OGC: buyers not adding value

24 July 2008
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25 July 2008 | Jake Kanter

The government is not getting value for money from its procurement operations, according to the OGC chief executive Nigel Smith.

Addressing delegates from the energy industry at a procurement seminar in London last week, Smith also described the volume of OJEU notices for energy supplies as a "massive waste of time and money".

"The OGC has the task of getting value for money from procurement," he told the audience. "Does government get value for money now? I'd have to say, in my limited experience over nine months, the answer has to be 'no'. I don't think you would find anybody in government who would answer 'yes'."

Despite some good work in procurement, Smith argued, it is "absolutely vital" the OGC helps the government improve its purchasing.

The government spends more than £70 billion on common commodities and the OGC is working to create six categories, including fleet, travel and stationery, where public sector buyers can work together to push for savings.

The OGC chief said one of the most important categories is energy, where government spent more than £3.5 billion in 2006-07.

He explained the public sector has issued 250 separate OJEU notices for energy supplies over the last two years, amounting to a "waste of time and money" for buyers and suppliers. The public sector purchases eight times more energy than any other organisation in the UK and Smith urged buyers to adopt four measures for reducing costs. These include greater aggregation of spend to improve contracts, better risk management, leveraging public sector demand and cutting energy use.

In 2007 the government set up an Energy Strategy Team to promote cooperation and tackle energy procurement. The group is led by Berni Holdsworth, assistant director, support services at the MoD's Defence Equipment & Support.

Speaking at the same event Holdsworth said that last year 40 per cent of the public sector's spend on electricity and gas supplies was disaggregated and only 30 per cent used best practice procurement. In 2008, he hopes 10 per cent of this "fragmented" purchasing will become more collaborative.

Smith asked suppliers to help reduce duplication and demand so the government can become like a private sector client. Then vendors could get access to longer-term contracts and benefit from lower transaction costs.

SMjul2008

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