060901 2nd  International Public Procurement Conference Rome
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060901 2nd International Public Procurement Conference Rome

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Procurement as a shared service. ...

Procurement as a shared service.
presentation to 2 International Public Procurement conference , Rome 2006

Subsequently published in International Journal of Public Sector Management

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  • 2005 government eGov strategy

060901 2nd  International Public Procurement Conference Rome 060901 2nd International Public Procurement Conference Rome Presentation Transcript

  • Collaborating on procurement as a shared service Gordon Murray Peter Rentell David Geere
  • Common procurement structural models
    • Centralised (nationally or organisationally)
    • Decentralised
    • Lead buyer
    • Mixed, hybrid, devolved, hard core/soft core
    • Outsourced (consortia, purchasing agents)
  • National Procurement Strategy - milestones
    • “ By 2004 every council’s corporate procurement strategy should set out the council’s approach to collaboration (including purchasing consortia, joint procurement and commissioning and shared services )…”
    • “ By 2005 smaller district councils without dedicated procurement resources of their own, should be collaborating with others, through the regional centres of excellence, to create shared services for procurement and project management.”
  • Gershon report (2004)
    • There is a need for “… an effective strategy for reforming the back office through approaches including, simplification and standardisation of policies and processes; adoption of best practices within each function; and sharing transactional support services to achieve economies of scale through clustering with other central government bodies.” (p12)
    • Scope exists for achieving procurement savings through “… further professionalism of the procurement function … through either use of shared procurement models , or enhancement of procurement skills.” (p14)
  • Transformational Government: enabled by technology (2005)
    • “ Government must move to a shared service culture – in front-office, in back-office, in information and infrastructure – and release efficiencies by standardisation, simplification and sharing.” (p7)
    • “ specific opportunities lie in … reforming the corporate services and infrastructure which government uses behind the scenes, and in taking swifter advantage of the latest technologies developed for the wider market”
    • “… each government organisation should set out clear polices for sharing services and assets that it needs or can provide to others.” (p14)
  • Why collaborate?
    • Access to resources
    • Shared risk
    • Efficiency
    • Coordination and seamlessness
    • Learning
    • The moral imperative – there is no other way
    • “… but don’t do it unless you have to”
    • Huxham and Vagen (2005 pp 4-7, 13)
  • Views on success factors
    • Invest in building trust
    • Get governance right
    • Create a shared vision
    • Be clear about objectives
    • Learn from success models
    • Establish collaboration among public bodies before considering a commercial partnership
    • Agree the business case
    • Bergeron (2003), Huxham and Vagen (2005), Serco (2005)
  • Procurement as a shared service – the paradox
    • Bergeron (2003) typically shared services for non-strategic functions
    • Ramsay (2001) ‘Purchasing’s strategic irrelevance’ – therefore ideal
    • Cox and Lamming (1997) ‘managing the supply in the firm of the future’, the strategic make or buy decision – strategic therefore definitely not suitable
    • NPS (2003) – strategic make or buy decisions for the council
  • Procurement as a shared service – BIG ISSUES
    • What happens if you outsource strategic procurement decision-making?
    • What happens if you subsequently change your mind?
  • Research questions
    • Is there evidence of procurement being carried out as a shared service? If so,
    • What was the catalyst?
    • What form does it take?
    • Were there business cases?
    • What were the realised benefits?
    • Are there shared objectives and targets?
    • Strategic or operational shared procurement?
    • Are exit strategies developed?
    • Are risks identified?
    • How is performance managed?
    • What lessons were learnt?
    • What are the emerging issues?
  • Method
    • Descriptive case studies
    • 6 shared services/15 district councils
    • semi-structured stakeholder interviews
    • subsequent follow-up interviews on ‘what happened next’
  • Findings (1)
    • Evidence of six shared services procurement between 15 councils
    • Generally the only affordable option to accessing a procurement professional
    • NPS was a major catalyst
    • Eight new professional procurement posts established
    • Narrow approach to options appraisal
    • 2/3 were based on informal business cases
  • Findings (2)
    • Primarily tactical/operational procurement with 3 rd tier staff
    • No shared procurement strategies as yet
    • Benefits achieved include early cashable (e.g. 20% on a £1.2m e-auction; 40% on stationery; £300k on wider use of frameworks)
    • Transactional cost reductions (common documentation)
    • Development of procurement strategies which hadn’t previously been in place
  • Issues arising – suggestions for further research
    • Shared services procurement needs to be included within our consideration of structural models
    • What about shared services across public sector bodies?
    • What’s happening with bigger councils?
    • How robust is the options appraisal process?
    • Do operational shared services procurement lead to strategic procurement shared services?
    • A longitudinal cost/benefit analysis?
    • To what extent does political procurement curtail decisions?
    • To what extent do shared services constrain political procurement?
  • Thank you for your time, questions welcomed
  • National Procurement Strategy for local government (2003)
    • “ The strategic objective of collaboration is to obtain better value by bringing councils and other public bodies together at local, regional and national levels to combine their buying power and create shared services .”(p33)
    • “ The creation of shared services (including procurement resources) is a form of public-public partnership that should be explored in particular where smaller councils have relatively less capacity to deal with procurement in a corporate way.”(p37)
  • Collaborative procurement is not new for local government
    • 1957 saw the development of the Consortium of Local Authorities Special Programme
  • The Public Contracts Regulations 2006
    • A contracting authority may purchase
          • goods or services from a central purchasing body; or
          • work, works, goods or services through a central purchasing body.
  • Why collaborate?
    • Integrate services for the public
    • Reduce costs
    • Deliver consistent quality
    • Increase resilience
    • Pool scarce resources/expertise
    • Migrate to best technology platforms
    • Share risks
    • Increase purchasing power