Procurement and commissioning – is this the difference?

In our first piece here on this topic we showed that the core processes of commissioning and procurement are very similar. (By the way, thanks for all the great comments on that piece - well worth reading if you haven't already). So might it be that commissioning is different because of what is being bought?

Well, we're getting a bit closer here perhaps to a real difference, but it still doesn't quite work. Commissioning  clearly isn't just health services these days, which is where the term first started being used heavily.  Commissioning is being used to describe procurement of everything from building maintenance services, through waste management to marketing projects and social care. It’s interesting to note that many of these categories are bought in the private sector as well as public, and yet we don't hear private firms talking about “commissioning” their building repairs and maintenance contracts.

On possible argument is that the commissioner is often the budget holder as well, whereas in traditional procurement, the buyer is often separate from the budget holder.  But this is not always the case – procurement can own budgets in either public or private sector, and that doesn’t make then commissioners. And even in areas termed commissioning, we may see procurement working in tandem with budget holders. So the Department of Work and Pensions might talk about commissioning welfare to work services,  but the budget holders work with subject matter experts and professional staff in the Commercial (procurement) function to drive successful results. So I don’t accept this hypothesis.

But the use of the term predominantly in the public sector gives us a clue as to what a potentially valid differentiator might be. The most distinctive element of what is usually termed commissioning is perhaps that, unlike most traditional procurement, the goods or (usually) services bought are provided to recipients who are external to the organisation that funds the purchase and runs the procurement process.

 In the case of traditional procurement, the purchased items are generally consumed by the buying firm - in their factories (raw materials, packaging, components) , by their own staff (fleet, stationery, laptops), or to support their own activities (marketing, professional or IT services, plant maintenance).

Commissioned services are provided to patients (healthcare), council tenants (social housing maintenance), children, parents or guardians (children’s services). They are all outside the organisation who is buying the service – so is that at least part of what defines commissioning as something different from traditional procurement?

There are some limited private sector examples of this as well – insurance companies agreeing contracts with car repair firms or lawyers to provide services to the customers of the insurance firms is one example.

This idea explains why – as some of the comments on our last post pointed out – the identification of needs is such a key part of the process. It is intrinsically more challenging to establish the needs / requirements when you’re dealing with people outside the organisation.

Another aspect some readers identified is the “make / buy” decision that can be part of the commissioning role. Having identified those needs, the best option might be for the public body to meet them through their own resources. Now that is essentially a “make / buy” decision in private sector terms, and again the best  procurement functions in either public or private sector would expect to have an involvement in such processes and decisions.

So are we getting somewhere? Commissioning is fundamentally a procurement process, but a complex one involving management of the provision of services (or occasionally goods) to recipients  outside the commissioning organisation.

What do you think?

Voices (4)

  1. Dave Sheldon:

    I agree the Social Care world is now changing, historically Commissioning was undertaken when the Commissioner didn’t want to undertake a procurement process and go directly to a provider they knew. With Corporate Procurement teams becoming the norm with responsibility for Social Care procurement along with other Goods and Services this has now changed with Procuremeent becoming an integral part of the process.

    In my experience the procurement cycle which worked had the involvement of three “teams”, Commissioning, Procurement and Monitoring whose work overlapped at times to achieve the required solution:

    Identify the Need – Commissioning

    Market Analysis – Commissioning & Procurement

    Tendering – Procurement

    Implementation – Procurement & Monitoring

    Contract Maangement – Monitoring.

    A very simplistic model for sure but one which brought teams from varying different perspectives together to achieve a common goal, a service which was required that delivered VFM and the outcomes needed.

  2. John LIttlefair:

    I think this gets very close to the answer. It does explain why “Commissioning” is a term that has only really evolved in the public sector, particularly in the Health and Social Care areas. It also provides an explanation why in other sectors and contexts there has never been a need to create this new discipline.

    You can also argue that the idea of commissioning is a helpful concept to explain the context in which procurement sits alongside service planning and service needs assessment in those types of organisation.

    I know from my own experience that procurement, as it has traditionally been practiced in Local Authorities is not on its own adequate to describe the whole process that the term commissioning is intended to convey. Historically, in the organisations I have been familiar with, procurement teams have been kept as far away as possible from the social care “commissioning” functions.

    Ironically, in many organisations in the Social Care field, “commissioning” teams are actually social care procurement teams and it would have helped enormously in this debate if they hadn’t co-opted the commissioning label.

    Happily, this is now breaking down. Commissioning teams now understand that procurement activity (and the relevant skill base) is fundamental to delivering their plans. However, they do still hang on to the idea that there is more to commissioning than procurement, and I’m happy to agree with them.

  3. Taughttofish:

    I think you more or less have it Peter. ‘Commissioned services…… are all outside the organisation who is buying the service’ and also probably explains why the difference is more important in public sector circles where funding is given to be passed through to the eventual deliverer/recipient of the service.

    Your make/buy point however is interesting. In health, GP’s (private contractors essentially) have been established as the ‘Commissioners’ of a large chunk of the health budget and one of numerous debates has been how to ensure any ‘make’ decisions are not based on self interest rather than patient interest.

    Commissioning may be a ‘niche’ profession in the wider environment, but in healthcare in England it is incredibly significant in value and enjoys a closeness to core services that procurement as we know it can only dream of.

  4. Trevor Black:

    Make no mistake – it’s all procurement! It’s only in the world of procurement where we can have this crazy debate. It’s similar to being a Surgeon and just because you may specialise in either cardiovascular, brain, heart, plastic, pediatric or any other discipline still makes you a surgeon. You can’t imagine lawyers having this type of debate. The problem originates in the public sector where those who have little or no knowledge of procurement (particularly those in Central Government) have created a niche profession and where having any commercial skills appears to be an option. Just take a look at what has been created in your local health centre as a good example.

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