The Slow Death of Public Sector Procurement (part 3)

So yesterday we explained that procurement spend and workload is declining in the UK public sector as outsourcing of different types takes what was “public sector spend” and transfers it into “private sector spend”. Even if a contract is still awarded at a more aggregated level, (e.g. for running a hospital), the procurement workload has declined dramatically.

So why is this happening? Before the last election, I predicted that there wouldn’t be an immediate boom in outsourcing, but now, two years in, the floodgates appear to be opening. Here are some of the reasons.

- The pressure on costs and the lack of capability or capacity to drive change internally without help.

- A lack of believe within the public sector that they can sort out their own problems, and perhaps sometimes an over-inflated idea of providers’ capability.

- In our area specifically, the need for procurement skills, and the difficulty of investing internally, exacerbated by recruitment freezes, problems with use of long-term contractors etc.

- The desire to avoid the inevitable public sector bureaucracy and regulations (including public procurement issues); or minimise public scrutiny.

The last point is significant, and I despaired when I saw the Public Services (Social Value) Act come into force recently. While well-intentioned, could it be the straw that breaks the public procurement camel’s back?

After the Remedies Directive increased the potential punishment for procurement errors, now this “asks public bodies to consider how they might use public service contracts to improve the economic, social and environmental well-being of our communities”. Another burden and risk of non-compliance.

Meanwhile, Francis Maude wants procurement done more quickly, with wider advertising (which means I get hundreds of responses, while my department’s headcount has been cut by 30%..)

So what do you do? Struggle on doing procurement internally, with greater challenges and less resource? No, you let a single contract whether it is end to end BPO outsource, a category prime contractor, or a functional procurement outsource. Now, we know that if you want the provider to be free of the regulations, they have to act as a genuine Prime - if they are just an agent, they will still be bound be EU regulations. So increasingly that will be the chosen route – I reckon one major, high-profile challenge and fine for a local authority, and the floodgates could open in terms of offloading procurement to private outsourcers.

As a Prime, the private sector organisation can run procurement exactly as it sees fit. They don’t need to advertise, to run formal processes, or to respond to FOI requests, so visibility and transparency declines. Might private firms be more malleable than public procurement teams as well? So there might be advantages to unscrupulous officials or elected representatives; a quiet word from the councillor or CEO to the outsourced provider to make sure some business goes to a particular sub-contractor?

That’s a worry – and we’re back to Dave Orr’s comments on accountability. We can ask a police force or council why a contract has gone to a particular provider under FOI and get a lot of detail. We can’t ask why Capita or their competitors awarded their contracts to sub-contractors.

So the end result, whatever the reason, is fewer public sector procurement people. And there are other factors driving down the numbers, such as Francis Maude’s drive for “lean procurement”. Of course it is the right thing to do, and it is not being driven primarily by a desire to reduce procurement numbers, but that is an outcome. Meanwhile, technology is taking out some of the low skill procurement roles, and again, this is probably for the best.

But a consequence will be a need for fewer procurement people – and on Monday in our final installment we'll take a look at the implications of that.

Voices (2)

  1. Andrew:

    I do worry about the increasing prevalence of “prime” contractors within public sector procurement, particularly the bigger deals. These type of contracts work well if the organisation (or department) has a clear long term strategy that it is trying to achieve; however they are far less effective if the goalposts are continually shifting. Which may well be the case when the contracts are linked to government departments and the associated Politics. What then tends to happen is that the contractor uses the contract to generate additional (significant) revenues from ‘change control’. Whilst these contracts may well work for us now, I fear that (a bit like PPI) we may be storing up problems for the years to come.

  2. Dan:

    I’m starting to think that the key skill of a good public procurement officer is knowing which rules you have to follow and which ones you can bend. Trying to follow all of them in the spirit in which they are intended is too much.

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