The road to collaborative procurement
The Northern Ireland Audit Office wants the public sector to seize more opportunities to work together in the procurement process.
Progress is being made in procurement collaboration in the region after a decade of little movement.
Procurement spending accounts for almost £3 billion of public expenditure annually and savings can help to avoid cuts to front line services at a time of great pressure on budgets.
A Northern Ireland Procurement Policy was agreed in 2002, with one of the main objectives being that public bodies become more efficient through greater collaboration. However, this commitment had no detailed action plan. It also lacked a formal strategy outlining how demand could be aggregated, and had no specific targets on making savings through using collective spending power.
In September 2012, the Collaborative Procurement and Aggregated Demand report was published by the Northern Ireland Audit Office, covering common goods and services across the public sector. The report found that savings could be achieved by organisations joining forces to aggregate demand in order to create more buying power over suppliers.
When the Audit Office was setting out on its research, one of the hardest things to understand was the actual potential for aggregated demand. The Central Procurement Directorate (CPD) was unaware of the historic spend on common goods and services in Northern Ireland. Investigations were carried out by the Audit Office – and the figure was identified as close to £900 million.
One factor mitigating against collaboration was the lack of standardised specifications on products being purchased. More focus on this going forward could lead to increased opportunities to aggregate demand and collective spending. Good management of high quality information is also a priority. Basic information was not always readily available in the past e.g. shared information on contract renewal dates, suppliers and their performance. A lack of detail on future planning on procurement, collaboration and aggregated spend was another problem area.
More than 90 per cent of businesses in Northern Ireland are SMEs and their interests need to be safeguarded when promoting collaborative procurement. Compared to Great Britain and the EU, SMEs in Northern Ireland are awarded a very high share of public sector procurement but, more can be done to follow best practice while engaging with them.
Since the report’s publication, much has changed. One example from the Audit Office is that the seven centres of procurement expertise (CoPEs) e.g. Northern Ireland Water and the Housing Executive, are working more closely together. In instances where they were buying the same items, the centres can now collaborate to negotiate a better deal with suppliers.
To conclude, collaboration is progressing, but as always more can be done. Other UK nations have set challenging savings targets with England’s being the most testing of all – 25 per cent over a four-year period.
In Northern Ireland, the Procurement Board Strategic Plan (2012-2015) set a savings target of £30 million from aggregation of common goods and services over a three-year period, equating to 1.1 per cent of expenditure. If the region adopted targets matching the UK average, it is estimated that £70 million to £100 million could be saved over a three-year period.
