Martin Sykes

Executive Director Supplier and Government Marketplace Development

Directorate

Topics to be covered

• OGC – a brief history

• SMEs in the UK marketplace

• Aggregation

• E Procurement

NOVEMBER 1998:NOVEMBER 1998:Review of Procurement in Central Civil Review of Procurement in Central Civil

GovernmentGovernment

““To review civil procurement in Central To review civil procurement in Central Government in the light of the Government in the light of the Government’s objectives on efficiency, Government’s objectives on efficiency, modernisation and competitiveness in modernisation and competitiveness in the short and medium term and to the short and medium term and to report as soon as possible”report as soon as possible”

Office of Government Commerce

O G C

• Created in April 2000Created in April 2000• ““Of” but not “in” HM TreasuryOf” but not “in” HM Treasury• Chief Secretary of the Treasury is the Chief Secretary of the Treasury is the

responsible Ministerresponsible Minister• Supervisory BoardSupervisory Board• New Chief Executive – John OughtonNew Chief Executive – John Oughton

OGCOGC GOVERNANCE GOVERNANCE

Value for Money

• OGC helped to realise £1.6 billion value for money gains in 3 years up to March 2003

• Target for 3 years to March 2006 is £3 billion

SOURCES OF VFM SOURCES OF VFM IMPROVEMENTSIMPROVEMENTS

• Greater focus on quality & whole life costsGreater focus on quality & whole life costs• Reducing process & transaction costsReducing process & transaction costs• Co-ordinating departmental & Government Co-ordinating departmental & Government

purchasing powerpurchasing power• Wider involvement of professional Wider involvement of professional

procurement staffprocurement staff• Gateway reviews - improvements in cost & Gateway reviews - improvements in cost &

schedule performance of major projectsschedule performance of major projects• Better exploitation of assetsBetter exploitation of assets

Emerging role

• Our core area of operations is central civil government – not the defence or health areas

• Increasingly working across the wider public sector and local authorities

Government Marketplace

• Government needs to get more out of markets

• Kelly review – looking at long term capacity of industry to deliver and optimising competition

• We need to increase competition – partly by levelling playing field for SMEs

• Ensure drive for efficiency does not result in a narrow approach to aggregation

• Develop e procurement techniques

SME Procurement Pilots

May 2003: Independent review of SME involvement in public sector highlighted key barriers:

• Difficult to find out about opportunities

• Limited SME understanding of public procurement

• Resource-intensive tendering processes

• Aggregation and bundling

• Perception of risk in engaging SMEs

Background to the Pilots

• Review produced 11 recommendations to drive

creation of a more level playing-field in government

marketplace

• June 2003: West Midlands & London Borough of

Haringey Projects launched to pilot a number of the

recommendations

• Representative cross section of UK SMEs

• Involvement of a number of central, regional & local

government partners

• Web portal for below threshold opportunities

• Practical training and advice

SME workshops on how to tender

Workshops to raise buyer awareness of SMEs

• Standardising pre-qualification process – self-certification model

• Encouraging prime contractors to provide visibility of subcontracting opportunities

SME Procurement Pilot SME Procurement Pilot Selection of ActivitiesSelection of Activities

Aggregation

• Aggregation of demand does not necessarily lead to aggregation of supply

Aggregation

• Aggregating requirements can strengthen departments’ negotiating position with suppliers…

• …but aggregating across government could distort markets, by developing a situation where too few suppliers are operating…

• ..and without people of the right calibre many of the potential benefits of aggregation can be missed

E Procurement – business driversImproved control and lower risksBetter knowledge of what we spend money onMore efficient – so lower costsBetter supplier relationshipsEnables procurement staff to focus on high value procurement – 80/20But must be careful to reduce transaction costs – not increase bundling

E Procurement – aggregation issues

eProcurement gives us much better information on what we are spending and with whom

It delivers dramatically lower process costs

BUT – a danger that if we use information to bundle requirements we could distort competition

Process cost reductions sufficient to support many suppliers