Spend Matters Peter Smith’s Tesco rant misses the point by Jon Hansen

Posted on March 18, 2013


Just so I leave no room for misunderstanding, I have never been an advocate of the centralization of the procurement process in the public sector.  Nor have I been lured into accepting the New Public Management or NPM mindset that automatically and without justification cedes procurement expertise and best practices to the private sector.

The mess that David Marshall left at the Canadian Imperial Bank of Commerce, which he then followed-up with his Way Forward fiasco as PWGSC Deputy Minister, speaks to the veracity of my thinking.

Given the above, one might be surprised by my reaction to a recent Spend Matters UK post by Peter Smith.

However, before sharing with you my two cents, let me first share with you the closing paragraph from Smith’s post Public Sector Procurement is NOT like Tesco;

“So repeat after me. The public sector is not “just like Tesco”, never will be and shouldn’t be. That’s not to say public procurement can’t learn something from the best in the private sector. Of course it can. But Cram’s comparison is facile and immediately sets us off on that illogical and ill-founded route that leads to the crazy “centralise public procurement” argument – which we’ll come back to later.”

Towards Tesco Duo

While I will encourage you to read Smith’s article in its entirety, my problem with his assessment is that it is being presented as an absolute.  Along the lines of the old saying that absolute power corrupts absolutely, when you assume an inflexible position – regardless of what side of an issue you may be on – you invariably corrupt your ability to keep an open mind.  As a result, you get stuck into a way of thinking that limits your ongoing relevance in what is always a changing world.

For example had Smith done his homework, he might have uncovered the 2004 MOU between the State of North Carolina and its higher education institutions.   To this day I still consider the state’s MOU to be one of the most creative approaches – at least in principle if not execution – to centralizing the procurement process.

Specifically, Smith would have seen the early makings for the collaborative framework of the new relational outsourcing model that is redefining how stakeholders both within and external to an organization, work together towards a mutually beneficial outcome.  As a result, he would have hopefully come to the conclusion that his definition of centralization is more a state of mind or attitude than it is a reality.

The fact is that regardless of whether we are discussing a centralized purchasing body, or the perpetuation of individual secretariats or departments, the real issue that needs to be addressed is what I call collaborative scalability.

I wrote about this collaborative element in a recent paper How to make your outsourcing and PPP initiatives successful, including the importance of creating a Relationship Charter (see earlier MOU reference).

Under this scenario, the structure within which said collaboration occurs is not as important as the charter under which the relationship is managed.  Or to put it another way, without effective communication and collaboration centralization or non-centralization becomes somewhat of a moot point.

Unfortunately Smith’s apparent limited scope of understanding reduced his position to an arbitrarily narrowed either-or argument that rendered him incapable of offering anything beyond the criticism of Cram’s paper.

In the end, and like the dissolving of the functional silos that once defined the CIO, CFO and CPO roles within an enterprise, territorial rifts are by and large a waste of time.