Advisor: Martin Jay Martin Jay was appointed a non-executive director of Invensys in January 2003 and became Chairman in July 2003. He retired as Chairman of VT Group plc in July 2005, where he was also Chief Executive for 13 years. He previously held a range of leadership positions at GEC and was a member of the GEC Management Board. Martin is the Chairman of the Tall Ships Youth Trust. Summary recommendations: 1 extend the current programme of collaborative procurement to cover additional categories of common spend. In the first instance this should include construction, facilities management and food; 2 improve the quality of management information on procurement spend across the public sector to ensure that common standards and much increased transparency are implemented; 3 improve access to better deals for local service providers across the wider public sector by working with and through Professional Buying Organisations (PBOs) in a more regulated manner. This will incorporate sharing management information across PBOs, sharing the best framework agreements and developing common, transparent business models and governance across PBOs; and 4 increase uptake of collaboration (through PBOs or other collaborative strategies) on common categories of goods and services within the scope of the programme: 80 per cent of all available spend1 in central government (including NDPBs and agencies) and 50 per cent in the wider public sector, by March 2011. This should be achieved by: • more focused marketing of available deals; • better use of existing investments in Procurement systems; • regular reporting to Ministers on the value derived from collaborative procurement and ensuring value for money and collaboration form key components of skills and capability development of procurement professionals across government; • ensuring accounting officers in central government departments hold commercial functions across department families to account for delivering value for money through increased collaboration, and monitor progress to achieve this across their departmental family; • ensuring accounting officers give commercial directors in central government departments increased powers to coordinate delivery of the collaborative agenda throughout departmental families, including NDPBs and agencies; and • ensuring public sector organisations can keep any collaborative procurement efficiency savings they deliver in excess of what they need to live within their budgets and incentivising good performance through not penalising departmental success against collaborative procurement targets. |
2.1 This workstrand has found that collectively, the public sector has the potential to become an extremely powerful purchaser, with over £175 billion spent on external goods and services in 2007-08.2 However, it is also clear that:
• the process of procuring common goods and services across the public sector is dispersed, resulting in a wide range of prices for similar goods and services;
• the majority of public sector procurement spend is undertaken by organisations in the wider public sector. £103 billion of the total £175 billion public sector procurement spend is spent by local authorities, schools and health organisations alone. In order to deliver true value for money, large public sector organisations need to procure in collaboration with small organisations so that the entire public sector can benefit from the full leverage that it can exert; and
• suppliers, including both large organisations and small and medium-sized enterprises (SMEs) are disadvantaged by a disjointed approach from government to supply markets.
2.2 This workstrand considered collaborative procurement practices both within central government, and in the wider public sector and examined the centrally driven programme of collaborative procurement, led by the Strategic Stakeholder Forum (SSF) and administered by the Office of Government Commerce (OGC). This programme currently targets six categories of expenditure on goods and services such as desktop computers and electricity, which are commonly bought across the public sector. It aims to bring all parts of the public sector into a single governance structure, where government can derive maximum value from its common spend by approaching the supply market in an appropriate and coordinated manner.
2.3 This workstrand has found that it is realistic to achieve a total of around £6.1 billion of annual value for money savings3 by 2013-14, compared to the 2007-08 baseline of the £89 billion government procurement spend that has been categorised to a commonly procured commodity. A further £1.6 billion value for money savings could be achieved through the collaborative procurement of IT, and are included in the savings figures set out in Chapter 1. This gives a total collaborative procurement savings figure of £7.7 billion by 2013-14.
2.4 Of these savings, by the end of 2011-12, £4.1 billion could be delivered, plus £1.6 billion from IT, giving a total of £5.7 billion a year, as demonstrated in Table 2.A. Some of these savings will already be underway but there is scope to go further than current plans, provided that the Government acts swiftly to implement the recommendations of this report.
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1 In this report, "available spend" is categorised as spend not locked into existing procurement contracts.
2 Derived from Tables 2.2, 2.3 and 7.10 in Public Expenditure Statistical Analysis, HM Treasury, March 2008.
3 Value for money savings defined according to HM Treasury methodology and consistent with value for money savings achieved in the Comprehensive Spending Review 2007 period, accumulating against a 2007-08 baseline. All of these savings are cash-releasing and net of implementation costs. This review has not sought to distinguish the degree of overlap between collaborative procurement delivery and pre-existing 2007 CSR departmental delivery plans.