Public sector procurement under scrutiny

Published on Friday, 11 July 2014 11:55
Written by Paul Tomany

Over the past two years we have seen public sector procurement coming under increasing levels of scrutiny. It's hardly surprising. In an era of austerity it's one area that offers huge potential for greater efficiency with the added bonus of providing savings without the pain of job cuts.

Back in March the communities and local government select committee reported £1.8bn a year could be saved by councils through greater collaboration on the purchase of goods and services. A year earlier the National Audit Office came to a similar solution with regard to central government procurement.

The higher education sector has seen arguably the most explicit focus on collaboration. In 2011 a review of efficiency and effectiveness across the sector called on universities to collaborate on 30% of most areas of non-pay spend that good procurement can influence.

The sector has and is making steady progress towards that target, in part thanks to well-established regional purchasing consortiums like my own, North Western Universities Purchasing Consortium (NWUPC). Consortia have proved highly effective in using institutions' combined spending power to drive better value from suppliers of a wide range of goods and services – covering everything from high value lab equipment to stationery. Purchasing consortia are nothing new, it's an approach found across the public sector and some have been around since the 1970s. However, some have evolved more than others.

For collaboration to be truly effective you need buy-in from all members of your consortium. There's very little point in drawing up a contract that no one uses. And yet in the public sector we still see framework agreements for a particular area of spend created with little consultation with the people it's intended for.

These 'let and leave' contracts assume that organisations will use them simply because they are there. Worse still, some will claim unrealistic levels of potential spend. They go out and say, for example, there will be £50m of spend on this contract and end up being lucky if there's £5m.

It matters because not only are potential savings missed through lack of collaboration but also bad blood is created with suppliers who have signed up to framework agreements expecting a certain level of business. The consortium and its members lose credibility and this fuels distrust with suppliers who may be reluctant to offer competitive prices in the future. Suppliers would prefer to win a £5m contract when they know they have a good chance of getting that £5m than a £50m contract that they don't believe in. It inadvertently amounts to deception and can be very damaging.

NWUPC, which is collectively owned by 22 universities in north west England, north Wales and Northern Ireland, has pioneered a simple but effective way to ensure contracts are well supported. It asks its members to pre-commit to using contracts before they are released to the market. Of those that can commit, 90% do so. Pre-commitment forms are sent to heads of purchasing and category managers at each institution asking them a series of questions around how much money they expect to spend through the contract, their preferred suppliers and any particular requirements they might have. By involving them in the process of creating a contract it not only engenders an expectation that they will use it but also ensures that it's fit for purpose. Better still, it enables NWUPC to go to suppliers with key information about the customers they will be working with. This builds confidence throughout the supply chain and enables suppliers to provide a better, more tailored service to the universities. After all, effective procurement collaboration isn't just about buyers working together – it's also about how they work with suppliers and contractors.

Having pioneered pre-commitment for more than a decade, it's pleasing to see others gradually adopting the approach. But more need to join them.

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