By Paul O'Brien
23 September 2010
Significant steps have already been taken to develop a rounded policy on procurement at national level. These include Sir Peter Gershon’s 2004 efficiency review; the three-year National Procurement Strategy for Local Government; Bill Roots’ 2009 review of procurement by English councils; and John McClelland’s review of the £2.3bn spent by Scottish local authorities.
In March this year, the Office of Government Commerce’s Policy Through Procurement Action Plan set out how public procurement can underpin economic growth.
These national initiatives highlight the importance of minimising the amount spent buying goods and services and of taking a holistic approach that links procurement to an authority’s wider goals, such as regeneration, economic development and tackling climate change.
The Association for Public Service Excellence believes that local authorities should avoid making massive and rapid cuts to services as a knee-jerk reaction to next month’s CSR. Instead they should aim to ‘manage transformation’ in a sensible and systematic way.
This should include finding ways of procuring more effectively. Apse has been developing suggestions for how this can be done, based on best practice from councils across the UK. Measures such as more focused leadership, better supplier management, better use of technology and greater collaboration have led to impressive savings.
For example, Peterborough Council embarked on a transformation programme three years ago and has since shaved £3.5m off its procurement bill. This has been attributed in part to its approach to supplier management, which used the latest technology to capture and consolidate information.
At Cornwall County Council, the introduction of procurement cards has saved at least 40% of the administrative costs on 25,000 transactions worth some £5m. A system developed in-house enables cardholding staff to buy stationery, office equipment, computer supplies, books and periodicals, hotels, travel arrangements and education and training courses.
The risks were fully assessed in advance and auditors were involved in the design of the scheme, as well as the chief officers in individual departments.
Another authority that identified savings through a transformation programme is Sheffield City Council. Its detailed business case found potential savings of £23.5m by 2011. So far it has saved £17m – primarily through commodity reviews, standardising processes and changing its procurement arrangements so designated skilled officers work alongside the respective service managers.
Collaboration can also cut purchasing costs. Nine authorities in Gloucestershire and Wiltshire have formed a partnership for buying office supplies. Anticipated savings on the contract amount to £720,000 per annum. Further savings are expected, as the contract requires all suppliers to trade electronically. Procurement Scotland, set up by the Scottish Government in 2008 to develop purchasing strategies for public bodies, has also established a number of national contracts for a range of goods bought by local authorities. This has led to savings of £7.6m on general stationery and £3.1m for paper alone.
Apse’s own research, produced in partnership with the Centre for Local Economic Strategies, examines how to use the power of the public pound more effectively.
For example, Swindon Metropolitan Borough Council wanted to ensure that its spending benefited the local economy as much as possible. Its research found that every £1 spent by a council could generate £1.64 for the local area. It used an economic multiplier model, which involved analysing staff spending diaries and the knock-on effect on local suppliers.
Public services account for 18.7% of jobs in Swindon and 34.4% of the council’s commercial services division’s spending on suppliers goes to local companies and organisations, who re-spend 30.8 pence in every pound in the local economy. In this case, effective local employment and supply chains have created a virtuous circle and stopped funds leaking out of the area.
This model has recently been applied in West Lothian where £1 spent by the council generated the even larger sum of £1.71 in the local economy. Using council spending power to maximum effect therefore means a positive cycle can be developed that provides employment, promotes local businesses and social enterprises and encourages investment and innovation.
Sound procurement practices can help make local economies more resilient, communities more sustainable and minimise environmental threats.
There are many ways to do this. Glasgow City Council, for instance, is using ‘community benefit clauses’ in contracts, to promote local employment and training opportunities as part of its £4bn investment in regeneration prior to hosting the 2014 Commonwealth Games. Staffordshire County Council has saved an estimated £10m as a result of reviewing its procurement procedures since 2004 – and a total of 36% of procurement spending is now within the local area. Changes to its procurement process include; tender guidelines for local suppliers; e-tendering for low-value contracts; pre-tender workshops; and lengthening and ‘unbundling’ contracts to enable smaller companies to bid.
None of this is necessarily easy. Achieving managed transformation means addressing a number of challenges head-on. UK and European Union law are often cited as barriers to using procurement to benefit local areas, but case studies show that less risk-averse councils are able to boost employment, skills and training and support small businesses locally while remaining within the law. Apse’s guides show how authorities are overcoming obstacles and include checklists to help gain more benefits from spending.
Organisational culture and risk aversion are often more significant obstacles than national policy or European law. It is not easy to change ingrained perceptions, but the authorities that have had the most success in achieving community benefits are those that have rethought their entire approach.
Involvement with local suppliers, capacity building, electronic procurement, contract unbundling, staff training, reviewing procurement processes from tendering through to contract management and using community benefit clauses in contracts can all help achieve the ‘triple bottom line’ of greater economic, social and environmental value.
But these need to be implemented within a holistic strategy that ties in with wider council objectives. Senior managers, councillors and heads of department, as well as those responsible for procurement, need to embed economic, social and environmental value into all contracts that are being let.
It might be convenient for politicians at national level to view public spending as merely a drain on resources. But this overlooks the value that public employment and spending brings to local economies. It is up to local government to make that spending work for local economies and communities. Minimising the costs of procurement and maximising its outcomes are essential in the face of a severe CSR settlement.
In the fierce debate about what dwindling public funds should be spent on, the process through which they are spent must not be overlooked. Spending the resources that remain in a way that benefits communities is surely a wiser alternative than merely slashing services and further undermining struggling local economies in the process.
Paul O’Brien is chief executive of the Association for Public Service Excellence
23 September 2010
Not all cuts have to be bad, sometimes you can get more for less – and that’s particularly the case with procurement, argues Paul O’Brien. Some councils have already found new ways to make the most of their spending power
Coping with cutbacks is not just about spending less. With October’s Comprehensive Spending Review expected to slice around 25% from council budgets, getting procurement right is essential to provide the biggest possible bang for the dwindling local government buck.Significant steps have already been taken to develop a rounded policy on procurement at national level. These include Sir Peter Gershon’s 2004 efficiency review; the three-year National Procurement Strategy for Local Government; Bill Roots’ 2009 review of procurement by English councils; and John McClelland’s review of the £2.3bn spent by Scottish local authorities.
In March this year, the Office of Government Commerce’s Policy Through Procurement Action Plan set out how public procurement can underpin economic growth.
These national initiatives highlight the importance of minimising the amount spent buying goods and services and of taking a holistic approach that links procurement to an authority’s wider goals, such as regeneration, economic development and tackling climate change.
The Association for Public Service Excellence believes that local authorities should avoid making massive and rapid cuts to services as a knee-jerk reaction to next month’s CSR. Instead they should aim to ‘manage transformation’ in a sensible and systematic way.
This should include finding ways of procuring more effectively. Apse has been developing suggestions for how this can be done, based on best practice from councils across the UK. Measures such as more focused leadership, better supplier management, better use of technology and greater collaboration have led to impressive savings.
For example, Peterborough Council embarked on a transformation programme three years ago and has since shaved £3.5m off its procurement bill. This has been attributed in part to its approach to supplier management, which used the latest technology to capture and consolidate information.
At Cornwall County Council, the introduction of procurement cards has saved at least 40% of the administrative costs on 25,000 transactions worth some £5m. A system developed in-house enables cardholding staff to buy stationery, office equipment, computer supplies, books and periodicals, hotels, travel arrangements and education and training courses.
The risks were fully assessed in advance and auditors were involved in the design of the scheme, as well as the chief officers in individual departments.
Another authority that identified savings through a transformation programme is Sheffield City Council. Its detailed business case found potential savings of £23.5m by 2011. So far it has saved £17m – primarily through commodity reviews, standardising processes and changing its procurement arrangements so designated skilled officers work alongside the respective service managers.
Collaboration can also cut purchasing costs. Nine authorities in Gloucestershire and Wiltshire have formed a partnership for buying office supplies. Anticipated savings on the contract amount to £720,000 per annum. Further savings are expected, as the contract requires all suppliers to trade electronically. Procurement Scotland, set up by the Scottish Government in 2008 to develop purchasing strategies for public bodies, has also established a number of national contracts for a range of goods bought by local authorities. This has led to savings of £7.6m on general stationery and £3.1m for paper alone.
Apse’s own research, produced in partnership with the Centre for Local Economic Strategies, examines how to use the power of the public pound more effectively.
For example, Swindon Metropolitan Borough Council wanted to ensure that its spending benefited the local economy as much as possible. Its research found that every £1 spent by a council could generate £1.64 for the local area. It used an economic multiplier model, which involved analysing staff spending diaries and the knock-on effect on local suppliers.
Public services account for 18.7% of jobs in Swindon and 34.4% of the council’s commercial services division’s spending on suppliers goes to local companies and organisations, who re-spend 30.8 pence in every pound in the local economy. In this case, effective local employment and supply chains have created a virtuous circle and stopped funds leaking out of the area.
This model has recently been applied in West Lothian where £1 spent by the council generated the even larger sum of £1.71 in the local economy. Using council spending power to maximum effect therefore means a positive cycle can be developed that provides employment, promotes local businesses and social enterprises and encourages investment and innovation.
Sound procurement practices can help make local economies more resilient, communities more sustainable and minimise environmental threats.
There are many ways to do this. Glasgow City Council, for instance, is using ‘community benefit clauses’ in contracts, to promote local employment and training opportunities as part of its £4bn investment in regeneration prior to hosting the 2014 Commonwealth Games. Staffordshire County Council has saved an estimated £10m as a result of reviewing its procurement procedures since 2004 – and a total of 36% of procurement spending is now within the local area. Changes to its procurement process include; tender guidelines for local suppliers; e-tendering for low-value contracts; pre-tender workshops; and lengthening and ‘unbundling’ contracts to enable smaller companies to bid.
None of this is necessarily easy. Achieving managed transformation means addressing a number of challenges head-on. UK and European Union law are often cited as barriers to using procurement to benefit local areas, but case studies show that less risk-averse councils are able to boost employment, skills and training and support small businesses locally while remaining within the law. Apse’s guides show how authorities are overcoming obstacles and include checklists to help gain more benefits from spending.
Organisational culture and risk aversion are often more significant obstacles than national policy or European law. It is not easy to change ingrained perceptions, but the authorities that have had the most success in achieving community benefits are those that have rethought their entire approach.
Involvement with local suppliers, capacity building, electronic procurement, contract unbundling, staff training, reviewing procurement processes from tendering through to contract management and using community benefit clauses in contracts can all help achieve the ‘triple bottom line’ of greater economic, social and environmental value.
But these need to be implemented within a holistic strategy that ties in with wider council objectives. Senior managers, councillors and heads of department, as well as those responsible for procurement, need to embed economic, social and environmental value into all contracts that are being let.
It might be convenient for politicians at national level to view public spending as merely a drain on resources. But this overlooks the value that public employment and spending brings to local economies. It is up to local government to make that spending work for local economies and communities. Minimising the costs of procurement and maximising its outcomes are essential in the face of a severe CSR settlement.
In the fierce debate about what dwindling public funds should be spent on, the process through which they are spent must not be overlooked. Spending the resources that remain in a way that benefits communities is surely a wiser alternative than merely slashing services and further undermining struggling local economies in the process.
Paul O’Brien is chief executive of the Association for Public Service Excellence
