Money to burn: the procurement money saving myth

By Tender Spot

May 22, 2012 | 4 min read

I’m going to talk about advertising here, but it could just as well be PR or digital or media or exhibition stands.

But I’m talking about advertising because if you ask anyone what their favourite ad is, they’ll tell you. They’ll tell you their all time favourite, their current favourite, the one they hate the most and the classic one they remember as a kid.

Everybody in Britain loves advertising.

Ask any public sector department what they think of advertising, however, and they’ll tell you they’re cutting the budget.

Every Body in Britain hates advertising.

In particular they hate to be seen paying for it, which is why we have Procurement.

“Look we have a department dedicated to cutting our advertising spend. So that’s that sorted. Vote for me.”

But is it really cutting spend?

The first myth to bust is that Procurement saves money. Fundamental Truth No. 1 about public sector spending is that if there is a budget, it will be spent. All of it. Nobody in the history of public service has ever been given a budget and then at the end of the year said “I didn’t need it all, here’s some back.”

The money is getting spent, regardless. The only way less gets spent is if someone cuts the budget. And that’s not a Procurement decision.

“Ah, but Procurement ensures we’ll get more for our money.”

Does it? Does it really?

As I’ve said before, advertising is a competitive marketplace. Over the centuries competition has proven the most effective means yet devised by man for keeping prices down. And right now, times are tough. Agencies are sharpening their pencils just to stay afloat. Yet the process to Procure a closed list of a very few agencies for another four years continues apace. Even if it’s a snail’s pace.

So much for saving money.

One way to ensure lower costs is not to put agencies through a costly bidding process every time a job comes up. Because if, as a client, you choose to make the tendering process burdensome, be it in terms of time or resources, then someone has to pay. And it shouldn’t be the agency. They are businesses after all, and employers, and part of the economy you are so keen to promote.

Then look at the ever-widening spread of organisations being sucked into Scotland’s central Procurement programme. Typically they have had quite small marketing departments. But now that they have to invite tenders from everyone every time they run an ad, wade through all those tenders, and provide feedback and respond to every query at every turn, they find they can’t cope. So they employ more people. Solely in order to service the bureaucracy handed down to them from above.

That money comes out of the marketing budget, of course, which means less to spend on marketing.

I’ve also heard of a number of instances where organisations were happily working with their choice of agency and paying far lower costs than the agencies they are now compelled to use are charging them. Because that’s the contract rate agreed by Procurement.

Procurement adds cost.

“But it’s not about cost, it’s about value.”

Okay, what is “value”? Let’s say it’s the ideal balance of cost and quality. We already know that Procurement isn’t going to lower the cost – in fact quite the opposite.

That means it must be doing a great job of encouraging higher standards of advertising. Or PR, or media buying to digital development.

Yes, quite.

And all this is before we touch on the expense of supporting a burgeoning Procurement industry serviced by websites and consultants and seminars and more seminars.

The irony, of course, is that we live in a time where all budgets are under scrutiny and savings are being sought. And the tool of choice to do this? Procurement, of course.

So guess which budget is unlikely to be cut any time soon?


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