Councils could deliver £10b efficiency saving annually by adopting new procurement processes and making better use of spending analysis. But to make the savings, the procurement expertise of council staff must improve, senior executive must buy-in to the changes and fears of losing control by collaborating with other councils must be overcome.
Procurement experts Opera Solutions were commissioned by Communities and Local Government to recommend how councils could cut the annual £50b procurement bill. Following an analysis of council spending data, Opera concluded that that greater transparency coupled with improved analysis is the key to unlocking massive savings by driving down costs.
Opera looked at spending on energy, mobile phone and legal services across three separate local authorities. The bill for these services totalled £13.6 million pounds. By consolidating that spend in order to boost buying power and get better prices Opera estimated the three councils could shave a collective £1.44 million off their bills – a 10 per cent reduction.
The report argues that Local Government, by adopting new processes and making better use of spending analysis, could replicate these kind of savings across a wide range of back office functions, with no impact on quality of service and reduce spending by up to £10 billion a year.
The report recommends that councils should make better use of data, identifying incorrect payments, eliminating duplicate spending and detecting fraud. They should also buy in bulk and join forces with neighbouring councils to drive down overheads and secure better economies of scale.
Councils are also urged to shop around to secure better prices and increase competition between suppliers, negotiate harder on contracts and end over-reliance on a small number of vendors to provide a large numbers of services.
The research highlighted the lack of procurement expertise amongst council staff, lack of buy-in from senior executives and fears that joining forces with other councils to collectively buy goods and services will result in less control are putting the brakes on simple changes that could drive out waste, drive down cost and save the public purse billions of pounds.