20 July 2010 | Lindsay Clark
As central government is told to make yet further savings, Lindsay Clark hears about how one department is changing the procurement culture
The challenge for public procurement could not be greater. In the UK, government departments must come up with proposals to slash budgets, in some cases by as much as 40 per cent. This demand is made in preparation for the autumn spending review from a chancellor bent on slashing record government borrowing.
While procurement professionals expect demand management to play a vital role in reducing spending (which is set for an average cut of 25 per cent in departments outside health and international aid) buyers must have some way to extract more from shrinking budgets.
According to John Collington, Home Office group commercial director, one problem is that departments still struggle to get accurate information on and control over spending. When he joined the Home Office in 2006, this was the exactly the situation he faced and has since worked to improve. “Less than 40 per cent of spend was under management,” he told the conference Central Government Efficiency: More with Less, “but that situation exists elsewhere [in government today].”
So what did he do? First, he had to recruit skilled purchasers. “It’s difficult to hire quality procurement resources in Central London because you’re competing against the City and management consultants. We opened a centre of excellence in Newport and hired from the private sector.”
In addition, he supported training programmes, including CIPS qualifications, for existing staff.
Having worked for Accenture, Collington was well positioned to observe the difference in buyers in the public and private sector. “In Accenture, staff were more confident than they were capable; in the public sector, people are more capable than they are confident. If you give them confidence, by putting them up for awards and so on, they can compete with the private sector.”
The Home Office also had to improve its management of contracts. “We tended to issue contracts and let contracts, but we weren’t very good at managing them. I never came across the term ‘let and forget’ until I came to the Home Office. How did we manage transactions with suppliers? ‘That’s the job of accounts’ was the answer.”
Similarly, the department was not exactly proactive in nurturing a strong relationship with its top suppliers. “We spend £110 million a year with Fujitsu, but had never seen the chief executive. We need to know the top suppliers at chief executive level.
“With suppliers you have to build trusting and respectful relationships; that makes them more likely to deliver long-term sustainable value.”
The final key problem to address was access to spend data itself. Through an Oracle-based finance and procurement system, the Home Office now has greater visibility of purchasing and 80 per cent of spend under management.
But herein lies a warning of the difficulties departments could face. Collington did not refer to this, but the roll-out of the Oracle system (which was prior to his arrival) was not exactly smooth. In 2006, the National Audit Office said the department was unable to reconcile its cash position during 2004-05 because of problems with the finance module of the system, underlining the interdependency of successful IT and purchasing projects.
Nonetheless, Collington said the overall procurement transformation programme had saved £243 million over three years. “Procurement can make a difference, and procurement transformation supports change in other departments,” he said.
Procurement now has the opportunity to increase its influence because political leaders are listening. Cabinet Office minister Francis Maude is set to mandate collaborative procurement across government, and existing contracts with top suppliers are to be renegotiated. Collington said of him: “Francis Maude: he gets this.”
The public spending cuts run to 2014-15, and are bound to meet ardent public protest, meaning the drive of people like Collington will be severely tested.