Harnessing demand to make the most of your purchasing power is crucial in any sector – none more so than higher education.
Budget cutbacks, falling student numbers… it’s a tough time for universities. So why aren’t more people making use of demand management, one of the most important procurement tools we have at our disposal?
My organisation, one of the UK’s regional higher education purchasing consortia, uses pre-commitment to contract to harness demand across our 22 member institutions in the north west, north Wales and Northern Ireland. We prepare a contract for a particular area of spend, ask our members if they’d like to take part, and if they do, find out what their annual budget will be.
We can then go to market with a proposition that’s not only attractive in terms of its scale, it’s also accurate. We can say with some certainty that, for example, a contract is going to be a worth £2 million but could be worth up to £4 million. We’re not saying that amount of business is guaranteed but it’s strongly indicative. It provides certainty and puts weight behind the proposition – i.e. it’s worth x amount of money, it grew by x per cent in the last 12 months and we expect it to grow by x per cent over the next year.
From a supplier’s point of view they think, “this is something we can put a price on”. They can pitch with confidence regarding what’s at stake, knowing there’s a good chance they’ll get a fair share.
Nothing annoys suppliers more than when they’re told a particular contract is worth, say, £25 million and yet just £250,000 ends up going through it. Plucking figures out of the air rather than compiling accurate data does little to build relationships with suppliers – and it makes getting value for money harder.
And yet in the higher education sector no one outside the north west is using pre-commitment. It’s almost as though people are scared of it, even though it’s not a legally binding agreement. Perhaps we need to change the name; we certainly need a change of mindset.
This isn’t just an issue for consortia – universities also need to get a better handle on budgets if they’re to harness demand and drive better value for money
In the context of Sir Ian Diamond’s review of efficiency in higher education, pre-commitment will have to play a huge role if we’re to hit a target of 30 per cent of non-pay spend being addressed through collaborative arrangements.
☛ Mike Haslin is deputy director of North Western Universities Purchasing Consortium (NWUPC). The biennial Conference on University Purchasing will be hosted by NWUPC in Liverpool on 9-11 September.