With an annual spend of £300 billion across the public sector, and £70 billion in central government, the Government Commercial Function (GCF) wields significant influence across the UK supply markets. Public sector commercial leaders will need to focus on maximising outcomes with taxpayer money as they navigate fluctuating markets, using spend leverage to drive forward government's most pressing priorities, including Social Value and Net Zero.
In FY22/23, GCF achieved approximately £2.9bn in savings and commercial benefits, yielding a six-fold return on investment compared to personnel costs. But the function's impact extends beyond financial benefits, actively promoting socially responsible and environmentally sustainable practices through its commercial decisions.
During 2024, the legislative changes contained within the Procurement Act will transform the landscape of government commercial activities, simplifying and modernising our framework to drive innovation, slash red tape and take tougher action on underperforming suppliers. It will afford buyers greater flexibility to design their procurement processes and open up public procurement to new entrants like small businesses and social enterprises.
There is a major focus on further developing the capability of the profession (for example continuing to extend the UK’s Commercial Standards Framework across departments) to take advantage of the opportunities these changes offer. The upcoming training regime is a crucial step in ensuring the successful implementation of the Act, and I encourage colleagues across government to engage actively in this process.
Embedding sustainability and social value
Sustainable procurement has been rapidly growing in significance in the private sector, and it is no different in the public sector. Recent policy announcements support the UK's aim to be a leader in sustainability and, in particular, net zero. Procurement will be an important catalyst for positive change and delivering wider social value benefits across the UK.
For example, government departments can no longer accept bids for contracts of more than £5 million a year if a supplier does not have an established carbon reduction plan. This rule applies to all suppliers bidding for work, not just the winner of bids, resulting in a “multiplier” effect across the UK supply market. GCF has already applied this policy to procurements totalling over £200 billion, spurring over 3,000 vendors to publish their carbon reduction plans.
Businesses hoping to work with public sector organisations now need to think not just about how their net zero policy is applying to their government work, but how it applies across their entire business and client portfolio. This will have enormous implications for the country’s net-zero journey and will impact a substantial portion of the UK GDP.
This, coupled with the new requirement for a minimum weighting of 10% on social value measures on larger contracts when procurement sector teams award contracts, means that UK business responsiveness to sustainability will only grow in 2024.
Getting to grips with new regulation
More specific to the public sector but still incredibly impactful for business are the UK government's recently enacted new procurement legislation. These will transform how public sector procurement operates and how taxpayer money is spent in the UK in 2024.
A lot of the historical critique around public sector procurement has focussed on the stringent process and how this can stifle originality and commerciality. This new model will embed a more fluid approach that allows commercial professionals to use their skills in pursuit of outcomes better whilst, importantly, still having the core principles of fairness, openness, and transparency at the core of every procurement process or buying decision.
These regulations are a change from the status quo, and are set to impact sixty thousand professionals within the civil service. We will be focussed on supporting central government and the wider public sector to get to grips with the changes, as well as disseminating good practice, so that they can start to reap the benefits.
Finally, whilst the UK may be a leader in procurement reform, we are not unique, and I expect to share learnings with other government procurement leaders around the world in 2024.
Keeping a laser focus on the delivery of outcomes and cost
Ultimately in the public sector, we exist to deliver value for money for taxpayers in support of the policy aims of the UK Government. This will always be a core principle of what we do. With this in mind, 2024 looks set to be a challenging year, particularly for those organisations that are seeing multi-year fixed-price contracts ending this year. Whilst inflation is thankfully coming down, many of these contracts will still have an inflationary drag, increasing the cost on the like-for-like purchase of goods and services.
Procurement teams will need to ensure they are effectively managing cost and taking advantage of the new regulations to ensure they continue to get the best value possible for public money. Remaining agile in their approach, using their skills, and understanding the economic landscape will be key, as will their attitude in not taking the "foot off the pedal.”
To read more about priorities for CPO’s in the year ahead, download the 2024 CPO Report