Six ways to kill business with Procurement, Part 3: Contractual Suicides and Laziness

And so we continue the descriptions of how Procurement can contribute to not-so-successful outcomes of the whole business…

Contractual suicides

 Ts&Cs are boring. They are long, hard to read. Many times, they are written in very small shrift. But the general rule is: if it is worth having a specific contract, you need to read it. Sometimes, actually, not having a bespoke contract might be better. There are government laws that regulate the sale and purchase of goods and services. So if you placed the order and received the services or products – it is not like you are thrown out onto an uninhabited island. There are rules and regulations that protect all sides of every deal. However, if you choose to sign a contract and, and especially, use your supplier’s documents – read it. It is mandatory. If you think that worst-case scenario of not reading an agreement might mean that you will have to pay a bit extra or be stuck with a supplier for a bit longer than you would have wanted initially – that is not entirely true.

I once dealt with a situation where we needed to negotiate our way out of a contract—a vending services contract which signed without reading. The situation was threatening the overall results of a low margin business. It was an outsourced service business, with forecasted £120k annual profit and only one year left in contract duration. To keep it short: the person committed to a completely not needed £600k spend, which would have been a pure loss to the business. And it is just a small example. There are plenty of cases where faulty contracts lead to unfortunate situations.


 To me, not doing your homework appropriately is being lazy. Let me give you a few examples:

  • The Public Accounts Committee report says Ministry of Justice pushed on with an overly complicated project without clear evidence it was needed.”. (, n.d.). This was £60 million.
  • The Ministry of Justice (MoJ) has written off £56 million in IT costs … The project centred around plans to set up a single Enterprise Resource Planning (ERP) system for HR, finance, procurement, transactions and payroll. The MoJ decided to abandon the project to avoid duplication when they discovered that the Cabinet Office was planning to implement a similar scheme…” ( Surely they had to go through OJEU procedures to award the contract in the first place? It is a bit of a sarcasm, you are right.

Please look up more keywords online: e-borders programme with Raytheon (hundreds of millions), Verify, Lidl SAP introduction (five hundred millions), Emergency Services Network modernisation (overrunning a budget by £3.1billion), Home Office’s DBS modernisation project (4 years late and £229 million over budget), Army recruiting Partnering Project. And, of course, the all-famous no-deal Brexit ferry company with no ships and no experience in running Channel Services.

Procurement professionals, blindly relying on tenders and not doing their homework properly in the first place, should cause any CFO or CEO a massive fear. “But…but the tender submission says that the supplier will hire all the people they need…” – tender submission is nothing more than just another template sales pitch. If you were lazy and did not challenge the statements or collect all the information to make business and procurement decisions – then it is not the supplier’s fault, right?

Six ways to kill business with Procurement, Part 3: Contractual Suicides and Laziness

6 ways to kill business with Procurement. Part 2: narrow-framed TCO

It is procurement who claim to be the champions of the approach for always assessing the Total Cost of Ownership. But if you forgot it by now – procurement professionals are still only people. narrow framingIt is hard enough to navigate through natural biases, let alone the traps that the salespeople set to buying colleagues. I have provided one example in the picture. You will have seen similar situations with three sizes of pop-corns or coffee servings at the shops. However, falling into such “small” traps would not be enough to kill a business, right? Let’s see what would kill a business.

A company ran a tender. They were buying a check-weigher for a meat processing plant. Check-weigher is a machine that checks if the weight of the packed product is accurate. The requirement from the technical department was 98% accuracy – due to due to regulatory requirements. There were two suppliers left in the process [1]: table2

  • Supplier A submitted the required 98% weighing accuracy machine for £1m.
  • Supplier B offered a 99% weighing accuracy machine, priced at £2m.

The buyer also compared: critical spare parts (prices, schedule of changing), engineer callout costs and frequencies, secured downtime warranties and all other possible cost drivers. Overall Supplier A was cheaper over the investment lifecycle time by £1.2 million. Framing the situation like this (project-width framing) makes the decision very simple and obvious.

However, there is a different way to look at it. In this case, the buyer went to talk to business analysts and the commercial department. They worked out the numbers: the weighing accuracy difference would pay for itself in approximately three months of full capacity running [2]. To view it from a different perspective: had the buyer not checked this detail, the company could have potentially lost up to £18 million of revenue. To recap: the company could have lost eighteen million pounds. Do you think this could be a significant enough number?

Saying that you analyse the total cost of ownership is not enough. Do you frame your TCO from a business perspective? I would welcome a discussion on different framing ways for various situations. Are you wondering how stationary buying might be framed differently? Are you working on something and would welcome a different approach? Please comment and share – I will share my views and I am sure the colleagues from the network will add to it.

If you missed it, the first way to kill a business with procurement (by buying not needed items) is here.

[1] The numbers provided in the example are fictional and for illustration purposes only.

[2] The supplier A was given a chance to review their offer and technical specifications.

6 ways to kill business with Procurement. Part 2: narrow-framed TCO

6 Ways To Kill Business With Procurement. Part 1

…and I mean it. Procurement can bring the company to the point of no return. And there is more than one way to do it. One quick stab in the back or “death by a thousand cuts” – you can choose a method closer to your heart (ironic, right?). So the next time you even think about complaining that “your CFO does not love you” – take a second look at the list below and consider if potentially any of the phenomena analysed below apply to you and your function.

A Recipe for failure

If you read “Outliers” by Malcolm Gladwell, you will know by now that a success or a failure is rarely an outcome of only one factor. Most of the time, it is a combination of a few of those. In my experience, procurement is frequently guilty of more than just one of the below:

  • Unnecessary purchases.
  • Narrow framed TCO approach.
  • Contractual suicides.
  • Laziness
  • Business bottlenecks.
  • Poor objectives (which can be implied or self-imposed).

If you identified only one of the above and think that you are off the hook, think again. Those are the factors that your department can influence directly. However, there are always external factors that work as multiplicators of the failure. Think about fraud. Think about suppliers, genuinely abusing the situation, and overcharging the clients. Think about supply chain and risk costs. External factors, not managed properly, could become strong enough to cause issues to a business. But if a CPO adds additional internal obstacles – you have a recipe for failure. Let’s review the first one today and others in my next posts.

Unnecessary purchases

Many of us at least sometimes find ourselves staring at the wardrobe with a blank face and only one thought in the head – “nothing to wear, again…”. It’s just that the closet is not empty. We buy things – gadgets, vitamins, tools, gym membership – and never use them. Or use them so frequently that the gym administrator does not recognise us in the photo on the member pass.

I am not sure if this will surprise you, but the same rules apply at work. Really! Let me give you some examples. IT license list being the first one. I bet not all companies analyse the functionality of the software that different stakeholders buy across the organisation: there are plenty of duplications and lost negotiating power. I bet that not all of the organisations stay on top of various users that have licenses – and overpay for things they do not need. I could continue. I know, I know, these would not kill the business.  It is difficult to track the ones that really would. And there is a good reason for it. I mean, would you brag about something that is not going to get you an award?

However, the European Union publishes the findings of public procurement audits. Official conclusions say that approximately 5% of all spend could be a waste of money. A lot more than that were simply very well covered. Lifts that take you to no-where and other Italian adventures with EU money (Patrick Browne, “Five insane ways EU money was blown in Italy”, MEPs charging for the offices that do not exist (Jonny Wrate, Donkeypedia and many more. Most of these projects cost millions. Consider how many private businesses work with a much smaller margin than this… I realise that some of these projects are under investigation for good reasons – but someone approved the plans in the first place! And paid for them!


Most of the times, it is not the procurement department who initiate such purchases. But many times, they participate – if not lead – the procurement process. In the time of increasing popularity of inclusive and engaging company cultures, procurement should be able to speak up if they see strange requests coming through, surely? Yes, people are wasting money on the things they do not need. And yes, procurement could help stop them if they wanted.

Have you witnessed unnecessary purchases in your organisation? What were they? If you want to share your experience anonymously, text you story to me and I will upload to the comments without specific details.

I will post explanations about other phenomenons in my blog later.

Stay safe and stay healthy!



6 Ways To Kill Business With Procurement. Part 1