Public Sector Efficiency and Procurement

David Shields

February 2014

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Broad Scope of Activities• Civil Service Reform;• Public Bodies Reform Programme;• Commercial Models – including mutualisation;• Supporting Economic Growth;• Benefits Fraud and Error Programme;• Procurement;• Major Projects;• Government Digital Strategy;• Government Property Unit;• Shared Services;Procurement was one element of a broader programme of transformation.

Efficiency and Reform Group

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Total procurement expenditure is approximately £190bn per annum.

Spend categories are as diverse as defence equipment, medical supplies, energy, adult and children's care services, waste management and construction.

There are over 40,000 separate organisations, including schools, district councils, GP surgeries, local authorities, devolved administrations (e.g. Scottish Government) to large Central Government Departments such as Ministry of Defence and Department for Work and Pensions.

75% of procurement expenditure is in the most diverse and organisationally complex part of the Public Sector with 25% in Central Government.

Very limited examples of collaboration or data sharing across the Public Sector especially in procurement, e.g. over 13,500 separate OJEU’s per annum.

Transforming Government Procurement – Scale and Complexity

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Governance / Leadership

Ministerial Leadership – Francis Maude Minister for the Cabinet Office;Public Expenditure Committee – jointly chaired by Minister for the Cabinet Office and Chief Secretary to the Treasury.

Chief Procurement Officer post established, supported by,Procurement Delivery Board – major Departmental Commercial Directors who oversee and lead Central Government Procurement.

Non-Executive Directors (NED’s) Roles across Departments and other Public Bodies – a formalisation of the roles of NED’s with a particular focus on procurement and the successful delivery of major projects.

Government Procurement Service established as the primary delivery organisation.

Transforming Government Procurement

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At the beginning of the change programme there was a general rationalisation of Government Policies around procurement to provide greater focus on fewer key areas:

Centralising the procurement of common goods and services• Mandating the buying of common goods and services using

Government Procurement Service (the largest UK Buying organisation);• Spend under management increased from £7.6bn to £11.4bn in 2

years;• Total savings delivered first 3 years £6.9bn.Strategically Managing Major Government Suppliers• Engaging with the top 40-50 major suppliers as ‘the Crown’ / single

customer entity;• Approximately 60% of expenditure is managed via 100 suppliers;• Establishing the Crown Commercial Representatives to provide

commercial leadership in managing these relationships;

Transforming Government Procurement – Key Policies (1)

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Supporting SME’sCrown Representative for SME’s – single point of contact for SME issues;25% goal of all Central Government spend to be channelled to SME’s;Prompt payment for SME’s;Solutions Exchange;Reduce the need for PQQ’s and standardise PQQ’s deployed.TransparencyMystery Shopper – enables suppliers, customers and the public to complain or question any specific procurements or commercial behaviour;Publication of procurement spend data;Contracts Finder – publication of contracts over £10,000.Improving CapabilityCommissioning Academy – whole system delivery, outcome based activity;Major Project Leadership Academy – improving major project management skills;Lean Procurement – using lean techniques to reduce waste in procurement cycle.

Transforming Government Procurement – Key Policies (2)

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To support the transformation programme and provide greater central assurance and oversight a comprehensive series of controls and authorisations where established in the following areas:

• Advertising, marketing and communications;• Strategic Supplier Management – including disputes;• Commercial Models – including outsourcing and establishing new

organisations;• ICT expenditure;• Digital Service deliver- including ID Assurance;• External recruitment;• Consultancy;• Civil Service Learning;• Property – including lease renewals and disposals;• Facilities Management;

Transforming Government Procurement – Controls

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Implementing this transformation of procurement required the following critical activities:

• The establishment of a clear Operating Model across the Public Sector;• An effective buying organisation with improved capability and

performance to operationally deliver new agreements, manage contracts, more effective management of suppliers. This is now the Commercial Crown Service;

• Establish revised processes and procurement policies;• A more capable and flexible set of procurement professionals;• Great transparency of Government expenditure and the ability to

effectively utilise this data in driving policy and operational decisions;• Investment in leading class technology based solutions; • Improved performance management and transparent reporting across

the Public Sector;• Category management addressing the totality of Public Sector

expenditure.

Implementation

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Operating Model

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A critical enabler of the transformational change was the use of best of breed technology / service providers

Technology needs to be implemented within a clear Operating Model

Technology was used to help drive:1.Operational efficiency;2.Improved outcomes;3.Cultural change;4.Improved performance management and reporting;5.Compliance with processes and policies;6.Highlight new areas for further improvements;

Technology also enabled greater evidenced based delivery which was completely auditable

Technology – Efficiency, Transparency and Change

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Technology Road Map

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Bravo Solution – Spend Analytics

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Lean Procurement Process

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Significant Operational Efficiency

227 days 91 days

• Sub-OJEU procurements now run within 14 days• Pre-OJEU processes implemented within eSourcing

tool• Target pricing established for all procurements• Each part of the process is actively reviewed using

standard deviation methodology

27 days

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2010/11 2011/12 2012/13

Spend (£m) 7,602 8,430 11,441 (50.5%)

Savings (£m) 1,714 2,504 2,726 (59.0%)

Operating surplus (£m) 6.69 12.39 11.17 (67.0%)

Total cost per FTE (£000) 77.5 71.9 68.3 (11.9%)

Managed spend per FTE (£m) 19.39 26.91 30.27 (56.0%)

Savings per FTE (£m) 5.5 7.5 7.7 (40.0%)

Supplier commission (average %) 0.49 0.42 0.33 (32.7%)

Government Procurement ServiceKey Facts

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There has been a positive change in the way procurement is being managed across the Public Sector:

• Improved delivery of savings;• Increased efficiency in procurement processes;• Reduced costs of the broader procurement function across

Central Government;• Increased central control and assurance over broad areas

of expenditure;• Transparency of procurement expenditure;• Improved alignment of procurement policies to broader

Governmental objectives;• Strategic oversight of the major suppliers to Government.

Impact

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David Shields

David.shields@Apsiz.co.uk

+447920 768370

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