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FINANCE - MORE FOR YOUR MONEY

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With the chancellor voicing his commitment to public-sector savings, procurement is an area ripe for pruning, says ...
With the chancellor voicing his commitment to public-sector savings, procurement is an area ripe for pruning, says Chris Wilson

One effect of the efficiency review has been to push procurement further into the local government spotlight than ever before.

In his 2004 Budget, chancellor Gordon Brown spelled out the scale of the challenge facing the public sector: the achievement of efficiency savings of 2.5% per year from 2005-06, a total of 7.5% by 2008.

Procurement, which accounts for half of all local government spending, is an area in which savings on that scale can realistically be achieved. The markets identified as priorities by the review team are construction and facilities management, social housing, goods and services, social care, highways, environmental services, back-office processing, defence and sector-specific commodities.

One of the main challenges raised by the review is the need for awareness of procurement spend. There is still a tendency among councils to view procurement as a functional activity which does not impact on the day-to-day running of the organisation, and many do not know how much is actually being spent on procured services.

A second challenge is to gain a recognition from central government that lasting efficiency savings cannot be forthcoming without significant up-front investment. Without adequate funding for IT systems and change programmes, the drive for efficiency will be a non-starter.

With regard to back office and transactional processing, the efficiency debate goes to the heart of what councils perceive their role to be. Should they be primarily commissioners rather than providers of services? Arguably, individual councils should not directly provide non-core services if this inhibits their ability to focus on and deliver their core functions, particularly where there are alternative public, not-for-profit and private-sector providers who can deliver the same services more efficiently and cost effectively.

There is no doubt that the r eview amounts to a powerful endorsement of the nine regional centres of procurement excellence already established by the ODPM. These centres will work with all councils in the region to support the implementation of the measures in the national procurement strategy for local government and, in due course, those of the efficiency review.

We believe the centres of excellence should be structurally strengthened and extended to a sub-regional level to enable them to better lead and support the change programme. They should also cover not only procurement, but also back-office processing and transactional processing.

Although each of the nine centres is at a different level of development, there are a number of principles to which all should adhere. Buy-in from the political and managerial leadership of each council is essential. A panel of experienced procurement officers should also be involved.

A careful analysis of existing procurement spend is needed to identify where most money is currently being spent. Common criteria should be established to identify the market sectors on which to focus first, and common benchmark indicators set up to establish desired performance levels.

The view that either the public or private sector is the best at delivering certain goods or services is now

clearly outdated. Successful procurement is all about councils finding the most cost and time efficient way to deliver services.

Major change and ICT procurement projects often concentrate on the procurement of the ICT infrastructure, with little focus on business and cultural changes. This can result in entrenched positions and silo management going unchallenged. In fact, without a sustained programme of change management, silos often become reinforced by the new ICT systems.

A more business-focused approach is to build the council's capability to implement business changes across directorates, to take advantage of structural changes and ICT improvements. This requires understanding and agreement from the service areas that will be affected, all of which must have sufficient management resources available to be fully engaged in the development of specifications and implementation. Major change projects need to be underpinned by a clear communication strategy.

From our hands-on experience of working directly with councils on large-scale procurement, change management and ICT projects, 4ps is aware of the real commitment that exists among councils to re-engineer their processes, introduce change where appropriate and re-invest savings to improve front-line services.

Chris Wilson

Executive director, 4ps

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