Acareo Ltd

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Green Buying – is it really that simple?

Freelance journalist Michael Cross, founder of Free Our Data campaign, is one of the first, and no doubt not the last, to ask “11 years after Gershon, government is still dismal at buying stuff. Or is there more to it than that?”. Sir Phillip Green has now reported to government on public procurement and basically he says it is a mess.
I am by no means a procurement expert – but I do know some people who are and I was involved in establishing one of local government’s first online “marketplaces” and also the first reverse e-auction in local government which saved Preston and Chorley Council’s £25,000p.a. on white A4 paper alone back in 2004. Subsequent uses of e-auctions have saved the public purse considerably more. However, my point is one that many people, especially inside the public sector fail to grasp the rationale for;  that procurement managers were always keen to build up “framework agreements” for a basket of goods. By this I mean you would be presented (perhaps via a series of online or paper catalogues) with a list of prices for just about anything that local government might want to buy – from a paper clip to a street lamp. There would only be one supplier for each commodity which made life easy. However, their price for the item you were interested in might not be as cheap as you could get the item down the High Street. “Why should I pay that for it when I can get it cheaper down the road?” was the cry from budget holders and someone would be dispatched to a local store with petty cash.
What they failed to gasp was that the procurement team had negotiated a complete basket of goods based upon typical yearly or even longer periods of spend. The TOTAL aggregated cost of those goods would be significantly cheaper than if they were ALL purchased in isolation from different suppliers. However, the discount only works if minimum spend on basket items was achieved so when year end comes around and the reckoning is done, if budget holders have gone off and spent maverickly on paper clips at the local stationers this could have a seriously adverse effect upon the cost of big ticket items such as paper or ink toner where much larger discounts have been agreed. The end result would be that the maximum potential reduction in price would not be achieved. Through good training and comms this message can be hammered home but one thing it will have an effect on is the actual ticket price of items in the basket. Sir Phillip points out that one department is paying several times more than another for the same item. It may well be the case that department A doesn’t use (and therefore buy) as much as department B but Department A did get a much better discount on another commodity than Department B when negotiating its overall basket of goods. That aside, there will be an interesting debate on whether there should be total central control over procurement across government, let alone the wider public sector. Green’s key points about the lack of management information on spend could be echoed for just about any morsel of MI that a businessman would want to know about his own business. The public sector simply does not do management information very well be it buying habits, unit costs of delivering services, volumes of customers using services or their preferences for accessing them. If you’re lucky they may have some KPIs or customer satisfaction data. Unfortunately all too many public sector managers consider such MI to be an anathema; more effort than its worth – rather than a significant tool in an armoury of efficiency tools that could be far more effective than an axe.


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