Friday, 16 February 2018

CIPS Public Procurement courses - Birmingham 20/21/22 February 2018

Next week I am running 3 days in Birmingham for the Chartered Institute of Procurement & Supply, covering UK Public Procurement.  The first day is the Introduction and is fully booked (next one is 25th April in Bristol).  Second one is Applying the Procurement regulations, and the third is the Future of Public Procurement .

3 good days, which can be taken as a block or one at a time - they are as standalone as I can make them.

Thursday, 8 February 2018

Zebra fuel

Listening to the BBC I came across Zebra Fuel, who are a start up in London who will come round to your house and fill up your car.  They claim to be no more expensive than your local petrol station.  Which in London is apparently turning out to be not so local.

In the North of England where I live land is not so important.  But London has reached some quite staggering land and property values.  I am constantly amazed that the commercial infrastructure continues to work as for almost any business in London there is more money to be made by closing the shop and selling the building than can be made in a generation of hard work.  Ok, I have not done a detailed financial analysis, but I hope you can see where I am heading.  The average 2018 property is selling for £600 000.  Working on a 5% profit margin a shop has to bring in £12m to make that much money over a period of 24 years, say £500k per year, that is £10k/week, or £2k per day.  How many shops turn over that much?  Actually for a petrol station most, as that is only 40 fills - though really probably 80 would be needed as petrol only has profit margins of about 2.5%.

Anyway my point is that if you own a petrol station in central London you can have a quick windfall by selling it for development, or a long slow slog to make the same amount of money.  (let's not worry about future property values, and net present value of money over 24 years...).  Which would you do?

Petrol stations therefore are closing, and likely to continue to do so.  Electrical vehicles will only make this trend worse in the medium term.The prevalence of small corner shops and Supermarket Local branches means that the petrol stations other role as the shop of last resort is covered.

Zebra therefore makes sense as a value proposition - they can invest in out of London depots and delivery vehicles (ironically possibly electric to avoid the congestion charge), which may turn out to have lower costs that being physically based in London.  The customers don't waste their time finding a petrol station and then filling up.  So in theory there could be lower operating costs, and customers (in future, once the principle is established) willing to pay a premium for convenience.

Sounds very plausible. 

Apparently they have ambitions for Paris, but I suspect it will take a long time to come to Yorkshire.

It reminds me of a company in Manchester called Diesel Weasel who would go round and top up generators on construction sites on a daily basis.  They are no longer around (it appears) but I think Zebra have a good chance.  In business you never get more than that.

Tuesday, 6 February 2018

IChemE: Engineering Procurement Online course

Well we are nearly at the end.  The last webinar is tomorrow 7th February 2018 at 9am and 4pm.
This session is called Improving Engineering Procurement, and is based around a series of 5 tips to improve procurement in your organisation.  It should pay for itself.

All 4 webinars will be available to buy online after the event.

Full details are here.

Monday, 29 January 2018

IChemE webinar series: Engineering Procurement January 2018 - part 3; Price, Cost and Value

So the next webinar in our series is tomorrow, Tuesday 30th January 2018 at 9am and 4pm.

This time I am going to be talking about Price, Cost and Value.  As well as looking at the Total Cost Iceberg, we shall touch on Volkswagen Group cars, the world's most expensive painting to date (see above) and why bottled water costs so much at Schipol airport.

Hopefully something in there for you.

The previous 2 webinars are available for purchase, and the last one will be next Wednesday 7th February 2018 and will give some (hopefully) useful hints and tips for improving Engineering Procurement.

Details are here.

Friday, 19 January 2018

IChemE webinar series: Engineering Procurement January 2018 - part 2

We have run the first module of four and the next one is on Tuesday 23rd January 2018 at 9am and 4pm.  These are 2 different sessions so that we can pick the best recording and make it available for purchase on line.

So if you missed the first one you can still catch up by buying the course, and then joining in.  I am happy to take questions as we go along, or at the end - which of course you cannot do unless you are joining the live sessions.

The first session was Introduction to Engineering Procurement.
The next one is about Supplier Positioning - how we segment what we spend, and how we get the right relationships with our suppliers.

Full details of the courses (or the recordings) is here.

Tuesday, 16 January 2018

Carillion - a little extra input

Couple of talking points keep coming up about Carillion. 

Firstly that contracts should not be awarded to the lowest bidder - they usually are not in the Public Sector, but are awarded on the basis of Most Economically Advantageous Tender, i.e. Value for Money.  Obviously price is a factor.

Secondly, sub-contractors accuse companies like Carillion of not paying promptly (Carillion seem to have used factoring of invoices, so that should not be a problem).  Public Contracts require contractors to pay sub-contractors within 30 days.  If they do not then a) the sub-contractor can charge interest at 8% above base rate (i.e. 8.5% at the moment) b) the public sector client can arrange to pay sub-contractors directly and c) late payment may be held against them as a reason for not allowing them to bid for future contracts (in extremis).

I'm not saying these are not problems - they are - but there are existing provisions that could deal with them if applied and enforced.

Monday, 15 January 2018

Carillion - public sector contracts

I am sure that there are going to be a lot of "hot takes" on Carillion going into administration.  It is too early for me to go into it in detail, but a couple of key points to think about.

1. Procurement has to look at Risk as well as price and cost - a consolidation of suppliers may lead to efficiencies but can also increase risk
2. Bigger is not necessarily safer than smaller.  Think also of Connaught and the hard work Serco have had to do to turn themselves round from a big operating loss.
3. Apart from banks no UK business is too big to fail.
4. Contract management is key for the public sector.  It ensures contractors cannot make up for underbidding by changes and variations
5. Buyers need to be very careful about possible underbidding (by SMEs and charities as well as big contractors) - companies need to make enough profit to ensure they survive when things go wrong.  And at some point they will.
6. Split supply may be safer, but less efficient
7. Privately owned companies are not perfect.  I know that is obvious, but it is not what we sometimes hear when we talk about private companies delivering public services.
8. Public sector contracts normally prevent suppliers from assigning contracts to third parties without the buyer's permission.  We hear the government as been ensuring that Carillion contracts can be easily passed on to a new contractor of our choice.  That is good news.
9. I would not expect many of Carillion's contracts to be re-tendered in the near future.  Short term continuity will take precedence over the need for competition.
10. This will look bad on the UK, as overseas contracts will also be thrown into disarray including work on the Qatar world cup which like all such projects is on a tight timetable.
11.Finally, spare a thought for the sub-contractors and suppliers.  They are likely not to be paid anything for a long time, and then be offered pennies on the pound.  It is likely some will go bust.  It is not their fault, nor (most) of Carillion's staff and I hope they manage to get through.

This is another major shock to Britain's construction industry (after the collusion prosecutions, and Connaught).  I hope it can bounce back quickly