Moving from a collaborative approach to a centre led approach would deliver huge benefits for both the public sector and the government purse. Furthermore, such a transformation could be achieved within the life time of a government, making it a very attractive policy with an enormous return and little risk.
Adopting a more systematic and authoritative approach is central to successful transformation. Such an approach is facilitated by a matrix style organisation operating across the entire public sector which will deliver savings far greater and faster than any other proposal for public sector procurement so far.
A centre led organisation would be organised as shown in the Procurement Matrix shown in Fig 1.
Matrix Organisation
Procurement would take a leading rather than supporting role and have responsibility and accountability for all public sector procurement. The central team would not however, negotiate all public sector contracts. Instead they would direct and coordinate policy across all departments, regions and authorities within a single centre led integrated procurement organisation. Finding talent and getting the right resources in the right places is critical to get right:
Central Leadership
The central team shall have overall responsibility for all external expenditure. They will determine category structures and whether they shall be handled at the central, departmental, regional or local level. They will develop category strategies and ensure these are aligned to overall government policy and meet the needs of stakeholders.
They will be responsible for developing and standardising procurement processes, tools and systems, and for the performance management system and benefits tracking of the procurement function. Reported benefits would be audited and signed off by the National Audit Office on behalf of Parliament.
They would also represent the UK with the EU on Procurement Directives and other issues.
Departments
Large departments would have a procurement organisation that would handle specialist procurement’s unique to their departments such as defence and NHS drugs etc. They would be responsible for the management of major suppliers and market management within their specialist sectors.
Regional
Each region would have one procurement hub supporting both central and functional procurement. A hub would negotiate any unique regional contracts, roll out central and functional policy at local level, provide tactical and transactional support and oversee benefits tracking at the local level.
Local
Local procurement would be restricted largely to small contracts, transactional procurement, providing a link between stakeholders and category teams. They would also be responsible for supporting benefits tracking.
The Independence Question
Government would need to provide independent bodies a choice as to whether or not they join the centre led procurement organisation. However, the option to refuse must carry a stick by holding them to account for any failure to deliver procurement policies, targets or value for money.
The matrix model would result in a reduction in the overall investment in procurement and a significant increase in the savings/value gained as outputs. This would result in a significant increase in ROI from procurement resources and enable the Public Sector to attract the necessary talent to drive the desired change.
Governance
Despite good intensions, the current drive for collaboration across the public sector will be ineffective without a more assertive approach. Control, accountability and authority to act are too loose and differing cultures across the various government departments and organisations will ultimately kill off attempts to capture synergy.
Self interest, passive resistance and battles over authority results in disharmony, mistrust, and only a casual acknowledgement of central guidelines. The overall influence of procurement in this environment is weak and ineffective. Faced with this scenario, a strong governance structure is required to drive the desired behaviours to support the change programme. One such structure is shown in Fig 2:
- The Procurement Board is made up of executives from the centre, functional and regional procurement organisations. Its role is to set strategy and mobilise the organisation to execute on it.
- The Governance Team is responsible for overseeing how the strategy is carried out, decision rights, adherence to process and roles and responsibilities etc.
- The category team is the group of experts with the skills and experience required to successful execute the strategy and is led by the central Category Manager and supported by cross-functional experts from across the public sector.
Benefits
As stated in part 1, I would argue that $20m in the first year of operation and $12m per annum year on year, are a conservative estimate of savings. Representing less than 10% and 5% respectively. Over the lifetime of a government this would deliver $56bn in cashable savings. Whilst the cost savings will ultimately flatten out other value added benefits would include:
- Overall investment in procurement is lower than previous
- Procurement activity is integrated and managed as a single entity
- Improved management reporting supports better decision making
- Improved innovation and collaboration
- Consistent systems, processes, tools, templates drive efficiency and quality
- Increased compliance with negotiated contracts
- Reduced maverick spending
- Increased capture of synergies
- Improved benefits tracking ensures results are managed and corrective action is taken when problems arise
Center-led procurement organizations tend to have better alignment and integration into strategic planning and operations. By setting multi-year sourcing and commodity plans authorised by the procurement board, that are mapped closely to the financial and performance goals of government targets, control, accountability and authority to act becomes unambiguous.
Conclusion
There remains tremendous scope for improvement in public sector procurement. However, this will not happen without taking a stronger more assertive approach. The sheer scale of the benefits should have chancellors tingling with excitement and provide them with much welcomed relief from the pressure of cuts and mounting debt.
It would also place UK public sector procurement as a world leader and a shining example to governments around the world.
The level of savings finally agreed upon is almost irrelevant and could be debated needlessly for years. The numbers are huge and the tax payer has a right to expect the government of the day to execute on them as a matter of urgency. Savings of such magnitude would make a substantial imprint on the national debt, or could be used to protect services against cuts – both of which are conveniently vote winners and a matter of economic necessity.
That all this could be achieved within the life time of a government makes it a ‘must do’ policy in terms of both the size of the benefit and the ease of implementation.
All it takes is a government with the necessary vision, leadership and drive to make it happen.
The party labels of ‘strong on procurement’ or ‘weak on procurement’ have yet to be awarded.
Nuff said …