Efficiency Savings in Procurement

In 2010, the UK Government faced one of the biggest budget deficits in the EU. This led to the creation of the Efficiency and Reform Group (ERG). The ERG works in partnership with the Treasury and the various government departments to deliver efficiencies, savings and reforms. The aim of the ERG is to save money, transform the way public services are delivered, improve user experience and support UK growth.

The UK Government spends around £230bn a year on public services, making public procurement one of the biggest spend areas in the UK. Within public procurement, one very effective process that generates significant savings for the taxpayer is the use of electronic procurement.

E-procurement allows businesses to purchase and sell supplies and services or tender for public works through information and networking systems via the internet; thereby providing both buyers and suppliers with an efficient, innovative and cost-saving procurement method. E-procurement also provides a new source of economic growth and jobs including by facilitating access to public procurement contracts by SMEs.

Traditional procurement methods such as manual and paper procurement are considered outdated and their electronic alternatives easily out-perform them. Manual and paper procurement is incredibly tedious, time-consuming and costly. E-procurement is becoming a more attractive option for organisations involved in procurement mainly due to its cost-cutting and time-saving advantages.

Buying and selling via e-procurement systems has several benefits, one of which is full transparency and disclosure. E-procurement systems automatically create an audit trail, which is important in ensuring the tendering process is fair and complies with the procurement regulations. Traditional paper procurement efforts cannot guarantee a full audit trail or full transparency due to the manual nature of the process. Good transparency and good procurement go hand in hand.

A big positive for e-procurement is the time and cost saving element; doing everything electronically saves the cost of physically sending out paper documents to the potential suppliers. This not only reduces the costs paid out by the tendering organisation but also saves the time and resources of staff who would otherwise be burdened with manual procurement tasks. E-procurement is very efficient in that the systems are easy and straight-forward to use and all activity can be done via computers and the internet, with no need for paper and postage and drawn-out timescales.

Local Government

E-procurement has also been widely adopted by local authorities due to the efficiency savings it delivers. It helps drive collaborative procurement within the sector as e-procurement systems allow a quicker and simpler method of information and document exchange. E-procurement can enable a central portal for participating authorities to work together with ease of use, efficiency and the creation of an automatic audit trail – essential for compliance with the regulations.

Local government spending benefits greatly from the use of strategic collaboration and partnerships. Millions of pounds of savings have been made by local authorities partnering strategically in procurement exercises to mutually benefit from the best deals in the market. Working in collaboration offers participating councils a way to achieve goals and objectives in a cost-effective and innovative manner.

Transparency is also important within local government. Since 2010, as part of the Government’s Transparency Agenda, all local authorities have been required to publish their spend data via their websites. This data reports authorities’ transactional expenditure on a monthly basis. This has delivered greater insight into where local government finances are being directed, in turn leading to smarter spending decisions.

NHS

In 2009, the former head of NHS England Sir David Nicholson put forward his views on efficiency savings within the NHS. Ultimately, the NHS was challenged to find £20 billion in such savings by 2015. Those targets have not yet been met, however, and the NHS remains a sector in which efficiency savings desperately need to be made.

Several reports such as Lord Carter’s ‘Review of Operational Productivity in NHS providers’ have identified inefficient procurement within the NHS as being a major contributor to over-spending in the UK health sector. Lord Carter predicts that more efficient procurement within the NHS could save £1 billion a year and recommends the creation of a single national electronic catalogue for products used by the NHS. He also recommends the introduction of four national productivity collaboratives to identify and share best practice, including one focused on procurement. This would bring collaboration and e-procurement together as a solution to the huge efficiency savings the NHS has still to make.

The Department of Health has also highlighted transparency as an area that needs improvement, stating that greater transparency is vital to the NHS; the more transparent its procurement performance is, the more it will drive behaviours that improve service delivery. Transparency can be achieved via automated audit trails created within dedicated e-procurement systems.

Education

In England, higher education institutions must complete an Efficiency Measurement Model at the request of the Higher Education Funding Council for England to inform HEFCE of their tendering efficiencies on a yearly basis. This is the main driver for encouraging education authorities to take part in efficient procurement exercises and employ processes that save on costs.

The impact of better and smarter procurement across the higher education sector has been significant, with the Efficiency Measurement Model survey showing that procurement efficiencies totalled £153 million in 2013/14.

Higher education institutions often collaborate or join purchasing consortia in a bid to save costs on their contracts and procurement exercises. Significant savings have been made thanks to the efficient e-procurement systems used by collaborative ventures and purchasing consortia.