How do we recognise excellent procurement?

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By John Tizard, an independent strategic advisor and commentator on public policy and public services

As I prepare to judge the National Government Opportunities (GO) Excellence in Procurement Awards 2012/13 in a couple of weeks’ time, I have been giving some thought as to what constitutes excellence in public procurement.

In my view, the most critical test of any public or indeed private sector procurement is: ‘does it enable the organisation to achieve its mission, to sustain its values and to secure value for money?’ If it fails to maximise any one of these, it is not excellent procurement.

Procurement should not be isolated from the core activities of any organisation. Rather, it must be aligned with and support the core functions and objectives of the wider organisation. Senior executives/political leaders have to be connected to the procurement process and the procurement function. They have to regard it as key to the organisation’s strategic capacity and activity.

Procurement should be just one of the (albeit important) means of securing the outcomes that have been identified, both through strategic commissioning and political processes. It is not and should never be a substitute for commissioning nor be confused for it.

Procurement has to be about securing the wider objectives of an organisation and not solely the purchase of goods or services. This will mean achieving wider social, economic and environmental goals and, in some cases, political objectives. These may well include issues such as employment terms and conditions for staff employed by suppliers, local recruitment and local supplies of goods and support services, the use of SMEs and the third sector in the supply chain on reasonable terms, suppliers’ remuneration and governance arrangements, and sustainability policies and practices.

While procurement has to be focused on outcomes and not input, it is not unreasonable in public procurement to, on occasion, set certain limits and conditions on the means of delivery in order to maintain political and community goals.

Excellent procurement will embrace all such objectives and ensure they are secured through contractual terms. It will have attracted the right providers with the right ethos and values as well as technical competence. However, it will also have offered more.

It will have identified the most appropriate providers or suppliers and ensured that they are credible with sustainable business models; will adopt effective relationships with the client, staff and service users; and have designed the most appropriate solution. It will have identified the potential risks for both client and provider and ensured that these have been properly costed and allocated appropriately and ensured that the senior personnel in both the client and provider organisations are aware of and accepting of these risks.

In respect of major service delivery, procurement will have ensured that there are appropriate partnership governance arrangements.

Given the major changes, financial challenges and uncertainty across the public sector, executives and politicians will be looking to procurement to secure contracts that are as flexible as they can be in terms of affordability and effective risk management. They should encourage innovation and there should be the opportunity to share benefits between the client and the provider. This requires that procurement executives possess excellent commercial skills and competencies. Of course, excellent procurement is about far more than just buying or buying the cheapest.

Payment by results and other incentives will be deployed where they add value and in ways that are proportionate to the contract and the services being procured – not simply because they are fashionable.

An element of the provider’s reward will be at risk from securing pre-determined levels of user and wider public satisfaction. Public procurement is for the benefit of the public, not the public institution and/or its politicians and staff. Even support services must contribute to securing outcomes for the public or else they cannot be justified.

Contracts and relationships between providers and public sector clients must be transparent and accessible to the public, as must performance and payment information. The public expects the same levels of transparency and accountability for contracted services as they would for “in house” provision. Procurement has to ensure that this is the case.

Procurement processes are expensive for both the public sector client and for private and third sector providers. Excellent procurements will be SMART and ensure that the process (including using stages such as competitive dialogue) and the costs for all parties is proportionate to the scale of the risks associated with it and cost of the contract.

An excellent procurement process will have been preceded by comprehensive dialogue with potential suppliers. The excellent procurement function will have full knowledge and understanding of the supply market and will take the necessary action to attract potential suppliers. It will ensure that the barriers to entering a procurement process are as low and non-bureaucratic as is safe for the nature of the procurement and the outcomes being sought.

As above, the ultimate test for procurement is: have the outcomes which were sought been achieved and are service users and the wider public satisfied that they are getting excellent service and value for money?