Centralising procurement in Government moves on – part 2

We reported yesterday on the move of David Shields to Buying Solutions which seems to indicate the start of a major re-organisation of OGC / Buying Solutions in response to the UK Government's  ‘Centralising Category Procurement’ (CPP) programme.

As we said, we believe bringing together the expertise of Shields– and hopefully key members of his team – with Buying Solutions, and indeed other practitioners in central Government, in a co-ordinated manner is key if this initiative is going to deliver the £3 billion+ savings that it is targeting.

But centralising procurement looks easy to uninformed outsiders, but in practice it will be much harder to actually deliver. Here are a few of the challenges facing those involved.

The landscape

To declare an interest; I did probably the least value-adding consulting work I’ve ever done looking at the ‘landscape' of procurement organisations in Government a few years back.  Not that I wasn’t trying hard; it is just very complex and hard to untangle!  The full byzantine complexity of the issue probably deserves a post (or a whole series of posts) to itself.  Let’s just say that the various collaborative procurement organisations around the local Government, health and education systems ('PBOs'), even though they are in some sense at least publicly funded bodies, do not always take the wider view.  That is totally understandable from their own individual standpoint, but sometimes not in terms of the greater good.

Much depends on whether the CPP is really going to limit its focus to central Government (and perhaps their agencies, NDPBs) in which case the PBOs are not so key.  But if there is an ambition to drive some of these principles more widely, and turn the £3 billion into something much bigger, then the PBOs will have a role to play in determining success or failure.  I know this is going to be one of the key issues for David Shields; and he may need some pretty serious ‘air cover’ to make progress here!

Capability

There are a lot of good people in Government procurement.  They’re not all in the right jobs, or the right place though.  And I would imagine quite a lot of them are looking at the voluntary redundancy terms on offer and thinking “I could take my £50K + pay-off and make more in the private sector...”  Highly skilled category managers in areas such as IT or professional services can still make a fair bit more in the private sector.  Buying Solutions have at times struggled to fill senior roles; for instance, one key appointment was recently 'headhunted' for over a year before someone suitbale was found.  And being based in Liverpool and Norwich does restrict the candidate pool somewhat.   So making use of the talent that is available, and upskilling in an environment where money for training isn't going to be easy to come by, will be challenging.

Data and technology

Spend data has improved in the last couple of years considerably, whatever Philip Greene might say; the penetration into public organisations of serious solution providers in spend analytics and e-sourcing (such as Spikes Cavell, BravoSolution, ProcServe and Emptoris) has helped here.  But there are still gaps and a lack of consistency.  And technology will be vital, particularly if the idea is to move away from non-committed volume frameworks to competitive contracts and tenders for guaranteed business.  I can see more use of auctions, optimisation, dynamic purchasing systems and similar – in fact I can’t see how else the objectives can be achieved.

Market factors – SMEs, localisation etc.

Don’t believe anyone who tells you that there is no tension between aggregation / centralisation, and the desire to support small, local, new and innovative suppliers.  Of course there is.  It is not unmanageable or impossible, but it is not straightforward.  And if the big suppliers become convinced that ‘central’ procurement is really going to happen, they will offer some very attractive deals.  Going for a more diverse supplier base may well be worth it in the long run, but there are going to be some tricky balancing acts to be performed to get there.  Doing so will therefore require some real skill, determination and creativity amongst procurement teams.

So... Good luck to Shields, Collington, Littley and everyone else involved in this.  We will no doubt return to this topic, and when I’m feeling particularly incisive and brave, I will do an analysis of the PBO situation!

Voices (3)

  1. Peter Smith:

    You are so right as usual Christine – your point about the funding model is highly relevant and something I seem to remember suggesting (quite a few years ago) needed looking at to a previous OGC CEO with no success! Perverse incentives potentially at play again… I might add to that the point around some of the savings methodologies which have also not been helpful in terms of driving the right behaviour.

    And comms – yes, again, absolutely.

  2. Christine Morton:

    Also – in your landscape and capability sections you should note the need for communications. 1) There needs to be a communications strategy with stakeholders across the public sector to have access to the best strategies and contracts, and 2) the people behind the categories need to be able to essentially “sell” the ideas to other parts of government. This, to me, means no hiding behind the desk – it’s getting out there and pounding the pavement!

  3. Christine Morton:

    And what I would like to know is…. how, organisationally, Buying Solutions will manage with the change. I have often noted that Buying Solutions is by definition not neutral in advocating solutions to public sector bodies because of their funding model, which is that Buying Solutions gets paid based on contract flow-through. [Buying Solutions is self-funding as a result.] It would naturally be in Buying Solutions’ best interest to have its customers use their contracts more and more.

    However, in some categories where demand management would be perhaps a better solution, Buying Solutions is adversely incentivised to support such measures, because they would reduce contract flow-through, not increase it. Professional services is a perfect example of this.

    So how will the objective of “reduce government spending” marry with Buying Solutions objective of “increase contract usage?” Time will tell, I reckon!

Discuss this:

Your email address will not be published. Required fields are marked *