Collaborating on procurement as a shared service

Gordon MurrayPeter RentellDavid 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 factorsInvest in building trustGet governance rightCreate a shared visionBe clear about objectivesLearn from success modelsEstablish collaboration among public bodies before considering a commercial partnershipAgree 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 questions1. Is there evidence of procurement being carried out as a

shared service? If so, 2. What was the catalyst?3. What form does it take?4. Were there business cases?5. What were the realised benefits?6. Are there shared objectives and targets?7. Strategic or operational shared procurement?8. Are exit strategies developed?9. Are risks identified?10. How is performance managed?11. What lessons were learnt?12. 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 3rd 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