Power Corruption and Lies: Volkswagen compliance

The Volkwagen cheating on emissions testing scandal is not on the face of it a Procurement issue, though it is rather similar to an old Procurement problem: lying about compliance.

Suppliers can and do fake certificates of compliance.  Part of the job of Procurement is working out when it is worth doing our own investigations into compliance.  Sometimes it is, and sometimes it is not.  Sometimes the non-compliance is just cutting corners...

This is not.  This is a deliberate and calculated fraud.  VW has already allocated $billions to the anticipated fines and law suits.  Is this enough?

In Procurement we would find a deliberate fraud a good reason for blacklisting the supplier (if such a thing is allowed, and let's be clear probably even it if is not).   Who could trust such as supplier ever again?

Standards and certification are sometimes seen as job killing and industry damaging.  Surely the market will deter bad behaviour?  In reality they are there to protect us all and prevent a race to the bottom in a (generally positive) drive for profit.  And so wrong doers are fined.

However the fines are not enough.  For a business they are a cost of doing business, and can be set against the profit and loss account.  They are, in short, a calculated gamble.  If it pays off and you don't get caught great - if you get caught, pay the fine (or in the case of Goldman Sachs agree to pay a fine without ever actually admitting to wrong doing).  That is not enough to deter fraudsters.  Not nearly enough.

We look at some of the great business scandals (Enron, Lehman, Libor, VW, Goldman Sachs, RBS) and can ask how many people went to jail?  Not many.  Literally on the fingers of one hand (mostly from Enron).  With those odds we are not detering wrong doing - the balance of risk and reward is too strongly weighted to doing whatever it takes.  Handing back your knighthood is not a risk of consequence.

If we want to change the risk balance we need to ensure that more corporate fraud is dealt with by jail time.  A nice cozy jail no doubt, but still jail time.  Nothing else will make managers think twice (and it will not make all of them do so either).  This needs to be a regular result too, not just a one off. 

We have to make managers aware that there are real personal consequences - not just corporate ones.

Bidding for HS2

The Chancellor, George Osborne, has attracted a bit of flak for inviting Chinese companies to bid for contracts for the High Speed 2 rail link from London to Birmingham.  A figure of £12bn has been bandied about, and there are complaints that he is being cynical in talking to potential suppliers before the legislation has passed in Parliament and that he should be promoting these opportunities to British businesses rather than Chinese.

Well, he is a very political beast and so we can assume that this is part of a bigger political plan (which appears to be to build better links to China).  From a procurement point of view it probably makes sense.  This is a very big project.  The Chinese have great expertise, having built far more miles of high speed rail than we have in Britain.  However they may not be aware of a decent project possibly happening on a small island on the other side of the world.  I cannot believe that there are any British (or European) potential bidders who are not aware of the project.

So it makes sense to do a bit of pre-market engagement, and effectively fire the starting gun for the competition.  A competition that will no doubt follow OJEU procedures, which will give an advantage to EU companies used to complying with them.  But it will remind them that there are competitors.  Competitors who now will have time to consider whether they would like to be involved when the time comes.  And whether a Chinese company could actually win.  The Chancellor must hope to convince them that they can... whilst fervently (and powerlessly) hoping that they don't.

Politics, eh?  Give me Procurement anyday.

Short Notice: Managing Innovation

Very, very short notice (apologies) but we are re-running the Managing and Developing Innovation course at Junction 25 conference centre in Brighouse starting tomorrow 9th September and finishing on Thursday.  If you are based in Calderdale this course will be free to you.  Anyone else will have to pay (don't ask me how much - not a lot)

If you are interested then we would be delighted to see you.  Run for University of Bradford School of Management Knowledge Transfer Network on behalf of Business Growth Calderdale.

The new season: Contract Management and Compliant PQQ courses in Manchester 16/17 September 2015

It's not just football that has a new season.  We always have a relatively quiet summer for training, and then things pick up again in September.  Like the transfer window a few things are usually up in the air till the last minute.

But, I can confirm that I shall be running a couple of courses for BIP Solutions Pass Training in Manchester this month
Wednesday 16th September I shall be running Drafting a Compliant PQQ - which is a rather interesting topic given the changes to PQQs this year.
Thursday 17th September it is Contract Management - which is a topic that I know I always drone on about, but has always been vitally important and given the changes in the PCR 2015 will now be even more important than before.

Both are at the Renaissance Marriot in Manchester, just off Deansgate and down the hill a bit from Harvey Nichols (in case you need any more incentive to come along), next to a multi-storey car park.

Hope to see you there.  Now where is that suit and tie?