After the Chancellor’s Autumn Statement and following every other economic forecast, we know that 2012 will be even more challenging for the public sector than 2011 was.
There will be less public expenditure and yet more demand for public services. If, as looks all too likely, the private sector does not grow significantly over the next few months, there will be a further negative impact on the public finances. If the European and global economies do not recover, the implications for the UK economy will be dire.
The UK Government could change its economic policy and, in particular, could ease the pace and the degree of the cuts that it is imposing, but it appears intent on sticking to its set course.
Therefore, the mantra “more for less” is beginning to sound rather hollow and irrelevant. The next five or so years of austerity will be about “doing different things differently for a lot less”.
Procurement has a major role to play. Procurement professionals working across the public sector and those advising from outside have to step up to the mark.
Naturally, they have to constantly seek value for money when the public sector procures services and goods. They have to insist that the value is not confused and conflated with cheapness. Anyone can buy cheap, but this is not the same as buying well.
Public procurement has to move on from being solely about buying to being a key strategic element of the public leader’s armoury.
The New Year provides the opportunity for the profession and the wider political and managerial leadership of our public services to reflect on the potential contribution that procurement can make and what needs to be done to maximise this contribution.
My resolution for public procurement would fall into two parts. Firstly, there is the change that the profession has to make and, secondly, there are the changes that will be required to the application of public procurement.
Professional public procurement officials have to:
- demonstrate their strategic input to the wider leadership and management of public agencies
- understand their relationship and contribution to strategic commissioning and not seek to usurp the latter – procurement being only one means of implementing commissioning decisions
- adopt a wider commercial role and ensure that they have the necessary skills for this including risk management, contract negotiation and partnership development and management
- explain what procurement can and cannot offer to a public body and be ready to resist unreasonable or unfounded demands for cost cutting
- be ready to cede control and authority to consortia of public bodies as well as to community organisations
- earn their place at the top table in their organisation
The public procurement profession has to demonstrate that it contributes to the overall objectives of public agencies. In 2012, this will mean:
- renegotiating current contracts to achieve change in volume, quality and price but in ways that are prudent and achievable
- ensuring that decision makers are aware of the options for balancing price and quality
- recognising the value of and arguing for “in-house” provision or partnerships within the public sector where this makes more economic, financial and/or social senses than using external providers
- securing and incentivising better outcomes from providers with some form of “payment by results” – but also resisting overzealous pressures to press for untested or undeliverable “payment by results” contracts and putting some reward at risk, subject to user and wider stakeholder satisfaction
- ensuring that public contracts address social, economic and environmental goals as well as those directly related to the service or goods being procured
- addressing supply chain management to address issues such as ethical supply, local supply and the encouragement of SMEs and other smaller agencies
- using public sector contracts to press for progressive changes in employment practices, remuneration, governance and investment strategies in suppliers
- using public procurement to drive public policy goals to build a more vibrant voluntary and community sector, as well as social enterprises and co-operatives
- adopting procurement practices that are SMART, avoid unnecessary costs and delays for bidders and the public sector and which do not discriminate against smaller suppliers or new entrants
- advising on alternative financing options including new forms of private/public partnership finance and social investment
In this period of uncertainty, the public sector will wish to design and enact new models of contracting including joint venture companies with the private sector in order to secure greater flexibility in volumes and price with an ability to renegotiate without major financial burden. It will also wish to see effective risk management and risk transfer where this is commercially and politically appropriate with a consequential sharing of reward. This will require the public sector to ensure that significant contracts include auditable “open book” accounting and generally greater transparency of financial and operational performance. There is a strong case to be made that providers of good and services would be expected to match the public sector’s own transparency standards. Of course, the application of such expectations will be negotiated in ways that are appropriate and proportionate to a specific contract. The public sector has to remain accountable for public services that it commissions, procures and delivers. The public procurement profession has to ensure that contractors, partners and suppliers are held to public account too.
The public sector procurement profession has an opportunity to be seen as part of the solution and not as part of the problem. I very much hope that public sector professionals will adopt a New Year’s resolution to demonstrate their value to the public sector and those who rely on public services.