8 April 2013 - 9:41am | posted by | 4 comments

Is public sector procurement killing marketing services agencies?

Is public sector procurement killing marketing services agencies? Is public sector procurement killing marketing services agencies?

Questions about the public sector procurement strategy adopted across the UK to involve both the UK and the Scottish Government, a partner of the Scottish Minister’s Marketing Services Framework, are once again being asked after several agencies appealed the final decisions, citing their focus on price as a major issue harming providers.

The UK Government announced on the 22 March its final ‘streamlined’ creative solutions framework, claiming that it would save around £3 million a year across PR communications, direct and digital marketing services.

While it could be argued that in these times of austerity, it’s quite right that the public sector be paying more attention to what it spends when it comes to issuing public messages, however the marketing services community itself has said that it is being harmed by the introduction of procurement into the appointment process in recent years.

The IPA has been highlighting the issues of its members, and while it admits that not all of its member agencies were unhappy with the final outcome of the UK framework process, the process itself had concerned all involved, the organisation told The Drum, describing it as ‘unnecessarily complex and time consuming’.

“By excluding vital elements like effectiveness and past success has led, we believe, to an over-emphasis on price,” explained Geoffrey Russell, company secretary and director for Media Affairs for the IPA.

Agencies with a great deal of respect from their peers such as Karmarama, Dare, Mother London, The Leith Agency and Newhaven have each lodged appeals against their omissions across differing frameworks - with many surprised not to see such experienced names left off the final lists. The reason for this, it has been claimed by many involved, was largely down to their pricing and the focus placed on cost against quality.

“Choosing agencies to develop effective communication campaigns is not like buying aircraft carriers or paperclips – and to adopt the same approach is unhelpful to everyone,” continued Russell.

“No agency, whether it has been successful or not, would want to be appointed because it was the cheapest – our members are concerned with delivering value, but divorcing decisions from experience and past work, inevitably means that price becomes a key differentiator - whatever Government officials might say.”

Several agencies involved in the tendering processes have complained to The Drum about the weighting of the process, and indeed, the Scottish Minister’s Marketing Services Framework is also having questions asked of the figures involved, with sources stating that the figures have been reassessed since the appeals were made, due to ‘anomalies’ being found. However, further ‘anomalies’ have also been discovered within the reassessed figures also, it has been claimed, opening up The Scottish Government’s procurement department to claims of being ‘sloppy’ and not ‘transparent’ - ironically the reason why procurement was introduced through EU legislation in the first place.

Another criticism of the procedure that has been pointed out on several occasions since the introduction of procurement into the framework appointment process, is the lack of consistency once agencies are named on the framework, with mini-tenders including creative pitching then leading to campaign and account appointments.

Said one industry insider involved in the Scottish tender process: “It’s obvious looking at the figures that a number of agencies have dropped their trousers to get on the roster by dropping their prices to a rate that they can’t service. If price is so important then all appointments should be made by the procurement department.”

The Scottish Government’s procurement team was approached for a response to such claims, but only offered the following response: "The tender exercise for the Marketing Services Framework Agreements have not yet been concluded.”

The challenges against each framework seem to have made little difference to the final outcome - although The Scottish framework could yet have a few more twists and turns should rumours of legal action holding up the final framework emerge to be correct. This could see the whole process delayed, meaning that the previous framework would likely be extended once again in order to cover, or, at worst, see the new framework thrown out entirely should it be found to be flawed.

How important the public sector is to the creative industry varies depending on location, but temperatures are high across the board with the amount of work put into the procurement process, and the lack of clarity that seems to come back following their conclusions.

The IPA found that applications to the UK framework took each agency an average of 167 hours each in order to complete the paperwork, which at an average £300 per hour fee saw agencies spend over £50,000 just to get involved. A total of 231 agencies put in bids for the Government Procurement Services roster, the Cabinet Office has admitted to the IPA, meaning that over £11.5 million in total was spent in hours by the industry in order to apply for the initial tender.

Asked whether the IPA believed there had to be change within the process, Russell confirmed this. “There must be a better way of running the selection process for advertising – and we would hope to find a constructive way of working with the various Government authorities to this end.”

The Scottish Marketing Services Framework is expected, following a delay of over two weeks from its initial announcement date, to be revealed on Wednesday (should no further delays be necessary).

Comments

8 Apr 2013 - 12:38
steve_christie's picture

Why is this being reported as an issue? Anyone who has been involved with any sort of Public Sector tendering knows that the emphasis has always been on price as opposed to effectiveness. Thats why its a tender, its designed to drive prices down. Why else would the government say that this will save them £3m per year, its not going to come from efficiencies of bulk buying!

The only reason this is even news now is that some of the big boys, like The Leith Agency and Newhaven, who have traditionally pretty much only had to turn up to get their place on the roster, have been omitted and they want to take their ball and go home.

The rest of the agency world gets judged on price on a regular basis, welcome to the club! The fact you're not getting to feed off the dripping roast now must really sting!

I don't agree with the Public Sector tendering system in the slightest. I know a lot of people who have to work with the system from within the public sector and even they don't like it! They want to be able to build relationships that add value and having to sometimes use larger agencies for jobs that don't require it, is costing them money so I think the 'saving money' rationale from the Scottish Government is a bit of a smokescreen.

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9 Apr 2013 - 06:26
johnmgleason1's picture

Public Sector selection processes absolutely focus much more on the "measurable" and "tangible" - and money (rates, fees, costs, discounts, etc.) are often the primary "measurable" on which these organizations focus. But this emphasis on procurement and costs/rates/fees are not only isolated to Public Sector reviews.

But, rather than pointing the finger of guilt and blame toward the "client" selection processes and procurement procedures which are certainly becoming more prevalent... (in my opinion and experience), I contend that the agencies and the broader agency community are more to blame than client review processes.

I see the title of this article more like: 'is it the incredible sameness and homogeneity of almost all marketing services agencies killing their own margins?' I am sure that I will stir up a great deal of commotion from all sides of the industry... let's talk about it.

As a former "relationship owner" of external design-, innovation-, creative-, and marketing-services for a very large, global, and savvy brand-centric corporation, I found the above to be true. It was astonishing how 200-300 agencies (per year) could be so incredibly similar in their messaging and communications - and yet CLAIM to be so unique and differentiated.

I often say... 'clients have been trained to be disappointed', because they are over-sold and over-promised... and under-delived. Candidly, the same is true of client's over-promising "partnership", the desire to change the game, and their real commitment to their agencies... but this is a different article and discussion.

Somehow, every agency can do everything. They all "over-deliver". They all mysteriously have the best people. They all have extraordinarily long client relationships. They all have proprietary processes. They all work with the most prestigious brands and clients. They were all founded on the basis that they wanted to be and do something different than their prior employers. They all have incredibly deep expertise in their clients' categories and industries. They all work globally. They have all won prestigious awards (or talk about how awards programs are not truly reflective of real creativity). They all are brilliant collaborators with clients and other agencies. And they all offer exceptional client experiences which can only be experienced and not explained - "so give us a try".

Based on my experiences, this reality of an over-supplied and under-differentiated marketplace is the key driving catalyst for the commoditization that has emerged through client review, selection, and procurement processes.

So, blame the clients if you wish. Blame the procurement teams, if you wish. But agencies should REALLY look in a mirror to ensure that they are not contributing to the deafening noise and sameness of virtually every other agency. Because (whether procurement is involved or not), PRICE is the differentiator in a commoditized market. And since there is so much apparent sameness... pricing, rates, fees, and costs will a significant driver of choice.

Having interacted with more than 800 agencies, I have found only 30 or 40 to have truly set themselves apart from the crowd. They stand for SOMETHING, not everything. They are focused experts in narrow areas.

Two last things regarding "differentiation"... 1) every agency CLAIMS to be different - and usually cites several reason why that are different... but if you have to specifically cite these differences, than it is not compelling or obvious. And 2) more important than being different, agencies should strive to be RELEVANT.

Thanks for letting me offer a different point-of-view... and go off-topic from the original focus of the article - Public Sector. I am happy to talk about my POV... and to learn with and from others'. Cheers.

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9 Apr 2013 - 10:48
stephen_lepitak's picture

Thanks for your points of view guys - appreciate both. It's a huge topic that I hear a lot about - with pricing the main gripe with agencies cutting their own throats. I doubt we'll see an upturn in general happiness within the sector around this topic anytime soon however.

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9 Apr 2013 - 17:05
danje15032's picture

Great commentary from John - I would like to add a few points...

If you create great work and manage to stand out from the crowd you will, rightly, attract a premium for your services. If the client is not willing to pay that premium then you have a choice...that's the beauty of an open market.

If you don't want to be subjected to a 'price led' selection process then avoid tenders like this one - the only reason this situation can even exist is BECAUSE agencies have been willing to commoditize their services over the years to win more business - it's an unfortunate situation but one that has been created by the industry.

Love the comment on 'Relevance' as well - anyone can be different but it's a lot harder to be relevant...

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