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01.12.12

Why procurement reform needs to be at the heart of public sector reform

Andrew Forth, a policy adviser at the Confederation of British Industry (CBI) who leads the organisation’s work on public sector procurement, explains what still needs to be done.

Every year the UK’s public sector spends £230bn on buying goods and services from the independent sector. With the public sector confronted by huge pressures on resources, the need to get maximum value is both clear and urgent.

Over the summer, the CBI carried out a survey of members who supply the public sector with everything from advertising to construction services. The results made for depressing reading. Despite improvements in some areas, companies of all sizes still fi nd procurement in the UK to be a frustrating experience. Just 7% of respondents rated the UK’s procurement processes as good and over two-thirds of respondents described the effectiveness of procurement processes in the UK as poor or very poor.

Central and local government have started to make progress in delivering the policies that can lead to change. Since the Coalition Government came to power in 2010, the Cabinet Offi ce has promoted a vigorous and wide-ranging reform process. Similarly, across local government signifi cant changes are underway. If this early promise is delivered upon it could help make procurement cheaper, faster and more focused.

However, the CBI believes that the public sector has also been unambitious about the pace of implementing procurement reform. It has also not been suffi ciently holistic in its approach and the relationship between procurement reform and the wider public sector reform agenda.

Crucially for the future success of the reform process, these reforms have been based on good engagement with business. As a result, markets have been opened up to competition, innovative new payment by results models have been implemented and barriers to entry brought down to create markets of suppliers of all sizes from the public, private, voluntary and mutual sector. Crucially, procurement practices are starting to recognise that taking the needs of businesses into account can help get better results from procurement processes.

Our findings highlighted two key themes: a lack of commercial skills in the public sector to engage and the need for the sort of holistic and mutually benefi cial relationships between buyers and suppliers that can drive improved procurement processes.

To build the long-term partnership between government and the market, more focus needs to be given to building strong relationships across the supply chain. This means relationships that begin long before procurement begins and continue after contracts have ended as well as a determination on the part of the public sector to go out into the market place to find new suppliers and forge new relationships. This will ensure that both purchasers and suppliers work together throughout the commissioning and procurement process to deliver better services and value for money.

The first steps towards a new approach can already be seen. For businesses large and small, the way that government engages with and buys from them has begun to change significantly.

Most importantly, public sector bodies are doing a much better job of providing suppliers with information about their future plans.

Perhaps the most important development has been the Government’s move to publish pipelines of future opportunities across the public sector. Much work remains to make these more detailed and more useful to companies but the concept shows great promise.

By setting out future options, public bodies can start a dialogue with new suppliers and promote the investment in new products and services that can deliver better results and spur growth across the economy.

For smaller companies in particular this is a vital leveller that allows them to compete with established suppliers.

To move the reform agenda forward, these early steps need to be built into a seamless process which delivers procurement processes informed and shaped by the market that deliver the right results, at the best price and to the maximum benefi t of both users and the wider economy.

Procurement reform won’t deliver the right results if pursued in isolation: it needs to be part of a wider push to reform the public sector. While there is clear scope for effi ciencies through collaborative and bulk procurement, there is a danger that the potential benefi ts of a broader re-examination of how services are provided will be missed if reform is limited to reducing costs.

Much more can be done to connect procurement reform with the wider developments which impact on the interaction between the public and private sector: the open public services agenda, civil service reform, industrial policy and the strategic relationship between the public sector and its suppliers are all linked to procurement reform.

Tell us what you think – have your say below, or email us directly at opinion@publicsectorexecutive.com

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