The UK Government is estimated to spend around £230 billion on public sector goods and services in 2015 but even with such large figures, the public sector is facing ever-tightening budget restrictions. Public sector organisations are under constant pressure to deliver more value for less money; many are succeeding with the help of collaboration.
Collaborative procurement is when two or more organisations join together to engage in procurement exercises with the aim of cutting their costs and saving through efficiencies. This procedure doesn’t just save organisations money and time but it can also vastly improve the quality of goods or services being sought.
In 2014, the Local Government Association (LGA) launched its National Procurement Strategy, which aimed to help local government get more for their money. The strategy promoted the use of effective collaboration by sharing services on common goods and services. It was recommended that councils should “obtain best value through contract management, implement effective performance monitoring and transparency, have an appropriate approach to risk management and find alternative ways to meet user needs through demand management.”
Collaborative procurement has been identified as a key tool to help councils to continue to provide services in a time of rising demand and decreasing budgets. It enables authorities to achieve economies of scale and to share expertise and costs.
Some local authorities have been undertaking collaborative procurement since long before they had to respond to current financial challenges. The Procurement Agency for Essex (PAE), developed by Delta eSourcing, has been operating since 2004. PAE consists of 15 councils and three other local authorities that receive services such as: project management for a better procurement outcome, access to forums to share procurement best practice, knowledge, information, documentation and capacity and training and procurement-related commercial support.
A similar approach is now being taken in the NHS, where many Trusts are struggling to balance their books and where the NHS as a whole has to find £1.5 billion of efficiency savings in FY 2015/16. Earlier this year, a group of four procurement hubs were set up to develop supply chain collaboration within the NHS. The groups agreed to work to common principles and have opened up a number of frameworks to their combined membership.
Framework agreements, such as those run by the new NHS hubs and more established organisations serving local authorities, such as ESPO (of which Delta eSourcing is a member), are one of the forms of collaborative procurement that are growing in popularity. A framework agreement is an agreement or other arrangement between one or more buying authorities and one or more suppliers which establishes the under which the supplier(s) will enter into one or more contracts with the contracting authority in the period during which the framework agreement applies. These non-binding arrangements deliver value for money, improved quality and economic opportunities through collaboration. Once a framework is established, call-off contracts are awarded through ‘mini competitions’. These are far simpler than a full competitive tendering process, so save the buyer time and resource.
Collaborative procurement has been used in the education sector since as early as the 1980s, but development has been slow. In 2013, the then Business Secretary, Vince Cable, wrote a letter to the Higher Education Funding Council for England with one clear message: collaborative procurement across higher education institutions required quantifiable progress. He insisted that educational institutes in receipt of public funding had to operate efficiently and deliver value for money. The route to improvement was focused on collaborative procurement and delivering efficiency through effective benchmarking. Purchasing consortia exist to generate savings and better value for money through the collaborative procurement of goods and services relating to the further education sector.
New analysis by the LGA suggests that central government funding for local services will be reduced by £3.3 billion in 2016/17, which can only mean organisations must make further significant savings. Public sector bodies may be forced to join together and collaborate in procurement exercises in the future to make the necessary savings, while continuing to provide the service levels needed to meet public expectations.
To find out how Delta and collaborative procurement can help your organisation, request a free demo with Delta today!