The Perfect Storm – Recommendations (part 1)

If you are following our serialisation of this White Paper on public procurement, we have diagnosed some of the problems, and pointed out the risks that lie ahead for public procurement.  So we are now into our 10 recommendations for how matters can be improved.  We start with perhaps our most important...

Part 2            Delivering the savings

So can public procurement deliver in the face of the perfect storm?  It can, but it will require some different strategies and many specific actions, ranging from some at the most strategic level to some that appear quite tactical but will actually have a major effect.  Here are our ten initial recommendations.

1. From ‘Procurement’ to ‘Spend management’

This is the starting point, and in effect underpins everything we propose.  There must be a new paradigm for public procurement – and a move away even from the terminology of ‘procurement’.  Much effort has been put into improving ‘procurement’ but it has focused largely on running competitions, choosing suppliers and letting contracts.  The public sector has got better at this; that is clear to anyone who has observed the sector carefully over a period of time.  But if we define ‘spend management’ as the whole cycle from the identification of need through to delivery of the contract by the supplier, then the elements of that cycle outside the procurement core have had less attention.

We commented earlier that suppliers will not merely offer up price cuts to Government out of the goodness of their hearts.  However, a serious and strategic discussion with Government’s top suppliers around value improvement and cost reduction is possible.  But it must consider all the options that there may be for driving savings; from demand management, to commercial restructuring of contracts, to innovation and new technology.

This also means an even stronger focus on whole life costs, which fits very well with the sustainability agenda. That should not be seen as something separate or even opposed to getting better value.  It should all be part of the same picture; better value from end to end, whole life, spend management.

The only way in which the required savings can be delivered will be through relentless attention to the whole spend management process.  The focus in public procurement, led by OGC and other key stakeholders, should re-focus on this wider picture, and re-brand public ‘procurement’ as ‘spend management’.   That will require effort in promoting proactive demand management to cut off spend at source; in rationalisation of specifications; in aggressive and commercial contracting; and in skilful and value driven contract and supplier management.  Public organisations should ensure they have a Board level sponsor for Spend Management, and should report annually on results (see recommendation 9).

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