SUSTAINABILITY FEATURE
SUSTAINABILITY FEATURE
Government calls on SRM to answer complex demands Gareth RhysWilliams became Chief Commercial Officer of the UK government in 2016. He was previously CEO of PHS Group, a leading provider of outsourced workplace services, and Charter International, the FTSE 250 engineering group, until its successful sale to Colfax Corporation in 2012. He has a strong record of driving transformational change in large, complex and federated organisations. Here, he explains why SRM is now so vital in sustaining value in the public sector.
In government, we procure a bewildering array of goods and services. Some are relatively straightforward, like office stationery, electricity and IT hardware. But some are very complex, such as naval submarines, or the housing of asylum seekers. When you contract for asylum seeker accommodation, you realise there are all kinds of events that may influence demands on the supplier. They include such random factors as the weather in the Mediterranean and the escalation or de-escalation of global conflicts, such as the war in South Sudan. They affect not only the total demand for the service but also the type of demand: whether the supplier must house single young men or families with children, for example. These demands are difficult for both suppliers and the government to anticipate when tendering and negotiating contracts. For a long time, the government had the attitude that you sign a contract and step back expecting the supplier to tackle the issues as and when they occur and still deliver the required outcome. But it is not like that. You can’t just sign a deal and only intervene to punish the supplier for some perceived failure. You must develop a relationship with the supplier based on trust and openness that allows you both to adapt, as and when circumstances change. In some ways government’s experience in working with suppliers echoes that of the automotive industry, where I spent some time in management at Lucas Industries. More than 20 years ago, the industry went through a phase during which original equipment manufacturers would beat up the tier-one suppliers on price, so the tier one suppliers would beat up the next tier down the chain and so on. It meant profit moved up to the OEMs – for a while – but then came a period of parts shortages and disruption to the supply
chain. At the same time, we saw the threat from Japanese manufacturers and their just-in-time processes, which rely on co-operation with suppliers. The industry and in particular the senior customers realised it and needed to get everyone around the same side of the table to work together, which, over time, it did. We are in a similar moment in government. The period of austerity that has now been with us for almost ten years has resulted in huge pressure on the public sector to reduce supply-side costs and make every tax payers pound go further. Meanwhile, demands on services are increasing. We are faced with an aging population and higher life expectancy putting pressure on health and social services, a transport infrastructure that needs to be fit for the 21st century and geopolitics that mean our security and armed forces need to be equipped for almost any eventuality. At the same time, there has been some introspection over some suppliers’ behaviour in recent years. While it’s very important to hold suppliers to account when things go wrong, we also need to consider what role we might have played and how we both could have done things better. As part of this process, we are considering how well qualified our commercial teams are to deal with these suppliers, and we are investing in training as well as new pay structures to retain and recruit the right staff. We are also striving to become much more joined up across government where many departments use the same suppliers and where much more strategic relationships are necessary. The combined pressure of unpredictable and complex demands on services and the limits on
Gareth Rhys Williams
Chief commercial officer of the UK government
public sector spending is creating the impetus for our Strategic Supplier Relationship Management (SSRM) programme, which we are rolling out as fast as possible (see page 18 for details). We are moving away from the old style, arm’s length and sometimes adversarial relationships with suppliers to a much more collaborative model. We are working with them on a range of initiatives that not only focus on optimising the value from existing contracts but also seek to identify and deliver additional value to both parties. We recognise that to achieve every department’s strategic objectives and continue delivering vital services we must develop improved and sustainable relationships with our key supply side partners. Ministers are buying into the SSRM agenda. They understand why we now need to find win-win outcomes for the supplier and the government. With this, and broader backing across government we can ensure SSRM is not an optional extra. It is crucial to how we engage with suppliers to move forward as a government and ensure the products and services we procure represent long term sustainable value for the public.
While it’s very important to hold suppliers to account when things go wrong, we also need to consider what role we might have played and howwe both could have done things better.
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STATE OF FLUX
2018 GLOBAL SRM RESEARCH REPORT
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