Public sector purchasing policy is not exactly a subject designed to make the pulse race. But perhaps it should. At a time when scrutiny of the public finances has never been greater, a prudent procurement policy offers a heaven-sent opportunity to rein in public expenditure.
Purchasing impacts the public sector more profoundly than you might imagine. Everything which is neither salary nor distributed as a grant or as welfare is regarded as a public sector purchase. We are talking things from IT systems (not noticeably good value in recent years), buildings and highly sophisticated defence equipment to stationery and travel expenses. For this an estimated annual budget of £150 billion is up for grabs. But whilst the science of sales is well known, the procurement industry is very much in its infancy.
There are some fifty times more sales professionals than trained procurement people but the sums of public sector money they have responsibility for are truly mind boggling. Grouped by department, Local Government (£39.8 billion), Health (£30.1 billion), Defence (£16.9 billion) and the devolved administrations (£15.4 billion) are the largest public sector purchasers. Categorised by goods and services across departments, the government spends an incredible £5.4 billion on cars and business travel, £3.2 billion on food and £1.2 billion on furniture.
The lack of visibility of this spend means that the cost to the public purse has spiralled out of control. Discussing this issue with one of UK’s major procurement specialists, their experience suggests that the difference between good and bad buying can be as much as fifteen percent and I have heard a wealth of anecdotal evidence myself to suggest that the attitude of public sector purchasers needs a massive overhaul. I have heard of contractors being told that unless they increase their bids, they will lose a tender to provide a public sector service. Even a glance over the parliamentary stationery catalogue – public sector purchase on a smaller scale but a significant spend nonetheless – shows that the taxpayer is routinely ripped off. A Philips transcriber priced at £329 for MPs can be bought for £155.49 online, a 500g tub of Nescafe priced at £28.30 is sold by Waitrose for £13.06. Even the humble hole punch is priced at £5.14 when it can be bought for £1.99 from Ryman.
Simple and sensible price checking that could make a real difference if applied on the scale of the government’s massive procurement budget. Having written to all government departments asking for detailed breakdowns, I hope in the weeks ahead to follow up this article with some specific details of savings that might be made.
Once we get into government we must urgently drill down to determine the precise nature of the procurement and purchasing budget and seriously examine why people are so bad at the science of buying. There are straightforward disciplines which if adopted by the public sector could return billions to the taxpayer. (To read my more detailed observations thoughts on this, click here)
Just think of the impact on spending if we placed top procurement professionals in every department. Imagine if such purchasers were forces to be reckoned with rather than a source to exploit in the knowledge that the government is committed as the ultimate guarantor. As PFI projects in my own constituency have shown, all too often, far too little risk is transferred. Indeed most operators—for example, the bus companies in London—can run rings round their public sector counterparts when drawing up repayment terms.
At a time when the economic clouds are gathering and there are increasing pressures on the public purse, adopting a more systematic approach towards procurement represents an enormous opportunity for the Conservatives to say something new without the fear of detrimentally affecting services to the public. I believe we should grasp that opportunity with both hands.