Legislation to drive use of central purchasing bodies – a very odd idea

We featured yesterday the aspect of the new EU procurement regulations that enables governments to legislate to make organisations to use specific central purchasing organisations (such as Government Procurement Service / Crown Commercial Service or regional buying organisations). You can download the paper from the SOPO website here.

The discussion document (available here) seems to suggest that Cabinet Office wants to do this to “reinforce the existing mandate on central Government departments to procure common goods and services through the new CCS..”

That raises a lot of questions. Here are those that immediately come to mind.

  • Is the government going to impose regulation and the possibility of legal action on its own organisations, staff and perhaps even Ministers? Who would trigger an action – and is it really feasible for Cabinet Office to ‘sue’ MOD or take DWP to court if they didn’t comply?
  • Does the Cabinet Office really want to create more legal ‘red tape’ for its own government organisations – this government is supposed to be committed to getting rid of bureaucracy, not creating more laws (that Europe is not insisting on!)
  • Will every public body affected by this need to create a new role(s) – ‘Procurement Compliance Officer’ – whose job will be to make sure no-one in the organisation buys a pencil or a laptop cable outside the designated Cabinet Office contract? If departments are mandated to use CCS for, let’s say stationery, and a junior DWP clerk in Carlisle buys a pen from WH Smith, has DWP broken the law?
  • There is another provision in the new Regs that says Member States cannot prevent contracting authorities from using centralised purchasing bodies in other countries – how would that stack up with a mandate to use CCS?
  • Would the law still apply even if CCS increases its prices and margins so that the entire Cabinet Office budget can be funded by profits made from other departments?
  • How do you keep CCS on the ball, constantly striving to do a better job, and providing great  value for money when they know that their ‘customers’ have no choice but to use them? (I always thought procurement people didn’t like monopolies).
  • Might Cabinet Office be tempted to extend this to  wider contracting authorities – but would they have the power to force Hospital Trusts or local authorities to buy from CCS? I suspect there might be a judicial review or two (Trusts are pretty independent entities) if they tried, but interesting nonetheless.

The whole idea of legislation sounds crazy to me, whatever you think of the strategic merits or otherwise of centralisation. So here’s the final question - does Francis Maude really want his legacy to be as a bureaucratic centraliser in the tradition of Stalin? The centre knows best, Uncle Francis has your best interests at heart, and if you don’t like it, it’s off to the gulag with you – well, Southwark Crown Court maybe.

Voices (8)

  1. life:

    http://europa.eu/rapid/press-release_MEMO-14-20_en.htm

    “13. The creation of single national oversight bodies was not accepted by the co-legislators. Has anything changed as far as governance in public procurement is concerned?

    In order to improve the enforcement and implementation of EU public procurement rules in the Member State, the Commission had pleaded for an ambitious approach on governance and the necessity of a specific operational structure at national level, in charge of monitoring, implementation and control of public procurement. As both the Council and the European Parliament opposed such structure, the Commission agreed to limit the Directives to the identification of the tasks to be fulfilled while leaving decisions on the internal organisation to Member States.

    The measures on governance agreed upon provide for increased monitoring at national level and for Member States’ obligations to transmit to the Commission every three years a monitoring report covering information on: the sources of wrong application, legal uncertainties, level of SME participation, prevention, detection and adequate reporting of procurement fraud, corruption and conflicts of interest and other serious irregularities. This should help reducing the errors caused by the incorrect application of public procurement rules in the handling of EU funds.

    On the request of the Commission and not more than every three years, Member States shall also provide information on the practical implementation of national strategic policies.”

    Dodged the bullet?

    1. Dan:

      Thats a different issue. A central buying organisation sets up contracts for other organisations to use. There are plenty of these arond currently.

      What you’re referring to a central authority to govern how procurement is carried out in its country. The UK doesn’t have one of these, though the old OGC informally carried out some of these functions

  2. Robin Hunt:

    Perhaps, Peter, you should repeat the story you told at the COUP Liverpool conference about when aggregation isn’t necessarily best value for money. Procurement of wheat for Mars, if I recall correctly – unit price went up once a certain quantity threshold was reached?

  3. Phoenix:

    I can see a few problems with this.

    In my experience, framework agreements work best when there are fewer suppliers on it. They compete harder to win a place because they know they’re in with a fighting chance of securing a decent chunk of the business. And it’s much better for buyers who don’t then have to invite long lists of suppliers to tender in mini-competitions. But if framework agreements became mandatory, or the number of central purchasing bodies (CPBs) were to be limited, then the economic picture changes. We would be effectively closing down the market for public sector business to all but these few. And that might mean that some suppliers – perhaps many – wouldn’t survive the three or four years before the opportunity to bid comes around again. What effect might that have on the market? On capability? Or on long-term competitiveness?

    Outside central government, other public sector CPBs exist only because their customers want to use them, not because they have to. Hospital trusts, local authorities and universities have a choice whether to use their respective CPBs, or walk away. CPBs therefore have to stay on their toes and provide a quality, competitive service themselves to remain relevant. If they were to become mandatory, what then? It wouldn’t matter a jot how good (or bad) a job they do anymore, because the punters would have no choice but to use them. Result (in time): a widespread loss of professionalism, quality, competitiveness and value for money.

    I’m a firm believer that in MOST cases, scale economies do get you a better deal – up to a point. But there is the Law of Diminishing Returns and there is that point where just super-sizing procurement starts to bring cost back into the equation, because of the negative impact on efficiency, service, quality and competition in the longer term.

    Limiting the number of CPBs may be laying far more at the altar of buying power than the God of Scale Economies can handle.

  4. John Diffenthal:

    I note that contributions to the consultation ended at close of business 13 January (point 5, page 3). Who was consulted?

  5. Dan:

    This assumes that a) aggregation ALWAYS leads to better value for money and b) a centralised purchasing body is always capable of exploiting that aggregation.

    These are fallacies however a) there comes a point where continued aggregation doesn’t achieve better vfm and just becomes unwieldy adn b) it depends on the quality of the procurement staff. I know there have been instances in the past where we’ve achieved better vfm on our own rather than use an existing framework through a centralised purchasing consortium.

    A better option would be to mandate the use of a central purchasing body but allow a number of such bodies – this would allow for the benefits of aggregation while maintaining a level of competition. I’m pretty (cynically) sure that this would be one case where Francis Maude isn’t in favour of more competition as it would undermine the vaunted CCS.

  6. Dave:

    This is very interesting with all sections of the public sector being tasked with increasing the amount of collaborative procurement – which according to Central Government MUST provide better VFM.

    It would be interesting to see how this approach will dovetail with Government’s other much publicised policy of increasing the spend with SMEs.

    Are you able to download the document as the links on this page and the one on the previous article don’t work for me.

    1. Peter Smith:

      Dave
      I have added the link to download it, intended to do that so thanks for pointing out!
      Peter

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