Why Procurement Matters - Professor Nick Petford


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Why Procurement Matters - Professor Nick Petford

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  • Total expenditure of UK HEIs was nearly £28bn last year. That is a huge number. As a sector, we are major economic players.More than half of this – about 55% - goes on staff costs. A bit more goes on things such as interest, servicing loans, etc., or is accounted for by depreciation.This is the bit that people working in procurement really can’t do anything about. However, the rest – this large green segment at the bottom. That represents more than £10bn. And we can try to do something with this – not all of it, by any means, but a significant slice of it.Because of the way that HESA collects data, this “Other Operating Expenses” figure includes a lot of things that are outside of the scope of procurement – taxes, payments to other institutions etc. – but most of it represents the “stuff” we buy, everyday, the goods and services we need.This chunk is probably about 50-70% of this “other” spend – and it will be different for different universities - but we are talking in the region of £5-7bn at the level of the sector [NB: This is an educated guess, based on the figures we’ve seen so far. The procurement Professionals Group is developing the approach].And it is the people in procurement that are best placed to help ensure that all of us here – including vice-chancellors – make the most of that.
  • And we really do need to make the most of the resources we have available.As Ian Diamond showed earlier, the pressures that we are facing as a sector are not going to disappear any time soon. All indications are that the funding environment is going to be a tough place in the coming years.All of our institutions are having to compete with each other, with new entrants and – increasingly – in a global marketplace, not just for international students, but from a UK population which looks increasingly mobile.And to stay competitive, to ensure that we are attractive to students and valuable partners for businesses, we need to invest.We need to make sure that the education we offer, the learning environment, the whole package of the student experience – we need to ensure that it is absolutely first class. This not only means the learning opportunities and the educations and training we provide – but also the facilities, services and support we offer.
  • But procurement also matters in a very different sense. Universities are a public good. We are agents for change in our local communities, and we play a major role in the economic life of the towns, cities and regions in which we are based.The way we choose to spend and invest our money can have a big impact. And – as public bodies, from a procurement point of view – we have a legal duty to ensure that we consider “social value” and impact when we make many of our spending decisions.This was enshrined in the Social Value Act in 2012. I set the sector a challenge, asking if we could target £1 billion of our spend towardsThe scheme aims to support local and regional economies and to bring wider social and community benefits, while at the same time helping universities and colleges develop more efficient, sustainable procurement practices in line with their strategic objectives. Leaders in the social enterprise sector are calling on all organisations - public, private and voluntary - to improve their social impact by getting social enterprises into their supply chains. Many social enterprises are also SMEs, a key target group for UK Universities but often perceived as hard to reach. Procurement can help provide a route in to these supposedly “hard to reach” businesses.And this shouldn’t be turned in to a choice between delivering cost value or social value. We can do both.At the University of Northampton, we ask those wanting our business, how will you deliver social value and impact in delivering this work? How will you support the local community, hard-to-reach social demographics, how can you work with social enterprises?Given the level of business we co0nduct, universities can be real agents for change. We can get others to embed social value in to their own work.And by doing this, I think that we also respond to the demands placed on us by our students and by our local communities. The people on our campuses – they’re intelligent, politically engaged people. They demand certain standards. And by being smarter about how we spend our money, we can help to address issues that are important to them.The work of the regional consortia in England, and APUC in Scotland, to develop sustainable procurement practices that involve students are testament to this.
  • So savings and efficiency are an important part of the picture. But they are not the whole story. Being smarter in the way we spend our money can help us to have a positive impact in the local community and to bring about real change.But all of this only happens if we get better – individually, as institutions, and as a sector – at procurement. Thankfully, there is a lot of help out there already.First, we need to understand where we can improve. The Procurement Maturity Assessment, a tool which doesn’t just show you what you are doing well and what you’re doing less well but – critically – sets out the journey needed to make your whole organisation more effective. This has been developed by the regional consortia and which has been supported by the Innovation & Transformation Fund. They were introduced in Scotland a few years ago, and as a sector universities have improved their performance massively over the last 4, 5 years. The PMAs have now been rolled out to more than 70 universities in England. And those that have done the follow-up have shown great improvements. This is great news – but it still means that quite a number haven’t benefitted yet. Why would universities not want to know where they stand, and where they can improve?So my message today is that everyone needs to do this, because it is not just about getting a better score than someone else (although that’s not a bad reason!). Every improvement made means that you are getting that much better in the way that you operate. And that both saves money and helps to make sure you’re getting the best value.And when you know where the gaps are, it’s good to know how you can get better. The HE Procurement Academy provides this. Again, developed and led by the sector, this is the place to go for advice and to access training. Go and have a look at the website.And, importantly, we need to get better at collaborative procurement. We need to use our purchasing power more effectively. And this isn’t just a job for the purchasing consortia, this applies to everyone in the sector, everyone working in a university. We all know of people in our universities (though I’m sure no-one here…) who think they can save a few quid by scouring the internet, and get a slightly better deal than they think they can get by using the internal framework. I am told that train tickets are a particular bugbear. But how much time did they spend doing looking? What about the cost of claiming the money back, of processing invoices, and so on? We have these agreements in place for a reason, and they work!The Diamond review set a target of 30% of non-pay spend to be addressed collaboratively. We have listened to the procurement community and universities, and now agreed the way we will measure this. As a sector, we’re on track to hit this target by 2015-16. But we cannot rest on our laurels, and need to be thinking ahead. Is this enough? Can we be doing more? Where are the opportunities in the future?
  • Bear in mind this is not the most recent data, but based on the first round of institutionsUniversities are broadly within the “tactical” group. That’s not bad for a start. But we do want to be moving up the scale, towards the planned and superior categories.And this is what is already happening.
  • The PMA measures attributes in nine categories.For the institutions that have completed the follow-up, the average score across these nine measures went up from 36% to 51%.This is great news, and what we need to see across the sector.I can tell you that this is exactly the kind of thing that government and the Treasury want to see – and not just in procurement.We are being asked to see if this approach can be used in other areas.
  • So procurement matters!We need to be smarter in how and where we spend moneyWe need to become more effective in the way we operateAnd probably most importantly, we need to use the expertise of procurement professionals
  • Why Procurement Matters - Professor Nick Petford

    1. 1. Why Procurement Matters Professor Nick Petford Chair, Procurement UK Vice-Chancellor, University of Northampton
    2. 2. HE(Y): Big spenders…!
    3. 3. The need to make the most of our resources • Continuing pressures on HE finances • Increasing competition at home and abroad • The need to invest in the future
    4. 4. Capital Markets (Bond Procurement)
    5. 5. Universities as a “public benefit” • The £1 billion challenge – Delivering social value through smarter purchasing • Cost or value? A false choice – Embedding social value and impact in tenders • Responding to the demands of our students – Sustainability, using social enterprises
    6. 6. How can we improve our performance? • By understanding where we need to improve – the Procurement Maturity Assessment • By knowing how to get better at what we do – the HE Procurement Academy (www.hepa.ac.uk) • By making the most of our collective voice – opportunities for collaborative procurement
    7. 7. Outcomes from the first round of PMAs (to 2013)
    8. 8. Improvements across core attributes by early adopters
    9. 9. Summary • Procurement matters! • We need to be even smarter in how and where we spend money • We need to become even more effective in the way we operate • We need to involve procurement professionals more widely in decision making