Creating transformational commercial change in the public sector
In the age of austerity, Proxima believes that departments’ procurement and commercial teams need to move their focus from the tendering process itself, and concentrate their efforts on supplier collaboration and innovation
Austerity (noun, difficult economic conditions created by Government measures to reduce public expenditure) as a familiar term may be fading from the current political narrative, but public sector spending undoubtedly has challenges ahead.
Brexit rumbles on, the pay cap has loosened and the 2019 spending review promises to continue the expectation for Government to do more with less; whether for 1, 2 or 3 years – ‘renewed focus on the outcomes achieved for the money invested’. Where do we go next?
Procurement is well placed to help, but to make real impact, Departments’ procurement and commercial teams need to move their focus from the tendering process itself, and concentrate their efforts on supplier collaboration and innovation.
Delivering great processes doesn’t necessarily deliver great results
The procurement processes in the public sector seems to focus on two key themes:
- Compliance with legislation defining what and how a procurement exercise should be run; and
- A drive for greater co-operation between Government buyers
If we take each in turn:
Compliance to process has long been key to running a ‘successful’ procurement in Government.
In fact, many Departments measure themselves on their ability to do this within the complex set of rules and timelines set by EU Directives. Many individuals gauge their own commercial capability based on the lack of legal challenge against any process they have run, and carry this like a ‘badge of honour’.
In reality, putting adherence to the rules highest on the priority list can distract attention from creating effective commercial solutions – and, in turn, can stunt innovation. In effect, it creates downward pressure on the ability for procurement and commercial to deliver value for money more easily. In addition, this approach can force commercial to have only arm’s length interactions with potential supply partners, and risks missing the more open thinking conversations that lead to transformational improvements.
Aggregation has arguably worked for Government. There are now many pan Government arrangements which are available to purchase common goods and services, principally through the Crown Commercial Service. What is less clear, is how Government can now increase uptake from the 5% of public sector expenditure is currently aggregated.
The larger prize for suppliers does deliver some benefits, and increases competition through frameworks. It also means Departments can reduce the lengthy OJEU procurements which take up significant time and effort from front line commercial staff. But is it really going to deliver broad transformational outcomes?
Different thinking for a different political landscape
The macroeconomic landscape we are working in is undoubtedly changing – the marks of Brexit will last for many years, and cover many spending reviews. Government will only be able to deliver incremental value if it challenges current thinking about what is important.
Proxima sees transformational results in a range of sectors; almost without exception this comes from thinking about the business needs differently. This ability to think differently isn’t achieved in isolation and it’s the deep relationships with business users and suppliers which enable our clients to focus on buying differently, and not repeating the same process ad infinitum and expecting different results.
How often have you or your team started a project by walking in the shoes of the operational team to understand its demands? This rich understanding of needs, combined with collaboration from suppliers, will bring about the innovation needed to deliver transformational change and deliver real, sustainable value for money.
It’s often said that commercial teams in the public sector have their hands tied by process…but it is eminently possible to be both compliant and commercial, when public sector considers the importance of the following:
1. Thinking more commercially, upfront
Commercial solutions start from a deep understanding of what is being bought, how, and what the supply market looks like. Instead of focusing time and effort on which process to use to get an incremental price improvement, spend more time understanding the organisational requirements and scenario planning alternative solutions to meet those needs, this will reap real rewards.
2. Investing time in people
Procurement of the future needs strong traditional procurement skills but also demands high levels of empathy and interpersonal skills to succeed. The GCF has identified this and is working hard to upskill the function in specific areas. Creating different and ground-breaking solutions will involve difficult conversations and procurement as a function needs an ability to win trust and influence stakeholders. The best conversations and ideas are unlikely to stem from an overly rigid process.
3. Setting ambitious targets
Government often declines to set benefits targets for procurement exercises. Business cases are based on a blend of tangible and intangible efficiencies. Challenging targets ‘open-up’ thinking, and encourage dialogue. This is a different approach to how public sector might be able to deliver more value from the same set of requirements. More robust targets may even enable procurement and commercial to develop more innovative solutions and be creative in delivery.