Archiv der Kategorie: Governance

Governance covers regulations and control aspects.

Buy a pig in a poke

The price is rarely an indicator for good quality. Some people always buy the most expensive in order to believe that they get the best quality. Others always buy the cheapest in order to believe not to pay too much. The right approach is the best value for the price. For this purpose, it is necessary to look at the proposals in a structured way. Each role in the procurement process has its own view – Purchaser: maximum price reduction; Finance & Control: to pay as little as possible; Supplier: maximum price for minimum effort: Buyer: maximum value-add. But how to evaluate the pig in a poke?

KatzeimSack Piginapoke

On the one hand, the roles need a clear division of work. On the other hand enforces a structured requirements the quality and the comparability. The proposals should contain the complete description of the deliverables, the required contract elements and the prize.
The evaluation will then be done according the following aspects.

  • Selection criteria
    Based on the following criteria the detailed proposals are evaluated: Basic information, like e.g. information about the supplier, project organization, further products and services, costs, Compliance; Functional aspects, like e.g. the available functions, processes, data, interfaces, administration, IT.
  • Weight
    Since not all criteria are equally important, the individual criteria should be weighted beforehand, like e.g. 1=Standard, 2=Important, 3= Mandatory).
  • Evidence
    The traceability of the deliverables creates additional gradation of the proposals. For this purpose, the proven elements are rated 10 and incomprehensible 1.
  • Price expectations
    The internal estimation of the costs sets the limits for the offers. If an offer is considerably under the expected figures, important functions could be missing. If the offer is significantly above the estimated figures, unwanted elements could pollute the proposal.

Bottom line: The approach for the evaluation of the proposals should be clearly descriptive in advance, in order to get an objective evaluation as quick as possible. The clear division of tasks and the standardized requirement specification are the pre-requisite for an effective procurement.

Money still does not smell

The substantial difference between commercial and governmental economic activities is the fact that an enterprise cannot simply decide and collect its incomes, but it has to work and to negotiate with the customer for it. Taxes were always raised by various societal groups – called tribute, tithe, toll, indulgence or temple tax. Some people did not shy away from exploiting the most bizarre sources of income. A good example is the emperor Vespasian, who justified himself with the saying „Pecunia non olet “(Money does not smell). He had imposed a tax for the public convenience. Amazingly the same creativity survived until today.

Maut

Clients have the choice and adjust the prices simply by evaluating the relationship between price and performance of the offered products or services. If the ratio is not beneficial, they waive it – and the price decreases.
In contrast, the citizen has only occasionally the choice. By voting, they hand over control to political officials, who make in the course of their tenure what they want – well packed in statements like “We must only promise things that we believe that we can do.” „I believe that people understand“. In the absence of acceptance of the citizens for new taxes, they are called now income, fee, supplementary or special tax. Current examples are:

  • The extension of the solidarity surcharge
    The solidarity surcharge for the reunification was eventually accepted. But to maintain this supplementary tax is a good example, how politicians try to increase their budgets. If costs will occur in the future that should be taken by the society, then the right of digging into the pockets of the taxpayers is questionable – above all, if they cannot fend off.
  • Highway toll (Maut)
    Many countries have a fee for the use of highways – even for a few border kilometers. So far the collection of the highway toll is OK. A compensation for Germans car tax is certainly appropriate. How foolish to take back this compensation before the adoption. Thus, the toll is a hidden tax increase.
  • Cold Progression
    The cold progression is the thimblerig of the Treasury department. The citizen always has to pay extra and even does not receive an appropriate adjustment for the inflation of the past years. Eventually, the cold progression helps the government to reach the black zero.

The list of the examples could be extended, from the Riester pension to the fees for the health insurance. At the same time the employers are relieved with the justification that it secures jobs. This goes so far that enterprises can reduce their HR expenditures by benefiting from low wages and temp work. Are these the safeguarded jobs?

Bottom line: Politicians do everything possible, in order to increase their incomes at the expense of the citizens and lower the costs for the industry. This modern form of waylay will not function for a long time. The following generations will have to carry the bill. Will they then still show solidarity with the older generation? The consequences for the pension system are already foreseeable – certainly without consequences for the pensions of the politicians, who create the future problems today. Of course – money still does not smell.