Towards Tesco – Improving Public Sector Procurement to the Tune of £25 Billion Per Year

UK public sector spending amounts to some 1.5 per cent of global GDP. In 2009-10 it will amount to nearly 50 per cent of UK GDP, approximately £11,000 per man, woman and child in the UK. This is equivalent to a lifetime investment of £850,000 for a person with average life expectancy.

The public therefore has a right to expect that this money is spent efficiently and wisely. However, despite some excellent recent initiatives, the efficiency of the public sector remains too much a legacy of its past and a prisoner of its structures.

This article sets out how the public sector could achieve efficiency savings of some £25bn a year.

from Towards Tesco – improving public sector procurement by Colin Cram (March 19th, 2010)

When I received a copy of the above paper by Colin Cram, a Senior Adviser to the Office of Government Commerce, a Fellow of the Chartered Institute of Purchasing and Supply and someone who has held senior positions for over 30 years in central government, higher education and local government, I knew that this was a seminal work that would without a doubt cause a significant reverberation throughout the public and even private sectors.

The first thing I did was to book Colin as a guest on the PI Window on Business Show, which will air April 9th at 12:30 PM EST, to talk about his unprecedented work and the fact that he seems to have answered a long standing question of mine . . . can a shared services platform work in the public sector?

Those of you who have followed me for the past few years will note that I have never been a fan of the overarching, monolithic pursuits of a government looking to “centralize” its procurement function under an enforced compliance model. Especially given the fact that 85% of all such initiatives have and continue to consistently fail. The Veterans Health Administration’s Oracle and JD Edwards forays into this realm costing the agency $650 million US while producing nothing more than a congressional hearing, is just one example that immediately comes to mind.

Nor have I felt compelled to rally behind either the Government of Canada’s Way Forward initiative or the UK’s Gershon Review recommendations.

In fact, the only public sector procurement initiative that I have wholeheartedly endorsed (if that is the right word), is the Commonwealth of Virginia’s eVA program, which I covered extensively in a series of articles that have frequently appeared in both virtual as well as print publications under the “Yes Virginia There is More to eProcurement Than Software” heading. I even wrote a “Yes Virginia” white paper that has been widely read around the world.

So what is it about Colin Cram’s paper that would lead to this rare but enthusiastic response. Quite frankly, it is the simplicity of practical observation that can only be achieved through a long and varied career experience that is unencumbered by partisan interests and vendor relationships. In short, while everyone talks about the complexity of the government procurement apparatus, Cram quite unassumingly shows us in everyday terms what actually goes on behind the curtain.

While anecdotal observations such as “The reality overall is that the public sector should have gone out of business many years ago,” is nothing new, explaining the absence of cohesion within the government hierarchy in clear and concise point form ventures into new territory that provides a way out of the “throw one’s hands up in the air, that’s government” lament.

Leaving the core discussion of the finer points of Cram’s work to the live broadcast, here are a few of the highlights or “Snapshot” as he calls them from the Towards Tesco – improving public sector procurement paper:

  • £25bn of annual efficiency savings in the public sector could be realised within three years through a restructuring of public sector procurement and greater use of shared services and outsourcing.
  • Public sector procurement is at a multi-Tesco sized level of spending, but much is still organised on a ‘corner shop’ model. If the public sector were a company, it would have gone out of business long ago.
  • HSBC Bank would not be in business if each of its own branches had its own IT, its own finance system, did its own procurement, did its own processing, had its own call-centre and offered its own financial products, albeit
    to a common theme. Yet that is how much of the public sector behaves.
  • There is enormous scope for fewer tenders, better management of contracts and lower costs for taxpayers through integrated public sector procurement.
  • The reforms outlined in this chapter could help to reduce the deficit, improve services and make tendering easier for suppliers, especially SMEs.

Remember to tune in to the live April 9th broadcast of “Towards Tesco: Saving The Government £25 billion Per Year” on the PI Window on Business Show on Blog Talk Radio.

Colin Cram in Action

About Colin:

Colin Cram has a successful procurement, outsourcing, conference programme and training consultancy business, Marc1 Ltd. An Office of Government Commerce accredited consultant, he is a regular speaker at national and international seminars and training events, lectures on university degree courses, is a regular contributor to professional journals and is an associate of Manchester Business School. He has been a member of EU working groups on Procurement, Innovation and Sustainability. He provides consultancy services to public and private sectors, including how to secure business from the public sector.

Colin Cram, a Fellow of the Chartered Institute of Purchasing and Supply, held senior procurement positions in the public sector for over 30 years, including central government, higher education, scientific research and local government. He was responsible throughout for initiating and implementing innovative strategies for procurement, shared services, outsourcings and organisational re-engineering. He developed and successfully implemented strategies to tackle monopoly supply situations. In creating several leading edge procurement organisations and collaborations, he was responsible for third party spends of up to £7bn a year. Savings from his initiatives exceed £1bn pa.

Colin’s most recent public sector position was as Director and founder of the North West Centre of Excellence. This led the drive for efficiencies through collaboration, joint procurement organisations and better practice across 47 local authorities. Its scope included procurement, construction, shared services, health and social care and the national lead for local passenger transport.

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Note: Originally posted in the Essential Connections Blog

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