stockton, California, is a stark reminder of what can befall cities that mismanage their finances. There are some similarities with Greece – making unfundable commitments to workers over wages, spending on ill-conceived projects such as the $35n spent on a city hall that remains unused and is now infested by rats, and the borrowing of $125m to purchase pension fund investments that went sour. Effective risk management seems to have been absent – or else politicians were not interested. The problem is that they were gambling with other people’s money – that of taxpayers and with other people’s jobs and with welfare of the citizens. A large proportion of the police force has had to be laid off, leading to big increases in crime.

Gambling with other people’s money is not just the prerogative of cities. North Carolina appears poised to require the North Carolina Coastal Resources Commission to plan for sea level rises on the basis of historic trends rather than forecast rends. http://tagalog.wunderground.com/blog/JeffMasters/comment.html?entrynum=2118

This could put at risk the homes of thousands – possibly hundreds of thousands of people and large stretches of the coast. However, in the short term, it probably costs less and perhaps by the time the situation becomes serious, most of the legislators will no longer be around – somebody else’s problem.

Lawmakers in the State of Virginia have apparently banned the term ‘sea level rise’ and replaced it with ‘recurrent flooding’ – the former term being a ‘left wing’ one. http://www.huffingtonpost.com/2012/06/11/chris-stolle-virginia-gop-climate-change_n_1586128.html How long does the sea have to cover the land for it to cease to be recurrent? This reminds me of the English King, Cnut, who reigned 1000 years ago, who was flattered by his courtiers who told him that he was so powerful that even the sea would obey him. So he sat with them on the beach with a rising tide and commanded the sea to stop rising. The result? They all got wet and he informed them that only God could command the sea – a lesson for the North Carolina legislators. In an even more ridiculous scenario, the former Soviet dictator, Stalin, decided that Einstein’s theory of relativity was a “hodgepodge of dirty capitalist baloney”. http://news.google.com/newspapers?nid=1129&dat=19520528&id=OsRRAAAAIBAJ&sjid=ymoDAAAAIBAJ&pg=4742,1657851

It was probably fortunate, as this most likely delayed the former Soviet Union’s development of nuclear weapons.

One of the problems of democracy – certainly in the UK and one suspects it applies to the United States – is that those who become members of city councils or legislators tend to be those either with time on their hands or with very strong convictions, as opposed to capability.

So how can procurement help? Many of the problems of cities and increasingly, one suspects, states, will have a strong procurement element – for example some of the Stockton decisions or the proposals in North Carolina to combat rising sea levels. The more complex or critical procurements should have an assessment made at the outset of how sensible a particular scheme or proposal is. Are the objectives clear, are they realistic and what chance does the proposed solution have of delivering the desired outcome? A business case should then follow, with a decent risk analysis, an analysis of options, a realistic understanding of costs. Once the option is chosen, rationally, a procurement plan needs to be developed and the proposed costs and risks need to be re-checked. One may decide that a ‘do nothing’ option is best. For example, is there any point in North Carolina spending any money on sea defences that are likely to be overwhelmed in a few decades at most?

Even the best procurement people might well shy from telling city councils or state legislators that a pet project did not make sense. However, if the elected representatives were given a though training in procurement, programme and project management, one might achieve much better and less partisan decision making, fewer nugatory projects and a little more financial resilience.

©Colin M Cram FCIPS

30