The problem with public finances is obvious; we are spending more than we generate in taxes. Tax more and spend less, some argue, but raising taxes hurts the economy and cutting frontline services hurts the people we all want to help.
There is another way: drive down the public sector’s £220 billion third-party spend. Nigel Smith, chief executive of the Office of Government Commerce, has recognised this
, as have commercial directors, but have they found the solution? Pan-government collaboration is managerially very difficult to achieve.
It is difficult to deny that the private sector has the advantage of speed, and never has that been a currency of such value as now. The private sector can deliver on day one with a single, unified team and a commercial approach less distracted by broader policy. It works to agreed targets and brings resources, incentivisation and the ability to invest. It also operates with a delivery culture that could take years to fully replicate in government.
I’ve spent three years at DHL-operated NHS Supply Chain, helping build and develop a group of former public sector buyers into a thriving and dynamic private sector team. I work with talented, motivated people who used to be civil servants, as well as many others we’ve recruited from all industry sectors. Every day we worry about commercial issues such as driving savings for our NHS customers and achieving a decent margin to pay our wages and invest in the business. I don’t believe these achievements could have been realised if the organisation had stayed in the public sector, and certainly not as quickly.
Why? First, our parent company has invested in people. We now have a procurement team of 200 compared with about 90 three years ago. This doesn’t mean lower productivity; activity levels and financial outputs on a per capita basis all exceed those we inherited.
Second, we have invested significantly in building IT resources that enhance our capability. Even the most strident public sector advocate wouldn’t claim IT investment and implementation as a core competence.
Third, we can innovate more quickly. This is not about working harder, it’s because we are free from the bureaucracy and policy constraints that have made government into a supertanker that takes years to turn. Examples of innovation include directly sourcing products from low-cost manufacturing countries, new product innovation and a thriving level of e-auction activity (we conducted 54 e-auctions last year saving an average of 15 per cent – and 85 per cent of savings achieved were passed to NHS trusts).
It is not for the private sector to set policy, but we can, and do, want to play our role in helping the UK reduce its deficit rapidly and effectively.
Roger West is procurement director of NHS Supply Chain
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