Councils ‘dangerously dependent’ on key suppliers

Local authorities in England have failed to diversify their supplier base since the collapse of Carillion.

A series of FOI requests have shown more than half of local authorities still concentrate their spend on their top five suppliers.

On average councils spent £52.5m, around 55% of their total spend, on their top five suppliers in the last 12 months.

Alex Saric, CMO at Ivalua, which carried out the FOIs, said many councils had a “dangerous dependence on a handful of strategic suppliers, increasing the risk of being left in limbo and scrambling to backfill contracts and onboard new suppliers”.

Ivalua found 22% of local authorities worked with Carillion before its collapse. But just one authority said it planned to increase the number of suppliers it is using over the next 12 months. Another 21% said they were planning to reduce suppliers.

Ivalua sent FOIs to all London boroughs and metropolitan and county councils in England between June and August 2018, of which 141 out of 161 wholly or partially responded.

“While there are notable exceptions, too many councils are not considering a change their approach to supplier management, continuing to concentrate spend with just a handful of strategic partners,” said Saric.

“The failure of Carillion exposed the risks of a cost-dominated approach to procurement, as well as the risks of relying on a handful of large suppliers.

“If there’s one thing Carillion can show it’s that bigger is not always better when it comes to supply chain risk… Focusing on supplier diversity and innovation will encourage sustainable cost savings that are driven by the supplier rather than the buyer.”

Carillion, a major government contractor, quickly went into administration at the start of this year, putting into jeopardy the provision of many public services.

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