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Sir John Bourn, the head of the National Audit Office, reported to Parliament today that the Prison Service has made good progress in improving its procurement of goods and services but that scope exists for further financial savings to be made.  Performance in monitoring and controlling the consumption of goods and use of services and in optimising stockholdings varies widely from prison to prison.

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The Prison Service spent £461 million on essential supplies in 2001-02, including prisoners’ food, clothing, and drug and educational programmes. Today’s report found that the Prison Service has reported savings of £5.76 million in 2001-02 and a further £6 million saving is expected in 2002-03.  Procurement practice has been improved through the centralisation of a number of purchasing functions and through developing the skills and training of procurement staff to negotiate and manage contracts better.  The Prison Service has successfully reduced stock holdings from £62.7 million in March 2000 to £47.6 million in March 2002. 

According to the NAO, however, many prisons have yet to make the necessary changes to their procedures to realise the full financial savings available.  Recognising that the Prison Service needs to maintain sufficient stock to meet demands that may arise from a fluctuating prison population, the NAO estimated that reducing overall stock levels to around a maximum of three months’ supplies, for example, would achieve a further stock reduction of £12 million.

The costs of procurement also differ significantly between similar prisons.  Staff costs, for example, range from £56,000 to £329,700.  The Prison Service estimates that there are some 2,600 staff involved in prisons’ procurement activities, equivalent to over 1,100 full time staff.  Apart from the governor, there is often no single person with the authority and responsibility to oversee the various procurement activities in a prison.  Some prisons have reduced costs by negotiating contracts involving groups of local prisons rather than individually but this remains the exception rather than the rule.

Procurement within the Prison Service also lacks as yet, common, service-wide information technology support for purchase order processing and stock control. The Prison Service sought to introduce an integrated purchase order processing system in 2001 to enable electronic processing of orders, better management information and better stocks management. The project has been postponed pending the introduction of suitable information technology infrastructure. Communication between the central procurement team and prisons is likely to be improved by the introduction of a service wide intranet.

To improve performance, the report concludes that the Prison Service needs to establish clear responsibilities within prisons for procurement, further reduce stock holdings by setting benchmarks across prisons, encourage establishments to make greater use of central contracts, improve local purchasing power by linking with other prisons in the vicinity, and reduce the administrative cost of procurement.

"The Prison Service has done well to improve its purchasing of goods and services in recent years. But further financial savings can be achieved by streamlining procurement activities, reducing stock levels and maximising the benefits of the Service’s purchasing power through central contracts and locally negotiated contracts covering several prisons. The weaker performing prisons need to learn from the success of the best."

Sir John Bourn


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