George’s Christmas tree and aeroplaneless aircraft carriers, all part of the same problem.

I read with a mixture of amusement and horror at the effort that George Osbourne has had to invest in getting a cheap Christmas tree for the Treasury’s offices.  He wanted to get something around the £50 mark but it transpired that he was tied into a PFI contract which meant the tree would cost over £800.
When Liam Fox looked into the option of cancelling the two aircraft carriers planned under Labour it turned out to be more expensive to cancel the contract than to build the things.  Being tied in to this contract means that we can’t afford the aeroplanes to put onto the ships until a couple of years after they are launched.

Both, seemingly unrelated, stories indicate a problem which goes to the heart of the country’s financial problems.  The public sector’s unwillingness and inability to properly negotiate contracts with the private sector.

Everyone in business knows that a contract with the public sector is not always easy to win, often going to one of a small pool of preferred suppliers, but once won are highly lucrative.  I used to work in magazine and web publishing and the government’s media department, the COI, was the big fish that everyone wanted to land.  All over the country, in all areas of the public sector we are paying too much in PFIs and other contracts with the private sector.

I say that there is both an unwillingness and inability to negotiate properly,  The unwillingness is born out of two parallel public sector mindsets, firstly that all public spending is good public spending and that by paying over the odds the public sector is “keeping the economy going”.  The second is a misplaced but understandable fear that by negotiating hard the public sector buyer may push the private sector seller out of business.  Both these mindsets need to be stamped on.

The idea that public spending drives the economy is intellectual rot.  Public spending is paid by taxes or public borrowing (deferred taxes) both of which stifle private sector growth.  Secondly when two companies negotiate neither has altruistic motives, they both try to get the best deal and agree a mutually beneficial position.  The public sector should drive down costs as far as it can when negotiating, the company will not sign up to a deal that would lose it money.

Because they have never tried to get good negotiated settlements there is no experience in the public sector of proper negotiations.  If we are going to bring about real value in public sector procurement we need to train up a new generation of buyers who drive just as hard a bargain as their private sector contemporaries and we’ll need to pay them properly to do so.  A small number of big salaries in purchasing departments could save us billions every year.

17 responses to “George’s Christmas tree and aeroplaneless aircraft carriers, all part of the same problem.

  1. I was having exactly this same conversation with a uni mate at the weekend who has worked in both corporate and public sector purchasing, and has seen these kinds of contracts in action.

    His view was that the cancellation penalties are often used to mask and offset the upfront risk that public sector contracts now try to place on the private sector – demanding that contractual, investment and legal hoops be jumped through to get on the shortlist in the first place.

    I'm not sure of the ins & outs of the defence deals but maybe one answer would be for total transparency for public contracts – so the buyers see the books of the suppliers, and agree that they will pay a x% margin above their (transparent and reasonable) costs – which guarantees the supplier to be paid and to stay in business, but that the public purse doesn't become the cash cow that supports price cutting for other customers.

    I'm pretty sure there are holes in my argument, but you're right to bring it up, and I hope some headway is made on addressing it.
    Mel

  2. It could be said that local Conservatives entered into a contract over Queen Mary's Hospital: vote for us and we'll do all we can to keep A&E open. As you know, many people did just that and you stood by and let it shut whilst you thought up excuses like 'not being anle yo find staff.' You were asked, not by me, to provide a weekly update on what you are doing to bring back this facility. This is a good idea as it can't then be hidden behind aircraft carriers and Christmas trees. So what do you think to a website section/update on QMH?

  3. Well said “Obsessive”,

    My understanding is that the temporary closure of QMH A&E and the Maternity unit is now permanent.

    Well done Tory boys, what next? Sidcup Fire Station will get its second fire engine back (another useless PFI contract with AssetCo). No bloody chance, I also notice that Mr C is a “close” friend of the Odious B. Coleman. So no surprise there then.

    So lets not hold our breaths about further cuts in the important frontline services the people of Bexley and Sidcup rely on.

    And yes Mr C you can still call me Bob.

  4. Just a side note on “Hospital closures under a Coalition Government”.

    I find it interesting to following the fate of “St Georges Hospital” Ilford, which is about to suffer the same untimely fate of QMH.

    Well Tory boys, better start writing the excuses for this one…

    You can still call me Bob…

  5. Bob has a good point, I hear the PFI contract handed over to Assetco, for providing private fire cover in the event of a pandemic were wining and dining Brian Coleman for some time.

    So perhaps it is not an unwillingness to negotiate properly, but how big are the back handers.

    And yes when will get back our Fire Engine at Sidcup Fire Station. It arrived to a huge fanfair when the the fire station re-opened, and I believe you were there trying to steal a photo opportunity. So where are you now? We have a huge new fire station built at some expense (rented for the next 100 years) to the public purse via a PFI agreement, that only houses one fire engine?

    And Brian Coleman (overweight chair of the fire authority)is on record (check LBC) as saying these cuts will be permanent.

    So QMH, Sidcup Fire Station, what next? Bexley police station being sold off. Sidcup rail station being shut down and turned into new council offices?

    All we have is Tory lies, lies and more lies.

  6. Hell yeah.

    Where is the post regarding the permanent closure of QMH. You are all fibbers. I would never have voted you in if I knew you couldnt keep the services at QMH.

    Perhaps we should all ignore it and it will finally go away. Think again. Gotta agree with everyone else here. What are you gonna cut next. Bet its not your wages.

  7. “Because they have never tried to get good negotiated settlements there is no experience in the public sector of proper negotiations”

    The only negotiations the Tories are famous for is free lunches and Duck Houses.

    The contract always goes to the provider of the biggest lunch.
    Where do the public come into it.

  8. What an interesting fellow Brian Coleman sounds! I know that many awful things get written about people that they don't deserve but the sheer variation and level of allegations are something to behold, a very entertaining few minutes on Google. No wonder we have situations like QMH occurring if this is the standard of politician representing us. But thanks for the introduction.

    Anyway, about that weekly update on the A&E unit that you used as a campaign tool, what do you think?

  9. You seriously think only one person is interested in the loss of a vital local facility and its cynical use as a campaign tool? For a start it would appear that I found out about your mentor Mr Coleman from myself!

    You might find it useful to start answering some questions from constituents, which is your job. Until you do so this subject will not go away, no matter how many dinners you go to or personal insults you throw out about anyone whose points you are unable to argue with.

    I thought I was the only person who was willing to constantly challenge you and your colleagues on this, I cannot tell you what a delight it has been to find that there are others.

    So how about some real answers?

  10. dear Obsessive

    If you are a constituent please feel free to write to me at City Hall or email me and I'll be more than happy to respond.

    I do not regard comments left on this blog by anonymous people as questions from my constituent(s).

  11. With the sort of behaviour you display, such as name calling and the dismissal of questioning as one 'obsessive' person, you are the last person on earth I'd want having my details.

    We vote anonymously, you provide a facility for anonymous questioning, I don't see the problem. If we write, this is what will happen:

    1. You will write back saying there's nothing you can do about it.
    2. You will ignore the fact that you used it as part of your election campaign.
    3. You will either recycle or make up ever more ludicrous excuses as to what happened because you are not able to admit the reality of the matter.
    4. Any further response to your inadequate response will be labelled as 'obsessive'.

    You seem to want to take part in the modern world when it suits you. We have the facility of social media that provides the transparency that you would ask from your opponents. So keep us informed of how you intend to carry through your pre-election campaign to save QMH A&E in public, not through private letters to one person that you can dismiss but in front of a wider audience.

  12. With the sort of behaviour you display, such as name calling and the dismissal of questioning as one 'obsessive' person, you are the last person on earth I'd want to have my details. But I can assure you that I am a constituent – and a user of Queen Mary's.

    We vote anonymously, you provide a facility for anonymous questioning, I don't see the problem. If we write, this is what will happen:

    1. You will write back saying there's nothing you can do about it.
    2. You will ignore the fact that you used it as part of your election campaign.
    3. You will either recycle or make up ever more ludicrous excuses as to what happened because you are not able to admit the reality of the matter.
    4. Any further enquiry over your inadequate response will be labelled as 'obsessive'.

    You seem to want to take part in the modern world when it suits you. We have the facility of social media that provides the transparency that you would ask from your opponents. So keep us informed of how you intend to carry through your pre-election campaign to save QMH A&E in public, not through private letters to one person that you can dismiss but in front of a wider audience.

    I will also copy this over to the more relevant QMH thread.

  13. Obsessive (the name you gave yourself by the way)

    I don't delete comments, I've found that your posts seem to be caught in blogger's automated spam filter. Make of that what you will.

  14. As I said in the other thread, some posts take hours to appear even though the system shows them there as soon as they are posted. And then they end up posted twice as it looks like they've been lost or deleted.

    With regard to spamming, what I make of your spam filter, if it removes posts about Queen Mary's Hospital is that it clearly needs to be managed properly.

    Anyway, how about an update on what you're doing about A&E?

  15. Dear Sir,

    As a very amused reader of this rather one sided blog.
    I feel I must correct you with reference to “Obsessive”, naming himself.
    It was actually you who coined the name when you accused all who post anonymously about QMH as being from the same person, and that the subject would not be sided to an old blog subject, you called him/her obsessive.

    And by the way he/she are not talking to themselves. I along with many of my associates find some of the flippant remarks regarding QMH very interesting.

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