Ireland's struggle to turn predicted savings into reality

25 November 2010
The figures contained in Ireland’s national recovery plan about procurement make interesting reading.
Just as in the UK spending review, the terms “aggregated procurement” and “maximising efficiency” feature prominently. It says the public sector can save €40 million (£33.8 million) through improved purchasing this year, €50 million (£42.2 million) by the end of 2011 and €65 million (£54.9 million) a year by 2014. This accounts for more than half of the €110 million (£93 million) annual “non-pay administrative savings” the government has identified. That is, of course, if they can be achieved. Procurement savings in Ireland last year were €27 million (£22.8 million), is it realistic to expect this can be almost doubled? Of course, Ireland spends less on public purchasing annually than the UK - the latest figure available shows it is €17 billion a year (£14.4 billion) compared to the UK’s £220 billion-a-year budget. The phrase “savage cuts” is bandied around a lot, but in percentage terms Ireland is trying to save 0.38 per cent of its annual procurement budget, whereas the UK is trying to save 0.18 per cent. That doesn’t look that savage – or ambitious. As a comparison, here are a couple of private sector examples I found in our archive. Smiths Group targeted £11 million savings – 1 per cent of annual spend. Virgin Atlantic plan to make £10 million savings this year (having already made £20 million last year) – 2.8 per cent of annual spend. Lloyds Banking Group wanted to save £250 million in 2008 – 12.5 per cent. Are the purchasing functions at these firms so much more inefficient that there are more savings to be had? Quite the opposite I would expect. This post is not intended as a slight on public sector buyers. On both sides of the Irish Sea it will be a struggle to turn predicted savings into reality, and as a taxpayer I am desperate for them to succeed. But both governments need to be more ambitious if procurement is to make a worthwhile contribution to the cause.
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Ministry of Defence: Defence Infrastructure Organisation
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