The UK Experience by Malcolm Morley *
Together, Councils in England spend over £40 billion per year on the procurement of goods and services. Despite this huge investment the procurement activity in Councils is often underdeveloped and means that opportunities to improve value for money are missed. This in turn means that the potential to free money from within existing budgets to invest in the provision of additional services or in the improvement of existing services is never realised.
Councils have a duty to ensure that they get good value for money from their suppliers and provide good value for money from their service provision. Lessons that can be learned from best procurement practice in both the public and private sectors are not being learned on a sufficient scale, so that many Councils are failing to achieve maximum value for money from the resources available to them.
Traditionally Councils have undertaken procurement in isolation. This has led to the fragmentation of purchasing power. With over 400 Councils buying paper and other commodities it is little wonder that there have been a wide range of deals struck at differing prices.
It is also of little surprise that suppliers, given the relatively low value/volume of individual Council procurement, have been reluctant to enter into partnerships with individual Councils to develop innovative approaches to procurement/service provision.
In recognition of all of the above, Government and the Local Government Association (representing Councils in England) have developed a National Procurement Strategy intended to improve Local Government procurement. The Strategy seeks to ensure that:
- value for money and efficiency savings are obtained on a continuing basis
- improvements are made to the way Councils manage procurement.
- Councils work with a range of quality service providers.
The Central Government has already gone down this route with the creation of its own Office of Government Commerce, with significant success. It is now requiring Local Government to match that success.
The Strategy has been placed within the Comprehensive Performance Assessment framework for the assessment of Council performance. This framework publicly classifies Council performance and increasingly has implications for the level of freedom and resources individual Councils have available to them.
Larger Councils with significant purchasing power and resources will find it easier to devote resources to procurement. This will not be the case for smaller Councils. Smaller Councils with limited purchasing power, resources and corporate capacity will have to start their response to the National Procurement Strategy by looking at how they can jointly develop the resources and corporate capacity to tackle procurement.
Only through working with other Councils and organisations will smaller Councils be able to even start to develop a credible approach to the challenges set by the National Procurement Strategy. This will require both political support and breaking down managerial and operational barriers to joint working and procurement. It will also require positive choices to be made regarding the balance between pursuing the lowest price based upon aggregated volumes and the desire to support local small enterprises that can neither cope with large volumes or compete on price.
There is little doubt that procurement is a significant and complex issue for the whole of the public sector. Progress in achieving significant increases in value for money will challenge the strategic thinking, culture and operation of all Councils.
Details of the UK’s National Procurement Strategy can be found on www.odpm.gov.uk
* Malcolm Morley is Chief Executive of Harlow District Council and can be contacted via the Editor, email info@lgfocus.com.au The views expressed in this article are not necessarily those of his employer.
