Commercialism in public sector procurement needs to be driven from the top down, buyers have been told.
Ken Lyon, head of commercialism at Birmingham City Council, said the “first and most critical” step to creating the right environment for more commercial procurement in local authorities was having leadership that was “empowered to take bold decisions”.
Speaking at the Public Sector Show, Lyon said both political and officer leadership needed to be enabled to spot and act on talent and opportunities and to “set the agenda, the tone and the pace” of commercialism.
“Commercialism is more than about generating income, it’s about driving that business-like thinking, that efficiency, that effectiveness and making those bold decisions that enable us to maximise the value of the money that we have for the impact on our citizens and the people that we serve,” he said.
Lyon said public sector organisations needed to “play to their strengths” and avoid the temptation of trying to commercialise everything they do.
“Recognising the things that we do well as an organisation and a sector, the assets that we’ve got and exploiting those is really important, and understanding the things that we’re not good at and looking to get out of them.
“In Birmingham recently we transitioned out of a cleaning business which had a £9m turnover because we couldn’t make any money on it and we knew we would lose money on it going forward.”
His comments came after the Confederation of British Industry (CBI) released a report calling for greater consistency of good commercial practices in the public sector.
The report, Partnering for prosperity, written alongside law firm Browne Jacobson in response to the collapse of Carillion, outlined a number of recommendations for improving the way the public sector engages with businesses to deliver public services. These included a focus on long-term partnerships with business and the simplification of procurement processes to open up more contracts to SMEs.
Removing the cost and complexity of bidding for government contracts would also allow suppliers to invest in finding more innovative solutions to providing public services.
The report included a survey of 253 companies providing public services that found more than half said cost was the driving factor behind how the public sector awarded contracts.
Carolyn Fairbairn, director-general of CBI Director-General, said: “In the aftermath of Carillion’s collapse, it’s essential for industry and government to learn the right lessons so public services and people’s jobs are protected.
“By working better together, industry and government can help restore the public trust in public sector partnerships with the private sector and make them work better for all concerned.”
Earlier this week David Lidington, minister for the Cabinet Office, outlined a set of changes to improve the way departments contract with the private sector, including an expansion of the Social Value Act.
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