The Perfect Storm – Recommendations (part 2)

More of our recommendations which form part of the serialisation of our public sector procurement White Paper - "The Perfect Storm".

2.  The Stopping Gate

The first stage of spend management must be demand management, and the most fundamental part of this will be to stop things happening, or being bought.  This applies at a ‘micro’ level; reducing travel spend by use of video conferences, or monitoring spend per head on stationery; the savings here are useful but relatively small.  More significantly, we need to stop many existing major projects; and kill off others at birth (because whatever is said now, after the election new Ministers of whatever persuasion will want to start new projects).

The Office of Government Commerce (OGC) Gateway process is already a feasible tool for doing this.  The Starting Gate Review (SGR), introduced recently, looks at projects and programmes early in their life cycle.   The process is close to fit for purpose already, but needs one change of emphasis to fit our purpose here; there is currently an assumption that projects will go ahead, and the role of the SGR is to help increase the chance of success.

We recommend turning this assumption around; rename the process the STOPPING GATE review, with a presumption that projects will NOT be allowed to commence. Treasury (or the Office of Budgetary Responsibility) should oversee this process with an iron fist in an iron glove.  Only projects with a high probability of success, a strong financial / economic payback, and top level support should proceed.  The same process can also be applied to existing projects to establish which should be closed down immediately post election; the top 100 projects and programmes should be reviewed within 6 months of the election.

3. Stop buying the best

Just as demand management will have to do much of the heavy lifting of efficiency savings, specification management must bear some of the burden.  There is an irony here.  The public sector was at one stage accused of not understanding the difference between cost, price and value.  (Much of this was actually propaganda from suppliers who wanted to justify their own high prices).  But even if there was once some truth in the accusation, it is very rare now to find a procurement that does not have a complex evaluation process that looks at far more than ‘price’.  The focus is on total cost of ownership, with additional factors such as quality, service, even the sort of relationship that might be developed with the provider, all factored formally into selecting a winning supplier.

Much of this has been absolutely appropriate.  But it has ended up in many cases with a high quality product or service chosen; one that is more expensive perhaps than the minimum acceptable specification, but offers apparently good value based on the evaluation process.  In many cases, price, or even total lifetime cost, is weighted at only 20 or 30% of the total marks available for tenders. The stories about the high cost of furniture for new government buildings may be partly apocryphal but may be the logical consequences of this sort of procurement process.

The time has come for the public sector to focus on buying appropriate quality; adequate but not over-specified goods and services.  We recommend, as a step towards this, that all procurement exercises should weight total lifetime cost as at least 60% of the overall weighting in the evaluation.  This seemingly trivial step would actually send a strong message to supply markets and lead to lower priced goods and services being chosen in many cases.

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