A new Commercial Reality under Austerity

How to compete fairly and openly.  [Part of our ‘The Trouble with Innovation series 1,2,3,4,5 – Part 6]

Doing business anywhere, anytime is never easy!

That is a stark commercial reality, that most business people will accept as a given.  But how? now? does is work in a climate of AUSTERITY???

(Apologies for the blatant confusion and poetic licence taken in the previous sentence).

Public and private sectors mostly have an uneasy symbiotic relationship with each other.  If the public sector cannot deliver a solution, they have to procure it from a private provider and a private provider (generally, but not always) rub their hands with glee, as it is relatively speaking ‘easy money’ provided you meet and exceed certain framework thresholds.

All nice and cosy, when we are in a growth cycle of the economy; yet ever so tricky when those Framework Procurement Agreements come up for tender during the down slope side of the cycle…

Business Cycle
Image via Wikipedia

It is odd how the ‘staccato’ relationship between private and public sectors work at different periods during the business cycle.  And this is exactly where the public sector, with an astute “commercial hat” on, can take advantage of it’s perceived negotiating strength during the down cycle agreement drafting / tendering process.

Yet, do they take advantage of this? 

Our view is that any Public Sector Procurement Framework Agreement with private sector providers will always be a FLOOR, thereby setting the minimum expectations and requirements, without ever really driving proper continuous INNOVATION and COMPETITIVE DYNAMICS to ensure players with ‘skin in the game’ continue to understand and manage their businesses with the proper risk attitude (never mind risk appetite).  Rather than act as a (“floor price”) barrier to entry, they should act as ceiling, or rather more ‘bluish sky’ REACH or STRETCH agreements, setting the rules of the game, but not acting as the default pricing mechanism , meaning that the private sector provider must continue to be innovative, rather than wait and ‘cream-off’ the best bits whilst seeing out the agreement time period until the next time anyone bothers to ‘tamper with the height’ of the limbo bar…

Our summary take away from this article:

The Public Sector Procurement Framework Agreement therefore should act as an incentive to compete and have fair access, but never as the default pricing mechanism.

Community and Public Sector Union Pledge Signi...
Community and Public Sector Union Pledge Signing 20th August 2010 (Photo credit: Senator Kate Lundy)

theMarketSoul ©2012

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