In the United Kingdom (UK) Government’s search for budget balancing savings of tens of £ billions annually, as led by Prime Minister Gordon Brown, attention is increasingly directed to the more than £160 billion that the public sector reportedly spent on the procurement of goods and services from third party suppliers (half of which is spent on common consumables).
"With public sector income diminishing and the deficit growing (last year’s outcome has just been announced as a £78 billion shortfall of income over expenditure), this is a search that is not going to go away. As a result, the top echelons of the UK’s public sector business units’ managements, including big spenders such as the National Health Service, need to start concentrating on the delivery of the procurement savings opportunities as hard auditable savings at the local business unit level. These savings are undoubtedly ‘there for the taking’ in the operations of most public sector business units, but spending other people’s money is for many individuals one of life’s great experiences. The more you spend, the more compulsive your spending becomes, and price does not really matter when you are spending other people’s money," Wally Johnson, Chairman, of UK Based Purchasing Index Ltd told Smart Procurement.
How then should Trust Managers get started on the ‘purchasing savings delivery game’?
"The public sector’s bases for delegating authority to spend £160 billion annually are not exactly ‘state of the art’ expenditure control mechanisms. Keeping track of the cumulative cost of what large numbers of individual end users are requisitioning, how much is being paid vis-à-vis market prices, and the bases on which suppliers are selected, is just not happening. Requisition volumes, for even the smallest of trusts, run into many tens of thousands annually – a near impossible task to manage effectively on the bases of the UK public sector’s current Information Technology (IT) facilities."
"Most public sector IT systems are notorious for their very limited capabilities for providing meaningful, timely and targeted information on purchasing processes and their pricing outcomes, or on the spending habits of the requisitioners using the end users’ often less than explicit statements of what purchasing should procure on their behalf. When moving on to the next stage of the procurement measuring process, capturing requisitioning information on an ongoing basis is also not easy, but that is only the start of it. Presenting this kind of information catalytically to those who have authorised most of the transactions covered, and challenging their ‘approvals’, is an even trickier task."
"Questions to be asked are: What was it that the end user required in the first place? To what was the authoriser agreeing to in terms of what the money was spent on? Who is getting the money? And, exactly how much is being spent on things that management increasingly would rather not buy?"
"This is not the kind of situation that can be remedied by a megabuck consultancy. The solution has to be structural, ongoing and capable of producing the catalytic perspectives of NHS overspending by individuals as and when it happens – as near to real time as can be managed. It is an expensive mess that deserves the highest priority if the UK Government is going to get into a budget balancing position."