Opera admits extrapolating savings figure

13 July 2011

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13 July 2011 | Adam Leach

Procurement consultancy Opera Solutions has admitted its claim that local authorities could potentially save around £10 billion through increased spend visibility was a “broad extrapolation”.

Speaking to SM, Nigel Issa, who produced the research paper Realising Savings Through Procurement Optimisation, admitted the £10 billion figure was a headline “not backed up by analysis”. However he maintains that savings of 10-20 per cent are still achievable.

His paper has been criticised by buyers after Opera’s findings were published on the Department for Communities and LocalGovernment website. The website said savings could be made by sharing expenditure data across all local authorities to give purchasers access to competitive prices.

Opera Solutions’ savings figure was calculated after the consultancy analysed the spending on mobile phones, energy and legal services of three adjoining local authorities. Across these three councils – the location and size of which Opera would not reveal – it found around 20 per cent could be saved on mobile phone deals, 10 per cent on buying gas, and 10 per cent on purchasing the services of solicitors. It looked at which authority had the best deal in each category to come up with the savings percentages. It then applied this calculation across total council spend. There are 433 local authorities in England alone.

Issa said the 20 per cent across-the-board figure was simply a target: “It's a broad extrapolation saying if you look at local government spending, that sort of figure [10 to 20 per cent] would equate to £10 billion, but there is no justification in our analysis. It's a target. Achieving that is very difficult and that’s what we go on to say in the next four pages.”

While the data in the study suggests that achieving the savings on commodities like energy and mobile phones is realistic, critics expressed their concern over the credibility of applying those potential savings across other areas of local authority spending.

David Pointon, who retired as head of procurement at PortsmouthCity Council this week, said: “How can they say, by selecting three authorities, they are typical of local authorities, especially when they are in the same geographical area? The whole thing doesn't hold water.”

Ken Cole, a director at procurement consultants SPS and former director of the London Centre of Excellence which was set up to improve local government purchasing, said: “My personal view is that [local] government can get 15 per cent, so that would add up. But to do it would also mean attacking the big contracts, such as highways, construction and adult social care.”

He said that by making extrapolations there was a danger of “over-simplifying to the point of being misleading”.

Issa said Opera Solutions is hoping to work with UK councils to conduct further, more in depth research.

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