So the scaremongerers have scuttled under the rocks and the cloud of doom and gloom known as Brexit is upon us. The list of fear for procurement starts to build: higher prices, change to contract law, future contracting methods, access to EU suppliers, exchange rates and access to labour. The impact on procurement practice and relationships are manyfold, however the reality tends to be less innocuous than the hype.
There have been several examples of Brexit messages sent out regarding sudden price hikes that were ‘possibly’ going to happen or ‘could’ happen. In one instance a thirty percent increase in material prices was predicted. The reality is that prices may see some fluctuation, but only as much as would be expected within volatile markets. Huge increases are unlikely and unsubstantiated.
Contract law, particularly for the public sector, relies heavily on EU directives. The thought that Brexit would cause a sudden chasm in legal documents is unfounded. Many EU directives have already been encapsulated in English law and other agreements including those with the World Trade Organisation (WTO). Existing contracts should have made provision for the law under which the contract is governed.
In the future contracts may be governed by a simpler form of directives. These would be based on the original EU rules but would be developed to enhance the ability to choose suppliers quickly and effectively. Instead of Most Economically Advantageous Tenders (MEAT), in theory a balance between quality and cost, it would be possible to measure success through Five Rights Applicable Tenders (FRAT) within which quality, quantity, price, place and time are all given consideration and lowest price is finally consigned to the dustbin.
The Fear Musketeers also seem to have assumed that all trade with the EU would cease to exist after Brexit and that Europe would not wish to trade with us. Some procurement professionals with European suppliers are concerned that they will lose key sources of supply. European suppliers will continue to do what they were doing before Brexit: make money by dealing with buyers including those in the UK, they would not bite the hand that feeds them.
Brexit has caused a fluctuation in the value of the pound and exchange rates have had an impact on existing agreements. To those who did not prepare for such a situation this will come as a shock. To procurement veterans who deal with overseas agreements on a regular basis would have seen this as a potential risk and taken precautions such as fixed exchange rates or forward contracts.
A shockwave has been sent through the UK labour market with the fear that Brexit would see the loss of European labour that has been made available in Great Britain. Procurement concerns regarding the availability and cost of labour are once again exaggerated as there are no immediate plans to limit access to existing migrants. The Government would be misguided to reduce available human resources when they plan to develop trade and increase UK production.
Brexit would not have caused such panic where procurement practitioners have routinely carried out risk analysis of their supply markets. Making use of such tools as PESTLE or STEEPLE analysis combined with risk grading and risk registers would have identified potential changes in the environment and produced plans to mitigate or eradicate such risks.
If you are interested in how to undertake a PESTLE or STEEPLE analysis and how it can be used to identify and reduce risk in the supply chain, why not develop your procurement knowledge and skills further with the CIPS Diploma in Procurement and Supply. For more information about this qualification or the range of procurement courses from The Oxford College of Marketing, call one of our course advisors today on +44 (0)1865 404900 or email firstname.lastname@example.org.