Procurement in UK central Government part 4: the big ideas

In today’s exciting installment in our central Government procurement review, let’s take a look at how a couple of the key initiatives are going.  I should say this is pieced together from various conversations – I’m hoping to do some more formal interviews with key people in Cabinet Office over the next few weeks.

The ‘immediate savings from major suppliers’ initiative continues to be somewhat enigmatic. People I respect who are involved tell me that the programme has been successful; and that the savings (Francis Maude has talked about £800 million) are ‘real’, although I understand they are a mix of cash, spend avoidance / demand management, and contract re-structuring. There may also still be some work to do to link up what has been achieved through these central negotiations with direct benefits for each Department; the problem of ‘benefits realisation’ that many of us will be familiar with.

And yet… none of the suppliers have issued a profits warning or similar. This week it was Carillion’s turn to announce an MOU and say, “the outcome of these discussions has no material effect on Carillion’s current market guidance”.

So given that, and the commercial confidentiality constraints on Cabinet Office explaining the outcomes in detail, achievements will have an element of doubt until National Audit Office take a look at the detail. And as for the measurement of savings – remember the ‘top 12 fiddles” we published here? I’m not saying that Maude’s £800M is dubious for a moment. But I know NAO have a copy of the ‘fiddles’ note, and they won’t be afraid to use it….

The centralisation of procurement for the top categories across Whitehall has also seen a considerable investment of energy and resource.  An operating model has been agreed, and while what has been publicly announced is pretty high level, it appears to have three key levels; a ‘strategic sourcing’ level (category strategy), a sourcing delivery level (running whatever procurement exercises are necessary) and then a delivery level, running through a small number of ‘procurement delivery centres’, encompassing P2P, demand management and reporting / analytics. There is also a major emphasis on data and technology (quite rightly) to make this all happen, so I would also expect to see moves towards a common sourcing technology platform for procurement across Whitehall; and there are some obvious contenders for that in terms of solution providers.

Whilst the high-level model is in place, I don’t believe exactly ‘who does what’ has been agreed. For instance, there is a school of thought that says Buying Solutions are the obvious choice for the ‘sourcing delivery’ activity; but others are less keen. (We'll come back to that in our final post in this series tomorrow). I’ve heard rumours of how many procurement delivery centres there will be and location, but I’m not clear that is buttoned down yet either.  There’s also an issue of what you might define as ‘change management’ – putting the technical processes, systems and so on in place are major tasks in themselves, but there is also a hearts and minds aspect to all this.  In some Departments, the internal procurement function has never had a full grip on spend or compliance; so being able to ‘deliver’ that spend to the central initiative is a challenge for everyone.

None of this means we won’t see significant and public activity shortly; I believe we will. But (as anyone who has ever tried to get public sector bodies to work together knows), this is more difficult than it perhaps looks at first sight. So there is bound to be some uncertainty about how this is all progressing until there is tangible evidence of milestones being achieved; particularly new procurement processes and projects being initiated.

And ultimately the success of the initiative will be determined by the strength and value of the new aggregated contracts / frameworks, the compliance to them, and the genuine, measurable savings accruing.  So given public sector procurement lead-times, that is probably still at least a year away.

Voices (2)

  1. Dan:

    Is it me, or does this sound a bit like what we have today with:
    – ‘centralised policy’ aka OGC
    – sourcing delivery aka Buying Solutions /PBOs
    – procurement delivery centres aka procurement teams from Govt Departments.

    So question I would ask is how is this new model going to differ from today’s practice of:
    – policy being out of touch with front line delivery, no real contacts/relationships or mandate to enforce policies
    – sourcing delivery putting in place frameworks with no committed demand (therefore not best pricing) claiming ‘savings’ as per rule 3 of Peter’s helpful guidance on savings reporting and complaining when no one uses your deals
    – local delivery being overstretched, having no real reward or incentive to work with the centre (I bet right now most Departments are putting forward their counterproposals – a bit like the experience on Shared Services, where with one Cabinet Office Shared Service Programme suddenly found itself with 1900 competing shared service programmes run by the individual departments)

    Key things for me would be:

    i) commercial directors having participating in the new model in their work objectives (so it flows down to buyers). Surely Maude and co can achieve this via Perm Secs?

    ii) credible, high quality individuals in the policy area

    iii) work objectives for local buyers to use the model and follow policy

    iii) at the sourcing level – good quality/credible framework managers who really manage the framework suppliers and understand the market

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