8 June 2010 | Nick Martindale
Purchasing heads in government departments have welcomed plans to centralise commodity spending as part of the coalition’s pledge to deliver savings of £6 billion.
John Collington, group commercial director at the Home Office, whose department has to deliver savings of £367 million, said: “This is an opportunity for procurement to really play its part and to support real cost savings as opposed to savings on spend, probably for the first time in many years.”
Ian Taylor, commercial director at the Department for Education, said: “We’re all negotiating on the back of our own volumes rather than across the government. To put everything into one pot and negotiate once would be entirely desirable.”
Under government plans, all non-strategic spend will be pooled and mandated under the authority of the new Efficiency and Reform Group (ERG), the launch of which was announced by Chancellor George Osborne last month. This will include office supplies, travel, IT equipment, FM services, energy and training. The Office of Government Commerce, and its Buying Solutions commercial arm, had previously strived to aggregate demand, but could not force departments to use its deals.
“This is a chance to make a step change in delivering real value from commonly bought commodities,” said David Smith, commercial director at the Department for Work and Pensions.
It is currently unclear how the process will be managed. “It could be hosted by another department, run from within a public sector buying organisation or outsourced,” said Taylor.
Departments would then be able to focus on renegotiating existing contracts for strategic suppliers. “Some we will allow to come to a natural end and some that are deemed to be not good value for money we will look to close in an appropriate way, under the terms of the contract,” said Smith. “That’s our default position, but all things are negotiable.”
Gordon Samet, former head of national contracts at the Department for Environment, Food and Rural Affairs and now a government supplier as director of the consultancy Gretzky, said estates management and professional services would come under review.
He said: “There is a concern about the level of maturity of the cuts. Are they going to be cuts for cuts’ sake or are they going to be made in a sensible way? There’s trepidation [from suppliers] as to what this means.”
SM understands a chief operating officer will be recruited to head the ERG, reporting directly to the chief secretary to the Treasury and the Cabinet Office minister. All heads of procurement will report to this post.
Meanwhile, the pay of the top civil servants who will drive these efficiency cuts has come under scrutiny following the government’s publication of those earning more than £150,000 a year.
OGC chief executive Nigel Smith earns between £185,000 and £189,999 annually, but two of his employees are paid more. Programme director David Shields earns between £205,000 and £209,999 a year and David Pitchford, major projects executive director, earns £200,000-£204,999. Buying Solutions chief executive, Alison Littley, earns £150,000-£154,999.
Others involved in procurement on the list include Les Mosco, director commercial at Defence Equipment & Support (DE&S), Andrew Tyler, COO of DE&S and Andrew Manley, director general, defence commercial at the Ministry of Defence.