Councils fall short on savings goals

31 March 2004
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01 April 2004 | David Arminas

Savings on goods and services from 12 major pilot e-procurement projects in local government launched a year ago have been lower than expected.

A report published on the progress of the pilot schemes by independent research firm Deloitte MSC found average savings were 2.8 per cent.

Martin Scarfe, financial adviser at the London Borough of Newham and chairman of the National e-Procurement Project (NePP), which sponsored the schemes, said he was surprised at the average savings: "It was lower than we expected."

Newham put £5 million of its £30 million budget through its e-procurement pilot.

Scarfe told SM: "We had savings of 10-12 per cent but realistically we don't think many authorities will get that because not everybody has the high maverick spend we had."

The report concluded that if all 388 English councils bought their goods and services electronically, the percentage savings would translate into £1.5 billion off the annual £14 billion spent.

But Scarfe said the report estimated that by using full e-procurement across all authorities, they could save the equivalent in 3,300 full-time-employees.

This means purchasing would be freeing up staff not only in procurement but throughout an authority to do other work, in particular front-line services such as in education and social work.

The report also noted that 64 per cent of the savings through e-procurement came from using improved procurement practices beside the electronic capability.

"What the report says is that you cannot distinguish between good procurement and e-procurement," said David Pointon, procurement manager at Portsmouth City Council, which ran one of the pilots.

Other findings were average savings of £26 per e-procurement transaction, a £33 saving on purchasing card transactions and average savings of 13 per cent on e-tendering exercises.

At a two-day conference on the pilot schemes held in London last week, Phil Hope, minister for local government and e-government in the Office of the Deputy Prime Minister, said e-procurement was central to improving local authority efficiency.

"The NePP is at the heart of local government's national procurement strategy," he said.

"The important thing is to make councils smarter buyers, to look at economies of scales within their own councils, but also with regional partners by teaming up with them to better negotiate with suppliers."

Hope added that councils could plough savings from e-procurement back into front-line services. "Local authorities have to re-focus to deliver seamless services to their citizens in ways that the people want and need them, and when they want them and do it more efficiently. The NePP falls into this last camp."

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