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Review of Public Procurement in Scotland - Report and Recommendations

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4 Executive Summary

Some significant improvements have been made in the last 3 years.

There have been a number of important developments. In particular the installation and partial adoption of the eProcurement Scotland service not only provides better processes but also symbolises that the theme of collaborative procurement is being focused upon. Also there has been an improvement in the central development of procurement policies within the Scottish Executive and the spread of good practice has been initiated including a special project on Purchase to Pay Solutions.

In some individual organisations in the public sector effective procurement organisational structures have been established, properly staffed and good business processes installed. These exemplary organisations compare well with the private sector. In others there has been increased awareness of the relevance of procurement and steps taken and action underway to address issues and opportunities. This type of action can be seen, for example, in SOLACE's (Society of Local Authority Chief Executives) efficiency initiative co-ordinated by its Improvement Services Unit which is sponsored by COSLA and the Scottish Executive.

I should also comment specially on the high level of commitment, work effort and the generally positive attitude I have perceived in my interaction with those involved in procurement in the public sector.

Despite all of the above, there are still, in many areas, weaknesses in resources, skills, organisation structures and practices which adversely impact upon achievement of minimum standards and obviously do not provide a good foundation for pursuit of Best Value and further cost savings through enhanced performance. These weaknesses are inconsistent with good governance and the strict accountability requirements of the public sector and need to be addressed urgently. As a result an investment in skills and resources is required.

Although there is growing awareness of the value of good procurement, there is still an insufficient level of practical priority given to it by some leadership groups within the sector.

Where progress has gone beyond the basic level there are shortfalls in execution resulting in low levels of penetration and only partial implementation of a number of very positive initiatives. For example, the phase control (Gateway) programme for capital projects is well documented and used in some organisations but not across the sector as a whole. There is also a special unit established to provide advice, guidance and support to Private Finance Initiatives but its use or engagement is not mandatory across the sector.

In the Health Service the Best Procurement Initiative ( BPI) programme is a sound and far-reaching approach but has recently needed senior executive and ministerial involvement to re-establish its progress and put it on an accelerated track for complete rather than partial implementation.

Twelve of the 32 local authorities combine procurement spend in consortium fashion as members of the Authorities Buying Consortium ( ABC) based in Paisley. However, although a positive example of collaboration, less than 20% of the total spend of those 12 authorities is channelled through the ABC. There are many reasons for this but irrespective of specifics the initiative is only partially implemented.

Driven by the granularity of the public-sector structure and limited collaboration, there is a fragmented approach to procurement and undoubtedly lost opportunity to better utilise scarce skills and take financial advantage of a "corporate" approach by delivering economies from combined purchasing power. Collaboration within organisations and across the sector, although well intentioned, has not been completely effective and must be improved. Also, best practice although often recognised and disseminated is not extensively adopted so that exemplar organisations tend to remain "islands of excellence". This report contains recommendations to establish Commodity Centres of Expertise which would address the opportunity to consolidate procurement spend.

A major effort is required. Initially an upgrade of resources, skills and practices is needed to meet governance and accountability criteria. Secondly, further steps should be taken to pursue advanced procurement capability to deliver targeted savings. In addition, more central leadership is required with procurement policy clearly defined and compliance mandatory across the whole public sector.

An area requiring special focus and action is interactions, tendering and contracting with suppliers. There are many problems and issues perceived by suppliers which require to be addressed by new approaches including a public sector-wide "Charter for Suppliers". The recommendations in the report also recognise the advantages of having access to a base of competitive local suppliers which can also contribute to the local economy.

Targets have been set for public sector financial savings to be achieved through better procurement. These are summarised as follows:

2005/6

2006/7

2007/8

£m

83

140

200

The implication contained in the approach to procurement is that these savings will be delivered mainly from collaborative buying. It is my opinion that by addressing and rectifying basic weaknesses there can be delivery of the first segment of the savings targeted. Advanced procurement including collaborative buying will add to this as progress is made.

In proportion to total procurement spend the 2005/6 target is relatively low but presumably recognises the current weaknesses in procurement effectiveness. From my review I believe that in the current year (2005/6) the target of £83m is likely to be met through existing momentum. In the medium term (2006/7) the target of £140m will only be met if urgent action is taken especially in the basic but quite critical areas highlighted in this report. Meeting the £200m per annum targeted for 2007/8 will require further progress on advanced procurement well beyond that basic level. However, it is my opinion that there is a subsequent and additional savings opportunity not yet targeted that can be captured in the longer term by full implementation of this report's recommendations aimed at Best Value through advanced procurement practices including collaboration.

This Review contains a number of detailed new recommendations but I believe that its general direction will have been anticipated by those involved in the sector. Determination to drive implementation will be the biggest single factor critical to delivering future success rather than that of reaching 100% agreement on every single facet of the approach.

I encourage strong Ministerial involvement and support to this initiative. Their personal backing of the important changes required is essential.