David Noble, Group CEO, CIPS sheds light on procurement in the public sector…
Supply chains lie at the heart of any good operation and this is no less true for the public sector, focussed on good services for the citizen and more value out of the public purse.
In the aftermath of the recession and in the continued age of austerity, local, regional and national governments have a responsibility to strategically align their spending to reduce the number of scandals around poor spending and achieve long-term measurable impacts and results. The public sector as a whole is effectively ‘UK plc’, and working together to collaborate and achieve not only the expected cost savings, but adding true value for their citizens should be the main driver.
By nature of its sheer size and buying capability, the public sector has massive leverage in the marketplace. By taking a collaborative approach to purchasing, there is strength in numbers but the sector often falls short of the mark as an ineffective and weak buyer. Though public buying cannot always enjoy the same freedoms as the private sector, suppliers find it easier to negotiate a good deal, for them and not for the buyer.
It takes a total re-think of how public sector buying is approached. There is some evidence that central government has taken this seriously, taking action and getting some excellent results in efficiency savings. But this means not taking the usual route of just beating down suppliers to cut costs. But, looking at creative and intelligent ways of considering whether your usual supplies are really what you need and whether your current suppliers are fit for purpose.
Taking a strategic approach is vital and this is not something that can or should be outsourced. It should remain an in-house function, aligned to departmental goals, looking both upstream and downstream at targets and need. Outsourcing can sometimes bring short-term gains, but the costs can sometimes be too high. A loss of control and misaligned long-term goals can be costly.
Though policies and procedures are vital in the procurement process, a strict adherence to procedures and the ‘letter of the law’ will completely stymie getting the real value the public sector seeks. For example, the tender process is weighed down by detailed procedures which can discourage good relationships with suppliers. Sticking to the rules may give you the best price each time, but constantly changing suppliers as they compete on price will not bring that long-term value. Recognising the changing nature of the needs in the supply chain is more likely to bring good results.
Perhaps one of the biggest issues in public sector procurement is that a large proportion of spend is not under the control of procurement professionals at all. Non-procurement staff in the public sector hold billions of pounds’ worth of spend and have little or no exposure to training or good procurement practice. This wouldn’t happen in the private sector, so why the public sector should expose itself to the dangers of poor practice, let alone malpractice, is something to be questioned.
Central government has sought to introduce a commercial aspect to public sector purchasing through the introduction of commercial officers, but the direction of travel is just the same even if the job titles are different. Having trained and talented professionals in place will make all the difference to public sector buying. CIPS is working with a number of government agencies to ensure targeted training and qualifications help support the needs of the sector and its challenges as a new government takes the reins.
The need to have backing from ministers and top civil servants to create an environment where smart purchasing is recognised as a vital strategic function will go a long way to make these changes happen. But that takes some work to re-negotiate and re-engineer old processes and ways of working.