The Perfect Storm – Recommendations (part 4)

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

6. Focus on value post-contract award

Several reports in recent years have pointed out the gap in skills and resource in terms of management of major contracts post award; the contract and supplier management phase.  If government wishes to make savings in the time frame needed, much of that must come from existing rather than new contracts; that will include some of the contracts we earlier identified as ‘sticky’ such as PFI or major outsourcing deals.

This will not be easy and will require skill and perseverance from the public sector.  As we said earlier, suppliers are unlikely to roll over and offer up price reductions. Every contract will be different, but issues we mentioned earlier such as demand and specification management may come into play; as well as looking for opportunities for mutual process re-engineering, better management of sub-contractors, or reducing transactional costs in the relationship.

Organisations should identify now the skills they have to address this area; develop plans for addressing their most significant contracts, and target savings through the identified routes. Continuous value improvement throughout the contract period must become second nature for purchasing and supplying organisations.  It may be necessary for organisations to put some of their best commercial / procurement people onto these activities in order to have any chance of achieving the required benefits.

7. Hit the fat cats, squash corruption

The ‘perfect storm’ points in section 1 included the potential public reaction to government suppliers lining their pockets at the expense of the taxpayer during difficult times.  This must be avoided in order to drive savings, as well as for political reasons.  There are a number of practical actions that could be introduced here.  One that attracts us is applying a cap to professional services rates.  There has been some discussion of ‘capping’ public sector salaries in some way (perhaps linked to the PM’s salary) after the election; if this is implemented, we are attracted to the idea of the same applying to partners in law or consulting firms who work exclusively for the public sector.

Other options to minimise the ‘fat cat’ accusation may be feasible including considering such issues as part of the tender evaluation process in public procurement exercises.  In addition, any incidences of corruption, favouritism, inappropriate lobbying and so on in public procurement should be dealt with very strongly.

We recommend introducing a ‘cap’ on day rates for professional service providers to public sector organisations, linked to the Prime Minister’s salary.  We believe this will equate to around £1250 per day.  This will also have the benefit of encouraging work on a payment by results or risk / reward basis.  The options around including ‘anti-fat-cat’ evaluation questions or criteria in tender evaluation should also be investigated. Corruption of any sort must be addressed harshly, and rules in areas such as lobbying, and ex-politicians or officials taking jobs with suppliers to government tightened up.

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