Sir John Bourn, Head of the National Audit Office, today reported to Parliament on Government procurement. Some 1,500 staff spend some £13billion each year on civil procurement across government. Procurement is therefore big business and getting it right is central to the management of any organisation.
The report focuses on the scope for improved procurement and the National Audit Office examined examples of good practice across government and considered the role of HM Treasury in developing and disseminating good practice. The report notes that the Treasury has made good progress in promoting many initiatives to help departments improve their procurement. These initiatives and the case examples of good practice examined offer a springboard for future innovation. The report takes on board relevant academic research and draws in experience in the private sector and elsewhere in the world.
Following a review published in July 1999 by Peter Gershon, the Government announced the creation of the Office of Government Commerce to determine procurement policy, to integrate purchasing across government where appropriate and to act as a catalyst for change.
The National Audit Office conclude that Peter Gershon’s suggested target of £1 billion over three years will only be realised if there is a sea-change in approach to strategic and routine procurement.
- £9 billion each year is spent on the purchase of strategically important goods and services and improvement will require a cultural change. Procurement staff must have the authority and management backing to influence all such purchasing decisions. The report illustrates how both the Driving Standards Agency and Defence Estates have adopted that approach and achieved significant savings and quality improvements.
- Routine purchasing is time consuming and expensive. Some two to three million such orders are placed each year for goods averaging £100, but the processing costs can cost anything from £25 to £100. Greater use of the Government Procurement Card could lead to annual savings of £50 million to £75 million each year and greater use of G-Cat, a catalogue of IT software and equipment, could yield further savings of £20 million.
- The Government has set demanding targets for the use of e-commerce – 90 per cent by volume of routine purchasing to be done electronically by 2001. But if savings are to be made it is important that procurement staff are encouraged to use the full range of technology, otherwise they might focus efforts on straightforward approaches such as placing orders by telephone at the expense of those which offer the greatest return. Therefore there need to be clearer definitions and clarity as to how the target will be measured.