Collaborative procurement proposals will result in a shake-up of procurement across all UK public sector organizations. It is estimated that efficiency savings £7.7 billion will be produced by 2013-14. The proposals are set out in a Treasury report ‘Operational Efficiency Programme’. The other strands of the Programme are Shared Services
Property Asset Management
and Total Place
Publicnet provides an overview of the Programme.
The 44,000 UK public sector buyers, which spent £175 billion on external goods and services last year, includes approximately 20,000 schools, 355 English local authorities, 43 police forces, around 500 NHS trusts, central government departments, agencies and non-departmental public bodies. Consequently the process of procuring common goods and services across the public sector is dispersed, resulting in a wide range of prices for similar goods and services. For example, individual energy contracts with energy companies are part of the reason why there is over a 50 per cent cost variation in energy prices across the public sector.
The major weaknesses which the collaborative procurement proposals will address are the limited scope of current procurement arrangements, lack of management information about how money is spent and the failure to coordinate the activities of professional buying organizations.
Collaborative procurement operates currently, but its scope is limited to Professional Services, ICT, Energy, Fleet, Travel and Office Solutions. The collaborative procurement proposals will now bring in Facilities Management, Food and Construction.
Management information on how the public sector spends money on procurement is poor and this lack of data is a key blocker to making progress against a number of agendas and is the single biggest factor preventing the Treasury from quantifying the case for increased departmental and wider public sector collaboration. The collaborative procurement proposals will require public bodies to standardise procurement data to make it possible to analyze and aggregate data from the different sectors.
Much procurement is carried out by professional buying organizations, but they have evolved in an unplanned manner with varying business models and no clear common vision and no clear governance. The largest professional buying organizations are OGC Buying Solutions, NHS Purchasing and Supply Agency and PRO5, the local authority buying consortia. They have a regional or sectoral focus, for example concentrating on health, or on a region of the United Kingdom. This vertical structure contrasts with the majority of supply markets in which they operate, which are common across sectors and not restricted to a particular region.
There is no overall governance to coordinate activities of professional buying organizations and this results in duplication of effort and duplicated contracts offering varying degrees of value for money. Some professional buying organizations compete with each other over similar geographies or service offerings and they do not routinely share management information on the best deals available to the public sector, nor do they collaborate on purchasing or logistics.
The collaborative procurement proposals will foster better use of professional buying organizations by setting up a governance group to bring together central policy and local delivery representatives and to drive greater coordination, consistency and transparency. By December 2009, this governance group should ratify a strategy for an operating framework that will allow professional buying organizations to cooperate across categories, regions and the procurement process. This should lead to sharing management information on the best deals available to drive best practices.
The collaborative procurement proposals are one of a range of measures recommended in the ‘Operational Efficiency Programme’ report to deliver additional efficiency savings of £15 billion. See Five Wise Men.
Shared services, where public bodies collaborate in providing back officer services could also save some £4 billion.
Local incentives and empowerment, such as empowering professionals to collaborate and innovate and creating the space for this by reducing burdens on the frontline, has the potential for further efficiency savings. This includes taking forward the new ‘Total Place’ programme that will map flows of public spending in local areas and make links between services to identify where public money can be spent more effectively.