Can SME’s Win Supply Contracts With Councils?

For the small business owner who has spent years crafting their offering to give customers genuine and superior value/service, the promise that it is possible to win supply contracts with their local councils can be somewhat of a pipedream to the uninitiated.

Many would say that to chase this kind of business is a fool’s errand: that it serves only the large businesses that would want to cover their fixed costs with little, none or even less than profitable contracts.  At least they are over a guaranteed period, and once you have the systems in place to manage the contracts any opportunity costs are balanced against the risk associated with more commercial yet more fluid contracts, the network available to you once you are in the supply-chain, and the subsequent negotiating power with your own suppliers .

Below is an interesting editorial perspective about the impact of purchasing and supply decisions, experienced firsthand by eprint in Peterborough, a 20+ years printers that specialise in applying print expertise to their customers benefit – which protects their print, their brand, and their sanity:

Keeping Our Money In Our City

Did you know that the council is one of the biggest employers in Peterborough, and yet with a budget of £247.9 million it still orders take-out for goods and services that can be delivered by businesses right here in the City?  So, the counter argument is that Peterborough businesses are offered the various tenders, but are uncompetitive.  Really?  Because logistics are so much cheaper these days, of course.  Just because companies tender low for contracts does not mean that they are the cheapest.  Most cost analysts know this.  Just look at the real costs one year on and you will see that what is tendered for is only part of what is delivered.  It’s the added items that send the true costs of the contracts soaring,  but by then people start citing ‘ the cost of change’ and they rap the supplier on the knuckles, who promise to do better next year, and so another year passes.  By this time, you are in the third year of the contract and – guess what!  Most contracts run for three years so – there’s no point in changing supplier now!  So, they just let it roll on as the contracts are up for renewal or retender, and they’ll probably even stay with that supplier because they ‘know so much about the organisation’ that new entrants are locked out for good.

So external companies that are ‘professional bidders’ win the contracts – make money elsewhere in the supply (claiming they are cost-effective because of the scale of their business) when in fact they aren’t big enough to supply themselves, and end up sourcing cheaply back in the original area.  I’m not saying that this happens with print for Peterborough City Council.  Or am I?

Our money is going out of County, having the cream taken off the top and then we’re ending up doing the work but for less money.  Now I’m not suggesting that we should be milking the taxpayer (which is us too) for loads of cream, but cheap, cheap business means that there is less money being spent within our communities by the people in the communities who are working for our local companies.

Want another example?  Thomas Cook invested in a range of ‘therapies’ to de-stress its workforce in Thorpe Wood.  Did it go to the city’s businesses?  No.  They contracted out to a ‘specialist’ company in London, who then contacted therapists contracted to local businesses in Peterborough.  Cream gone, the city gets the basic price – and we can all be secure in the knowledge that our average basic wage is going to stay the same, even though around the country someone else has all the cream!

Ed.

Great reading, and I would go further and suggest that most businesses wouldn’t want the type of customer that councils would prove to be – especially if they are making the kind of decisions outlined above.

Sometimes it pays to interrogate your dreams, strategies, and business decisions from a range of perspectives – just to make sure that you end up with the right ones.

TCM

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2 responses to “Can SME’s Win Supply Contracts With Councils?

  1. I think you have just opened up a whole can of worms on this one!

    Being an ex Civil Service employee, (Taxman), I witnessed first hand some of the most ludicruos decision making of my life.

    One exampe of this was the simple matter of making sure there was enough drinking water for the several hundred phone advisors. Every Thursday lunch time, with out fail, the water cooler machines would run out of drinking water. When this was repeatedly brought up at meetings, it was decided by the management that they should get a company in to do a three month assesment of the situation. This would cost thousands of pounds and take three months for someone to stand and watch the amount of water that was being drank each week.

    Is it me or is that just total insanity?!?

    At the meeting I scribbled a couple of figures down and did some truly basic calculations, bearing in mind that my job was to do complex tax calculations, along with 600 other people in the building! I then handed the piece of paper to the manager who was holding the meeting and once they had read it said that it was not possible to just do a few sums and come up with the number of bottles we needed each week.

    I just laughed and said you could either order this number of bottles each week and tell the delivery guy to come first thing on a Monday morning so that the water was nice and fresh and not been standing over the weekend when the office was closed, ‘just give it a try’. Or you could spend thousands and hang around for three months…

    Three weeks later, shock horror! They started to order the number of bottles I’d suggested and they turned up at 8.30 on Monday morning!

    Total cost…?

    Whatever a few extra bottles of water cost. Not several thousand pounds and at least three months of waiting for someone to do the same bit of maths I had.

    The point is, with the likes of the Civil Service, you need to break through the utter blinkedness of the people you are working with. In this case, blatant maths did the job. After all, they ‘got’ numbers, tax people are probably the best number crunchers in the world!

    The problem is breaking through!!!

    • What a great anecdote. I’m delighted that you relieved the Tax Payer of that burden. There is always the possibility of ‘over-thinking’ a problem especially when you are working in a specialised environement, but there should be much less resistance and unprofessionalism in response to suggestions, interaction, and problem-solving from staff teams.

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