A government contract can be a huge opportunity for the business that wins it but, as the collapse of Carillion earlier this year showed, it doesn’t come without risks.
As the founder and former chief executive of one of the first and biggest British outsourcing companies, Capita, Rod Aldridge knows a thing or two about what to watch out for. Here’s his advice.
"It’s very easy to get seduced to win these big contracts, but you’ve still got to deliver and the reputational risk is very high if you get it wrong. We always had strict discipline about what we were prepared to bid, our responsibilities and the risk we were prepared to sign up to, and we never moved from it.
You’ve got to understand the issues they’ve got in the public sector, and have some empathy for how they operate. I spent 20 years there before starting my business – I call it my apprenticeship – and 80% of our staff used to work for the public sector.
There’s a big difference between local authorities and central government. Local authorities are good customers – we found them much more receptive to us working as partners rather than as contractors, with joint objectives and visions. The great thing about them is that if you get one local authority interested in you, you’ll probably have ten or 12 others that you can market to behind it.
I think central government has become a very difficult marketplace. It’s become too clever on procurement, trying to drive a bargain and squeeze the margins, transferring all the risk to the person given the contract. I don’t think that is clever, and a lot of things have gone wrong as a result. Frankly, I wouldn’t go near it."
-- Empathise. The public sector certainly isn’t a monoculture, but it’s worth considering the effects of budget cuts and a long legacy of hierarchy. As ever, start by listening and consider hiring former civil servants, who know how it works.
-- Don’t be seduced. Big contracts look great, but the risks scale with the reward and central government drives a hard bargain.
-- Be disciplined. You have to be prepared to walk away from a bid if the terms are too onerous.
For more information
For an in depth account of the differences between the public and private sectors, read Paul Morrell’s account of his journey from 40 years in the commercial world to becoming the government’s construction Czar. For more advice on working with the public sector, see this article by Judicium’s Leon de Costa.
You’re Better Than They Think You Are by Sir Rod Aldridge (John Blake publishing) is out now.
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