Better buyers vital for public sector

29 Jun 10
Public procurement officers are unlikely to be ring-fenced by ministers, but efficient buyers could save government departments millions of pounds. David Williams investigates
By David Williams

29 June 2010

It is safe to say that the government’s procurement function has never been a doorstep issue for the electorate. Whenever politicians talk about cuts, they try to reassure voters that the ‘bureaucrats’ and ‘back office’ will take the pain. Yet the public sector’s buyers could prove vital as drastic spending cuts take hold.

Last year’s Treasury-commissioned Operational Efficiency Programme found that the UK public sector spent £175bn a year buying goods and services in 2007/08. That spend matters: it pays for big IT systems and staffing contracts for services such as social care, alongside the more mundane pencils and paper clips.

Jonathan Jones, improvement manager at the West Midlands Improvement and Efficiency Partnership, says effective procurement can ‘be a saviour for frontline services’. But, he adds, most best practice exists in isolated pockets on a ‘cottage industry’ level.

He is just one person expressing widespread concerns that buyers are not in a position to make the savings they know are possible.
Barbara Cairney, procurement head at Northamptonshire Police, argues that obstacles to saving are built into the structures of government. The annual budgeting cycle, she says, leads to short-term buying decisions made out of the fear that any unspent funding this year will vanish next year.

When combined with the dependence of local bodies on central funding streams, this leads to piecemeal and short-sighted buying. Cairney cites Blackberry phones as an example. ‘The Home Office says to us, “I’ve got this money, go out and buy some Blackberries – and spend it in three months”. So we’re all running about madly trying to get Blackberries for our officers.’ And worse, this activity is being duplicated by forces all over the country, making economies of scale impossible.

More centralised contracting might remove duplication, but it would run counter to the government’s stated aim of decentralisation, including its proposed general power of competence for councils.
Mo Baines, principal adviser at the Association for Public Service Excellence, points out that smaller, localised contracts can make savings by opening up the marketplace for smaller businesses. 

Baines also underlines the potential for councils to use contracting to, say, support local apprenticeships or promote use of sustainable technologies. She argues that procurement will become increasingly important to achieving these aims as other budgets shrink.

‘There has got to be compromise,’ she says. ‘You have to look at what things are winnable, what the capacity is locally and where the economies of scale are.’ 
 
One example where procurement is succeeding in lowering costs is the NHS Supply Chain – the firm tasked with saving £1bn through procurement between 2006 and 2016.

The £200m savings announced so far are only a start. But Roger West, procurement director from 2006 until this spring, is confident more will be saved as an increasing number of trusts choose to buy through the central agency.

West says the body is saving money by joining up large, fragmented groups of suppliers and customers. And it is now going further by bundling up large investments, such as MRI scanners, with maintenance contracts and arrangements for the equipment to be disposed of at the end of its life. In doing so, it is saving cash by taking the rare step of combining capital and revenue spending.

However, as a single agency generating savings through buying for an entire sector, it remains an exception. West tells Public Finance that the approach could work in other parts of government, or in large-scale areas of spend such as food.

But West also sees the potential for savings in the procurement function itself. In the NHS, he says, 40,000 buyers cost the taxpayer £2.1bn a year. ‘There’s a huge cost wrapped up in the cost of doing procurement,’ he says. ‘One thing we have to do is get rid of the duplication of activity where you have numerous buyers all buying the same thing.’

And regardless of whether those workers are saving a fortune, no politician is likely to save procurement jobs over those of nurses or police officers.

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