Centralising procurement in central government

We wrote last week about the 'negotiating immediate cost savings' Government procurement initiative.

The other major central activity going on at the moment is the drive to centralise procurement of common categories across central government.  I heard a little bit more about this last week, although I don't pretend to know all the details.

While I believe most of the big name  procurement heads in central government are involved, John Collington , Commercial Director of the Home Office, appears to be playing the leading role in this programme, which is focusing on 'common categories; stationery and paper, travel, consulting, etc.

Anyway, if this programme is to deliver real benefits, it has I think now been recognised (as per the recent NAO report) that new contracts with committed volume will have to be put in place.

Merely using existing frameworks is unlikely to generate savings; as the NAO pointed out, committed volume is what drives real benefits.  It may be possible in some cases to re-negotiate existing contracts based on a larger commitment - but that may run into issues around EU legislation (suppliers who don't get the new pan-Government contract may well cry foul).  So this will probably need a pretty extensive programme of new contracts.

There is quite a long list of categories under consideration.  Some make sense; you can see a 'better deal' being negotiated based on leverage for IT equipment, some software, or copier paper.  But there are no real economies of scale pan-Government on consulting contracts for instance; the smart negotiation needs to be done at assignment level.  So I cannot see what additional value a cross government consulting contract (or framework) is going to deliver that Departments can't do individually if they have the capability.  There may be some merit in pooling scarce procurement expertise; but care will be needed to avoid procurement becoming distant from the internal user (which we all know spells disaster).  And there may even be questions about whether procurement can 'deliver' the internal spend from some Departments - the CPO may say yes, but his / her users may refuse and go their own way.

There has been talk I believe of three procurement 'centres' based on existing departmental resources.  I am not clear whether this is to cover the sourcing process, the purchase to pay transactional processing or both? Any inside information on that most welcome.

That highlights one of the interesting issues here; there is no commonality of technology across even central Government (let alone wider Agencies, devolved government etc.)  So Oracle has the biggest market share in terms of ERP, but SAP is also a serious player (e.g. at HMRC).  In the sourcing space, things are even more diversified (and that's just central government, before we even think about local authorities, police forces etc.)  The Home Office are major Emptoris users; but some of their own Agencies are not.   Emptoris is also in use in HMRC and other organisations.  BravoSolution is widely used, including by Buying Solutions and many others .  ProcServe / Zanzibar - which started life an an OGC 'product' - has not been as successful as many expected, but is DWP's core sourcing solution.  And newer faces are appearing; Intenda have made successful inroads recently, particularly with MOD.

So if sourcing is going to be centralised, there will be some serious questions around capability and technology.  Will DWP trust the Home Office's capability - or vice versa?  What is the role of Buying Solutions in all this and indeed the OGC collaborative procurement teams? Will there be a common technology platform?

And in terms of the P2P side of things, my personal observation as a supplier is that some of the Departments who are apparently at the P2P  'leading edge' are a nightmare to deal with.  (It is not necessarily the technology, rather the processes, or the ability of staff to manage process and systems that is the problem).  If there is any selection of which Departments should take the lead in this, my one plea to Ian Watmore would be this - talk to some suppliers about what it is really like as a user!

So some progress is being made, but still more questions than answers is my take on things - will keep my ears to the ground.  And later in the week I plan to do a post on the critical success factors for any collaborative procurement programme; whether across different organisations or internally, public or private sector.

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