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Improving procurement processes

The Commons Communities and Local Government Committee has called on councils to step up and get better value from the £45bn they spend each year on procuring goods and services. David Stevenson reports.

A new report by the Communities and Local Government Committee has called on councils and the Local Government Association (LGA) to “invest and improve” the current culture and processes of procurement.

Local government spends about £45bn – over a quarter of its annual expenditure – procuring goods and services from third parties.

The CLG Committee said procurement should not be “viewed as a niche activity for specialists”, but rather as the essential underpinning of a joined-up process “delivering excellence” from the commissioning and procuring right through to the delivery of services.

It identified that many councils are working to improve their procurement operations to cut costs and reduce the burdens on those doing business with them – but progress has been too slow. According to the report authors, local government has a responsibility to show that it can “put its own house in order”. If it doesn’t, they fear the Department for Communities and Local Government (DCLG) will opt for compulsion.

Therefore, a number of recommendations have been made by the CLG Committee including improving collaboration across councils; spreading best practice on how to maximise the social, economic and environmental impacts of procurement; developing streamlined processes; managing complex contracts to secure better value; and reducing risks to service delivery and the likelihood of fraud.

Within the report, it has been suggested that if councils improved their collaborations an additional £1.8bn of savings could be made each year. The LGA has also been advised it should produce best practice guidance on the most effective means of joining up procurement to deliver savings.

The CLG Committee added: “It is clear that many local authorities are already conducting procurement in collaboration effectively with other councils, either through initiatives established between individual authorities or groups of authorities, or via procurement organisations on a regional basis. Enhancing such approaches is a sensible way forward.”

The authors also stated that they understood the government’s “frustration” that authorities’ responses to its funded collaborative initiatives have not been as expected. “But the answer is not compulsion,” they said.

Another recommendation identified scope for more economies of scale by linking the procurement approaches of public sector bodies. The LGA has again been charged to create best practice guidance to highlight the most effective joining-up approaches.

The report made clear, however, that councils can and should adopt policies that enable them to maximise their procurement spend to deliver local priorities by requiring contracts to be let on the basis of wider best value, not simply lowest price.

Council policies disproportionately favouring local or smaller firms, or those not in that community’s longer-term interests, should also be addressed – since these approaches could exclude cost-effective options offered by non-local or larger businesses. The CLG Committee said: “We support targeted council approaches which effectively balance support for local businesses whilst not precluding value for money or undermining the effective operation of markets.”

To assist with this the Cabinet Office, working with the LGA, has been advised to produce guidance on how councils can apply the provisions of the new EU Directive on public procurement to better support smaller businesses and local economies.

Additionally, there is scope for more standardisation and simplification across the procurement sector to cut suppliers’ costs and to facilitate the use of community budgets to deliver joined-up local services. Therefore, government proposals to standardise, on a national basis, data collected from tenderers, have been welcomed.

The LGA should take the lead in ensuring all Pre-Qualification Questionnaires are as simple and straightforward as possible. “This would entail potential suppliers filling in a form once only for use by any public body.”

Councils must also develop and support a culture that embeds appropriate risk management across the authority, not simply in procurement teams. The LGA should undertake, with relevant professional bodies, a detailed assessment of the level of contract and risk management skills and resources available across the local authority sector.

The CLG Committee concluded: “Devoting resources to bringing the performance of all local authorities up to the best standards is more than a worthwhile investment. At a time of financial constraint, spending now will enable savings both now and in years to
come which should pay back initial costs many times over.

“We recommend that the LGA and other bodies working with councils, as well as local authorities themselves, prioritise implementation of our recommendations in order to accelerate reform of local authority procurement across England.”