The vast public procurement budget can be spent much more efficiently

This article was first published in The Guardian Public Leaders Network, July 2013:

There have been numerous attempts to improve government procurement in recent years. From Sir Peter Gershon a decade ago to Sir Philip Green in 2010, they come with breezy regularity – but are they making any difference in getting greater efficiency out of the £227bn public procurement budget?

The commons public administration select committee is discovering that while there have been some improvements, there’s much more to do if we want to secure maximum value for the British taxpayer.

The government’s announcement of a Crown Commercial Service (CCS) to centralise procurement on common goods and services is a welcome attempt to address this lack of consistency – but it needs to go further. The new body should publish data on procurement from all government departments and agencies, and insist on common standards and approaches that maximise both financial and social value when decisions are taken on how the government spends our money.

With control over some £10-12bn of spending, the CCS will still cover less than a quarter of the £45bn spent annually on goods and services. Departments still have too much leeway to do their own thing and do it badly.

The government say they want 25% of spending to “flow” to SMEs and the third sector by the end of the 2015 parliament. That aspiration seems unlikely to be achieved. While the Cabinet Office trumpet their success in introducing lean processes to speed up procurement decision-making, 90% of business respondents to a Confederation of British Industry survey found that procurement had not changed at all or had got worse.

By 2011/12 SMEs accounted for only 10% of government spending, with the pattern across different departments very inconsistent. The Department of Health has reduced their spending on SMEs from 18% in 2010/11 to just 9% last year, while the Ministry of Justice has increased theirs from 9% to 34%.

The third sector feels that the warm words thrown their way have failed to have any real impact – it receives barely £1 in every £50 of government procurement spending. Big framework contracts squeeze out smaller organisations in both the private and voluntary sectors, requiring them to accept levels of risk or have access to capital that are simply impossible for smaller enterprises or new start-ups.

Value is seen far too narrowly, with the focus on short-term financial value rather than using procurement to promote jobs, apprenticeships, social cohesion, environmental sustainability and economic growth.

The lack of appropriate procurement skills across the civil service is also a key concern. The government fails to attract and retain professionals with the right procurement skills and experience because of the practice of keeping pay below market rates for the job. The West Coast Mainline fiasco happened, in part, because of a shortage of staff with the right experience. That decision alone has wasted over £50m according to the Public Accounts Committee – far more than was saved by reducing capacity below what was needed.

The civil service currently has limited means of identifying existing procurement skills across different government departments so they can be deployed strategically where they are most needed. More reciprocal secondments with the private and third sectors would ensure that skills are maintained and the contractor’s perspective properly understood. Get that right, and more costly and riskier alternatives like outsourcing procurement to the private sector become unnecessary. The government is engaged in making short-term savings that lead to longer term costs that are much higher. That, surely, is perverse.

The government’s approach to procurement lacks clarity and fails to understand the wider concept of public value that could be the prize of a more visionary approach. Progress is slow and patchy, processes still too slow and bureaucratic. At a time of austerity, with frontline services under pressure as never before, the country can no longer tolerate inefficiency on this scale.

A link to this article can be found here:

http://www.guardian.co.uk/public-leaders-network/2013/jul/25/steve-reed-public-procurement-pasc