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Procurement:
more with less in the public sector

Wax Digital's Richard Mullins speaks with FinanceWeek

• The need for spending efficiency and deficit repair is pushing procurement up the public sector agenda
• Finance needs to collaborate effectively with procurement to improve public spending efficiency
• Budgets should be scaled based on a department or organisation’s ability to do more with less

Procurement and finance are two departments inextricably linked, but do they always work in harmony? 'Not always', was the resounding answer from procurement officers speaking at a recent public sector procurement debate. Faced with a new agenda for spending efficiency and deficit repair, the onus on public sector procurement departments is to collaborate more effectively with their finance counterparts in order to improve public spending efficiency. Here are the reasons why.

	It is time procurement and finance departments joined forces in public sector to help each other battle the deficit. Richard Mullins, Wax Digital

Different strokes

While procurement often reports into finance, its functional style and role is very different. Procurement and finance need to collaborate but also operate as strategic entities in their own right.

Procurement needs the flexibility to define the tools it uses to improve purchasing but must also accept the need to integrate these tools with financial systems. When finance ‘prescribes' eProcurement software on the purchasing team, it can focus more on being an integral part of ERP than unlocking purchasing control and capability across large communities of buyers in the organisation.

“The quality of public sector procurement is at both ends of the continuum,” commented Glenn Gooch, associate director of procurement and contracting at NHS South West Essex at the debate. “There are lots of pockets of excellence and best practice but there are great big holes where there is a dearth of commercial and procurement expertise. This crisis is an opportunity we need to make the most of.”

Compliance Conundrum

Financial compliance is an essential part of many sectors and procurement plays a major role in achieving it. That said meeting compliance demands without the tools required to handle them can be a hindrance for procurement as they strive to improve purchasing efficiency. It can restrict contract renegotiations, stop good suppliers from entering the market and create heavy paper work. As Barbara Cairney, head of procurement at Northamptonshire Police said: "We are buyers... let us get on with buying on behalf of the organisation."

Compliance is a necessary part of making procurement effective but new public information regulations might increase pressure. The new government’s plans for spending visibility on public sector transactions, as low as £500 for local authorities, will add new layers of compliance that must be addressed efficiently between finance and procurement.

Improved budgeting

Procurement heads highlighted budgeting as an area that historically has worked against their plans for spending efficiency. Many feel this because budgets have been awarded on the basis of spending, not efficiency or effectiveness. Procurement officers believe that to get the best results budgets should be scaled based on a department or organisation’s ability to do more with less, which would encourage everyone to adopt this mentality. They want to have a more collaborative relationship with finance to ensure that financial innovations reflect the need to save.

“Commonly there are often too many people involved in procurement decisions,” said Jonathan Jones, programme manager, West Midlands Improvement & Efficiency Partnership. “This pulls away from a standardised approach and as a result a fairly low level officer can stop an innovation that will save potentially millions of pounds because they don’t like the idea. That can’t be right.”

Strategic versus administrative

In a commercial procurement organisation a team of strategic buyers probably spend 80% of their time negotiating 20% of the contracts to deliver 80% of the savings. In public sector the opposite is more likely. This is not because procurement teams are strategy shy, merely that they get embroiled in tactical spending due to urgent releases of money and managing paper based buying processes. They want to affect change but they don't always have the tools at their disposal to do so.

As Cairney at Northamptonshire Police commented: “We do need to be strategic at the category management and contract management level. You can put the best contract in the world in place but if procurement isn’t there pushing it through, driving it through, getting the developments and the KPIs out of it, it will fall apart and won’t be delivered.”

Legal transparency

According to procurement experts, suppliers are getting wiser to EC legal frameworks that allow them to appeal against lack of fairness in tenders or 'unfair dismissal' if their contract is cancelled. This will put increased pressure on the need for buying processes to be transparent. Finance and legal teams will need to consult procurement professionals on these matters as they have the knowledge about setting up competitive contract tenders.

As Glenn Fletcher, director of EC services, Achilles commented: “Anecdotally...my clients say suppliers are threatening and starting action much more than they used to do.”

It is time both procurement and finance joined forces in public sector to help each other battle the deficit. Procurement officers are crying out to be consulted and strategically involved. Perhaps the pressure of a real public finance crisis will be enough to get them there.

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