“Interesting yet . . . outside of a handful of States, the majority of the 33 using the NIGP Code according to my multiple sources, do not feel that the history component is enough of a deterrent relative to making the change to the UNSPSC Code. Their determination in this regard is further underlined by the fact that most believe that Periscope is intentionally making the crosswalk complex to prevent existing licensees from switching to the UNSPSC Code – which the majority of their suppliers presently use.
This, as well as the significant licensing fees, are also the major impetus behind the growing movement for government intervention and the need for a neutral third party to take over the stewardship of the Code.
In this regard, it is one of many reasons why there is significant and growing frustration regarding the arrogance of the NIGP and the manner in which they exposed the taxonomy to private interests.” – Jon Hansen
During a recent exchange with Kelly Barner from Buyers Meeting Point – with whom I am also co-writing a book that will be out in the fall – she made the following statement regarding the options that licensees of the NIGP Code have relative to the disturbing revelations of the past two weeks;
“Just think about what those companies who are giving up NIGP are accepting in order to do so. They are facing a break with historical data, but also any ability to go back and provide support for claimed results. It may change the way category-based teams are staffed, and which projects or categories are prioritized for sourcing. Etc…” – Kelly Barner
My response -which opened this post – indicates that while making the switch to the UNSPSC Code may be more problematic for some than others, the general consensus is that enough is enough. Like an animal that will chew off its own paw to escape a trap, many are willing to endure the pain of such a move to gain freedom.
But should this really be a surprise to anyone?
Even though #CodeGate is a flashpoint point, it has become increasingly clear that the disenchantment with the NIGP has been building for some time. The Missouri award protest – in which both the NIGP and Persiscope were clearly attempting to leverage their control over the Code to serve their own best interests as opposed to those of their licencees and customers, was simply too much to bear. Let’s face it, no state or municipality or for that matter vendor, wants to have an outsider dictate with whom they can or cannot do business.
Of course it did not help that NIGP Chief Executive Rick Grimm imploded when he attempted to justify the actions of both the NIGP and Periscope in two separate comment streams on this blog. I mean come on . . . an RFI no matter how much you dress it up, is not a competitive bid. By the way, you can access my exchange with the Chief Executive through the following links; The Grimm Facts (Part 1) and The Grimm Facts (Part 2).
For some, the cost of not dropping the NIGP Code and adopting the UNSPSC Code is much higher than to continue along the present path with the current players.
Above frustration notwithstanding, are there other options besides dropping the NIGP Code altogether?
“These concerns – especially in relation to the comments made in a 2001 press release, and about which I will talk further in The Simonton Years section of this post – centers around the one to as many as five possible matches between the NIGP Code and its counterparts in the UNSPSC Code. As a result, States as well as other government entity’s feel that their ability to move away from the NIGP taxonomy, and the related significant license fees, have been deliberately hindered.” – April 10th Procurement Insights Post
1. Simplify Crosswalks
In referencing the years that Simonton Enterprises held the exclusive contract rights to the NIGP Code, research suggests that the intention was to “make the “crosswalks” to the UNSPSC Code as simple and as direct as possible.”
This all appeared to have changed when Periscope acquired Simonton in 2001.
The consensus among those individuals with whom I have talked over the past two weeks is that the complexity of building a crosswalk to the UNSPSC Code which, according to the Missouri award protest submitted by Periscope and endorsed by the NIGP can only be done by Periscope, is by design.
In other words, the purported complexity is used by Periscope to shackle the Code’s users, thereby eliminating the option for them to make the switch to another taxonomy. Given the fact that the NIGP Code has become a cash cow for Periscope, and has provided them with an unfair market advantage being both licensor and eProcurement vendor licensee, one can understand why they would obfuscate the path to an alternative code.
All this being said, the right thing for the NIGP to do would be to step up and proactively work with capable partners to simplify the process for developing crosswalks to the UNSPSC Code.
Even though Persiscope would likely put up a fight based upon their current agreement with the NIGP – an agreement I would love to get my hands on – to reestablish their waning creditability with the very people they are supposedly in existence to help as opposed to hinder, such a move would be necessary.
2. Transfer NIGP Code Stewardship
Someone – ideally the NIGP as they are the authors of the #CodeGate mess – would take the initiative to transfer the stewardship from Periscope to a neutral third-party. They might even want to use the current management structure for the UNSPSC Code as a reference model.
The possibility that NASPO might be willing to assume the stewardship mantle has also been suggested on more than one occasion.
Once again, and backed by Parthenon, Periscope would likely put up a fight. However, and based on my last post regarding novation and novation agreements relating to the BidSync merger, the customer or licensee community may have a hammer in the form of challenging Periscope’s continuing rights as the code’s stewards based on a material change in the company’s structure.
3. Make Changes At The Top
While not necessarily the best solution as it could be more symbolic than anything else, the removal of the current NIGP leadership – starting with Chief Executive Rick Grimm, might soothe the riled sensibilities of the customer base as well as others.
As referenced earlier, Grimm’s clumsy attempt at diffusing the #CodeGate crisis makes him a clear liability and likely scapegoat. The fact that he appears to be the one constant in the NIGP Code timeline puts an even bigger culpability target on his back.
Of course even with making such a move, concessions from new NIGP leadership as well as Periscope would have to made including the provision of open access to the current contract between the NIGP and Periscope. This transparency would also have to be extended to include access to the details surrounding Parthenon’s control recapitalization of the company and its simultaneous merger with BidSync.
After all, what better way to herald in a new era of openness and full transparency?
“earthquakes occur anywhere in the earth where there is sufficient stored elastic strain energy to drive fracture propagation along a fault plane. The sides of a fault move past each other smoothly and aseismically only if there are no irregularities or asperities along the fault surface that increase the frictional resistance.” – wikipedia
In the end, and similar to the origins of an earthquake, eventually the irregularities or the asperities of the present NIGP – Periscope relationship means that something has got to give.
The seismic activity brought about by the Missouri award protest and resulting #CodeGate controversy is likely just the beginning of what will become a series of escalating crisis that will continue to shake the very foundations of the public sector procurement world.
In this context, it would be prudent for all concerned to smooth out the nooks and crannies of the apparent questionable dealings between the NIGP and Periscope, through one of the prescribed measures referenced above.
However, if the NIGP remains reticent about their relationship with Periscope, and determined to stay on their present relationship course with that entity, then I can see no other alternative – as painful as this might be for some – to make the move away from the NIGP Code.
Knowing what we know now, to allow things to remain the same and do nothing, shifts the responsibility of the next crisis from the NIGP to the licensees themselves. Or as the old saying goes . . . fool me once, shame on you – fool me twice, shame on me.
Just started following the NIGP #CodeGate story? Use the following link to access the Post Archive; https://procureinsights.wordpress.com/nigp-codegate/
You can follow my coverage of this story on Twitter using the Hashtags #missbid and #CodeGate
On The Go? You can also listen to the audio version of this post as well as others through @Umano https://umano.me/jhansen
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Procurement Insights 
colincram
April 15, 2015
Giving an independent 3rd party responsibility for the code would be the easiest option to implement. If NIGP and Periscope are unwilling for this to happen and able to prevent it happening, a group of senior procurement people could set up a project to move away from the NIGP code to, say, the UNSPSC code. The biggest potential problem that I see is that the product codes may not match precisely.
Allison Future Purchasing
April 21, 2015
This is an extraordinary story demonstrating how badly things can go wrong when category management techniques were not used effectively when making the procurement decision. In classic Kraljic matrix terms, a serious bottleneck situation seems to have occurred which has now been noted, and the market is wising up to removing the bottleneck even if there is some short term pain.
And there will be some short term pain, as agreeing a taxonomy – or as we prefer to call it – category families – is fundamental to category management success. A good taxonomy clarifies definitions, removing opportunity for overlaps or misunderstandings between what sits in what category versus another category and crucially supports the all important baselining. We all recognise the adage that “what gets measured gets done” and we in the procurement profession know that we are measured on the value that we deliver, whether by cost down, cost avoidance, increased revenue etc. or supplier rationalisation, say (amongst other important KPIs – more on that another time). Clearly anyone moving from one taxonomy to another will lose some of that clarification around spend, and overlaps, and suppliers, that they would have worked hard to achieve and it could be hard to compare value delivered in the new taxonomy world to the old one. Still, not one of us procurement professionals can afford to live with a bottleneck, so it’s probably a price worth paying – perhaps for some, it may be worth a little effort doing a translation between the old and new, to help keep a degree of transparency as the change takes place and beyond.
Simon Future Purchasing
April 21, 2015
1. There definitely seems to be a real conflict of interests where the organisation looking after the NIGP code is also potentially a bidder for govt contracts. Surely the NIGP should be an independent body simply overseeing the code for the simplification and ease of use for all its members?
2. The other factor is that the broader supply market uses the universal UNSPSC codes which must surely create some problems when working with the US Public Procurement organisations. Standardisation has to be the best route forward or a second best route is having NIGP code being completely aligned with UNSPSC codes and not having four or five different codes that could be applicable for the same item. Alignment will ultimately reduce errors in definition and will mean you buy the right things hopefully at the right prices and avoid wasting valuable tax payers money. This has to be a prize worth chasing.
3. Finally with regards to category management – that works best when products are put into families or sub categories and categories to enable focus on products/services that have something in common whether it be functionality, materials, types of services etc. Any coding system should help to make that categorisation simple rather than complicated. So having one coding system or two that are aligned should be the minimum to help category managers do their job more effectively.
piblogger
April 21, 2015
Thank you for the additional insight Simon.
What is most interesting is that the various challenges be it the alignment between the NIGP Code and the UNSPSC Code or, the threat by the NIGP – Periscope partnership to pull the license from a vendor that won a contract from them in Missouri, all points to one thing . . . there is a definite conflict of interest that needs to be addressed and dealt with.