Q1: What would be a realistic savings goal for this parliament across the whole of the public sector? The Efficiency & Reform Group have set themselves a target of 25% savings and Sir Roy McNulty’s report on the railway system identified a 35% goal. A goal of 15%, therefore, should be very achievable, and if applied across conventional public sector procurement spent would unlock £37bn.
Q2: Has anyone in government highlighted such a figure? Not in the Cabinet. In our report, Why Public Procurement is Central to the UK’s Economic Performance ... and How to Transform It, we have argued for such a quantum of savings. Interestingly Lord Sugar, in a debate in the House of Lords, also believes that this is eminently achievable. At the moment, though, there is no such policy goal across government.
Q3: Are cost savings the only goal? Definitely not. But at a time of real financial austerity, it is essential that procurement makes a major contribution. Billions of pounds saved can then be reinvested in front-line services, infrastructure and the competitive advantage of the UK.
Where will the savings come from?
In the cost reduction section of this
public sector transformation
, we have summarised nine options to do with price structures, cost structures and
commercial structures that can be applied to total spend. One of our major concerns
is that cost management will be tackled only from the most tactical perspective rather
than through the application of systematic category and supplier management.
Q5: Will those savings be driven top-down by the ERG? No. Less than 10% of total savings are likely to come from mandated collaboration of pan-government commoditised spend. What is really needed is for each part of the public sector to create its own public sector transformation reform plan, focused on 1:3:5 year strategies to drive out cost savings, redefine services in innovative ways and maximise competition.
Q6: Does the public sector have sufficient resources, firepower and skills to do this? Alas, no. Unfortunately a lot of skills have been hollowed out across the public sector, particularly through poor use of the big management consultants and an over-reliance on contractors. A much better resource and leadership plan is essential, to use scarce resources in the most effective way.
Is there still a role for consultants supporting public sector organisations?
Most definitely, but without the need for an army of them. Injection of top quality
expertise, properly planned transfer of skills and much greater emphasis on coaching
and staff development will certainly help. This is the style of consulting that Future
Purchasing adopts with clients, and we feel it can really make a difference.
UK Public Sector Procurement
|Annual UK GDP||£1,473bn|
Private Finance Initiative
Public Procurement as
a Percentage of the UK’s GDP
Annual Tax Per UK Taxpayer
Spent on Public Procurement
15% Cost Reduction from
Conventional Procurement Spend
Overview: Public Sector Procurement Reform