Tag Archives: public sector procurement

Better Procurement – Learning from the Private Sector

Who does procurement better – the public or private sector? Is there any reason we all can’t do better together through sharing knowledge and experience? Much depends on the professionals involved.

You could argue that an uneasy relationship exists between procurement in the public and private sectors. On one side, there is full accountability and audit trails, scrutiny over every penny/cent spent and the need for what is, from the outside at least, an almost impenetrable set of regulations and documents that have to be completed.

On the other side, it’s just as accountable and auditable, but there’s more freedom in the process, things happen quicker and there’s more time for the good stuff like contract management. I think it’s fairly obvious which is which…

Accept What We Cannot Change

To stop this becoming a lengthy piece on which is ‘better’, public or private sector procurement, it’s important to separate what could be done better from what we cannot change.

  • Regulation and Legislation

Yes, the public sector is highly constrained by regulations, leaving it more inflexible and giving less freedom in the process to procurement professionals. But beyond getting better at working within the regulations, there’s not much to be done about it. Even post-Brexit, there will still be substantial regulation governing procurement and procurement process, even if it looks slightly different to what it is now.

  • Budgets

Yes, budgets in the public sector are being squeezed. Hard. But no, this is not going to change any time soon. What both the public and private sectors need to do is be savvier with how the available money is spent and how they can maximise what they get from a contract with less money to spend.

  • Transparency

Let’s knock this one on the head straight away. Public sector procurement receives the level of scrutiny it does as it is spending the general public’s money. To ensure everything is above board and audited this needs to continue. And the private sector will only face increased scrutiny in the coming years, so there’s no escaping on either side of the fence.

Lend a Helping Hand

However, there’s nothing to say that the public-private relationship can’t be better. Both sides could teach each other a thing or two about the procurement process and how to make it better or more efficient. After all, at a time of squeezed budgets and regulatory pressure (not to mention Brexit and trade wars), why wouldn’t we all want to work together to make our lives and jobs easier?!

In this article, we’ll be looking at three key areas in which the private sector can help the public sector and at some point in the near future, we’ll look at this from the other side.

Some of this is based on what has been written about both sectors in the press and in thought leadership papers. The rest of my advice, to paraphrase Mary Schmich and Baz Luhrmann, has no basis more reliable than my own meandering experience. I will dispense this advice now…

  • Negotiation

In the private sector, procurement professionals have the opportunity to negotiate at any stage in the process. Indeed, they may even choose to negotiate at multiple stages in order to get the best deal. Opportunities are more limited in the public sector, meaning more contracts are awarded without negotiation, or negotiation at a stage where the deal is almost done.

However, even these could be maximised to produce a better deal and this is where private sector professionals could help. Who better to assist with a negotiation than someone who is practised, skilled and used to carrying out the process? Swapping notes on good negotiation techniques and where savings have been found in contracts for similar goods or services could provide some much needed wins.

  • Longer Contracts and Relationship Management

You know the score – you spend months painstakingly putting a contract together and awarding it, only to come back to the same contract 18 months later to tender again. The limiting factor here is the length of public sector contracts in many cases, but could this be a valuable knowledge sharing opportunity?

Crafting long-term contracts, aimed at longer than 5 years (for the right goods, services or works), is a skill. Maintaining the right balance between getting a good deal on both sides, opening up avenues for innovation, while at the same time knowing that come year 5 any prices are still competitive, is something that the private sector has greater experience with. By putting heads together, this could also be passed into the public sector.

  • A Strategic, Value-Adding Profession

Are you in a senior management or executive level role in procurement? What do you think your organisation views procurement as – a tender machine for purchasing or a strategic partner for adding value? Some argue that in the public sector, the former is much more common. When there are savings to be made, procurement is the one tasked with delivering, but is left out of the loop when it comes to bringing the value to the top line.

Leaders can help drive a change in this view. If private sector procurement leaders have been able to make this leap already, then using a tried and tested approach may help gain the necessary traction in the public sector.

Share Your Thoughts

These are my thoughts on what the private sector has to offer the public sector in the overall procurement process. None of them represents a quick fix in terms of greater efficiency or costs savings, but done properly, could provide these benefits in the long run.

It would be interesting to hear from professionals on both sides of the fence on this too. Would you be willing to work closely with the public/private sector? How would you facilitate this? Are there other areas you think you could help with, or have greater priority? Let’s get the conversation started – you never know where it’s going to take you and the profession.

Making the Case for ‘Libertarian’ Procurement

Can we start taking an approach to spend management and compliance that nods to the free will of buyers?  Kelly Barner discusses Libertarian procurement. 

Public sector procurement has always gotten a unique kind of attention. Not only is it the sector of our field most likely to get general media coverage, when it does, it is almost always spectacularly bad news. Trying to regulate procurement may be well-intentioned, but things have a way of going awry when buyer free will is denied.

Here’s a perfect example:

In 2013, the Massachusetts State Lottery Commission awarded a $5 Million contract for advertising services. They required that a portion of the work be sub-contracted out to a minority or woman-owned supplier. All proposals were evaluated on cost and presentation as well as the diversity requirement.

The contract was awarded to a firm that did not earn the highest score for cost or presentation but did commit to sub-contract $12,000 (0.24%) of the work to a woman-owned supplier. As a result, another firm involved in the bid, sued the lottery commission. Not only had they earned the highest score for cost and presentation, they were a certified woman-owned business. Had they been awarded the contract, 100% of the $5 Million would have been awarded to a diversity supplier and the state would have gotten better results for less money. They did not receive the award because they did not submit a plan to subcontract the work, believing their own status covered the intent (if not the letter) of the requirement.

Talk about missing the forest for the trees.

Public sector procurement may take the majority of the heat, but private sector procurement is just as guilty of using rules rather than sound judgement to drive desired results. Onerous governance and harsh mandates can have the opposite effect of what we intend with ‘strategic’ processes such as sourcing and supplier performance management.

Technology and consumer expectations have advanced to the point where we can consider the possibilities of ‘Libertarian’ procurement, an approach to spend management and compliance that nods to the free will of buyers whenever possible, even if it means giving up some of the ‘control’ traditionally associated with spend management. Libertarian procurement might include:

  • Allowing distributed buyers with strategic experience and category expertise to run their own sourcing projects.
  • Evaluating the suitability of a full sourcing project on a case by case basis (I.e. sometimes when a buyer requests to contract with a specific supplier, they have already done their homework and procurement should just support them).
  • Balancing supplier performance metrics with qualitative approaches to recognizing their total value contribution.

Sometimes internal colleagues want to work around procurement’s processes because they find them too slow or frustrating and just plan to push on principle. Other times, they really know what the right path forward is and can’t get started a minute too soon. The challenge is for procurement to tell the difference between the two. Understanding the motivations of stakeholders who want to exercise their free will is what separates spending mischief from spending vision. Procurement should be willing to take a chance when the conditions seem right, allowing vision to thrive even if the occasional mischief slips through.

Combining responsible spending principles with an increased level of trust for internal buyers will create challenges for procurement teams, but it will also create new opportunities and increased ownership on the part of internal stakeholders. Not being open to such change may actually be a risky move for procurement. After all, the more rigid and codified our role is, the more likely we are to be the target of automation initiatives. Any procurement team with their own healthy dose of free will should want to prevent that.

Late, Late For An Important Date? Why Time Isn’t On Public Procurement’s Side

Time is fleeting and never more so when a contract deadline is looming large. How can public sector procurement professionals use their time more effectively?

In the second in a series of articles on the challenges facing public sector procurement, we examine the issue of time and why it must be managed better.

Before we begin, I have a riddle for you:

This thing all things devours;

Birds, beasts, trees, flowers;

Gnaws iron, bites steel;

Grinds hard stones to meal;

Slays kings, ruins town,

And beats high mountain down

Extract from ‘The Hobbit’ by J.R.R. Tolkien, 1937

Those of you familiar with the great J.R.R. Tolkien will recognise this as one of Gollum’s riddle to Bilbo Baggins in ‘The Hobbit’. The answer? Time, of course.

Time is the one thing none of us can avoid and all wish we had more of. How many times have you wished you had an extra hour before a work deadline? And that’s before we even consider more time at the weekend, or an extra hour in bed!

For public sector procurement professionals, it frequently feels like time is not on our side. An increasing volume of ‘Business as Usual’ work, combined with new ‘one-off’ projects, means it can feel like a juggling act to meet all the relevant deadlines.

In the public sector, these deadlines can sometimes mean the difference between the delivery or not of critical goods or services across a city.

It often feels like we’re like the White Rabbit from Alice in Wonderland, constantly running late for an important date. And the more time pressure builds, the more likely it is that mistakes will be made, costing even more time in the long run.

Typos in letters, ambiguity in specifications and issues with evaluation or award criteria – they all have the power to send us back to the drawing board. Getting it right first time is critical as the more time spent doing tendering, the less time there is to actually manage contracts.

When it comes to creating the value and savings required in the public sector, contract management is key. After all, you can agree savings in a pre-contract phase, but without effective contract management, organisations will typically lose 50 per cent of this value in the first year of the contract.

And that is why we need to manage our time more effectively.

More Haste, Less Speed

Before looking at how time might be managed more effectively, it’s worth examining why procurement in the public sector can be so time consuming.

Public sector procurement is a very bureaucratic, very legalistic, very risky – for both buyers and suppliers – and, ultimately, very slow process.

For procurement exercises above the EU Procurement thresholds, and requiring advertising through OJEU (Official Journal of the European Union), it’s not unusual for the process to take up to nine months (and frequently even longer) from identification of need to the award of a contract.

And while that may seem like a complete anachronism to those of you in the private sector (and believe me, it did when I first started in the public sector), there are good reasons for this. The process is aimed at promoting competition and procedural conformity, not necessarily value for money, though this is what most public procurement professionals are aiming for.

Greater competition allows for more open and transparent tendering and contracts, where SMEs, local suppliers and parties that may not ordinarily have access to these markets can get involved. A wider supply base may lead to new ideas, innovations and process improvements while at the same time potentially being a boon to the local economy.

The bulk of this time is taken creating a set of fully auditable documents for any procurement exercise above these thresholds. This includes a sourcing strategy, outlining key decisions and the reasons for them, detailed tender documents, including specifications, selection and award criteria, and a fully tracked evaluation process.

The type of route to market will, of course, be determined by the product, service or public works being procured. The detail of all of these routes is too much to go into here, but you can find a lot of useful information on ‘The Procurement Journey’, if you want to understand the end-to-end process.

There is limited scope for reducing the time taken to complete these processes, so where can time be saved to allow for more contract management? This is where good planning comes in.

Proactive Procurement

Procurement could be accused of operating in a reactive manner and it’s no different in the public sector. However, this can often be attributed to the nature of procurement’s place in the organisation and the changing nature of how organisations operate and procure goods and services.

The increasing number of ‘one-off’ projects, on top of the ‘Business as Usual’ work, can make even the best procurement functions feel like there is a never-ending volume of tenders to complete (referred to as the “tender sausage machine” where I work).

Moving from a reactive to proactive approach can help in this and crucially buy more time for that all important contract management. There are three suggestions below to help make this work, but it’s important to understand the caveats on these at the same time.

Making this a reality takes not only input from procurement, but from all its stakeholders and end users across the organisation. Procurement needs to be seen as a key strategic function and help mould the strategic direction that underpins procurement requirements.

That said, there’s still plenty scope for procurement to make changes and help things run that bit smoother.

  1. Proper Planning Prevents Poor Performance

This is very simple to say, but very hard to do. Get all your contract details in one place, including the dates of when they need to be retendered or procured and plan accordingly. Have quality project plans available to help understand when the procurement process needs to start and the key dates involved. Most importantly, share these dates with your stakeholders and then stick to them.

  1. Don’t “Boil the Ocean”

Once you know the procurement requirements, assess the market to see if other organisations or Local Authorities are doing the same or have been there before. Ask for documentation – my experience is that people are only too willing to share if they know it will be reciprocated in the future.

Also check out organisations like Scotland Excel, Yorkshire Purchasing Organisation (YPO) and Crown Commercial Services (CCS) for frameworks. If the framework is applicable, that’s half the work done for you and a major time saver.

  1. Kick-off Means Buy In

A kick-off meeting is a good way to get all the appropriate people in the room to discuss the requirements of the contracts and make sure that all the vital details are captured. Getting this done up front not only means you are better prepared, but you also get buy in from stakeholders who feel involved and will be better placed to help push the project along.

These suggestions by no means cover everything that can and probably should be done to make the procurement process more efficient. However, from the point of view of marginal gains, making these adjustments should help increase procurement efficiency and free up time to manage the contracts you’ve put so much effort into creating in the first place.

Public Sector Procurement Talent: Fact V Fiction

The search is on for top talent to fill an increasing number of procurement roles. But is the public sector being beaten to the finish line by its private sector counterparts?

In the first in a series of articles charting the key issues facing public sector procurement, we examine the facts and fictions of the public and private sector battle for talent.

Talent and recruitment – just two of the key issues for CPOs and Heads of Procurement around the world. As the role of procurement expands, managers need to know their teams have the right skills for the job. For many, this means searching for the profession’s top talent, the high achievers. The superstars.

But identification is only half the battle. Actually attracting these stars to your team is another challenge entirely. And this is where many believe that the public sector loses out to its private sector counterpart. But how much truth is there in this?

The Facts

According to the CIPS/Hays Procurement Salary Guide 2017, 70 per cent of managers said they were planning to recruit within the next 12 months. However, 51 per cent also admitted that they faced challenges in finding the right talent in the face of a skills shortage and budget constraints.

Let’s set budgets aside for a moment. There is a distinct set of skills required for success in public sector procurement. Sure basic skills are all transferrable, but public sector professionals need to adapt to a very different, highly political, environment.

Add in the requirement to drive new ideas, use specific IT systems, and operate within the bounds of EU Procurement Regulations and you’re starting to look at quite a bespoke skill set.

Speaking from experience, the majority of these skills can be learned or trained. But with budgets (that word again!) tight and time short, training is becoming an increasingly unaffordable luxury for many in the public sector.

This means public sector hiring managers are chasing the white rabbit – those professionals with all these skills, able to hit the ground running on Day 1.

But in a sellers’ market where there are an increasing number of procurement jobs to be filled, professionals with these skills are in demand. And this comes at a price.

All About the Money, Money?

Money isn’t everything and it can’t buy you happiness (according to Rousseau at least), but it is a key driver for procurement professionals when they look for new roles.

According to the CIPS/Hays Guide, 72 per cent of respondents highlighted salary as the key factor for a new role. This is compared to 41 per cent and 36 per cent for flexible working and non-salary benefits respectively.

The money argument seems to be borne out by the average salaries across the sectors in the UK:

  • Private Sector – £46,825
  • Public Sector – £40,915
  • Charity Sector – £40,379

And the trend continues when the average salaries are broken down by seniority within the public and privates sectors (see below):

The picture doesn’t get any better for the public sector when bonuses are taken into account either. In 2017, an average of 50 per cent of professionals received a bonus in the private sector, versus only 13 per cent in the public sector.

However, the public sector may have the beating of the private sector in one facet – non-financial benefits. Over two-thirds (67 per cent) of public sector professionals have access to flexible working (versus 36 per cent of the private sector), along with greater provision for support for study and career development.

The Permanent vs. Temporary Debate

The other option open to hiring managers is bringing in interim or contract workers. This has proven to be a good way of providing additional resources in a flexible manner for specific projects or time periods. The CIPS/Hays Guide states that 61 per cent of public sector organisations will recruit in this way.

While this suggests that there is an attraction for some professionals in contracting, many looking for new roles want the security and safety of a permanent contract. So how much truth is there in the belief that the public sector isn’t able to offer this type of contract?

While it was certainly more fact than fiction when it came to salaries, there is certainly less evidence for the permanent-temporary contract question. A search across UK job sites for public sector procurement roles shows that actually there are almost twice as many permanent roles advertised as temporary, contractor or interim roles.

So taking this factor out of the equation, what solutions are available to the public sector to meet the recruitment challenge?

Redressing the Balance

Unfortunately, there is no easy answer. Budget restraints make it nearly impossible to compete on salaries, bonuses and other financial benefits. However, it’s not all doom and gloom. There is plenty to offer besides salaries that make jobs attractive.

The CIPS/Hays Guide shows that the majority of public sector organisations are making flexible working available to their employees. Having contracts that are as flexible as possible only increases their attractiveness at a time where people (and many organisations) are looking to step away from the traditional desk-bound, 9-5 roles.

Flexible working hours, flexi-time, working from home and contracts allowing greater work-life balance are just some of the non-financial benefits job seekers will look for.

The second area is the attractiveness of the roles. This might seem like a counter-intuitive argument given what’s been said before, but this doesn’t relate to money, contracts, or working hours.

A common (mis)conception of the public sector is that it isn’t as interesting. The truth is far removed from this. From roles that allow procurement professionals to directly impact their cities for the better, to working on major, one-off projects – think the European Championships in Glasgow in 2018, or the Commonwealth Games in Birmingham in 2022.

And these are just a couple of highlights in the vast array of fascinating projects in the areas of sustainability, technology and services only available in the public sector.

Raising the profile of these roles or projects and their interesting, challenging and diverse nature can only help to attract the superstars.

So here’s my challenge to you in the public sector. What are you going to do to help?

Do You Have Any Idea What Your Consultants Are Doing?

Hand-on-heart: Can you swear that you’ve properly briefed consultants and paid only for what you’ve received?

Buying professional services is often accompanied by a host of reputational risk and budgetary pressures.  However, for the public sector, a new approach to professional services procurement is proving that it doesn’t have to be that way.

Public sector procurement continues to be a highly debated topic in the UK, against a backdrop of reduced budgets and high-profile failures, it seems clear there’s still a need for new and innovative approaches.

What needs to change? Well, traditional purchasing frameworks have long been pegged as a solution to the sector’s buying challenges. They promise fully compliant access to a range of suppliers with all the hard work that comes with the tender process done for you. However, as they often offer a limited pool of suppliers and a notable cooling-off period which can delay a project’s start date, frameworks can be a frustrating route to market for some.

It’s in the procurement of professional services where the frustrations of traditional routes to market are often most keenly felt. There’s often a lot at stake. As budgets shrink and requirements evolve, the need to access expert external advice, often at short notice, is crucial to the success of some projects.

Consultants are often appointed as trouble shooters; to advise and lead on new projects or even spearhead big organisational changes. Using such services can represent a significant investment for public bodies and the failure of high profile projects such as IT infrastructure demonstrates the reputational and budgetary risk that can occur if you don’t get it right. Control is a key success factor.

There’s a need for change and some public sector bodies have already embraced a different approach. It’s an innovation that, unusually, could see the public sector leading the private sector.

The NEPRO neutral vendor solution recognises and responds to these and other short falls of traditional frameworks. It helps procurement professionals gain that control, mitigate reputational risk, deliver on budgets and manage demand. It’s a fast solution for the procurement of professional services that offers a welcome alternative to traditional purchasing routes.

The NEPRO solution is based on outcomes – buyers pay only for results delivered, measured by pre-agreed project milestones. We’ve all heard stories of consultants hired by public sector organisations to work on a specific project for a significant fee, only for the provider to still be there long after the project has finished having been hijacked by another department. This approach puts an end to that, with both the buyer and supplier clear on what is needed, by when and at an agreed fee.

If there’s no robust focus outcomes or deliverables it’s easy to see how contractors can end up staying in departments long after project completion and be paid significantly beyond the original value of the project they were hired to support.

When speed is important, procurement professionals have the opportunity to cut red tape and realise the benefits of consultant-based projects in a third of the time it traditionally takes to procure professional services. While traditional procurement routes can take 100 days from initial request for information through to a consultant starting work on a new project, this approach can see consultants start work in an average of 30 days through direct contract awards and fully compliant mini competitions.

The starting point for any new project is to fully understand what the buyer needs and find the right supplier to fulfil the brief. All the complexities of supplier management are taken care of on behalf of the buyer, providing compliance, control and transparency of expenditure. NEPRO delivery partner Bloom then manages the project and assures delivery.

We’re proud to now be transforming the procurement of professional services across the UK, giving buyers more choice and more business opportunities to suppliers of all sizes. To put that in context, last year, the number of contracting authorities wanting to procure through Bloom almost doubled to 170, suggesting that the public sector is waking up to this faster and more effective way to procure the services of consultants.

By Rob Levene, executive director and co-founder, Bloom.

With its unique neutral vendor solution, Bloom offers buyers access to a vast community of over 4,000 suppliers across 19 categories and 240 sub-categories. This dynamic supplier marketplace drives choice and competition and with over 70% of projects delivered by SMEs, helps drive growth back in the local economy and supports social value agendas.

Why Public Sector Procurement Consolidation Won’t Take Forever

Driving change within the public sector takes forever… and ever! Right? Tim Hamper begs to differ as he explains why procurement consolidation will only accelerate in coming years, if not months!

A few weeks ago another UK public sector body, Fastershire (a partnership between Gloucestershire County Council and Herefordshire Council, backed by the Department of Culture, Media and Sport), began implementing a major new combined agreement – this one with Gigaclear, a rural Internet Services Provider. The deal is to roll out “ultrafast” Fibre To The Premise broadband to thousands of some of the hardest to reach homes and businesses across the two counties, at speeds of up to 1000Mbps.

After decades of individual procurement teams in separate organisations diligently applying public procurement rules (often with relatively small spend and time-consuming award processes), it’s now becoming normal to combine with others. The results are often not only larger economies of scale, but also better access to relevant products and services.

Public sector procurement consolidation

Combined (in other words consolidated) public procurements have for some time been delivering in areas where it’s fairly easy to see a commodity – energy, office supplies, facilities. They’ll really take off and show benefit when they fully embrace what used to be called “ICT” – now better labeled Digital. Leaders of public bodies won’t be interested in the details of latest products or software solutions, or even in traditional efficiencies. They’ll be concerned about big outcomes. How to better support local economies and communities? How to join up health and social care? How to keep the trains running?

The facts about consolidation are impressive:

  • Although not everyone is a fan, in 2016/17 Crown Commercial Services, the public sector aggregator, channelled £12.4bn of public sector procurement spend through its commercial arrangements including frameworks – £6bn from central government, £6.4bn from the wider public sector.
  • The National Procurement Strategy for Local Government in England was launched in 2014. By 2016, 53% of single tier/district councils and 48% of district councils said their organisation had made savings or achieved other community benefits by “partnering and collaboration”.
  • Owned by six county and city council authorities, one public sector buying group based in Leicestershire, ESPO, now has over £1.4bn of spend going through its frameworks. The organisation consolidates requirements from over 9,000 education customers across the country.
  • Another buying group, Kent County Council’s Commercial Services, is one of the largest trading organisations of its kind in the UK. As the contracting authority, Kent operates in partnership with 12 district councils and 289 parish/town councils. It recently published details of framework contract awards for water and sewerage services potentially worth up to £208m on behalf of a number of public sector organisations.

The tipping point for consolidation

The often-heard view is that change in the public sector takes forever (one digital industry leader recently claimed this is due to a “lack of vision, entrepreneurial thinking and execution”, another that “the last ten years have seen public sector organisations progress only 20 per cent of the way through the business transformation journey, with the remaining 80 per cent to be delivered over the next ten years.”). But with the focus on outcomes, the necessary speed and type of market engagement will mean the trend for procurement consolidation will only accelerate. The benefits will be big: public sector bosses are already seeing better outcomes and stretched budgets being brought back into balance. In Gloucestershire, County Councillor Lynden Stowe, Cabinet Member for Economy, Skills and Growth says “faster broadband is vital for our communities and businesses to thrive and grow. I’m delighted that the Fastershire project, in partnership with Gigaclear, will be taking faster broadband to even more homes and businesses in some of the most rural areas of the county where larger suppliers were not prepared to go.”

We’re probably already at the tipping point where most public procurements look across organisational boundaries, so the need for separate individual procurements will diminish. A lead or buying group will more and more be seen as the right place for consolidating spend, not just for commodity items but strategic stuff as well.

Suppliers will react quickly to this situation and respond to consolidation opportunities – not least because larger volumes are more attractive, and with fewer organisation touch points, the cost to them of doing business will be significantly reduced.

Dramatic change has already started, though not every public sector management team involved in commercial activity has fully embraced it. They should. Consolidation in public procurement won’t take forever – the focus on outcomes and market speed will ensure that it’s now measured in months, not years. Certainly not in decades.

I’d Like To Purchase Some Expert Advice

Obtaining access to high quality consultancy services can often be the crucial factor in the success of a project. But buying advice is also one of the most confusing challenges for procurement. How can we overcome this?

Despite some consolidation in the financial consultancy sector, the overall market for consultancy services continues to grow, with the global consulting market valued at $250 billion.

While technology consultancy is leading the continued growth curve, other sectors including HR, operations and strategy are making strong contributions to overall value. For those seeking consultancy services, the market however can be complex. Is there a way to simplify the complexity of procuring consultancy services?

Why are consultancy services so confusing for buyers?

Much has to do with the breadth and depth on offer. Consultancy services are available in just about every industry possible and the sector continues to grow. The broad reach and sheer volume of suppliers can make it difficult to identify the best consultant for your needs. Take ‘Digital Transformation’ consultancy services as an example. It was barely recognised a sector just a few years ago, now it’s worth over $23billion and represented over 15% of the global consultancy market last year.

Consultancy services are provided by organisations large and small,- from multinational organisations and specialist niche providers to freelance independent consultants – often with much crossover in between. Many of the companies started life offering a single specialism but have grown and added additional services to their portfolios as their sector and market experience has developed.

Consultants often use a variety of language and definitions to describe who they are and what they deliver. With no single regulatory body on board to help define the market, its no wonder that buyers can find drawing comparisons a challenge.

As procurement budgets decrease globally, the lack of resourcing and specialisms often means that in-house buyers are generalists not specialists. As a result they may not have the insights into specific markets to be able to evaluate different consultancies meaningfully.

As a professional buying organisation, ESPO’s recent experience in building its largest ever public sector consultancy services framework highlights just how crowded and complex the marketplace is. It received a record number of tenders from suppliers – evaluating over 240 tenders before awarding 135 to the framework. As part of the process ESPO found that the marketplace is so complex that public sector buyers often remain with the same consultancy provider for years to avoid going through the procurement process again, putting budgets at risk.

Top things to consider when buying consultancy services

Utilising a team of 12 procurement experts with cross sector experience drawn from across the organisation and externally, ESPO was able to effectively evaluate the tenders before awarding the successful organisations a place on the framework. Here are its top considerations for buying consultancy services:

  1. Closely define your outcomes or objectives. By identifying the outcomes, procurement teams can work backwards from the end goal to define the exact service required.
  2. Request case studies. This will help you understand the process for delivery and ensure that the consultant has the right experience.
  3. Review technical capabilities. Whether you’re buying financial, waste disposal or even logistical advice, ensure that the consultants are specialists with the technical capabilities needed to deliver. This may mean that you are required to use a different provider for each project.
  4. Consider using a specialist framework for complex service procurement needs. Framework providers operate under strict due diligence rules and processes so you’re assured of the suppliers’ capabilities.   

Sheena Kocherhans is Category Manager for Professional Services at ESPO

The Big Squeeze in Public Procurement

As budgets continue to shrink, how can professionals working in public procurement do more with less?

We live in a world of apparent contradictions. The amount of money being spent by global governments is rising year on year. And yet, in the majority of these countries, public sector institutions are seeing budgets shrink at the same time.

Governments are increasing spending in order to continue to provide vital services to the public. In the UK, public spending reached £761.9 billion in 2016. This is forecast to rise again in 2017, with total UK public spending is expected to be £784.1 billion.

However, there are a number of factors that need to be taken into consideration when assessing these figures. The average age of the population is on the rise. Health services are dealing with a rise in chronic diseases as a result of lifestyle choices. Investment is not only being put into social care, but also into improving the lives of the entire population. All this means that any increase in spending is swallowed up as quickly as it is released.

In addition, slow global growth means that Governments have to be aware of future spending too. What this means, ultimately, is that spending at a local level is reduced. So what does this mean for public sector procurement?

More for Less

In Scotland, funding for Councils from the Scottish Government has decreased by an estimated £180 million for 2017-18. Some of this will be offset by rising Council Tax across the country, but many Councils and Local Authorities will still be looking to make major savings.

Maintaining, and improving, public services is only the start. The public sector in a situation where they not only have to achieve more with less, but they also have to invest wisely to help future savings targets.

Technology is just one area where this can be achieved. Many cities are investing heavily in technology that will align with existing infrastructure. Following in the footsteps of pioneering cities like Barcelona and Stockholm, a number of UK cities are moving to become ‘Smart Cities’.

Intelligent Street Lighting, sensors measuring urban data including city centre footfall, air quality, and new applications for refuse collection and public parking, are just a few examples of how technology helps to build a smart city.

These technologies have a dual-benefit for Local Authorities, and other businesses in cities. Data collected can be used to drive savings initiatives, while at the same time helping to improve the quality of life for residents.

Public Procurement’s Three Cs

What does this mean for procurement? The profession will be at the forefront when it comes to savings initiatives, and will play a vital, and ever-increasing, role in these projects. But at the same time, procurement still needs to prove its worth to, and make these savings stick.

If you’re looking for somewhere to get started, or to drive continuous improvement, here are three Cs that are applicable no matter your organisation, industry, or category (or even sector).

  1. Challenge

The best saving procurement can make is by not spending money in the first place. And the best time to do this is at the very beginning of a project. By challenging requests, procurement can begin to weed out wants from needs.

Does the organisation actually need this? Does it really need the 24-carat, diamond encrusted version, when an off-the-shelf one will do just fine? Is there an alternative solution to the question that could cost less while doing the same job?

Get your client, end customer, and specification writers to really think through their requirements. Once you’ve done that, you can move on to the next C.

  1. Collaborate

Collaboration should be both an internal and external activity. Procurement should be involved from the start of the project, and work closely with other departments to get the best for the organisation.

The public sector can also collaborate more too. Instead of all setting up individual projects for the same thing, why not share what’s been done in the past? Frameworks, Dynamic Purchasing Systems, and collaborative purchasing can help save time, resources, and money.

It’s also time to be working more collaboratively with our suppliers. Procurement needs to focus, where appropriate, on building long-term relationships. By building these relationships, suppliers will feel more open to collaboration, and potentially start bringing innovative solutions to the table.

And the other thing collaboration is going to help is with the final C.

  1. Cost

As in total cost, lifecycle cost, or Total Cost of Ownership. It’s critical to long-term savings ambitions that the total cost of goods or services is understood. Depreciation, residual value, maintenance and disposal costs all need to be taken into account before any decisions are made.

Procurement should also be focusing more on the cost element with suppliers too. Profit margin is not necessarily the best place to start looking for savings. Rather than creating the perception of going after profit, switching the focus to cost can provide more opportunities for discussion and even innovation.

Getting Started

While these are very good areas to start in, they are just the start of a larger exercise. However, they will help to provide the foundation for best practice, and to change the way projects are put in place across the organisation.

Defining & Defeating Maverick Spend

Is maverick spend an issue for the UK public sector? Is local government adhering to procurement practices when spending taxpayers’ money?

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It’s not uncommon for businesses to suffer from high levels of uncontrolled procurement, often known as maverick spend. These levels can often reach 80 per cent of total spend, a figure likely to send shivers down the spine of any procurement professional.

To elevate its role within an organisation, procurement must extend its reach. A CEO is unlikely to take a function seriously that only influences 60 per cent of the activity for which it’s responsible.

Yet that is the situation of the average procurement team. No other function would allow this: Legal, HR, Finance, Compliance, Public Affairs – all insist their writ runs broad.

Maverick spend is a major obstacle to extending procurement’s influence. However, decades of setting policies and rolling out enterprise systems have had limited impact in reducing it.

Maverick Spend in the Public Sector

While it’s often easy to see the figures in an individual organisation, actively tackling this spend is another matter. Solutions range from improving reporting to enabling other functions to see the benefits proper procurement processes bring.

Today, Applegate PRO has released a whitepaper on maverick spend via Procurious. The paper will showcase data on procurement practices gained via a Freedom of Information (FOI) request to all local councils in the UK.

This is one of the largest FOI requests relating to procurement processes that has ever been conducted in the UK.

We hope that this research will provide a valuable snapshot of how local councils weigh up in the use of their allocated budgets on a national scale.

Applegate PRO are exploring further areas of research to analyse the maverick spend in public sector bodies, including the Ministry of Defence and NHS.

What the Whitepaper Offers

This white paper uses a case study of local government procurement to explore the varying levels of maverick spend across a set of comparable organisations. It reveals startling differences in levels of uncontrolled expenditure and explores the ramifications for this.

Findings from the 276 councils that responded from across the UK include:

  • Definition of maverick spend.
  • The top three councils that reduced levels of maverick spend between the financial years of 2012 and 2016.
  • The councils whose maverick spend increased the most between the financial years of 2012 and 2016.
  • Local council with the most maverick spend.
  • Local council with the least maverick spend.
  • The percentage of maverick spend undertaken in their council from each financial year from 2012 to the present day.
  • The sanction systems in place for non-compliance to procurement practices.
  • The percentages of transactions that require a purchase order.
  • The number of procurement professionals that have a CIPS or other professional procurement qualification and how many are currently undergoing procurement training.

If you are interested in reading the full report, you can sign up to receive your copy here.

Applegate PRO is a free-to-use eProcurement system that streamlines request for quotation and purchase order processes, enabling buyers to submit a request, receive up to ten competitive quotes and raise a PO in a matter of hours.

Submit your request for quotation today with no obligation to buy at http://www.applegatepro.com/

How to Introduce a Sustainable Procurement Strategy

Although the theory is well regarded, the practical aspects of introducing a sustainable procurement strategy are often overlooked.

This article is by Gerard Chick, Chief Knowledge Officer, Optimum Procurement Group.

About 10 years ago the UK government started taking the pursuit of sustainable procurement seriously. They established a task force of industry experts to try to define ‘sustainable procurement’, and develop appropriate standards for general deployment.

The Government’s goal was position the UK at the forefront of sustainable procurement in Europe by 2009. Their framework and recommendations have been instrumental in guiding sustainable procurement strategy, theory and practice across the globe.

What is Sustainable Procurement?

So what is this thing we call sustainable procurement? Sir Neville Simms, chair of the UK Procurement Task Force, described it as the use of procurement “…to support wider social, economic and environmental objectives, in ways that offer real long-term benefits” to organisations and the communities in which they exist.

These long-term benefits include:

  • The achievement of significant savings by focusing on a “whole life costing” methodology for procurement.
  • The incorporation of the “three Rs” (Reduce, Reuse, Recycle), to cut waste and improve the efficiency of resources.
  • The enhancement of businesses public image, by demonstrating a sustainable approach to business, and championing related environmental and social benefits.
  • The development of new markets for innovative products and services through technological advancements.
  • The improvement of management information, a focus on business and supply chain risk, and better supplier relationships.
  • Competitive advantage as a consequence of the early adoption of practices, focusing on increasingly environmentally-focussed legislation.

Developing Sustainable Procurement Practice

The UK Task Force devised a National Action Plan to inform interested organisations to adopt a sustainable procurement strategy. In 2006, Procuring the Future was published to support public and sector organisations in taking their first steps in this burgeoning area of interest.

To help you, here are the central planks of the report established as recommendations for those who wanted to develop sound, achievable, sustainable procurement practice:

  • Be a beacon: Provide clear direction for both procurement and your supply base providing consistent leadership and policy-making on sustainable procurement issues.
  • Set the standard: Fully implement existing procurement policy and standards. and ensure these are extended across all procurement activity. This will improve performance and underline expectations, including the establishment of well understood minimum standards for your suppliers.
  • Prioritise: Rationalise existing procurement standards into a single integrated procurement framework, which covers both policy relevance and appropriateness.
  • Test: Filter and select new procurement policies to ensure they are enforceable, before considering implementation.
  • Develop capability: Ensure you and your team have the requisite professional skills to support the efficient deployment of sustainable procurement.
  • Tool up: Provide the appropriate tools, training and information resources to execute these standards.
  • Be ready: Ensure you already have the appropriate budgetary mechanisms in place, and that your spending and budgeting policies facilitate your sustainable procurement strategy.
  • Be proactive: Encourage openness to innovation and look proactively for opportunities to drive social benefits through your engagement with suppliers and the wider marketplace.

There is no doubt that the UK’s lead is now being adopted elsewhere, and that the global procurement community seeks to embrace a sustainable approach with an eye on good practice coupled with other significant business rewards.