William Barter, a rail planning consultant, said that it was “probable” that redesigning the 54 HS2 trains would cost tens of millions of pounds.
“I think the original contract price was regarded as good for the government. So I suspect that here it’s not going to be particularly generous about variation orders,” he added.
Bid low and sting ’em on the variati9ons. For we all know that the public sector is never, ever, going to not have variation orders.
I wonder why public procurement always has to be this way. It’s like the process rules are engraved on tablets of stone, probably dating from the time of Moses. Private companies seem to find ways of buying and selling to each other that are, mostly, equitable to both parties. But it’s public money! seems to freeze uncivil servants’ brains.
Back in the nineties, so Railtrack days, I was looking for fire safety training. I’d found a good, reliable and local provider. Yet the tendering provisions meant that I was forced to take the lowest bid, regardless of technical considerations. Fortunately, purchasing wasn’t something I did very much.
Tractor Gent,
The problem is that people don’t think things through in the public sector, because it’s not their money. You don’t have management who are focussed on delivering a service and making money, so the good decision making that comes from that is absent.
HS2 is this vague political thing. Capacity, speed, “levelling up”, bullshit anti-Beeching romanticism about choo-choos, creating jobs, environmentalism. No-one really knows. No-one is balancing things up, just swaying between all of them. And no-one cares that much, which is why it’s ending at Old Oak Common. The politicians know it’s a bad idea, or they’d be paying for the link to Euston. Old Oak Common is just a political fudge. How do we say we finished HS2 without spending a whole lot more money.
Michael O’Leary knows how he wants an Airbus plane because he knows its purpose – get a load of people to Malaga cheaply and reasonably quickly.
” Yet the tendering provisions meant that I was forced to take the lowest bid, regardless of technical considerations. ”
One assumes that this process is for the benefit of the civil servants, as it gives them a simple numerical based decision that ensures no culpability for future failure can come back to haunt them.
‘I was forced to employ Contractor A because their bid was lowest. Its not my fault they proved to be a pile of sh*t and not fit for purpose. Please give me my massive pension now’.
Never mind the sunk costs, scrap it, pave it, run buses or just seit all off piecemeal.
Better to live with the brief embarrassment than live with a useless white elephamt forever.
WB:’The problem is that people don’t think things through in the public sector, because it’s not their money.’
Friends in the civil service tell me every large IT project has to consult NUMEROUS ‘stakeholders’ who all say ‘Can you make it do this as well?’ and so a simple project devolves into a nightmare Frankensteinian monster of many unrelated parts.
In defence of some civil servants who I have worked with they were very conscious and conscientious about tendering process. They do come under a lot of political pressure over costs which politicians want to see as low as possible during bidding phase but then don’t care as long as they get to wear a hard hat when it comes to delivery.
It should also be noted that lowest bid is after the final bidders have passed a competence threshold. On the project I worked on we even gave them a model to price against with a guarantee that pricing would hold for x years, which we held them against.
Unfortunately political pressure to deliver something tangible was more important than commercial concerns.
JuliaM,
“Friends in the civil service tell me every large IT project has to consult NUMEROUS ‘stakeholders’ who all say ‘Can you make it do this as well?’ and so a simple project devolves into a nightmare Frankensteinian monster of many unrelated parts.”
I haven’t experienced that, so much that people overcomplicate a particular function. Like we spent weeks working on some custom authentication changes, where every private sector company just uses what’s out-of-the-box. And I’ve worked on systems where an off-the-shelf package would have been fine.
Think of it like this: you can go to Oak Furnitureland and buy a table that’s within an inch of what you want for a grand, or you spend £20K on a carpenter to make you a table to the exact size you want. On balance, you would buy the Oak Furnitureland table. The way the public sector looks at things is that they specify the table size and get bids to the specification and then pick the cheapest. But they don’t think “well, we could just get one slightly smaller and save £19K”. Instead they know they’ve got £20K budget, so they’ll spend it.
Sometimes it’s cheaper to get the original contractor to deliver what was contracted then get them and other contractors to bid for the task of converting them to the new requirements.
We had this where I worked. As a new building was being erected, it was decided that the auditorium on the top floor should become a bigger two floor design. The variation quote was enormous, so the contractor finished the building as contracted and another contractor was brought it to rip off the newly finished roof, take out the small auditorium and go up another floor. Apparently it saved many millions.
I understand that this is the problem with the Scottish ferries.
TG – the public sector is incapable of calculating value. They think they can, but talk to a pubsec procurement person and you’ll find that what they mean by “value” is actually “price”.
So they aren’t that much more sophisticated in their buying behavior when procuring a a railway system than they are in buying pencils, although obviously the former attracts a lot more corruption through friends of the government getting their snouts into the taxpayer’s pocket.
The public sector thinks adding a load of jizz about Modern Slavery and Community Benefits makes their buying process better. The private sector is more interested in actual RoI, risk, and credibility of their selected suppliers.
WB: ’Instead they know they’ve got £20K budget, so they’ll spend it.’
Because if they don’t spend it all, it’s seen as a failure of budgeting – there are no brownie points to be had by giving back money.
Julia – if they don’t spend their budgets in financial year, that money gets deducted from next year’s budget.
So the incentives run the opposite direction from the private sector.
If you think adding a load off jizz is a public sector problem, let me introduce you to all the ISO standards private business insists you comply with. Plus the same legislative crap as the public sector.
It’s all totally worthless paper shuffling.
Joe – and who doesn’t love a Gartner Magic Quadrant?
There are a number of points concerning public contracts which private ones don’t have to deal with:
– there are generally a lot more “stakeholders”, i.e. people who have the power to put their oar in. A private contract generally only has the contracting company and the contractor.
– the public authority faces the losing would-be contractors’ suing if there’s any possibility of the letting process not having dotted the i’s and crossed the t’s. A contracting company may face that, but they can just say “We’re not going to consider you for any future contracts if you go ahead”. A public authority has very limited ability to do that.
– you’re correct in that it’s not their money. Which means they get both more and less oversight. More in that you get penny pinchers (more for this project means less for their pet project) and less in that the whole budget ends up ballooning because almost no one gets in trouble for that.
– yes, contractors low ball their proposals.
– the “project managers” that infest public authorities are of…varying quality. Mostly they have a PMP, which means they’ve gone to a bunch of courses and written an exam. Do they have experience? Are they any good? Do they even have the temperament for management? Not necessarily. It’s a step up in pay, often the only one. This happens in private companies as well.
– the face value of the contract is generally the only thing considered. Maintenance is only reluctantly looked at, and only if it’s required in law (and then only to that extent).
For that last point see the US budgeting process. There’s now a provision that they have to cost a project out over 10 years. Result? They push all the costly maintenance out to year 11 in order to get it past budgeting.
M – Yarp. And generally, private sector procurement works hand in glove with the business function that needs to buy something.
This is not always the case in pubsec, where the IT team could have a perfectly viable plan that gets torn to shreds after procurement turn it into a poorly written ITT full of irrelevant copy and paste from their 20 previous tenders.
I find it extraordinary that despite all that’s going on and the general state of – well, everything, we are still pouring (borrowed) money into this utterly useless white elephant.
Does no one in authority have the courage to shout “Stop”?
Having worked in tech in both public and private sectors it’s not so clear cut on the ground, both have strengths and flaws when it comes to these kinds of things. It also depends on how safety critical the process is. I remember a telco pouring money into customising a CRM system that didn’t work properly because it was too cheap to pay for the full vendor service and wanted to focus the spend on flashy stuff that got headlines, but nobody died when this went tits up. By contrast a public transit body implementing software that stops vehicles crashing will accept a lot of shit about overruns so that nobody does die!
Also, there are double standards of scrutiny. Execs in private sector are ‘captains of industry’ according business press, until their ‘bold’ decisions turn shite and fund managers (who they probably plays squash with) decide they’re to be given huge sums of money to go away and be quietly forgotten about until they can be reinvented into another role they probably have no aptitude for. In contrast the equivalent public sector boss who will never get anything like as much money for success never mind failure will get pilloried for relatively minor stuff.