11 Collaborative Procurement
As previously highlighted, one of the most significant opportunities that exists is the one of collaboration across the sector. There are many advantages. Some of the most important are as follows:
- Better utilisation of scarce procurement resources and skills
- Aggregation of spend to create greater purchasing power which will in return result in improved cost savings
- A more efficient and less complex interface to suppliers utilising the efficiency of systems and other refinements of e-trading
- Spread of best practice including sharing of market intelligence
There are examples of well-founded collaborative projects where professionalism is displayed and savings delivered. These include the Authorities Buying Consortium, ProcSNI (universities and some colleges) and the Health Service's BPI where the project is being monitored at Ministerial level. These initiatives are so far only partially implemented and shortfall in penetration is a major detractor to delivering all of the advantages listed above. In addition, there are a number of good regional initiatives where cross-sector groups have acted to consolidate locally their resources and spend.
For the other spend, not actually aggregated in these initiatives, there is therefore poor utilisation of fragmented yet substantial effort, with the same or similar commodities being procured by multiple public-sector organisations and often through separate contracts with the same supplier. As well as being a poor utilisation of scarce procurement skills this situation does not capture the other advantages listed above including in particular delivery of cost savings from aggregated spend.
An unparalleled effort is therefore required to improve the infrastructure to support collaboration and in defining, once established, how support and utilisation can be guaranteed.
Procurement "Centres of Expertise" should be established on a commodity-by-commodity basis.
A theme of categorising commodities and services into a series of logical groupings should be adopted. These groupings should define how and by whom contracts are established for each of the categories. These Centres of Expertise should provide a service to their user organisations and thus not impact on the autonomy of individual entities.
CATEGORY A - NATIONAL CONTRACTS
A relatively small number of high-value commodities and services should be classified as Category A items and these should be provided by call-off from a National Contract. These contracts should be established centrally for the public sector in Scotland by a procurement "Centre of Expertise" positioned within the Scottish Executive's Procurement Directorate. Having been established once for Scotland by a team inclusive of experts in procurement of these specific commodities, contracts should be used on a mandatory basis by all units funded or owned by the public sector in Scotland irrespective of legal or other relationships with the Scottish Executive.
These Category A commodities and services should be those that would be most logically procured by one centre for the country's public sector. Amongst the selection criteria would be the following characteristics.
1. Where the goods or services tend to be standard or of a similar nature across the largely common requirements of users in the public sector in Scotland.
2. Where the utilisation of contracts established by a single central organisation would offer:
- improved cost through consolidated procurement volumes and value
- the opportunity to avoid multiple-parallel activities by optimising the use of scarce procurement resources and skills and to concentrate market intelligence information. It should be noted that many same or similar commodities are currently procured multiple times by the 200+ organisations identified in Chapter 2 above
3. Where a single contracting interface facilitates the efficiency and competitiveness of suppliers.
It should be possible that the central Scottish national centre of expertise can also provide access to UK National contracts so that in some specific cases the contracts utilised are UK-wide, including those established by the OGC.
The list of National A commodities will require careful consideration but, in my opinion, will be less than 20 in number. It should also be noted that it may be appropriate to have more than one supplier contract established by the Centre of Expertise for each commodity. This will depend on the structure of the market and user requirements. It will also address the possible need for delivery and capability to be available within local economies and regions.
CATEGORY B - SECTOR SPECIFIC CONTRACTS
A number of high-value commodities and services that tend to be unique to a specific sector yet common within that sector should be categorised as Category B. These items or services should be provided by call off from common "sector specific" contracts. These contracts should be established centrally within each sector rather than as at present individual organisations in that sector performing the same function multiple times and without any advantage of procurement volumes or value consolidation. Therefore, Centres of Expertise in procurement should be established for each of these specific sectors so that teams of "commodity experts" can be concentrated on goods and services demanded on a cross-sector basis. Once contracts are developed and established for the B category items their use should be mandatory across that sector irrespective of legal or other relationships within the sector or with the Scottish Executive.
Centres of Procurement Expertise and an associated agenda of "category B" commodities and services should be established for the following areas and organisations within the public sector. It should be obvious that there will be a separate commodity list for each of the following centres:
- Scottish Health Service
- Local Authorities
- Scottish Tertiary Education System
- Scottish Executive Departments, Agencies and NDPBs (wider Scottish Executive)
In addition, consideration should be given to the value of establishing and operating sector specific Centres of Expertise for the Police and Fire Brigades across all of Scotland. For example the proposed new Services Agency for Police could be the logical organisation to host a Police Centre of Procurement Expertise for Scotland.
Examples of the type of items that may be classified as B are as follows:
- Prosthetics for the Health Service
- Refuse services and equipment for Local Authorities
- Library and publications for universities and colleges
- Advertising and creative media for the wider Scottish Executive
It should be noted that although nearly all of the "call off" from the B contracts will be from within that specific sector, access to these contracts should be made available to other sectoral units, e.g. while refuse services and equipment would be a category B item within the Local Authority central contract, it could also be advantageous for Health Boards to procure their requirements for refuse services and equipment from the Local Authority contract. Similar arrangements and access could apply to other commodities across the public sector. The Centres of Expertise should work with their colleagues within each sector to agree on the list of B commodities for that sector. In my opinion there would be less than 50 of the B items for a Local Authority Centre of Expertise to initially concentrate upon.
The leadership associated with establishing each B Centre of Expertise should be taken up as follows:
Scottish Executive - Minister for Finance and Public Service Reform
Local Authorities - CoSLA and SOLACE
Tertiary Education - Scottish Funding Council
Police - Justice Department
It should be noted that the Health Service has already created a Centre of Expertise with a new division allocated the responsibility to pursue collaborative procurement. This decision is commended. It should also be noted that in developing this recommendation it is recognised that Universities and Colleges are not technically public sector bodies. However, as recipients of significant public funds, it is expected that they adopt the principles of Efficient Government and Best Value and therefore participate in programmes that support those principles and provide benefit.
CATEGORY C - GENERAL CONTRACTS
Where commodities and services are neither categorised as A (National Contracts) nor B (Sector Specific Contracts) then they will automatically be classified as C where the establishment of contracts will be conducted as the remit of a single organisation, e.g. Health Board, Local Authority or University.
It should be emphasised that while these local procurement departments represent the public sector-wide procurement community within their organisations and also provide procurement services to their parent organisation, they should not involve themselves in developing contracts for categories A and B items. Although as part of their responsibility they should liaise with the Centres of Expertise in ensuring that A and B contracts satisfy their own local users needs. There is in my opinion a substantial opportunity for local economic benefits as local suppliers are developed and encouraged to compete to win business in the C category.
CATEGORY C1 - LOCAL/REGIONAL CONTRACTS
There is an additional opportunity within Category C commodities and services for local or regional optimisation. This is where items that do not merit consolidation as A's or B's could be consolidated in a region to the benefit of purchasing power and optimisation of skilled resources. There are a number of consortiums already operating in this manner and I recommend that this practice be extended wherever beneficial. I also recommend that the relevant Local Authority take the lead role in proposing and organising this form of regional consortium procurement.
In establishing the central contracts in Categories A and B above, it is essential that the optimum type of contract is developed and established. Although there may be exceptions the central A or B contracts should generally be of the "commitment" type in that minimum volumes or spend have been committed to a supplier as part of the contract process and award and all units within the sector are required to buy their requirements for A and B from these contracts and not from local contracts.
In some cases a framework contract with less specific volume commitments might be appropriate.
It is obvious that there is a level of mandatory compliance required for the effective operation of the model described above. Given the level of co-operation and the positive spirit that I have observed in my work, I am hopeful at this point that a renewed comprehensive collaborative effort would reinforce this compliance requirement. However, it may be that other instruments or influence may be necessary to ensure that these A & B commodities are purchased through the contracts set up by the Centres of Expertise. Alternatives should be reviewed in light of response to this report.
Once the Centres of Expertise are established their commodity-based structure will allow them to focus appropriate commodity aware skills in each of the commodity/service areas. A strategy for each A and B commodity or service should be developed including market intelligence, supplier strategies, economic modelling of demand and supply and recognition of other criteria and issues. These commodity strategies will have with them individual supplier strategies. These strategies should also address and accommodate the need for the existence and use of local supplier capability to deliver commodities and services. It is important to recognise that the theme of aggregation of spend is not synonymous with placing one large contract with a single remote supplier.
The concept of National A and Sector Specific B commodities and services should have the support of a single electronic procurement system for a streamlined interface to suppliers and to facilitate the aggregation of contracts for A and B items. As recommended at 10.1, ePS should be adopted for this and should allow procurement departments and individual, and often remote users, to directly access and easily use A and B contracts independent of the organisation creating the contract.
The Heads of Procurement responsible for the Centres of Expertise should undertake leadership roles for the procurement activities within the sectors served by their Centre of Expertise. The content of this leadership role should be similar to that assigned to the Scottish Procurement Directorate for the complete public sector. These Heads should also represent their sectoral communities within the central functional framework being co-ordinated by the Scottish Executive Procurement Directorate.