Government Procurement Service – an innovative energy procurement approach

- December 11, 2012 10:31 AM
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I spoke to the Government Procurement Service (GPS) team in Liverpool recently, who act as a buying organisation for UK central government (and beyond), and one of their initiatives is now coming to fruition with a major announcement yesterday from Francis Maude (the UK Cabinet Office Minister).

GPS is the UK’s largest energy customer, spending £1.5bn a year on gas and electricity, and buying energy for 75% of the entire public sector, which accounts for 3% of total UK demand. Now, in the New Year, GPS will pilot the new  “Energy for Growth” scheme. It will offer renewable generators long-term contracts for around 2 per cent (£25M a year) of its demand.  As the Cabinet Office says:

 “For the first time ever, contracts will be offered direct to renewable generators for a set proportion of their capacity for up to 25 years. This will appeal to new projects which can bank on the guaranteed business to attract investment. We are aware of at least 150 projects which are currently stalled and may need finance”. tweet

If this works, GPS will look at applying these principles to half their total energy requirement. As well as helping renewable generators by providing this certainty, which in turn helps attract investment, “the pilot will save taxpayers around £155m over fifteen years by agreeing the very best price in return for the financial security offered. Also, diversifying suppliers, contract duration and pricing mechanisms will protect taxpayers from volatile prices”.

This is a good example – perhaps the best we’ve seen – of Government using its buying power not just to “get a good deal” but to drive a wider economic agenda, and as such, it is to be applauded.

And it is only possible because of the hard work GPS have done – in fact, to be fair, it goes  back to work OGC did under the last government and previous management.  Pulling together more and more of the public sector energy spend, including much from the wider public sector, has got GPS to the situation where this initiative is feasible.

Now in some spend categories, we could argue about the merits of the public sector taking a highly centralized approach – I’m not convinced it works in categories like Professional Services, for instance. But given the oligopolistic supply market in energy, and the need for deep category expertise, this category would probably be top of my list for true centralisation.

So GPS now has a skilled category team, who track commodity markets, and carry out serious research and analysis – work that no individual public sector organisation with one or two (if that) energy buyers can replicate. And with this latest pilot, they’re taking a further step and showing how public procurement can be used creatively for wider economic benefit. We’ll watch its progress with interest, but it looks like a very positive development.

 

Procurement Jobs at Spend Matters search4 procurement!

 

Comments

  • Sam Unkim:

    I’ve never liked social engineering in purchasing & it’s not my field, but surely, there are some inconsistencies in this press release.

    How can a “start-up” guarantee a great deal to GPS and wouldn’t anything but a flat £££ per Watt (across all potential generators) would result in the Taxpayer taking a hit somewhere ?

    And what if the volatile prices are going down as more frac-gas hits the markets.

  • Final Furlong:

    In fairness Peter, the great work started with a great team in NHS PASA, who had captured a large portion of public sector’s biggest energy user (and world’s third largest employer) – the NHS – and who then migrated to OGC in 2009/10 (when PASA closed) and were then rebranded under GPS. The team were deploying sophisticated market analytics back in 2005/6. Agree that it’s good to see the team taking another step forward.

  • Winning Tenders - Public procurement services:

    [...] See on spendmatters.co.uk [...]

  • Winning Tenders - Public procurement services:

    [...] This is a good example – perhaps the best we’ve seen – of Government using its buying power not just to “get a good deal” but to drive a wider economic agenda, and as such, it is to be applauded.See on spendmatters.co.uk [...]

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