Improvement in the procurement of goods and services will make a major contribution to the savings local government has to make towards the Gershon efficiency programme. To support councils in getting the best deal, the Regional Centres of Local Government Excellence are compiling a supplier spend analysis which identifies the business that suppliers transact with local government.The analysis will give information on prices being paid on over 1500 commonly purchased commodities and allow councils to see the scale of business other councils are transacting with a supplier so they can decide whether a joined up procurement approach is likely to lever the price downwards. An example of how valuable this service will be can be seen in the case of the small unitary authority in the South East of England which was spending 400,000 pounds a year on stationery and computer consumables. The price benchmarking intelligence indicated a possible saving of 30% was immediately achievable by changing supplier and that a further 30% was achievable by ensuring that staff only ordered from core list products.
The analysis will also bring together supplier transaction information for each council which will reveal whether there is scope for rationalisation of the number of suppliers. It is also expected to make it possible to reduce transaction costs. A sample of 30 councils had more than 39,000 transactions with BT in a single year. Simplifying this will lead to a reduction in administration costs on both sides, as well as a rationalisation of the billing process leading to a reduction in service costs.
It is expected that the spend analysis will be on-line and available to all councils before the end of the year.
Next month the Regional Centres of Excellence will launch a reverse e-auction for the procurement of Agency staff, ICT consumables and other goods worth some 28 million pounds. Further e-auctions worth 150 million pounds with expected savings of 15 million pounds are planned to be delivered at no cost to local services providers during 2006.
The e-auction process involves suppliers competing in real time by bidding lower as the auction unfolds. e-auctions disclose the lowest price for each potential supplier, but they are not about price alone and other factors, such as quality and delivery, can be taken into account. They comply with the EC Directives on procurement.