Comments on “Two Years On” and UK government procurement

We’ve got a series of posts coming up around public sector procurement, but it is going to focus on one particular aspect; how outsourcing (in the broadest sense) is changing the whole picture of public procurement. A dramatic claim ....

But before we get into that, I thought we’d go back to the debate that followed our “Two Years On” post last week, which sparked some high-quality discussion amongst our readers around how successful (or not) the UK government has been in terms of improving public procurement in the two years since they took power.

My view is that the centralising Whitehall  procurement initiative has focused very strongly so far on demand management – with all the issues that brings. It needed doing however, and we shouldn’t under-estimate its difficulty. The jury is still out on whether the new centralised approach will bring real commercial benefits – we will know that within the next year or two. The appointment of Emptoris and BravoSolution as providers of spend analytics and sourcing software respectively may in the medium term lead to some interesting and worthwhile outcomes as well, so we shouldn’t ignore that positive step.

I do also believe the negotiations with top suppliers work was handled pretty well – it is just a shame, as we said, that the results are so opaque, and it’s therefore hard to judge the real benefit. But there are also problems, identified by our commentators.

“I continue to worry having glanced at the recent public accounts committee report that suggested 2.3% had been delivered in central government in 10/11, with a further 19% required over next 3 years. How is that going to be delivered?” (that from "Elephant in the Room").

“...there is no all-encompassing vision, strategy or change model that embraces what needs to be done across public procurement..”

That incisive analysis came from Jon Hughes, one of the authors of the report on public procurement we featured last year.  But as Dan pointed out, and I think he’s spot on here;

“Quite simply, I suspect that “an all-encompassing vision, strategy or change model that embraces what needs to be done across public procurement” is far too great a task to be accomplished, which is why they have focused on central government spend for now”.

eSourcing Sensei wondered whether the low-hanging fruit savings through e-sourcing  had been achieved now, making further targets look tough  – but  I think he probably over-estimates how much has been done in that field! But he did also say:

“This also leads me to wonder whether the government really understand what they are spending and with who and where and on what”.

Well, it’s getting better but not there yet! Anyway, thanks to everyone for great comments and debate anyway -  do have a look here.

My main concern is the lack of any over-arching focus across the whole >£200 billion annual public procurement spend. The “central Whitehall categories” work covers £10 billion – that’s 5% of the total. Now, as Dan says, perhaps it is impossible for Francis Maude to try and “manage” this, hence his deliberately narrow focus. But with nobody in the centre taking any ownership of this challenge, huge though it may be, that leaves the coalition open to charges of missing a major opportunity when we approach the next election.

It’s also indicative of the tension between control and localism, which the government hasn’t really resolved -  promote free schools, but tell them they all have to teach English history; tell local authorities they’ll be released from the dead hand of Whitehall, then shout at them if they produce a council magazine...

And that tension affects procurement too, with the dichotomy between bigger national and regional contracts yet a desire to support local contracting. But the way Maude has “resolved” it is very much to centralise Whitehall, and let the rest get on with it. (The other aspect of that tension is the small supplier / large supplier issue, which again has not been clearly resolved or even analysed properly, despite some good but limited work from Cabinet Office).

One final point – “life” talked about 80% of public sector spend being staff. That actually varies considerably – in the Police and Schools, that’s about right. Health it is more like two thirds on staff; local authorities it is often close to 50:50, and it goes right down to an organisation such as the Highways Agency where the third party send is actually more than the staff costs.

So certainly, the further efficiencies required will take much more than just procurement savings. But is the government doing everything it can to make sure that better procurement contributes as much of the required saving as possible, rather than cutting heads and services further?

That’s the question that will be increasingly asked as we approach the next election. And at the moment, the answer is arguably “no” once we move beyond the narrow Whitehall focus.

First Voice

  1. Sam Unkim:

    Well at least NHS procurement as been put sorted in the last 6 years

    http://www.supplymanagement.com/analysis/features/2006/what-the-doctor-ordered/
    “Elsewhere, areas such as IT and stationery, which have a large number of suppliers, will be rationalised. According to Bennett, it is “inappropriate” to have options for 19 calculators or 20 office staplers. “The NHS is paying for that level of choice.”

    2012
    http://my.supplychain.nhs.uk/catalogue/search?LastCartId=&LastFavouriteId=&query=calculator

    We now have the Option of 453 calculators and 300 odd staplers

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