Why I believe in a centralised model for public procurement

5 February 2013

My appearance, with Jon Hughes of Future Purchasing, before the Public Administration Select Committee in January appears to have caused some controversy.

I have been arguing for a centralised model for public procurement for many years, so I’m pleased someone has finally noticed. For the past quarter of a century or so there have been reasonable government procurement policies that have largely failed to be implemented because there has been no mechanism for doing so, and there have been all sorts of problems with some major spends. With public sector procurement spend worth roughly £3,500 to each member of the UK population, this is a huge amount of money not to be managing coherently to deliver value for money and economic growth. Successive governments have invested tens - probably hundreds - of millions of pounds over the past three decades to try to compensate for the innate structural problems. When the present government came to power, it still felt the need to put the reform of public procurement high on its agenda of priorities for savings and, more latterly, supporting economic growth. Some high-profile problems have been experienced since then, such as the West Coast Main Line fiasco and the financial problems of Southern Cross Care Homes and even many of the problems of the Building Schools for the Future programme should not have happened with a better procurement model. It may be time to recognise the approach used up to now is unlikely to deliver the hoped-for results. My maxim is that if one wants a radically different result, one has to do something radically different. So, for procurement, what should that be? Jon Hughes would argue for sector procurement, but with a geographical hub within the M25. Given the huge public purchasing spend within the M25 and its extreme complexity, this is close to centralisation, and would not take much more to make it nationwide. Another approach is to have procurement operating in public sector silos. The Department of Communities and Local Government has been trying for nearly 10 years to create a coordinated approach to procurement throughout local government and has invested tens of millions in this. There have certainly been improvements and there are some great initiatives, but Sir Philip Green would have a field day if he were to review it. The NHS may get a more co-ordinated approach following the Carruthers review. But there is also the problem that the functions of the silos change, and many issues cut across the silos. One needs a procurement model that will handle this. It is an over-simplification to argue the more centralised approach of 30 years ago did not work. It had some major flaws, and there was no oversight of the organisations by anyone, including the National Audit Office and Public Accounts Committee, neither of which existed. Things got worse when the central organisations were disbanded and job creation for procurement and operational professionals as well as consultants rocketed. So, what is the solution? There is certainly no ideal one. Having worked in nearly all parts of the public sector, creating joint procurement organisations and fostering and managing collaborations, I have a good understanding of the sectors, their procurement peculiarities, differences and commonalities. The latter are huge. It doesn’t take a genius to work out that sectors and organisations within sectors are often competing with each other for the attention of the same suppliers. This is hardly market management. One problem may be that the public sector is not in competition with anyone, so it won’t go out of business. But that is not quite true. The UK is competing with other countries and we will be (and almost certainly are) much the poorer if it fails to harness the £230 billion per year procurement spend effectively. The procurement model that I propose is not simplistic, as is evident if one goes into the detail. It is the only model I have seen that provides a rational account of how public sector procurement policies can be implemented, all of which were developed by private sector procurement personnel. It also builds on some of the excellent organisations that exist in the public sector. I noted recently 60 significant benefits that I don’t see that any other model proposed could match – and could probably come up with 80 or 100. I challenge the detractors of my approach to come up with a credible vision of their own, that will take account of the complexities of the public sector, deliver government procurement policies, deliver many other benefits that one would expect to see from world-class procurement and abolish the weaknesses of the current scenario. They should also be prepared to explain their route map for delivery. ☛ Colin Cram is managing director of consultancy Marc1
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