Procurement and Commissioning – is there REALLY a difference?

This week we’re going to stop going on about central government procurement and the arguments around centralisation. Instead we'll look at an issue is arguably a lot more important to public sector procurement than the dispute over who buys copier paper for DWP or MOD.

That issue is Commissioning, and how it relates to Procurement. That has become important  in a number of sectors, perhaps most importantly health (commissioning of health services from hospitals etc), and local government (social care, children’s services etc).

I want to explore what Commissioning is, and look in some detail at why it is positioned as something different from procurement.  Now some people argue terminology doesn’t matter, and they’re right up to a point. Clearly, the most important thing is that the public sector does “it” well, whatever “it” might be. But if we don’t even have clarity around what Commissioning really is, if key stakeholders don’t understand how it relates to procurement in terms of processes, skills required and so on, then it’s hard to see that we’re likely to see great performance.

So let’s get into some analysis, and start by looking at procurement. There are three key stages to what we’d call the strategic sourcing /  procurement cycle – and note we're not talking about the transactional or P2P process here.

Stage 1- Identify and understand the requirements / specifications , and analyse the market to establish whether it can meet the requirements.  If necessary, carry out market making activities. Consider the market and requirements in order to develop the most appropriate sourcing strategy.

Stage 2 - Select the supplier(s). That may or may not involve a competitive process, such as a formal tendering  exercise, and / or negotiation. It also involves development of a formal contract in most cases.

Stage 3 - Manage the contract and the supplier to ensure they deliver against the contract, and that risks and opportunities are managed, including changes in requirements through the contract period.

Now, when we read documents describing commissioning, the process would appear to fit this model perfectly. In an area like health, there is rightly a lot of emphasis on understanding the needs of the recipients of medical services, and of matching this to what is available in the market, or creating new supply options if they are needed. That’s our stage 1, so no real difference between procurement and commissioning there.

Another possible differentiation is that commissioning involves "designing" the service. That's something I've heard from local authorities - but the cynic in me says this is what you and I might call "writing the specification".  But even if it is more than that, it is not fundamentally too far from the procurement development task of (for example) looking for a supplier to handle a tricky IT outsource or a complex global marketing assignment. The same basics of understanding the needs and the market, and aligning the two, remain.

And even where there is some genuine creativity involved, that will usually be an iteration between what is wanted and what is available in the market - something buyers of complex services or products have done for years.  Twenty-five years ago, when I looked for providers who could manufacture Easter Eggs for my firm, there wasn't a ready supply market in place, and we had to "design the service".

Equally, post-contract management in a "commissioning" environment stresses the need to monitor and measure supplier performance, manage improvement, and meet changing needs. Just as we would with our facilities management provider or a supplier of key auto parts in that industry.

So, despite the claims of commissioning being different from procurement, the actual core processes do not support that argument.  And of course Francis Maude's apparent misunderstanding of what procurement really is arises from his defining "procurement" as simply the middle part of our three core elements.

In order to position commissioning as a separate process and topic, others have made this same distinction. The Department of Health "world class commissioning" initiative produced some very good intellectual property (guidance, training and so on) but again defined procurement as "just" the central part of the process. But as we've shown, skilled buyers of virtually any category would recognise that three-stage, end to end nature of a best practice procurement process.

We therefore conclude that the fundamental processes of procurement and commissioning are very similar. So in part 2 we’ll look at what is being bought and see if that suggests some more fundamental difference.

Voices (16)

  1. Trevor Black:

    Commissioning is a term invented by those who do not understand procurement. It’s akin to Accountancy being called Book-keeping or Auditors being called Account Inspectors. If the definitive definition really is ensuring that the product/service procured really is fit for purpose then I am about to go into a deep depression as I thought that I have been a procurement professional all my working life when really I have only been a commissioner. I apologise profusely for this fraudulent behaviour and will start retraining immediately.

  2. Clare:

    Really glad to have found this article. I googled ‘difference between commissioning and procurement’ and this arrived near the top of the search results. I work in the health and social care field in local government as an independent professional/facilitator, and have always understood the difference to be that suggested by Gary Bandy. However another view was given to me yesterday by an ex-director of a private company, who said that instead of commissioning happening first to design a tender for the service required, it is the act of ensuring the product/service bought (procured) actually works as specified. At least the views proposed here are in support of my understanding as I was beginning to think that I was completely wrong! It’s clearly not at all straightforward.

  3. Alison Smale:

    Here in Wales childrens commissioners have worked closely with procurement colleagues to implement collaborative frameworks for looked after childrens placements. Following a detailed needs and market analysis, market sounding and then tender, the Childrens Commissioning Consortium Cymru, a partnership of local authorities are now working with providers to facilitate market development and ensure together outcomes for children are being met. We have developed collaborative contract managment to support collaborative provider performance review, risk managment and 360 degree outcomes tracking developed in partnership with young people with care experience.

    1. Helen Oliver:

      … and all using electronic procurement tools too 🙂

  4. Dan:

    From the National Procurement Strategy for Local Government 2003 – 2006, as published by the then Department for the Officer of the Deputy Prime Minister:

    ““Procurement” is the process of acquiring goods, works and services, covering both acquisition from third parties and from in-house providers. The process spans the whole cycle from identification of needs, through to the end of a services contract or the end of the useful life of an asset. It involves options appraisal and the critical “make or buy” decision which may result in the provision of services in-house in appropriate circumstances.”

    Seems like ‘commissioning’ covers something that was already understood to be covered by procurement

  5. Dave Orr:

    Commissioning does not equal outsourcing/privatisation!

    Whatever happened to looking at the in-house service and considering improvement or in-sourcing as well?

    This article appears to have been written with an in-built assumption that any public body with a commissioning mind-set is privatising a service, regardless of the cost/performance of the current service!

    Whatever happened to base-lining the existing service?

    SOLACE (Local Authority CEOs) has produced a rounded paper called “When the salami’s gone (SOLACE guide to commissioning and sourcing)” here:

    http://www.solace.org.uk/library_documents/CommissioningReport-salami-Oct2012.pdf

    No wonder staff morale in Councils who proclaim “commissioning” as the new religion plummets.

    How does “commissioning” differ from “strategic partnerships” or “joint ventures”?

    Somerset County Council have sworn allegiance to a “commissioning model”, yet remain in denial about the very same contract letting and management skills required that were so demonstrably absent in the failed Southwest One joint venture.

    Or are they all terms to avoid expressions like “privatisation” or “outsourcing” entering the public’s perception – especially NHS?

  6. Gary Bandy:

    My view is akin to John Littlefair’s. What you describe in the article seems to me to come from the view that something needs to be procured. I would say that Commissioning is what happens at Stage 0 in your model. It is concerned with identifying what the public wants and/or needs and making decisions about how to meet them. Sometimes that will mean employing people, or it might involve brokering other parties to do the work, or it might involve changing people’s behaviour. Sometimes, producing the desired outputs/outcomes will involve procuring goods or services and then Stage 1 of your model starts.

  7. Stephen Heard:

    I saw through this when I first joined the NHS in 2008 as Director of Commissioning after spending 6 years as a member of the OGC Buying Solutions Board (holding the role of Director of Procurement for some of that time).

    One of my first roles in the NHS was to understand the concept of World Class Commissioning so I went to a presentation provided by one of the leading management consultancies. Their presentation on the commissioning cycle seemed very familiar and it dawned on me that this was the same presentation that I had seen when the same organisation was detailing Category Management to the OGCBS Board some years earlier!

    The colours had changed and a few key words had been amended. However I can, as an accidental procurement and commissioning practitioner, see little difference. I have now returned to my preferred profession of generalist where I use both procurement and commissioning skills along with a whole host of management techniques as I manage complex supply chains!

  8. Taughttofish:

    In Health the distinction between Commissioning and Procurement is one of history and positioning.

    Health Commissioning has a history which goes back to a time when money flowed through the system but not in a competitive procurement sense, therefore Commissioners in SHA’s and PCT’s had no ‘Procurement’ role but rather managed health needs and delivery across a health economy. This is still the case in Scotland, Wales and Northern Ireland. Commissioning at that time involved market management rather than competitive procurement.

    When a competitive market was introduced in England, Procurement as a profession was not positioned to take on the full Commissioning role and where there has been involvement it has generally been in Stage 2 of your analysis as part of a wider project team led by ‘Commissioners’.

    Health commissioning is now the predominate spend area in Health in England.

    I would suggest the task for the ‘Procurement’ profession is to either bring ‘Health Commissioners’ into the procurement fold or get more ‘Procurement’ professionals into ‘Commissioning’ roles.

  9. Sam Unkim:

    It’s quite simple to me………

    Commissioning is having a complete understanding of the Problem.

    Procurement is having a complete understanding of the Process.

    Some times I can do both ( Need Copier Paper, Buy Copier Paper)

    Othertimes I cannot

    As a buyer, I can buy well and negotiate well, but I do not hope to make patients well

  10. Phoenix:

    You’ve proved, so far, that the two terms are inter-changeable. The reality, though, is that there is a significant group of public officials for whom “procurement” is associated with tactical, administrative activity, defined in the public sector by rules, regulations and, often, a barrier to getting things done. We don’t like it, but that’s how many see it. A sub-set of the same people, meanwhile, see “commissioning” as characterised by thought, planning, design and execution – activities which are, for them, strategic, mission-critical disciplines. And you know what? If all we have to do is use a different term for what we do, then I’m fine with that.

    1. Dan:

      It does seem to me that they’ve come up with the word and only afterwards tried to think of a definition. I’m pretty sure thats not how it works. You’re supposed to have the concept first and come up with the name afterwards

  11. John LIttlefair:

    Interesting to see where this leads. In my experience, there is no “right” answer to this question. There are many different uses of the term “commissioning” and they can’t all be right. The term procurement is used more consistently, although some definitions are wider than others.

    As a procurement professional in a local authority, I see a range of decisions and processes that I recognise as commissioning activity that I wouldn’t include within the set of procurement activities. Here are some examples, maybe others can comment on whether or not they really are procurement activities. Maybe you don’t think they are commissioning activities.

    Commissioners will:

    • Decide to close a directly managed old peoples’ home without creating a replacement service in its place. (Direct service decommissioning)

    • Developing a proposal to employ two additional child protection social workers in response to an increase in referrals (Direct service commissioning)

    • Help social care clients articulate their preferred way of getting their personal care needs met (Brokerage)

    • Identify that the number of children with autistic spectrum disorder is increasing in the locality and feed that knowledge into school capacity planning (Needs assessment)

    • Create a directory of local services to support “self funding” clients identify suitable services to meet their needs when their level of need does not meet the local eligibility criteria for LA funded support. (Simulating other providers to meet local needs)

    At the end of the day it’s the exact definition of the two terms that you use that determines whether they are describing the same thing. Which is a circular argument and probably not very helpful!

    1. bitter and twisted:

      Seems to me the useful definition of Commissioning is ‘requisitioners doing stage 1 well’.

    2. Dan:

      So ‘commissioning’ is actually just ‘deciding what to do’? How is that different from plain old ‘management’?

      1. PlanBee:

        Agreed, there is a lot of make v buy, demand management and needs rather than wants going on there. All areas that Procurement have a role to play in

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