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Austerity: procurement teams must say “no” to the impossible and the wrong

Tuesday November 10th, 2015

The last five years have been hard and challenging for the public sector, most especially for local government, but also for many central government departments and agencies. The reality is that it is only going to get more challenging still, for these bodies and others such as the police, as the Government’s 2015 spending review is enacted. Indeed, schools and the NHS are not and will not be exempt from cuts over the remainder of this Parliament unless there is a very significant ‘u-turn’.

With cuts of the order of forty per cent coming after five years of austerity, there is a real danger that politicians and senior officials across the public sector will seek simple solutions and, in particular, there is already growing anecdotal evidence that they are turning to their procurement teams to perform miracles.

John Tizard

John Tizard

Of course, exemplary procurement has much to offer to any organisation seeking to be more efficient and to reduce expenditure. However, procurement officials cannot and should not allow themselves to be regarded as the team that can always conjure up spectacular savings at no cost to service quality,and/or volume, or to wider social and economic policy objectives, or to employment and staff terms and conditions.

Clearly, public procurement officials should always strive to meet the expectations and the policy goals of their politicians. And they should play a strategic role in terms of the corporate leadership and management of their public sector organisation.

Indeed, in the current public sector environment, these contributions have never been more important. Importantly, procurement professionals also have to be ready to say “no” if asked to do the impossible, or to take action which is likely to have a negative impact on wider policy goals. Above all, they must ensure that politicians and senior executives understand the consequences and the practicality of what they are requesting.

When purchasing commodities and goods, there may be opportunities to do so on a shared basis, to use electronic auctions and to act in ways that will secure the most competitive price. However, this is not the same as pursuing the cheapest price on every occasion. If pressed to buy the cheapest, the procurement team should explain the implications for quality, sustainability, the environment, employment and labour terms and conditions, and the local economy. Buying cheap goods from sweatshops employing child labour and using unsustainable resources is not what any UK public sector body should be doing, however tight its budgets are. Public purchasing should always be ethical and aligned with policy agendas.

When procuring public services, this approach is just as important. There is a positive correlation between quality and reliability of services, including the user experience and how those delivering the service are employed. This is very much the case in social care services. Staff forced to work for less than the minimum wage, unpaid for travelling time, and only being able to spend fifteen minutes with clients is a recipe for poor quality and longer-term cost pressures. Similar situations apply in other service areas. In particular, procurement officials should not ‘collude’ (because often this is exactly what it is) with commissioning, operational and policy colleagues to buy such services – and if they are told to do so, they must be ready to ensure that their views of the consequences are conveyed to the decision makers, senior officials and politicians.

Inevitably, there will be pressure to outsource services to business sector providers, to social enterprises and to national and local voluntary sector organisations. This means that procurement professionals have to have a sophisticated understanding of supply markets, but above all, they have to know when outsourcing will produce savings and be able to quantify any impact in terms of service quality, and the consequences for staff and the local economy. Given the degree of cuts required and the timescale for achieving them, together with short- and longer-term uncertainties, it is rare that traditional quality-based outsourcing will be the right solution. Where necessary, procurement teams have to be ready to argue this point and be willing to challenge ideological or other political demands to outsource, which lack any evidence base.

If and when services are outsourced, the procurement team has to ensure that it has the resources to undertake ‘informed and intelligent’ procurement, and to ‘client manage’ the contractor. To do these critical tasks without the necessary capacity and competency leads to a high level of risk, and politicians and senior officials need to be told this. At the same time, procurement team budgets should not be regarded as ‘easy cuts territory’.

Procurement officials increasingly need to have commercial skills and make interventions based on sound commercial acumen. This includes effective assessment and management of risk, and much more. They should be much more than just good procurers. They also need to proactively contribute to the wider corporate and policy agenda.

Austerity and financial pressure should not be an excuse to abandon or not to adopt commitments, such as that all staff employed in the delivery of public services should be paid at least the Living Wage, whoever their employer is. Equally, the pursuit of social value focused on place and communities should remain at the heart of public procurement. Indeed, given the wider economic and social climates in which the public sector is procuring goods and services, these value-driven goals make even more sense.

Local government and central government are rightly much exercised about economic growth and employment. Procurement ‘can’ play a role in meeting these ambitions. A local authority should, for example, analyse the ‘best value’ or ‘value for money’ of any procurement expenditure in terms of its economic and total financial impact. Well-targeted public procurement will inevitably have a local economic multiplier effect, and can support local SMEs, start-up companies and social enterprises, as well as wider civil society organisations. This holistic approach rightly brings procurement to heart of ‘joined-up’ government.

The next four to five years will be extremely tough for the public sector. I am clear that short-termism is absolutely not what is required, any more than ‘bargain basement shopping’ is. Unfortunately, there will be much pressure across the sector to be both short-termist and to buy cheap. Procurement professionals must help progressive political and executive leaders resist these pressures, and ensure that less enlightened politicians and leaders are challenged to change their ways. Public sector procurement teams have to be professional even if this upsets their bosses!

 

John Tizard

Online: www.johntizard.com
Twitter: @johntizard
Linked In: John Tizard

Gov Opps’ training partner, PASS (Procurement Advice Support Service) runs relevant procurement training events for the public and private sector. To view the brand new schedule of events, click HERE.

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