National Procurement Conference 7 February 2008 Transformation through market forces Peter Wilkinson Managing Director Policy, Research and Studies

National Procurement Conference 7 February 2008 The Government wants commissioning to transform people’s lives “Authorities should seek to secure the best outcomes for their local communities… without regard for whether services are provided in-house, externally or through various forms of partnership.” CLG statutory guidance, (2007) Creating Strong, Safe and Prosperous Communities, para 6.6

National Procurement Conference 7 February 2008 Back office efficiency due May 2008 The Commission is publishing a series of studies on commissioning and procurement

National Procurement Conference 7 February 2008 There are high expectations for commissioning Secure efficiency gains! Develop a diverse supply base Build third sector capacity Encourage BME Incorporate sustainability Support the local economy & SMEs Foster innovation Satisfy user needs Provide choice Improve service quality Procure in partnerships

National Procurement Conference 7 February 2008 Procure effectively Select most appropriate service providers Improve processes? Intelligent commissioning is needed to maximise the benefits of market forces INTELLIGENT COMMISSIONING VALUE FOR MONEY Understand the market Develop the market? Long term impact on competition & contestability User-focused, outcomes-based services Understand needs Redesign services? in the context of place-shaping

National Procurement Conference 7 February 2008 Public bodies need to focus on three simple questions... How do councils and their partners know what they need to buy? Where do they go to get what they need? Do their purchases lead to better outcomes and good value for money?... but there are no simple, formulaic answers

National Procurement Conference 7 February 2008 Councils need to be open minded when choosing improvement approaches… ChoicesApproachesExample methods Internal approaches Business process improvement Process redesign Business process re-engineering Lean ICT Asset rationalisation Mutual approaches Shared service production Shared service delivery Shared assets Shared services Joint boards / committees Transformation projects Co-location External approaches Outsourcing Partnering Multi-sourcing Joint ventures Procurement consortia and shared contracts E-procurement Framework and call-off arrangements

National Procurement Conference 7 February 2008 …and can use market mechanisms pragmatically on “improvement journeys”… Time Value for money ActualProjected Entering partnership (20% savings) Current contractor facing credible threat of in-house option Contract renewed Service outsourced

National Procurement Conference 7 February 2008 …though service managers may be hard to convince… …efficiency? …service quality? Corporate officers Will competition improve… Service managers Yes No

National Procurement Conference 7 February 2008 …and shortage of skills is a significant barrier National Procurement Strategy survey %

National Procurement Conference 7 February 2008 Significant benefits from strategic partnerships only come with excellent contract management Reference: ‘For better, for worse: value for money in strategic service-delivery partnerships’ Core and additional benefits: 5 councils Terminated: 3 councils Core benefits only: 4 councils Time Benefits realised

National Procurement Conference 7 February 2008 Intelligent use of market forces is pragmatic and evidence based Honestly assess current and anticipated skills and capacity Be clear about objectives Use a 'hard headed' approach to business cases (including costs of managing competitive exercises) Collect and analyse performance information

National Procurement Conference 7 February 2008 The new use of resources will assess intelligent commissioning (in draft) 2.3 …commissions and procures quality services, tailored to local needs, to deliver sustainable outcomes and VFM shaped by priorities and local need; includes local people, partners, staff and suppliers in design and appraisal; understands and seeks to influence and develop market; aims to reduce need through preventative measures; and evaluates external & internal options for provision and chooses best for meeting needs, wider social, economic and environmental objectives, and VFM NB shortened version – not actual wording

National Procurement Conference 7 February 2008 Procure effectively Select most appropriate service providers Improve processes? Intelligent commissioning is a challenge for public bodies working across areas INTELLIGENT COMMISSIONING VALUE FOR MONEY Understand the market Develop the market? Long term impact on competition & contestability User-focused, outcomes-based services Understand needs Redesign services? in the context of place-shaping

National Procurement Conference 7 February 2008