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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
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
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
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
He said that by making
extrapolations there was a danger of “over-simplifying to the point of being
Issa said Opera Solutions
is hoping to work with UK councils to conduct further, more in depth research.