Procurement: more than just buying

5 Jun 13

Public sector procurement needs to become increasingly commercial in its approach. Better market intelligence and contract management are key to doing it smarter

Public sector procurement has evolved significantly over the past 30 years. In the 1980s we had a simplistic approach based on ‘the buyer’, before specialised purchasing teams brought a new focus in the 1990s.

Nowadays we have what we like to regard as an altogether more strategic and sophisticated approach. But just how effective is it – and where do we go next?

I’m currently involved in a research project being carried out by Procurement for Housing, the University of Liverpool and social landlord Affinity Sutton which explores just what public bodies can get out of a more intelligent approach to procurement.

One key question is the role public sector buyers can play in an environment of declining state funding and greater demand for services, where a step change towards a more enterprising culture is needed.

Whether it’s sharing services, selling them to others or harvesting value from existing assets, some local authorities, social housing providers and other public bodies are demonstrating the need for an increasingly commercial mind set.

So how can procurement officers be influential in bringing about change towards a more profit-focused approach, right across their organisation?

Early research findings indicate procurement staff believe they need to concentrate on more than just buying if they’re going to move forward strategically.

Could one new area of focus be commercial intelligence? By becoming hubs of business insight, procurement functions could help to inform strategic decisions made by public sector ‘businesses’ in future.

We’ve questioned hundreds of finance and procurement professionals, mainly within social housing. The message that’s come out is pertinent to all in the public sector – detailed local knowledge and market data is key to helping your organisation think with a more commercial mindset, maximise its impact and become more sustainable.

Too often we see public organisations work in ways that betray a lack of understanding about the potential impact of both their procurement activity and the business intelligence that should underpin it.

By getting better at analysing market knowledge, public procurement functions can strengthen their position with suppliers, cut their cost base and maximise income streams. Strong market data can help organisations use their assets to create more social opportunities for local people and boost economic growth.

But how exactly can procurement staff lead the way? It wouldn’t be cost-effective to hire specialists to pull together the intelligence required. There are too many markets to cover – from office supplies to double glazing.

This is where sector-specific consortia can play an important role; sharing the best practice of their members and acting as brokers of data, layering and distributing knowledge as well as advising on contracts.

Encouraging public bodies to save cash through smarter buying is important but purchasing consortia must also help organisations to squeeze value from existing assets. Every public sector employee managing assets, from recycling officers to social housing staff, must become more commercially aware to maximise income and quality.

Once contracts are awarded we must also pay attention to managing cost and value. During the sourcing process, procurement staff spend time getting quality suppliers offering commercially attractive rates, best value and innovation. But once a supplier has been appointed, purchasing professionals must also manage the downstream elements of a contract so there is no cost leakage and they do get what they asked for.

Buying is important – but it’s only half of the issue. Improved contract management can develop market intelligence, supplier capabilities and help understand the issues linked to asking for certain terms in contracts.

Smarter procurement isn’t just about saving time and money through framework agreements or EU compliant tender processes. Public sector buyers are perfectly positioned to play a lead role in the commercialisation of the sector. And it’s this new, business-focused approach that will boost the sustainability and social impact of public bodies in the future.

Did you enjoy this article?