Welcome, Guest
Username Password: Remember me
Efficiency and Productivity
  • Page:
  • 1

TOPIC: Professionally led procurement leading the way in tackling public sector spend

Professionally led procurement leading the way in tackling public sector spend 5 months, 3 weeks ago #1

Public spending has always been high on the political agenda, but with a record deficit never has there been more focus. To help put this mammoth task into perspective, public procurement represents 40% of public sector expenditure and 20% of GDP- that’s around £5,000 for every UK tax payer.

The UK government is investing time, money and resources into how to make procurement more efficient and effective. Reports such as the Efficiency Review by Sir Philip Green have highlighted the level of disconnect in public sector spending. The report highlighted significant price variations across departments for common items and the inconsistency and poor quality of procurement data across departments. However there are many pockets of excellent public sector procurement practice and these provide a starting point for the dissemination of good procurement practice.

Government departments have been set tough goals on cost reduction and process efficiency so procurement teams will have to focus their energies and fine tune their skills to surpass anything achieved before. Now is the time for procurement and supply chain professionals to demonstrate what value they can bring to the table. In a recent report by Henley Business School and Future Purchasing “Why Public Procurement is Central to the UK’s Economic Performance .... and How to Transform It” five areas of best practice and innovation for procurement to focus on were highlighted. These are:

• Price management: many high impact “quick wins” exist, e.g. renegotiation of contracts, price benchmarking and levelling (removing the price disparities much ridiculed in the press), and much greater use of e-auctions. Other areas for price and contract innovation include a greater focus on changing supplier remuneration models, value based pricing and payment by results. This is all about restructuring price and price models.
• Cost management: there is immense scope to reduce complexity by rationalising “gold-plated” specifications, buying off the shelf wherever possible and standardising across common subcategories and platforms. But there is also a need for transformative cost savings that can come from unbundling mega contracts and re-engineering supply chains, particularly in complex projects and long-term maintenance deals in defence, PFI, infrastructure, rail, highways, capital equipment, IT and property. There is little cost transparency at the moment, with far too many examples of “black box” sourcing - no-one really knowing what is going on inside the contract. A stronger focus on post-contract supplier management is needed.
• Aggregation and shared services: procurement primarily operates on a devolved basis. There are between 25,000 and 40,000 relatively independent public sector procurement points across the UK employing 250,000 practitioners and up to 500,000 in total when the budget-holding, project-managing, programme-leading and commissioning community are taken into account. These half a million individuals spend £0.25tr of taxpayers’ money each year, but with minimal pan-government perspective. Many of these procurement points are far too small and fragmented, with inadequate resource to develop and apply best practice. There is strong evidence to suggest that intelligently designed, well- orchestrated and much stronger aggregation, collaboration and co-ordination needs to be applied through voluntary merger of small buying units, leveraging of procurement hubs and shared services groups, and rapid deployment of task forces and project teams when needed.
• Outsourcing: despite public perception that every outsourcing contract, particularly in IT, is a disaster, the reality is that there have been many successes. Research shows that there are substantial gains to be delivered in this area with extensive private sector provision being a considerable catalyst for change.
• Blue sky thinking in service delivery methods: there is immense scope for complete remodelling of service delivery. The welfare-to-work programme, structured around deferred payment by results and with extensive voluntary sector support, is an excellent example and potentially a new social model for service delivery. Local authorities can redefine their roles as enabling councils, commissioning rather than providing services. In defence, independent entities could be created that draw on world-class programme management to break the cycles of failure in equipment procurement. Free-standing, independent procurement agencies could be established for commoditised procurement spend.

In order for public sector departments and local authorities to engineer change for more efficient service delivery, legislation and funding mechanisms must also change so that new service delivery models can become a reality. For example, local authorities are restricted in how and with whom they can trade by their statutory make-up and this limits their ability to collaborate and to act commercially. Also the rules around the use of grants from central government have for the most part stifled innovation and these areas must be addressed to allow for change.

Having the right people in these roles is also a key measure for success and this can only be achieved by recognising the need for qualified professionals. Francis Maude has recently articulated the need to “transform the Civil Service into a modern, dynamic and innovative organisation and part of this process is to ensure that we invest in the right skills needed to ensure excellence in public services”. This emphasis on investing in skills is to be applauded.

There are many examples of innovative and strategic procurement in both central and local government but this culture has not taken root and good procurement practice has been slow to disseminate. This has been compounded by a risk adverse culture, difficulties in defining what constitutes innovation in procurement terms and insufficient capability in procurement skills, especially within and beyond Whitehall. Political will is at the forefront of change as is operational leadership of a collective rather than hierarchical nature. The signs are that the political will is there but the cultural/organisational changes needed are dependent upon leadership capacity and people capability.

The focus now must be on synchronicity and alignment, sharing of information and best practices, and building strong internal and external relationships. Professionally qualified procurement teams have these skills to lead the public sector to become best in class; the decision makers now need to ensure that they are given the tools, mechanisms and support to do so.

Re: Professionally led procurement leading the way in tackling public sector spend 5 months ago #2

Across London the requirements for procurement to better inform the wider community on what is currently going on is of paramount importance. Better communication is required to make people aware of existing and future arrangements enabling collaborations to be more achievable. Opportunities exist in waste and recycling, street lighting, housing, construction, property & employment law. By disseminating the many opportunities of various frameworks that exist across the wide area of services, this will in turn improve understanding of spend categories. The drive for this way of working will ensure greater attention to detail and seek to identify the opportunities that exist as providers (Major and SME) in order to provide better services.
  • Page:
  • 1
Time to create page: 0.18 seconds