Public sector overcharges and overpayments

Twice2much investigate how much of the public sector overcharges and overpayments, worth £220 million, could be yours

Every year, any organisation is susceptible to being either incorrectly charged for the goods and services that they procure or pay more than once for purchases they have made.

Overpayments happen due to a variety of reasons, ranging from accidental misposting of invoices (to the wrong supplier in the first instance) to invoices being raised by supplier branches and then their own Head office finance teams.

Regardless of how overpayments happen, spend recovery reviews provided by external specialists are the most commonly used route for identification and recovery. These services are generally provided by third parties on a ‘share of recoveries’ basis and therefore there are no upfront costs to the organisation and all the risks lie with the provider of the service.

Whilst no one can predict the likely recoveries from such a review, the fact that suppliers of these services are still in business is a testament to both their abilities to identify and recover monies and that overpayments are still being made by organisations regardless of improvements in system and controls.

Hundreds of millions is recovered every year within the private sector

The public sector is not exempt from this but has been slower to respond, mainly due to perceived issues around tender limits etc.…Crown Commercial Service (CCS) – the UK’s largest public procurement body, responsible for shaping and delivering government procurement policy – estimates that £220 million in overcharges and incorrect payments could be recovered over the next four years. To facilitate the identification and recovery of these valuable funds, CCS has created the Spend Analysis & Recovery Services framework to enable public sector organisations to procure these services more easily.

How it works

Under Spend Analysis and Recovery Services (SARSII) – Framework Agreement RM3820, public sector organisations can save significant time, resource and cost because virtually all the procurement issues have been addressed by the framework eliminating the need to conduct their own full procurement exercise.

The suppliers on the framework have already been carefully evaluated during the tender process against set criteria:

• Quality;
• Technical Merit including capacity
• to supply, performance, reporting, references, Insurances etc;
• Security Considerations;
• Environmental/Social considerations;
• Financial Assessments;
• Price.

The revised framework (SARSII) allows public sector organisations to procure a more specific range of services by splitting the Framework into various lots. It also enables customers to select a supplier via either direct award or a further competition tender to those suppliers on the framework.

How do you choose your supplier?

This is the most difficult element to consider.

You have a choice of up to Ten Suppliers on any induvial lot on the Framework, all quoting different costs (as fees are based on a ‘share’ of recoveries only, across various recovery ranges) with neither the Customer or Supplier able to predict likely recoveries and therefore costs.

Experience to date suggests that organisations have been looking at ‘cost’ rather than ‘benefit’. There is clearly a need for better understanding of the nature of these reviews but these are minor challenges compared with the potential benefit. CCS is there to assist and guide organisations along the way…

 

Please note: this is a commercial profile

Andrew Cushion

Managing Director

Twice2much Limited

www.twice2much.com