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The Importance of Procurement in Public and Private Sectors

Discover why procurement is vital for both public and private sectors, and how it can deliver efficiencies, cost reduction, and quality services. Learn about the key features of procurement reform, the role of procurement in growth, and the enablers of change in procurement systems, processes, technology, and knowledge.

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The Importance of Procurement in Public and Private Sectors

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  1. David Smith CB FCIPSPROCUREMENT SYSTEMS PERFORMANCE A UK GOVERNMENT CASE STUDY David Smith CB FCIPS

  2. David Smith CB FCIPS • Former Commercial DirectorUK Department for Work and Pensions • Former Deputy CPO UK Government • CIPS Past President

  3. Why is Procurement so important to Public and Private Sectors?

  4. Procurement is ‘Big Business’

  5. Procurement is ‘Big Business’ • UK Central Government spends over £66 billion per year on Goods and Services (non military) • UK Public Sector spends over £250 billion per year on Goods and Services • “from paperclips to prisons”

  6. Government Policy touches its citizen’s lives and defines them …..and can save them Procurement is often at the forefront of delivery of key services JUSTICE, HEALTHCARE AND HOSPITALS, SOCIAL CARE, CULTURE, TRANSPORT, EMERGENCY SERVICES, WELFARE REFORM

  7. Old Thinking The commercial function in Government used to be seen as: • A Barrier • A Process • All about requisitions • Just Negotiation! • Limited Added Value

  8. The General Election in the United Kingdom in 2010 brought • The first coalition government since 1945 • The worst financial position in generations • An agenda to tackle the financial deficit first and foremost • An agenda to reduce expenditure • An agenda to address waste and inefficiency • An agenda that promoted procurement as a key enabler to deliver efficiencies and savings yet improve public services

  9. Government to re-negotiate with its suppliers Top suppliers asked to contribute to Government’s efficiency drive Quick Wins Needed Procurement at the heart of Government’s efficiency drive

  10. Delivery of best value for money Cost Reduction Efficiencies Quality Services Propriety How are we being measured? Absolute reduction in Spend Reduced staff numbers and overheads Speed of delivery More sustainable outcomes

  11. Pre 1980 1980s 1998-2014 Effectiveness Collaboration Efficiency Procurement –an established profession Making a business Contribution Board Level Recognition/Presence Policy through procurement E-enabled solutions Minister for Procurement Introduction of Professional Purchasing Requisitions - Low Level Activity

  12. 2010-14 The Key Features of Procurement Reform • Key Suppliers • Controls and Approvals • Capability • Common Commodities • Growth • Organisation & Shared Service • Demand Management

  13. The role of procurement in ‘Growth’ • Small & Local Businesses • Lean Process • ‘Licence to Operate’ • Early Engagement with Market • Transparency, • Reducing Expenditure and delivering vfm

  14. Issues! Implementing cultural and behavioural change quickly Transforming the ‘Centre’s capability ’ to give Departments the confidence to centralise Delivering more with less!!!!!

  15. What’s Gone Well? • Government/Ministerial commitment given procurement higher profile than ever. • Crown management of key suppliers. • Level of efficiency savings. • Freezing discretionary spend, reducing demand. • Simpler, faster procurements.

  16. ‘The Enablers to Change’ • Systems , Processes, Technology and Knowledge - Data • Influence • Suppliers • People

  17. ‘The Enablers to Change’ • Systems , Processes, Technology and Knowledge - Data • Influence • Suppliers • People

  18. Basic Data • How much do we spend? • Who do we spend it with (and why)? • What do get for our money? • Then make informed choices!

  19. ‘The Enablers to Change’ • Systems , Processes, Technology and Knowledge - Data • Influence • Suppliers • People

  20. The Board

  21. Measurement! • Delivering!! • Cost of Function (absolute and %) • Third Party Expenditure against total Headcount • Reduce cost of function and improve Rate on Investment

  22. ‘The Enablers to Change’ • Systems , Processes, Technology and Knowledge - Data • Influence • Suppliers • People

  23. Working with our Suppliers • Out of every £100 we have we spend £50 with our suppliers (65% of this is with our top ten) Our suppliers play a crucial role in delivering both front line as well as support services • Our challenge is to ensure that our suppliers can stay long enough to contribute to delivering VFM and improving our efficiency

  24. Suppliers • Government being seen a single customer • Getting Better Value • Competition and the role of Local & Small Businesses • Supply Chain Management • Who is being managed?

  25. Supply Risk ManagementIs this the most important thing that we do? • Understanding dynamics of key suppliers • Understanding their Supply Chain • Contingency planning • Understanding the Risks • Risk Mitigation • Supplier Relationship Management

  26. Who are your key Suppliers? • By Value? • By Criticality? • By Vulnerability? • Who are their key Suppliers? • What are their risks? • Who is a more important customer than you?

  27. ‘The Enablers to Change’ • Systems , Processes, Technology and Knowledge - Data • Influence • Suppliers • People

  28. Our People!

  29. What do we expect from the next generation of public sector procurers? • Act with Propriety • Know what they want to buy and why • Market Aware • Commercially and financially aware • Act on behalf of the public sector

  30. What do we expect from the next generation of public sector procurers? • Improve and drive value from existing contracts • Manage corporate demand, • Understand the future supply chain • Is not averse to risk in procurements but knows decisions must be managed, commercially advantageous and legally sound

  31. Ambition? • ‘World Class’ Commercial Function • Staff 100% ‘Commercially Aware’ • 100% decisions ‘Sustainable’ • An organisation that understands and wholly manages supply risk and delivering value

  32. Current Issues keeping Procurement at the ‘Top Table’ • MONEY!!!!!! • The Economy • Supplier Vulnerability • Understanding dynamics of key suppliers • Contingency planning • Global Market • Data Management • Delivery!

  33. Issues being addressed personally by CPOs • ETHICS & FRAUD • SUPPLY CHAIN RISK

  34. Is it our time and our opportunity to make a difference!

  35. Thank you for listening and enjoy…

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