The Perfect Storm – Part 1 (second half!)

Continuing our serialisation of our White Paper on public procurement.

Part 1 (continued)

4.         Fat Cats and public sector cream...

As we enter a time of public spending cuts, redundancies and headcount reductions (which are inevitable), there will be more anger directed at those suppliers who are perceived to be doing well out of public expenditure.  Focus may move away from bankers to those who gain from the public sector either directly (consultants or lawyers who work on a day rate for government) or indirectly (overpaid Boards of firms whose main customer base is the public sector).

“Nurses (teachers, tax inspectors – insert your editor’s preference here) sacked while MD who supplies hospital (school, etc) awards himself £1 million bonus,” is going to resonate as a headline.

This understandable resentment will also manifest itself at any hint in the public procurement system of corruption, special treatment, or favouritism towards political friends.  The media are going to be looking hard for firms winning contracts who have links with current or ex political figures, particularly after the Byers / Hoon / Hewitt / Butterfill events.  Any hint of external ‘fat-cattery’ leaking over into the political world will be seized upon.

5.         Localism versus centralism

This is a wider tension than purely in the procurement arena, but it must be considered as part of the policy and social approach of whoever is in power.  Talking of localism, community groups and self-governed schools will lose force if these bodies are expected to purchase most of their requirements from a huge national purchasing deal, or have national specifications for goods and services imposed on them at every turn.  We are already seeing smaller and local businesses expressing strong concerns about the market-shaping effects of some national collaborative strategies.

Equally, losing all the hard-won benefits from public sector collaborative procurement work to date would have genuine financial implications for public organisations.  Balancing these two factors successfully is vital if tension between local and central government is to be avoided.

6.         Pressure on resource

We would be naïve to think that procurement staffing and resource levels will be exempted from the general pain to come. Procurement will have to try and deliver the savings required and face all of these ‘perfect storm’ issues with fewer procurement staff than we have now across the public sector.  And there is a real danger that small savings in overhead will come at the expense of larger cost elsewhere.  Sacking a good contract manager saves £50,000; the supplier extracts an additional £1 million per year from the public body now the oversight the manager provided has gone.

That all makes it even more important that public procurement focuses on the key priorities, and continues to build on much good work already in terms of capabilities, data, better processes and technology, and establishing a voice at the most senior level.

Public procurement will have to do more with less, which will need some dramatically different ways of doing things.

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