Balancing Public Procurement Objectives – Breakfast with Coupa

At the recent Coupa breakfast, we looked at the challenges facing public sector procurement, and in particular at the way in which the sector has to balance conflicting objectives. So procurement is charged with achieving best value for money in buying the goods and services public bodies need to deliver their objectives. It also has to act in a legally compliant manner and provide governance over public expenditure. And thirdly, it is now expected to support wider policy goals outside the core organisational requirements (such as developing SMEs, innovation, carbon reduction, equalities, employment, etc).

In my remarks at the event, I looked at how the UK was doing generally in terms of achieving this balance. Whilst we should celebrate the many good developments in public procurement, the picture is not all rosy. I argued that the UK has gone down a route of aggregation and centralisation to try and achieve savings and value, but without a real analysis of economies of scale at category or sub-category level. So it has been assumed that bigger buys better - but this is simply not always true.

In terms of compliance, procurement often ends up in effect making it difficult for users (line managers and budget holders) to work with the suppliers they want to work with. Procurement wants to control access to the market, to reduce supplier numbers, and restrict interactions. That is all done in with the best intentions, but along with the aggregation point, the end result is that public markets have not been as SME and innovation friendly as they could be.

Evidence for that comes with the central government SME data, which shows that spend with SMEs has not increased over the last few years. (The government claims to have achieved the 25% spend aspiration - but that depends on the intellectually dubious "spend through the supply chain" numbers). However, it is also worth asking why SMEs spend is seen as so desirable - surely it is innovation and competitive advantage that we are really looking for? That is another whole issue in itself, for another day perhaps.

So one direction that looks interesting for the future of public procurement is suggested by Coupa and their approach. From their beginnings, they have stressed two aims that look contradictory at first sight. Their focus is very strongly around spend management and savings, which requires strong control mechanisms, and yet they also emphasise ease of use, for both buyers and suppliers (simple onboarding, great user interface, a free-to-suppliers supplier network, etc).

Can we learn from that approach in how we work in the public sector? Is it possible to open up supply, to engage with more suppliers of different types, give users more flexibility in terms of trying new options, and yet keep control and compliance? That is where Coupa position their products, and new features such as the ability to convert emails into proper purchase to pay records, with full capture of the data, show how those apparently conflicting aims might be reconciled.

Anyway, the breakfast discussion was not about the Coupa product, but that philosophy is interesting. Can we aim for more open and dynamic supply markets, with flexibility and ease of use, but all combined with data capture and control? That is how organisations should be thinking.

And after my 15 minute polemic, the discussion was lively. One of our delegates who runs a collaborative body pointed out that collaboration does not necessairly mean bad news for SMEs, and of course he is right. However, as was also pointed out, what evidence there is suggests that the size of the contract is the main factor that determines SME participation, so aggregation does tend to make life harder for small firms. One executive from the sector highlighted that for local authorities, it is local firms that are interesting, not the size of them – true as well, but the point about opening up markets and seeking innovation still applies.

Thanks again to everyone who came along and contributed to the stimulating debate, and to Coupa for hosting the event of course!

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First Voice

  1. Dan:

    I think there are two good reasons why increased use of SMEs is in the national interest even if you don’t get innovation etc.

    1. SMEs are more likely to employ people in their home nation – unlike giant multinationals that can outsource departments to low cost countries.

    2. SMEs pay more tax – they lack a convenient office in Luxembourg that they can transfer most of their profits to.

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