Hughes / Day report on public procurement, part 2 – “Spend”

We introduced recently Why Public Procurement is Central to the UK’s Economic Performance.. And How to Transform It,  which you can download free of charge from Deficit-Reduction.com. It's the recent report from Jon Hughes of Future Purchasing and Professor Marc Day of the Henley Business School which looks at ideas, some radical, for the future of public sector procurement.

Last week we started looking at their six “pillars” in their report, when we featured their “Value” section. Today we’ll look at the second pillar, “Spend”.

They start by talking about their dislike of "arbitrary targets.. (which are) most unlikely to be successful or supported", but the authors do believe that broad goals of 2-5% saving a year of "actual bankable cost savings should be eminently achievable". They also comment that no more than a fifth of total public sector spend should be managed from the centre.

The report suggest “framing broad but explicit goals and milestones for total procurement” which could be reviewed annually. This programme should be owned by a senior Cabinet Minister, and supported by scrutiny from the Office for Budget Responsibility.

The authors move onto a thought-provoking section – they have identified 15 “mega-categories” that account for 90% of annual government spend. They’re pretty broad categories mind you - “Clinical and Medical” for instance, or “Professional Services,” which covers a very broad church of activities. But nonetheless it is interesting to see how a huge proportion of the total spend can be grouped in this way.

As they say, the overall half-trillion pounds (if PFI is included) of spend under consideration looks almost too much to grasp, but categorisation like this does start breaking it into manageable chunks - “eating the elephant”, as they say.

They also agree with the ERG  (Cabinet Office) intent to build a UK public procurement data warehouse. We wouldn't disagree, but we're a little worried by the time it is taking. OGC had made reasonable progress on this pre-election and we don't seem to have moved on much, given we've had 18 months of elapsed time. But the intent is good.

Anyway, back to the report. Hughes and Day them take us through the approach to the spend, from defining the mega categories, working out the links between them and the sectors (health etc), including exposing the PFI “black box” expenditure. They note the importance of both the top 100 key suppliers to Government and the need to support smaller firms SMEs.

Towards the end of this section, they state that gathering and analysing data, and harnessing it within improvement change plans, is as much a cultural and behavioural transformation as a functional and technological one, which is a perceptive comment I think, and perhaps particularly  in the public sector, which has not historically been very "data-driven".

Where I may take issue somewhat with the report is when it says “organisations need to beware of pursuing overly complex, all-encompassing systems, particularly starting from a low base". I know what they mean in terms of flexible and adaptive models being better – but there is much that is inherently big and complex to consider if we're serious about approaching the entire public sector as the target for this sort of change programme.

Finally, they look at some case studies, and conclude that:

“... the success of any supply management programme depends on access to well organised spend data..data should inform how an organisation positions itself in various supply chains using key measures of business value".

As with so much of this report, that's highly applicable to both public and private sector, which makes it well worth reading for any procurement person, whether or not you're likely to personally get involved in revolutionising public procurement!

More next week.

First Voice

  1. Rob:

    Jon and co have hit numerous nails on the head. They also mention Commissioning in Health, PFIs in Health etc. If that wasn’t enough, take a look at this (just sent to me). It’s enough to make you weep… 75,000 contracts to be novated from the existing PCTs.

    http://www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/documents/digitalasset/dh_131033.pdf

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