STRATEGIC PROCUREMENT ‘TOWARDS TESCO’ – A NEW APPROACH TO PUBLIC SECTOR PROCUREMENT Colin Cram Marc1 Ltd Tel: Mobile: ument/policy_article_towards_tesco.pdf

My Background Director, North West Centre of Excellence - 47 local authorities Director, Research Councils’ Procurement Organisation Director, North West Universities’ Purchasing Consortium Director, Benefits Agency Contracts Organisation Central Unit on Purchasing Cabinet Office, Treasury, Central Government generally Senior Adviser to Office of Government Commerce Member of Society of Local Authority Chief Executives -SOLACE Fellow of Chartered Institute of Purchasing and Supply Visiting Fellow Manchester Business School Institute of Directors: ‘Towards Tesco’

TOWARDS TESCO Backdrop: Public Sector Finances Public Sector Procurement is Vast There is Lack of Strategic Management Huge Uncontrolled Risks To Supply Chains Projects, Major Procurements and Government Policies Service Inadequate Accountability Probity Costs of Doing Procurement are Excessive Large Savings could be Achieved Reform is Desperately Needed A New Integrated Model could Deliver Huge Benefits

£220 Billion pa £3,500 per Adult and Child pa One Third of Total UK Public Spending One Sixth of UK Gross Domestic Product (GDP) 0.75% of Global GDP Size makes it Critical to Delivery of Public Services Effective Management is Essential to Reduce Public Spending Deficit and Deliver Government Procurement Policies LOCAL GOVERNMENT PROCUREMENT - £50bn Alone would put UK in top 20% of national GDPs

65% Non-Central Government 40% Common Categories, Goods, Services Professional Services £35bn Construction £21bn ICT £10bn Facilities Management £10bn Energy £4bn Reprographics £3bn Travel £3bn Fleet £3bn Food £2bn

SCOPE OF PUBLIC SECTOR PROCUREMENT C G & NHSLG Commodities GS Construction Health/Social Care Waste Roads Outsourced Services R&D Research Equipment Military Equipment Consultancy Utilities Medical Equipment Drugs

TYPICAL LOCAL GOVERNMENT PURCHASE SPEND Construction 25% Health And Social Care 18% Commodities Goods And 18% Services Waste 7% Transport 7% Transport (Excluding Ptes) 5% Agency Staff, Consultancy 5% Stationery Consumables 0.1%

Some Major Central Government Department Organisations Some Large Specialist Organisations NHS Outsourcing Buying Agencies: 40+ OGC and Category Teams Several Thousand Small to Medium Procurement Units 40,000+ Procurement Points Absence of Mandation BUT Increasing Collaboration/Joint Procurement

Indiscipline Different Procedures/Contract Ts and Cs Complexity – e.g. Tender Procedures/Ts and Cs Multiplicity of Tenders Multiplicity of ‘Duplicate’ Contracts and Contract Managers Specifications Inconsistency of Capability, Expertise, Processes Paying Suppliers to Sell to Them ALSO: Inability to use best procurement techniques

PUBLIC SECTOR ORGANISATIONS CREATE UNNECESSARY COSTS FOR SUPPLIERS Specifications: Tarmac IT Finance Systems Outsourcings Street Lighting Construction Waste Disposal Research Equipment Commodities Goods and Services Who has the Best Specifications?

WHAT ARE THE RISKS?

PROCUREMENT/THIRD PARTY SPEND: Savings/Benefits through Commitment Increased Leverage Focus on Big Spends Focus on Big Suppliers Better Quality Contracts Expertise Available to All Commodity Market Knowledge Available to All Better/More Consistent Policy Implementation Consistent Specifications Scheduling Opportunities to Use More Advanced Purchasing Techniques -Relationship Management -Supply Chain Management -Value Analysis -Market Management

Furniture 30% FM/Outsourcing/Major Contracts Up to 35% Laboratory Consumables Up to 90% IT 5 – 80% Construction 5 – 25% Excellent Construction Management 5 – 15% Reprographics 15-45% Social Care 10% Legal Services 10% Good Contracts Management 5 – 35% Benefits Agency 20% Research Councils £450m over 10 years © C M Cram

PROCUREMENT SAVINGS 1% Savings Overall - do the same, but better 3% Savings Overall - Do the same, but much better 5% Savings Overall - Some re-structuring, bringing in new expertise 7% Savings Overall – Fundamental Change and Re-structuring

WAYS TO SAVE 1-3% OVERALL Re-negotiate Benchmark Reduce Costs of Duplication Harmonise – Procedures and Specifications Enhance Power e.g. through aggregation Commitment Do Things Differently

Right Procurement Structures/Joint Procurement Common and Complete Databases Common Information/IT Systems Common Procedures Common Specifications Commodity, Markets, Procurement Expertise Specialist Management Best Practice Procurement Techniques

POSSIBLE PROCUREMENT STRUCTURES 1. Each Organisation Acts Independently 2. Benchmarking 3. Collaboration 4. Joint Local 5. Joint Regional 6. Sector Procurement 7. National Procurement

MODEL EVALUATION How Should the Sector Proceed? Collaborative Model/ Objectives IndB/MarkCollabJoint Local Joint Region SectorNational Leverage Negotiation Market Management Common Procedures Consistent Legal Interp Consistent Specs Fewer Tenders Expertise Service Localism TOTAL © C M Cram

PUBLIC SECTOR PROCUREMENT IN 5 YEARS TIME? Central/ Major Departments/ Buying Solutions Industry Specific Regional P Hubs/ Medium Depts Local/Med/ Small Departments Major National Contracts/Suppliers ** Common Categories ** Relationship Management ** Market Management ** Industry Specific ** PPIs/Major Project Support * ** Regional/Large Local Contracts/Suppliers * Small Local Contracts ** Discipline/Implementation/ Compliance ** © C M Cram

INDEPENDENCE COLLABORATION INTEGRATION © C M Cram PUBLIC SECTOR PROCUREMENT: THE FUTURE?

REPOSITIONING PROCUREMENT REGENERATION MARKET ENGAGEMENT CONSTRUCTION ROADS MAINTENANCE SCHOOLS MAINTENANCE TRAINING LOCAL LABOUR PROCUREMENT WHERE IS MARKET ENGAGEMENT MOST EFFECTIVE? © C M Cram X

BENEFITS Coherent Framework for the Strategic Management of Public Sector Procurement spend - the whole spend, not just 'common' categories Delivery of the massive procurement savings that are needed Accountability for the delivery of savings, value for money and public procurement policies Clarity about the costs of doing public sector procurement Consistent and expert procurement for all contracts, framework agreements, projects Enable best supply management and market management tools to be used effectively for all areas of procurement for the whole of the public sector

BENEFITS Continued Consistent approaches to procedures, specifications etc. Consistent approach to interpreting EU procurement directives and government procurement policies Eliminate Duplication 100% compliance with framework agreements Procurement personnel with the authority to challenge the need for procurements and query specifications Career development path for Public Sector Procurement Personnel Reduced Risks to Contracts Reduced Risks of Impropriety.

THANK YOU! Colin M Cram Marc1 Ltd Tel: Mob: