Transcript TOWARDS TESCO: TAKING THE COST OUT OF PUBLIC …

Colin Cram - Background
 Director, North West Centre of Excellence
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- 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
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Senior Adviser to Office of Government Commerce
Member of Society of Local Authority Chief Executives -SOLACE
Fellow of Chartered Institute of Purchasing and Supply
Honorary Visiting Fellow, Manchester Business School
Institute of Directors: ‘Towards Tesco’
TOPICS
1. Procurement Context
2. General Procurement Principles
3. Taking Out Cost/Savings
4. Procurement Models
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Delivering Significant Procurement Savings is Not Easy
Many Public Sector Organisations are Too Small to Obtain Good
Overall VFM
Supply Chains are Increasingly Global
No Perfect Procurement Model
• £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
EDUCATION PROCUREMENT - £30+bn
Alone would put UK in top 30% of national GDPs
• 65% Non-Central Government
• 50% Common Categories, Goods, Services
• Professional Services £35bn
• Construction £21bn
• ICT £10bn
• Facilities Management £10bn
• Energy £4bn
• Reprographics £3bn
• Travel £3bn
• Fleet £3bn
• Food £2bn
• Some Major Central Government Department Organisations
• Some Large Specialist Organisations
• NHS Outsourcing
• Buying Agencies: 40+
• Office of Government Commerce and Category Teams
• Several Thousand Small to Medium Procurement Units
• 40,000+ Procurement Points
BUT
• Increasing Collaboration/Joint Procurement
•Indiscipline
•Different Procedures/Contract Ts and Cs
•Complexity – e.g. Tender Procedures
•Multiplicity of Tenders
•Multiplicity of ‘Duplicate’ Contracts and Contract Managers
•Inconsistency of Expertise/Capability/Processes/Procedures
•Inconsistency of Specifications
Varied Specifications/Reinventing the Wheel
Indiscipline/Disaggregation
Duplication
Inconsistency of Expertise, Processes and Procedures
AND cannot use industry best practice supply
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%
Social Care
10%
Legal Services
10%
Good Contracts Management
5 – 35%
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•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
PRACTICAL WAYS TO TAKE OUT COST
 Understand Procurement Spend – Great Start!
 How much does Public Sector need to save? - Develop Project
Plan
 Look at the big spends
 Opportunistic Spends
 Bankable Cash Savings
 Negotiate – e.g. IT or IT software
PRACTICAL WAYS TO TAKE OUT COST - continued
 Do things differently
 Re-visit specifications
 Question/challenge specifications
 Challenge need for procurements
 Cut out what is not essential – consultancy?
 Internal Discipline
 Competition
 Use Best Practice Procurement
 Manage Internal Demand
 Apply Project Disciplines to Larger Procurements
 Right Expertise, Resources, Authority, Motivation
PRACTICAL WAYS TO TAKE OUT COST:
COLLABORATE
 Price benchmark with other local organisations
 Use Office of Government Commerce recommended
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arrangements
Expenditure benchmark – with other public sector bodies
Identify spend with common suppliers with other PSBs
Collaborate on Specifications, Procedures, Processes
Joint Negotiations – aggregate suppliers/commodities – then
negotiate
Collaborate on individual procurements/framework agreements
Use consortia, purchasing agreements, Buying Solutions
Engage with RIEPs
Joint Procurement Organisation with other PSBs?
REPOSITION PROCUREMENT
REGENERATION
MARKET ENGAGEMENT
CONSTRUCTION
ROADS
MAINTENANCE
SCHOOLS
TRAINING LOCAL
X PROCUREMENT
LABOUR
WHERE IS MARKET ENGAGEMENT
MOST EFFECTIVE?
MAINTENANCE
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PROCUREMENT MODELS
OBJECTIVE / COLLABORATIVE
MODEL
Indep- Bench Limited Geogr- National
endence -mark Collab aphical Structure
Hub
1. Identify and Deliver
Savings
2. Negotiation
3. Reduce Costs for Suppliers
4. Consistent Contracting
Expertise
5. Consistency of
Specifications (to reduce cost)
6. Best Practice Techniques
7. High Levels of Service
TOTAL
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PUBLIC SECTOR PROCUREMENT: THE FUTURE?
INTEGRATION
COLLABORATION
INDEPENDENCE
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PUBLIC SECTOR PROCUREMENT IN 5 YEARS TIME?
Central/ Major
Departments/
Buying
Solutions
Industry
Specific
Major National
Contracts/Suppliers
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Common Categories
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Relationship Management
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Market Management
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Industry Specific
PPIs/Major Project Support
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Regional P Local/Med/
Hubs/
Small
Medium
Departments
Depts
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Regional/Large Local
Contracts/Suppliers
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Small Local Contracts
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Discipline/Implementation/
Compliance
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© C M Cram
Thankyou
Colin Cram
Marc1 Ltd
Tel: 01457 868107
Mobile: 075251 49611
[email protected]
www.marc1ltd.com
© C M Cram