By Suzannah.Brecknell

16 Sep 2010

With pressure on the use of ministerial cars, ministers are taking humbler forms of transport. But there are far bigger savings to be made by reforming civil service travel expenses. Suzannah Brecknell reports.

Reducing the estimated £662m spent on travel across central government in 2009 would be a welcome addition to the public spending cuts. Of course, even allowing for the fact that this total is probably an underestimate (see graphic below), travel cuts will be just a small part of broader departmental budget cuts. But there is a larger symbolic importance to reforming how ministers and civil servants travel. Taking away ministerial cars; sending senior officials on standard rail tickets and economy class flights – it all sends a message about being ‘in it together’, clearly presenting the coalition as a reforming, efficiency-seeking government.

It’s perhaps not surprising, then, that travel and expenses were mentioned specifically in the May announcements heralding the creation of the Efficiency and Reform Group in the Cabinet Office. The task of identifying and spreading best practice in the purchasing of travel services falls to the Travel Category Board (TCB), comprising representatives from the main government departments and other interested bodies such as purchasing agency Buying Solutions, Procurement Scotland and local procurement groups.

Nick Jackson, head of finance professionalism in the ERG, says that the TCB will be looking not just at the way travel is procured, but also at managing demand for it. One of the first steps the board took was to devise a set of principles to ensure that any travel undertaken has a clear business value; a copy has been sent to all departments.
“It is now for departments to negotiate how the principles are applied with local staff representatives,” says Jackson. “Many departments are well under way with these negotiations and some actions, such as clamping down on first class travel, have been implemented already.”

Some departments have also begun to take a smarter approach to buying, says Nigel Turner, director of public sector and industrial affairs for travel management company Carlson Wagonlit Travel (CWT). Turner says he’s seen purchasing across the public sector – and especially in central government – improve over the last few years, with a particular acceleration in last few months “for obvious reasons.”

Turner says he has seen not only more online bookings (see case study), but departments reviewing travel policies (mandating use of cheaper non-flexible rail tickets, for example), reviewing cap rates (which specify how much an employee can spend on hotels in a particular city), and re-negotiating rates with hotels.

That progress will now be expected to continue, under the watchful eye of the ERG. The TCB has gathered baseline information on current spending on travel and associated expenses, and will collect updates both directly from departments and from travel service providers, says Jackson. “This information is monitored by the ERG, which will challenge areas where progress is slow.”

But should government be taking a still more holistic view of travel? Jonathan Green, an associate at consultancy JMP and author of a 2009 report focusing on sustainable travel across government, emphasises that departments should think not about travel itself, but about the need for travel.

“Travel is a derived demand – people travel to deliver an outcome,” he says; so civil servants should ensure that any travel is key to realising delivery objectives. “You can make savings on the purchase price and process [of buying travel], but the bigger question is how we look at delivering a better service by travelling less,” adds Green.

Better behaviour

Travelling less is certainly a focus for the TCB. The communications it has put out, says Jackson, set out “a clear expectation” that other means of communication must be used more often, and travel must have a clear business justification. The requirement for “independent authorisation of travel and expenses” should allow managers to challenge the need for travel. For those with an interest in taking a holistic view of the importance of travel, it’s encouraging that Jackson says managers shouldn’t just apply simple rules-based judgments here. “Too often managers look for rules to define what they can and cannot do,” he argues. “The current climate requires them to move away from rules and more towards exercising a local value-for-money judgement.”

Jackson also acknowledges that travel cannot be cut in isolation; indeed, plans to cut costs elsewhere may even drive up travel spending. “There is a trade-off with other activities being implemented to reduce the costs of government: specifically, the rationalisation of the estate and the ongoing migration of large parts of government away from London and the South-East,” he says. “Whilst we would encourage use of other communication channels, there will always be a significant volume of travel required to and from major conurbations.”

He mentions video- and teleconferencing as two alternative methods of communication – methods also promoted by transport minister Norman Baker, who is responsible for reducing business travel both across government and in the wider economy. Baker says he wants to lead by example by getting his own department’s “house in order”.

“We have all the kit here in the department such as teleconferencing, videoconferencing facilities, but an embarrassingly low number of people use them,” he tells CSW. “I’m therefore writing to all policy officials to encourage them to use them more.” The department has also run seminars for staff on making good use of videoconferencing, and Baker is taking personal steps to reduce travel, recording speeches rather than “making unnecessary trips around the country to appear on a stage for ten minutes.”

Most government departments now have video conferencing facilities, says Steve Woollett, head of public sector business at technology provider Cisco Tandberg – but each department may have just a “handful of units”, he adds. “For government to make the required savings will need more than dipping toes in the water, in terms of investment.”

Given that investment in new services is not the easiest thing to secure in government at the moment, Woollett suggests risk-sharing models of procurement which link payments to realising travel savings rather than insisting that departments purchase the hardware.

Buy Buy Buy

Although departments can encourage employees to use technology more and choose cheaper travelling options, there are also large savings to be made through, as Jackson says, “changing the way travel is procured”. He says the TCB is “looking at integration of spend information so that better value for money can be secured from large suppliers”, adding: “There is potential to move travel and expense management to a shared service (which would facilitate this integration) and a move to standardisation of the ways that the principles are applied across departments.”

Improving use of spend information is an important part of reducing travel costs, says Stewart Harvey, commercial director of travel management company HRG. His advice to clients is to understand why and how their staff travel before they approach suppliers to negotiate rates, and to be specific in creating rates that cater for their own demands.
Negotiators must take account (and possibly advantage) of the trend in the travel industry towards ‘unbundling’ the cost of services – familiar to most of us through the growing charges for ‘extras’, such as baggage, food and breakfast in hotels, which would previously have been part of the overall ticket price.

“We’re moving into an area where behaviour is becoming a mechanism for pricing,” says Harvey; departments must therefore understand their own ‘traveller behaviour’ to achieve the best value prices. This means paying careful attention to the total cost of trips (for example, to spot extra, inefficient spending on hotel food or expenses incurred after booking), and using information on how and where people travel to negotiate flexible rates that account for a range of travel needs matching the organisation’s requirements. Rates could be designed, for example, which include baggage or breakfast, with cheaper prices when those services are not included: if employees are staying in a hotel for a morning conference, for example, breakfast may be available at the conference and a cheaper rate could be used.

Buying Solutions already offers a number of travel frameworks, including air, rail and fleet management, and has recently launched a government hotel programme which is expected to deliver a range of rates at hotels and serviced apartments from January 2011.

The hotel programme illustrates tensions around the negotiation of aggregated purchasing in this particular market. “Hotels have had depressed rates for a couple of years and are now being asked to provide fixed rates for the government, heavily discounted on the best rate available,” explains Mark Frary, editor of the website Public Sector Travel. Hotels must even set aside an allocation of five rooms per night on weeknights for government use. Frary suggests that some hotels – particularly in the regions – may decide the tender is not a good opportunity for them, and it may not see as many bidders as Buying Solutions would like. “With fewer companies than they’d hoped putting in offers, the rates available will perhaps not be as low as [Buying Solutions] had hoped,” he says.

Commenting on the travel industry overall, Frary says that “suppliers are generally wanting more professionalism from, and education for, people who work in travel in the public sector at all levels”. They need, he believes, “to understand how travel works and sustainable supply chains in travel, to make sure that those travel companies can survive.”

Green also suggests that travel procurement professionals should be thinking about broader outcomes than just reducing unit cost. “If travel is cheaper and [therefore] more attractive, is there a risk that there will be an increasing amount of travel undertaken?” he asks, suggesting that the chance to look again at purchasing models should be an opportunity to decide how procurement can support more environmentally sustainable travel.

One option is to reconsider the model by which travel-management companies are reimbursed for their services. “If a supplier is reimbursed on a transaction fee basis, their objective will be to encourage or enable people to travel: they won’t question that need for travel,” he says. Models which “reimburse suppliers in a way which helps to manage travel need, not just enable it” could be one way to reduce cost and travel.

This revenue model is already being developed for some corporate clients – travel management companies can link into the organisation’s meeting or telepresence booking facilities and offer these as well as flight, hotel and rail costs when asked to arrange individual meetings. In this model they are paid for a communications service, not a transaction – but the idea is not yet being adopted in government.

However, the signs for change are good. Turner reports that civil servants are ready to be innovative in this area: “Departments are saying to us: ‘If you’ve ever told us a good idea in the past, tell us again because we’re much more likely to listen’,” he says. “The appetite for change and for doing things differently is huge.”

The public sector spent £2.45bn on travel in 2008-9, according to the Public Sector Procurement Expenditure Survey carried out by the Office of Government Commerce (now part of the ERG).

Of this, local authority spend accounted for £1.79bn, with the remaining £662.7m split between central government departments and agencies (above). There are, however, many problems with this data. It represents only departments’ reported spend, based on management information and not subjected to independent auditing, and it may not always include executive agencies or NDPB spending. This makes it difficult to compare ‘per head’ figures and see how efficient departments are in this area.

Furthermore, this figure may not include money spent on sundries on business trips, meeting room booking fees and grey fleet (business travel in private car) costs. Even within the travel category, around a third of the money in this area is classed as ‘uncategorised’.

The need to clearly define the travel category and collate better information on exactly what is being spent across departments is one of the challenges facing managers tasked with reducing travel spend.

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