Somewhere between Sir Philip Green’s Efficiency Review and the coalition’s Comprehensive Spending Review, the much-derided reputation of public sector managers came in for yet another battering. Much respected for his ability to save money (including from his own tax bill), Green’s report was a showcase for financial irresponsibility in the public sector.
At least, that’s what most people who work in the private sector assume. And who can blame them? So often does our media report stories of lazy, feckless or even negligent examples of public sector spending that systemic recklessness is taken to be an unarguable fact. After all, can it really be so difficult to purchase straightforward equipment and services at market prices?
Actually, for the public sector, it is. If you are used to the freedoms of private enterprise, this may come as a surprise. Commercial managers, me among them, are free to make sensible judgements about procurement. If we think we’re paying over the odds for something, or believe we could get more for our money, we can call around for quotes from our own choice of suppliers. We decide, through processes of our own corporate making, which supplier has presented the best proposal. And we are at liberty to chop and change as much as we choose.
Yet I know from experience that the situation in the public sector is very different. My company consults to many public sector organisations – local councils in particular – and like Sir Philip we too have witnessed needless overspend. What we have also seen – and this is not revealed in his report – is that the public sector is bound by laws that ensure it keeps on paying overinflated prices for months at a time, even when managers know they can get a better deal. To me, that is the truly shocking fact of public sector waste.
Through our work we see a pubic sector trying to be enterprising and proactive in seeking savings, but finding itself relentlessly stymied by well-intentioned yet highly complex bureaucracy. Indeed, pursuing opportunities to cut costs requires a level of tenacity that might surprise the private sector. Any change must be proposed in formal reports and approved by departmental, corporate and cabinet boards to support the democratic process.
Laborious European Union tendering processes that managers legally have to follow, while aiming to make the process fair and transparent, have the effect of hindering what in private companies would be relatively simple procedures. Similar obligations make it difficult for public sector bosses to speak out on this matter. Certainly at this time when the axe of deficit reduction is swinging they understandably want to keep their heads well below the parapet.
I see the sense in trying to create level playing field for suppliers to the public sector. And I accept that it is reasonable to use the public sector as a vanguard for encouraging cross-EU trade. But if the process designed to advance these laudable goals has the effect of greatly increasing the cost of procurement to the public purse it cannot be regarded as fit for purpose.
It seems that the experts, stakeholders and pundits can’t agree on the best way forward. Green is a proponent of centralised procurement to achieve economies of scale. The Chartered Institute of Purchasing & Supply accepts this to a degree, but warns ‘centralising procurement with a few suppliers could put others out of business. This could end up creating monopolies and damaging the economy as a whole.’
This problem is complex and so will be its solution. We cannot escape procurement legislation as it stands. Although it is possible to be successful in making meaningful efficiencies, the current framework means that efforts to make very significant savings – enough to cut public spending by many millions of pounds without harming frontline services – are routinely delayed by a year at least, or in some cases prevented altogether.
If this problem is to be solved what needs to happen first is acknowledgement at the very top of government that there is indeed a problem. The coalition does not appear to be aware of it and neither does its top efficiency advisor. So long as the status quo persists, so too will public sector waste.
Rachel Wynne is CEO of Panacea Group, which offers consultancy services and software to public sector organisations
