Briefing notes

Balanced Scorecard for Public Food Procurement – Part 2 of 3

This is the second of three posts about Defra’s “Balanced scorecard for public food procurement”, published in July 2014. In their own words it, “describes an evaluation approach where more straightforward criteria, such as cost, are ‘balanced’ against more complex criteria, such as health and wellbeing, resource efficiency and quality of service.” They go on to say, “This will allow broader aspects of service to be weighed against cost”. Isn’t that the aim of most procurement exercises? There’s plenty to learn from, so much so that I’ll only pick out three examples to write about, each in separate Blog posts.

The main points to learn from this second example are:

  1. Promises create trust only if you can deliver
  2. Motivate with reasonable and attainable expectations
  3. Use specific and definite language

The sentence in bold (below) is what this post is all about.

Compliance reporting and verification (heading from balanced scorecard)

A critical aspect of making public procurement simple, transparent and fair is ensuring that suppliers have confidence when bidding against the balanced scorecard. In order for them to have confidence they must be sure that contracting authorities will deliver against their commitment to procure goods and services that offer the best value per pound spent, and not just the lowest cost. They also need to have confidence that their competitors will actually provide the quality of food promised e.g. to UK or integrated production standards. This is why the Balanced Scorecard sets out what will be expected of procurers in respect of verification.

What are your first impressions of the sentence in bold? Do you believe it and is there evidence in the rest of the document to confirm or disconfirm this? Let’s start by finding out the meaning and intention behind:

  • Best Value
  • Per pound spent
  • Not just the lowest cost
  • Best value per pound spent

 

Best value

I intuitively understand the intention behind the words “best value”, if I take them at face value and don’t stop to think. But if I do stop to think then I’m lost, I don’t know what “best value” actually is. If I don’t know what it is, who will?

How will the purchaser know which of the offers they receive will achieve “best value”? Most often they answer with, “I’ll know it when I see it”. When you stop and think about this you’ll find it is nonsense. Purchasers can only evaluate the offers they receive. This ignores the “best value” potential of all other possible offers that they didn’t receive. This means there’s no way of knowing whether an offer from amongst all other possible offers would be the one to achieve “best value”.

There’s also another element to consider. Offers are fixed in time and yet “best value”, should it exist, would be dynamic. It would change so rapidly that someone else would improve on the “best value” offer straightaway and then someone else would improve on that and so on.

Then there’s value. What is value? Value depends on perceptions and perceptions change depending on experiences, expertise, viewpoints, information and relative comparisons. For example, if you expect to eat top-notch grub you’d value it quite highly, more so than say a purchaser who’d be quite happy with a bacon sandwich at a tenth of the price. Beware, not all purchasers are this cheap!

When confronted with “best value” by proponents of “best value” I ask two questions, “What value will you achieve?” and’ “How do you know it is the best you could buy?” I’ve not yet had an answer that convinces me best value actually exists. Since I’ve not been particularly complementary about Defra’s use of “best value”, or for that matter anyone else’s use of it, it’s only fair you see (below) how I explain what a purchaser needs to achieve.

The goods and services whose purchase and use will satisfy the needs of beneficiaries, bought at the lowest price or to shorten this I often use the more sound bite friendly minimum effective quality, at the lowest price.

Implicit in these descriptions is the need to accept the influence of context and the specific circumstances of each situation.  You may have to compromise in the way you seek to satisfy beneficiaries and/or the price at which you buy. This is why I don’t use the word ‘best’.

Perhaps there’s an unintentional conspiracy amongst all concerned to metaphorically nod their heads and appear wise when asked about best value. Unfortunately there is considerable benefit for some if they’re not specific about “best value”. It means there are no barriers to the purchaser claiming their contract is best value and the supplier saying they provide services that achieve best value. Don’t worry, only the primary beneficiaries and tax payers lose out.

Best value is used regularly, albeit casually and irresponsibly, by politicians and others working in or with the public sector. It’s a cop out. A good sound bite that everyone thinks they know what it means and also think that everyone else does. Defra doesn’t define what best value is, they’ve left it for the reader to interpret and assume.

 

Per pound spent

Why use the term “per pound spent”? The only thing I could think of was it looks legitimate and it gives the appearance of being thorough and dynamic. Other than that it’s pretty useless. Professional purchasers should always consider the total amount they ‘will spend’ and not ‘have spent’, the first being proactive and something they can influence, the second being reactive and mainly for information only.

Here’s an example of working through the use of “per pound spent” relative to the total amount. Let’s say you’re spending £10,000 and this achieves a “best value per pound spent” of one unit of best value per pound spent. Now you’re spending £100,000 to buy more of the same, is the “best value per pound spent” still likely to be one unit of value per pound spent? It should be more because you’re spending nine times more. Perhaps for £100,000 “best value per pound spent” should be at least two units of best value per pound spent? Never mind the difficulties of establishing what a unit of “best value” is, it is clear from this example that “per pound spent” could mislead and result in something less than “best value”.

 

Not just the lowest cost

The mention of “and not just the lowest cost” is a clumsy attempt to right the public sector’s tarnished reputation for buying at the lowest cost or rather the lowest price. It’s about as subtle as a brick in the face especially when it’s being used in conjunction with “best value”. I can’t imagine how the writer came to think this would refocus, and not reinforce, the common stereotype potential suppliers have of public sector purchasing.

Then there’s the use of the word cost. The writer could be referring to the purchaser’s cost, which is the supplier’s price, or they could mean the total overall cost (including the purchaser’s employees) to provide a service. It becomes irrelevant in the end because of the paragraph below, where the writer contradicts the intention behind “and not just the lowest cost”.

“If in any particular circumstances, this leads to a significant increase in costs which cannot reasonably be compensated for by savings elsewhere, the procuring authority shall agree with the catering contractor or supplier to depart from this requirement and the reasons for doing so shall be noted and recorded.”

This reinstates and asserts, quite powerfully, the purchaser’s ability to buy at lowest cost (price). They can quite legitimately, without fear of breaking any promises made (my tongue is firmly in my cheek), buy at the lowest cost or price. Perhaps the use of cost is deliberate to give the purchaser more wriggle room, as there are many ways to manipulate cost but next to none for price.

 

Best value per pound spent

If you’ve got this far then you’re aware I think “best value” and “per pound spent” are not useful or relevant or definable terms. By this I mean you could, if so minded, define both such that they satisfy your needs, as the purchaser, rather than those of the primary beneficiaries.

How do you calculate “best value per pound spent”? If it’s difficult or impossible to calculate then how does the purchaser know if they achieve it, or not? Defra promise to achieve “best value per pound spent”, how can suppliers hold them to such a promise? They can’t.

I looked for a definition of best value and the most commonly used was for local authorities, as they have a general Duty of Best Value. It’s described as:

“make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.”

This just muddies the water even more. If best value includes having regard to economy (money) then “best value per pound spent” is meaningless. This is because, with this definition, it is best value for money per pound spent. It gets worse because value is whatever you perceive it to be and can therefore be twisted to suit the purchaser, and give them the ability to buy at lowest cost.

Defra should simply commit to buy value to satisfy the needs of those (beneficiaries) they intend the contract to benefit. If they include the process to define value for each of the different groups/types of beneficiaries this would provide clarity and certainty without the hype and misdirection. There’s no need for fancy promises.

However, because everyone likes a good sound bite there’s a need to describe this approach succinctly, so I came up with minimum effective quality, at the lowest price. You shouldn’t be frightened to mention lowest price, as long as you qualify it. Here I’m qualifying it with minimum effective quality. Any more than the minimum is wasteful and any less doesn’t meet the needs of those you intend to benefit from a contract. I call this the Goldilocks strategy, as your goal should be to buy what is ‘just right’ to satisfy the needs of beneficiaries. This makes life uncomfortable for purchasers as it puts pressure on them to accurately specify minimum effective quality, which I describe as outcomes, with conditions.

 

Fraudulent use of words and expressions

Why, in the one sentence that I’ve written about, is there wholesale, and I’d argue fraudulent, use of meaningless words and expressions? Words such as lower, commitment and best allude to aspirations, which, at first glance, appear entirely sensible. On closer examination they’re nonsensical, if you pursue meaning from them they reveal themselves as frauds.

The writer also uses emotive words, such as confidence and deliver, to try to convince potential suppliers of their intention to buy “the best value per pound spent, and not just the lowest cost”. Again this appears plausible but as I’ve shown, purchasers can buy at the lowest cost and still satisfy their promise to buy “the best value per pound spent” because it means different things to different beneficiaries. The writer also goes on to caveat this promise in such a way as reinforce just how meaningless it is.

 

What potential suppliers can learn

This is what I think potential suppliers can learn from this example.

  • Read carefully, very carefully
  • Make sure you thoroughly understand, does it make sense
  • Disaggregate and work through concepts logically
  • Avoid assumptions
  • If you don’t understand, ask, keep asking until you do
  • Especially for vague, seductive and seemingly positive expressions
  • Better than expected equals too good to be true
  • Learn about capability and likely future behavior
  • Be cynical and stay cynical

 

What purchasers can learn

This is a particularly good example to learn from.

  • Don’t deliberately or unintentionally mislead
  • Understand implications when you write
  • Don’t write for yourself, you’re already convinced
  • Write to influence your intended audience
  • Choose your words carefully, use them responsibility
  • Your point of view isn’t as obvious as it is to you
  • Don’t contradict yourself
  • Make promises you can keep
  • Don’t caveat promises, with “get out of jail free” options
  • Clarity is vital, be vague at your peril
  • Promote certainty not uncertainty
  • Be specific and definite
  • Use practical and relevant words
  • If you can’t describe it accurately, don’t use it

 

Other comments

Am I being pedantic with the comments I’ve made? I’ve had a good think about this and asked others, and my conclusion is, no, I’m not being pedantic. This is because language controls communication, and our ability to communicate begins with the words we choose. We need to choose our words wisely for them to have the positive influence we set out to achieve.

 

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