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The public sector procurement and outsourcing skills gap

David Noble, chief executive of the Chartered Institute of Purchasing & Supply (CIPS), talks about the public sector procurement and outsourcing skills gap and what can be done to improve it.

The current financial malaise we find ourselves in and the lack of economic growth continues to be the defining theme of our time. It has been this way since the 2008 financial crisis and nowhere is that more evident than the public sector, which has already experienced unprecedented reform.

If the public sector wants to embrace the first class procurement and excellent outsourcing skills that we all want to see and benefit from, it needs to acknowledge how Government procurement has changed – and procurement professionals need to adapt to that change too to deliver value for money.

Recognising this, the UK Government has had the unenviable task of making that process more efficient and ensuring it works for Government and suppliers. Some of this work has been undertaken; the abolition of a number of non-departmental public bodies and the simplification of procurement processes were necessary reforms, but the Government would be the first to admit there is still a long way to go.

To reinforce this message, the Public Administration Select Committee (PASC) conducted an inquiry into public procurement in March and found a host of problems with implementation, a lack of contracting skills and too great a focus on reducing costs rather than getting best value. A skills gap lies at the heart of these problems.

For successful Government procurement, it is clear further reform is needed, but under the current economic restrictions there are a limited number of options. One of the options is to find more efficiency savings and the Government should be applauded for taking this agenda on enthusiastically. This is now even more pressing, given George Osborne’s confirmation, in advance of the Comprehensive Spending Review, in June 2013, that more efficiency savings would have to be made by the Government as additional cuts to the welfare budget for example, would not be possible.

There is a sense however that the efficiencies to be found are saturated.

The area of skills in procurement and outsourcing, however – a relatively simple concept, and easily implementable – provides fertile ground, particularly if the Government is genuine in its commitment to reform.

Government procurement and outsourcing is a unique role which requires a specialist skillset and it is those specialists who will be tasked with finding the efficiencies outlined above.

Recruiting the right people with the right skill sets and ensuring those in place are equipped to deal with the challenges they face through specialist training should therefore be a priority.

The Government’s track record

Good procurement saves money, improves lives, protects reputation, minimises waste and increases sustainability in supply chains.

The Government, however, has not always spent money wisely. The swathe of public sector spending cuts reiterated in the last budget underlines the need to address any deficiencies and reinforces the need for increased efficiency and skills.

With these efficiencies, the Government could kickstart the economic growth it so badly needs and deliver better value for money – and deliver those cost savings at the same time just from good, skilled procurement activity.

In a recent report, the Institute of Directors argued that at least £25bn of annual efficiencies could be made in the public sector within three years through a radical restructuring of public sector procurement (£15bn saving) and a greater use of shared services and outsourcing (£10bn saving). Outsourcing and dissemination of procurement practices would allow the Government to benefit from economies of scale, achieve long-term, measurable impact without compromising safety or quality, whilst enabling businesses to concentrate on their core competencies and key processes.

Credit where credit’s due, the Government has proven more willing to outsource public services than it was previously. New figures reveal that the number of commercial outsourcing contracts awarded by the Government has risen by 16% in 2012, making the UK the biggest outsourcing public sector market after the US. According to the National Audit Office, the current Government procurement strategy is the most coherent approach to reform yet and has resulted in savings.

Progress can be seen in the development of the Government Procurement Service (GPS), delivering for the whole public sector.

Additionally, the Cabinet Office’s Efficiency and Reform Group (ERG) has established a more coordinated approach to driving efficiency across Government, through the renegotiation of Government contracts with major suppliers and a programme to centralise procurement of commonly used goods and services.

Key to this success has been skilled staff and senior support.

Skills

So whilst steps forward have been taken, and a more effective framework is in place for effective procurement, there is more to do if we are to avoid repeating the mistakes of the past. Key procurement and outsourcing functions are devolved to a level where there simply isn’t the skill base to manage it. Contract management, for example, is often devolved to the lower levels of departments, and the focus is too often on the call for competition to contract award rather than on the whole procurement cycle (which includes pre-procurement and contract/supplier management).

There must be an awareness of the skills required to carry out these functions by senior civil servants and ministers. In turn the Government must ensure procurement professionals have the right training, and strategic supply chain practices need to be rolled out across all government departments.

There are countless instances of the Government not maximising the potential for savings, and significant deficiencies in the information available to civil servants. These are compounded by problems implementing reforms, including ineffective governance structures, unrealistic targets, incomplete data, weaknesses in contract management, inadequate consultation, inadequate supplier management arrangements, inappropriate and unclear specifications. The list unfortunately goes on.

The West Coast Main Line situation is a case in point, where serious technical flaws in the process were not identified early on. The investigation undertaken by Sam Laidlaw noted errors in planning and preparation, poor organisational structure and a weak governance and quality assurance framework: all areas which point to a lack of skills and experience.

There are pockets of best practice the Government can and should rightly point to and the procurement and outsourcing programme for the Olympic Games is foremost among these. The Games was successful from a procurement perspective and this can be traced back to the fact that skilled professionals were making procurement decisions.

The Government is surely learning from these experiences, good and bad. The reality is that a balance is needed between increased skills in the public sector that deliver value for money on a consistent basis, and an emphasis on maximising the benefits of outsourcing on offer.

The Ministry of Defence has experienced its fair share of challenges in recent years. The Government spends £14bn a year buying military equipment, managed by 16,000 civil servants. Secretary of State Philip Hammond wants to replace this with an organisation that is Government-owned but operated by a private contractor.

In short, the job of managing the UK’s entire defence acquisition function will be contracted out to a private sector company.

This would represent a bold step that no other country, as far as we’re aware, has taken.

In order for it to be successful, and there’s no reason why it can’t be, a mix of public sector based procurement strategists will be required to direct a much larger group of private sector procurement managers.

Importantly however, it shouldn’t be one or the other exclusively, but a mix of skill sets that complement each other to deliver value.

The solution

Procurement needs people with new skills and demands a broader skill set and differentiated competences. This is true across our sector, but the public sector requires an even more complex mix of skills. It is not as simple as replicating the models and behaviours of the private sector. Whilst there are lessons to be learned from the private sector, it is not a panacea.

What is needed is a more strategic approach to Government procurement and outsourcing, implemented by professionals who have the skills and experience of best practice within the public and private sectors.

The Government mantra when it comes to procurement and outsourcing mirrors that of the private sector: how do we ensure we get more for less? The Government has rightly identified efficiency as one critical area.

It now has to recognise the other, and in many instances the key to unlocking those efficiencies, which is the quality, skills and expertise of its people.

Only then will the prospect of a fully reformed and best-in-class procurement and outsourcing function be a realistic prospect.