STRATEGIC PROCUREMENT TOWARDS TESCO A NEW APPROACH TO

STRATEGIC PROCUREMENT ‘TOWARDS TESCO’ – A NEW APPROACH TO PUBLIC SECTOR PROCUREMENT Colin Cram Marc 1 Ltd Tel: 01457 868107 Mobile: 075251 49611 colin. cram@talk. net www. marc 1 ltd. com https: //www. iod. com/Main. Web. Site/Resources/Doc ument/policy_article_towards_tesco. pdf

MIRROR TO PUBLIC SECTOR PROCUREMENT What Does It Look Like? How Well is it being Managed? How Can We do Better?

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

DOES PUBLIC SECTOR PROCUREMENT MATTER? • £ 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 - £ 50 bn Alone would put UK in top 20% of national GDPs

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

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

TYPICAL LOCAL GOVERNMENT PURCHASE SPEND Construction 25% Health And Social Care 18% Commodities Goods And 18% Services Waste 7% Transport (Excluding Ptes) 5% Agency Staff, Consultancy 5% Stationery Consumables 0. 1%

IF IT WAS YOUR MONEY, WOULD YOU MANAGE IT LIKE THIS? • 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

PUBLIC SECTOR ORGANISATIONS CREATE UNNECESSARY COSTS FOR SUPPLIERS AND RISK AND COSTS FOR THEMSELVES • 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

HOW ELSE TO TAKE OUT COST? TACKLE THE SUPPLY CHAIN

SO WHAT IS THE COST OF POOR PRACTICE/MISSED OPPORTUNITY? 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 £ 450 m over 10 years

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

BIG IMPROVEMENTS NEED BIG CHANGES • 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 Leverage Negotiation Market Management Common Procedures Consistent Legal Interp Consistent Specs Fewer Tenders Expertise Service Localism TOTAL © C M Cram Ind B/Mark Collab Joint Sector National Local Region

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

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

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

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 Marc 1 Ltd Tel: 01457 868107 Mob: 075251 49611 Email: colin. cram@marc 1 ltd. com www. marc 1 ltd. com