UK Government procurement part 5 – the future of Buying Solutions

In this final installment of our review of UK central Government procurement initiatives and developments, we’ll take a look at Buying Solutions (‘BS’) and where they might fit into the emerging picture.

Historically, BS put in place contracts and (mainly) frameworks that any public organisation could use in a manner that was compliant to EU regulations.  BS then took a small percentage margin from the supplier to fund activities.  So their modus operandi was generally this;

  • Identify a need – try and make sure you meet the broad user requirements (hard to get into specific needs when you’re selling to tens of thousands of organizations).
  • Don't worry too much about rationalising specifications – offer a wide range of products that meet all the individual preferences of their clients (motivation is to maximise sales).
  • No demand management – in fact because BS revenue is based on a % of total sales, if users choose more expensive products, then BS appear to do better.
  • Very hard for BS to aggregate or even estimate demand; approach the market with a best estimate of the volume in that category.
  • Put in place (in most cases) ‘framework’ type agreements that give users a choice of suppliers, market and publicise what is available, and carry out some limited supplier management (mainly to ensure payment from suppliers)

BS have performed a useful service for public organisations, particularly in terms of providing a convenient, compliant way of buying without going through the rigmarole of full EU procurement exercises. Knowing you’re not going to be sued has real value!  And BS has certainly helped the ‘weaker’ buyers; you’re not going to get totally ripped off with a BS contract.

But..there has been limited aggregation of committed spend, so no guaranteed volume in most cases, therefore little incentive for suppliers to bid their best prices.  And with prices that are in effect in the public domain, suppliers know they will never to able to charge more than their BS price, so you can see why pricing in some areas tends to be a ‘ceiling’ price rather than a best in market. (There are exceptions; some IT contracts for instance).

Multiple supplier and lotted frameworks also require long and complex procurement processes even though they are not awarding firm contracts.  Choosing 8 suppliers to go on each of 15 lots across consulting services for instance is a mammoth task – BS execute these projects pretty well in my experience, but they are lengthy and time consuming for both buyers and sellers.  Ian Watmore, COO in the Cabinet Office, speaking at a recent conference (see here) said "the argument has been lost on frameworks”.

And BS savings measurement has been somewhat dubious. They benchmark against ‘market prices’; then assume that every customer would have paid the ‘market price’ if they hadn’t used BS to calculate the ‘saving’.

I do perceive that there are a lot of capable people in the organisation. Alison Littley as Chief Executive has grown volume successfully, and made a start with implementing category management.  And BS are unique in being set up to market contracts to the whole public sector.

Now Francis Maude, John Collington and the key stakeholders have to decide if BS is the right vehicle for driving central procurement across Whitehall (see yesterday’s post). So let’s cut to the chase.  What needs to happen if BS is to play this key role?  What would need to change?

We would suggest that BS needs to;

  • work with committed volume wherever possible, or aggressive mini- competitions from frameworks where not;
  • focus on serious category management-type approaches;
  • understand customers’ needs, but play a leading role in driving rationalistion of specifications across Whitehall, so that demand can be aggregated in a way that drives better value;
  • support demand management rather than see it as a threat to income;
  • manage suppliers in a more direct and performance related manner;
  • measure savings in a more realistic manner, as well as improving measurement of suppliers’ performance and their own;
  • improve capability in order to make all of this possible; and
  • to enable a number of these changes, there probably needs to be a change of funding approach so it is not linked purely to volume / value of sales.

That’s quite an intimidating list; but in Alison Littley and David Shields, Buying Solutions have two very strong and capable people at the top. Personally, it feels like there should be an important role for BS in the emerging landscape of government procurement; but the next few months will determine whether Littley, Shields and their team can do enough to cement that place in the new world.

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