04 September 2009
Joint purchasing deals are popular in the public sector and gaining pace among private firms. But few of the latter schemes may be realised, finds Allie Anderson
Collaboration as a means of securing better deals has been high on the public sector agenda in recent years. NHS bodies, local councils and central government departments have teamed up to approach the market, with big savings for the public purse.
In the current climate, the private sector is also increasingly considering working with competitors to secure better deals on goods and services. Earlier this year German auto giants BMW and Daimler said they aimed to extend their collaborative procurement deal, after identifying more car parts they could source together (Web news, 30 July 2009).
And over half of buyers who responded to the latest SM100 poll confirmed they are looking to introduce such agreements in the next year (News, page 10).
However, purchasing consultants agree there's not yet much evidence of successful joint buying in the private sector. Lee Parkinson, director at Parkinson Procurement Solutions, says that where it has happened, it is "generally based upon close relationships between the respective buyers of peer organisations".
There are several things that hold firms back. For instance, a general aversion to sharing commercially sensitive information can make gathering details of each party's requirements and comparing products, services and prices a difficult process.
A lack of awareness of which categories of spend might benefit from co-sourcing is another barrier, says Peter Smith, managing director at consultancy Procurement Excellence.
Then there's the minefield of competition law to consider, Parkinson says. "If a collaborative procurement is of a magnitude that will drive a market to an unsustainable position, it could breach competition law."
John Durrell, managing director at Associated Procurement, agrees: "You have to be sensitive about anti-trust issues. You could end up unwittingly stepping into some legal grey areas."
But for many, overcoming the difficulties could be worthwhile.
Emma Brooks, representation manager at CIPS, says: "The benefits outweigh any potential risks, especially in the current climate."
For some businesses, particularly SMEs, she adds, it is one of few alternatives to going out of business. "If two heads are better than one, then why not four or five heads?"
The recession is cited by many firms as a driver for collaborative deals, but since economists are predicting a fragile emergence from the slump, planned joint buying arrangements may not now come to fruition, says Smith.
Durrell is also sceptical: "In 12 months' time some of the high hopes and great expectations people have now will not necessarily have been realised and they will have to go back to basics. Too often this kind of activity ends up just being an expensive distraction."
Brooks is optimistic: "Change is so rapid and unpredictable, people have to think outside the box. Collaborative buying is one way of doing that, so I think it will continue on the up."
So while joint sourcing in the public sector looks set to remain a priority, in the private sector, the jury is still out.