Should you be wary of procurement?

As procurement becomes more prevalent in agency relationships, Robert Gray asks how the bean-counters should be treated

British Airways' announcement that it was reviewing its European PR account and 'applying advanced procurement principles' (PRWeek, 15 May) illustrated how far procurement departments have come from the days of simply buying stationery and IT.

Having shaken up ad-land and direct marketing in recent years, these departments are turning their attention to PR services, including agency selection, contract negotiation, relationship management and, most importantly, performance assessment and pricing.

Such is the rise of procurement that the CIPR is preparing a guide in association with the COI and Chartered Institute of Purchasing and Supply, to be launched at the CIPR's annual conference on 9-10 November. It follows advice published by the PRCA and the US Council of Public Relations Firms.

World of suspicion
'Lots of PR people don't understand what procurement people are after,' says CIPR head of public affairs Francis Ingham. 'What is available is either too brief or too academic.'

Fear is rife. Many agency heads and new-business managers feel uncomfortable with the idea of margin-squeezing procurement officers muscling into their field and threatening profitability. 'They do everything from buying paper clips to handling multi-million-pound contracts, so what do they know about PR?' asks Citigate Dewe Rogerson MD Deborah Saw. 

Others, though, view the situation differently. 'Although there are more and more procurement professionals, they do not seem to have much influence over purchasing decisions when agencies are being selected,' argues Eloqui Public Relations chief executive Chris Genasi. 'Their role seems to be to screw you down after you have been awarded a contract – when, in fact, you are in quite a strong position.'

Liz Cullen, PR manager at CIPS – the  qualification body for purchasing and supply chain professionals – says agencies must accept that procurement has arrived and will affect the way they work. She insists there is a 'growing demand' for procurement experts with knowledge of PR, with some agencies encountering procurement professionals at 90 per cent of their pitches.

'Procurement officers and marketing services suppliers have long eyed each other with some suspicion – based largely on a lack of understanding,' says Cullen. 'But these different professions can be an effective combination. To work well, both sides have to understand the other's perspective and discipline.

Cullen argues that getting procurement involved from the earliest possible stage is the best way to maximise its benefits, and the better alternative to fear. This way, she argues, it can help to produce a clear brief that aids everybody's understanding. Although an important role for procurement is to help the client manage its spend, Cullen claims that agencies can benefit from working with procurement specialists to manage their own costs. She also says procurement can act as a mediator between client and agency in the event of a crisis. 'Having procurement working alongside agencies should provide the evidence of ROI for clients, on which they can base future campaigns and strategies,' she adds.

Porter Novelli UK managing director Jean Wyllie agrees that one of the effects of procurement is encouraging agencies to be more rigorous, whether in terms of creativity, measurement or financial management.

One common problem in the PR industry, she feels, is that senior practitioners may lack the financial management expertise of other business professionals. 'Increased involvement of procurement specialists should encourage PR consultants to develop their skills
in terms of financial planning and budgeting,' she says.

But she warns: 'If the procurement professionals involved in the decision-making process have a limited understanding of what PR can and can't achieve then this creates problems. If a company focuses too much on getting PR for the lowest possible price, they are losing out. The smartest organisations involve procurement specialists who understand the service they are buying. This means they will choose the agency with the right mix of talent, creativity and value.'

In this respect Saw says agencies should take responsibility in educating procurement officers about what they do, thereby turning the perceived 'foes' into 'impartial referees' in the agency-selection process.

This sentiment is echoed by Capgemini procurement transformation senior consultant Tom Casey. He argues that while marketing directors and in-house PR chiefs are  good at managing relationships, large, drawn out cost negotiations are better managed by a 'neutral' party. According to a recent Public Relations Society of America survey (see box), 55 per cent of agency respondents felt the procurement process helped to prove PR's value to senior management, while 74 per cent said it increased efficiency.

'Problems often occur around roles and responsibilities between marketing/PR and procurement professionals,' says Casey. 'It is understandable as historically the marketing/PR professionals were free to get on and do their stuff without legal or procurement interference.'

But some backlash about procurement officers 'getting in the way' is already being noticed. Rainier PR managing director Steve Earl, who says 50 per cent of his pitches now go through a procurement process, has noticed a growing number of smaller companies turning to procurement and then wishing they hadn't. 'Sometimes procurement officers become too much of an irritant, leading the marketing or PR team to encourage agencies to pitch directly to the managing director or CEO,' he explains.

Procurement slowing things down at times when speed is desirable has not gone unnoticed by others – not least in the reams of
paperwork created. 'On occasion, the amount of time it took to get a proposal through, particularly where it would trigger a tender process automatically, was an issue for the in-house team,' says Kinross & Render executive chairman Sara Render.

'If the relationship the agency has with procurement isn't good, or the process is notoriously slow, proposal writers will find ways of packaging PR spend into smaller component parts so that procurement does not have to get involved.'

Whether acting on this advice will protect agencies from their primal fear – being driven down on price to unsustainable levels –  only time will tell. Meanwhile, a handful of marketing services suppliers have been hitting back by recruiting ex-procurement professionals to bolster their negotiating power.

Streetwise dealings
Tina Fegent, formerly head of purchasing for global marketing services at Orange, is now commercial director at ad agency Lowe, having previously worked for Grey Advertising. She thinks agencies need to be more savvy at dealing with procurement teams. 'If you let yourself get screwed down you can't blame anybody else but yourself,' she says. 

But there is also a growing band of specialist freelance consultants in the field, such as Eoin Lonergan, providing procurement training and counsel to PRCA members. Lonergen warns that some procurement professionals assume PR agencies to have the same income structure as their advertising counterparts, which clearly is not the case – something PR agencies need to prepare for when they talk to procurement people.

And, while it may not be something that agencies want to hear, Lonergan claims the advantages of dealing directly with procurement professionals outweigh the benefits of trying to bypass them. One such advantage is that procurement professionals tend to stay in their posts longer than marketing directors. 'You are more likely to get your money if a procurement officer signed the contract than if you got a verbal agreement from the marketing guy in the pub,' he adds.

Lonergan concludes: 'Procurement professionals are more likely to honour payment by results. Procurement people don't lie, but marketing people sometimes do.'

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