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Technology Acceleration

Wax Digital's Richard Mullins speaks with
Government Opportunities Magazine

With budget cuts likely following the General Election, the public sector and its suppliers face new financial strain in the clearing of the national debt.

Following the General Election, buyers and suppliers alike will face fresh challenges as the new Government begins to look at how it will repay the national debt. One inevitable question will be: ‘is public sector spending as efficient as it could be?’ In truth much has been done to streamline public services and tighten spending over recent years. Buying Solutions frameworks, approved supplier lists and formalised tendering processes have all aimed at, and in some measure succeeded in, channelling purchasing towards high-quality, fit-for-purpose products and services from low-risk suppliers.

The burning question of ‘how will cuts be made?’ is on everyone’s lips. Before tax increases and service cuts are unleashed the incoming Government should be listening hard to the public sector procurement community. It needs to do this to create a policy for spending that is not only efficient today but will stay efficient in the long term.

Grandiose efficiency schemes perhaps need to be replaced by effective streamlining, agility and collaboration across the sector to reduce spend organically. It’s not necessarily all about big schemes for change. Policy and process needs to be teamed with a degree of creativity and measured risk if the public sector is to be as financially clean as the private sector.

Capitalise on collaboration

While great inroads have been made in reducing backoffice overheads in the public sector, for example in financial management shared services, little collaboration has been achieved in spending despite many purchased commodities being common across the entire public sector.

Opportunities for geographical and departmental collaboration in purchasing need to be realised. This is entirely possible now that web-based purchasing and supply systems make doing so easy across unlimited locations and users. Despite potentially reducing the number of contracts available to suppliers, collaboration leads to bigger contracts and closer tie-in for the supplier community, two vital benefits in the current economic situation. A regional purchasing consortium of five NHS trusts, agreeing joint supplier contracts and sharing a web-based purchasing and supplier management system, for example, could easily reduce purchasing costs across the board by up to ten per cent.

Technology going forward

As part of its modernisation programme, the previous Government intended IT to be a force for change. What we have seen over the last decade is phase one of that technology revolution. It has been about transformation of processes, getting government online and turnkey changes in integration and availability of information. Big things needed to be done, which has taken time. There have been failures, as there often are in IT implementation, and there has been an overemphasis on standardised, monolithic IT systems that are considered safe bets but do not quicken the delivery of returns.

The more is spent on IT, the more justification is required. Second-phase technology use by the sector, starting now, needs to focus on achieving returns in months, not years or decades. With public sector jobs on the line savings need to be realised quickly. The acceleration of technology development also means there is no point investing in three- to five-year IT implementations that will be heading for obsolescence with a cost justification mountain needing to be climbed.

The new Government should achieve most returns on investment made in technology well within a single term of office to avoid creating a technology legacy stretching into decades. Currently we are seeing large technology projects being shelved to cut spending, wasting all the money invested in them so far.

Web-based systems that aid collaboration, reduce the cost of engagement to suppliers, control on-contract spending, and manage back-office integration are examples of a technology that can pay for itself, saving costs quickly and taking just weeks to implement.

Stifled sourcing

Purchasing and sourcing strategies are more efficient than they were. The powers of the Office of Government Commerce (OGC) in pulling supplier communities together and formalising tendering processes, for example, have helped ensure that purchasing is governed more effectively and public money is spent more wisely. Reforming processes for the sake of hitting targets, however, can stifle creative methods of sourcing and is not necessarily the best way of ensuring that deals are done to support both the sector and its suppliers.

	Grandiose efficiency schemes perhaps need to be replaced by effective streamlining, agility and collaboration across the sector to reduce spend organically

Rather than creating a level playing field for suppliers, the sheer weight and cost of doing business with the public sector is enough to shut businesses down and put outsourced public services and budgets at risk. Many suppliers could afford to negotiate further discounts if tender processes were more open and transparent and offered more certainty. Smaller, niche or regional suppliers, who do not have the buoyancy enjoyed by larger organisations during long and treacherous public tenders, are often dead in the water. Current methods do little to support these smaller players, meaning lack of support for sustainable local sourcing or the small enterprises that play a big part in holding up the local economy.

Lack of creativity also reveals itself in the very limited use of auctions. Building online auctions into an organisation's purchasing plan is proven to reduce spending costs by 18 per cent. Yet adoption of eSourcing platforms that automate the auction and tendering process remains rare. Formalising the best deals with suppliers requires a decision to purchase through these methods on an unlimited basis and to give suppliers full visibility of the auction so that they can stake their own odds rather than being in the dark.

Key improvements

Collaboration, rate and type of technology adoption, and creativity of sourcing strategies are three key areas where the public sector can achieve greater spending savings very quickly.

As a guideline for the new Government as they look to direct and advise the sector in making spending improvements, the following four measures will help to fully leverage purchasing efficiency and improve life for the supply chain.

1. Take a long hard look at your internal procurement and sourcing processes. How do you measure up on efficiency compared to a commercial organisation? How do your suppliers rate you as a purchaser? Can you measure spending efficiency against targets?
2. Be ready to embrace new technologies that can achieve rapid savings in specific areas. There is a growing need to achieve returns quickly rather than relying on slow-moving oil tanker software that will probably never deliver true ROI. Time is of the essence. Don't invest in anything that is going to take more than six to 12 months to realise returns.
3. Consider what you could do, not what you should do. Get creative on the ways that you can procure more effectively, for example through eAuctions or collaboration. If we want to push savings back into the economy in the next two to three years then we need to implement changes in the next two to three months.
4. Consider the needs of your suppliers. Suppliers need a more efficient way of working with you and giving this to them will open up new opportunities to drive stronger deals, support sustainability, promote enterprise and ultimately boost the UK economy.

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