Whether we are at the end of austerity or not, public sector spending has challenges ahead. Brexit’s on the horizon, the pay cap has loosened and there is a Spending Review upcoming.
Much of the progress since the austerity measures were first introduced in 2010 has come from efficiency gains from the pay cap, so with this loosening, where do we go next?
When it comes to getting more for less, procurement is well placed to help but I believe that to make the impact that we all seek, we need to move from our focus being on the tendering process and instead concentrate more efforts on supplier collaboration and innovation.
When we think more about desired outcomes, we can let these define the process rather than the other way around.
Delivering great processes doesn’t necessarily deliver great outcomes.
The procurement processes in the public sector seem focused on two key themes:
- Compliance to legislation defining what and how we must tender. With this complex set of rules and timelines comes a focus on running compliant processes that can distract attention from creating effective commercial solutions.
The process does create competition and incremental improvement but beware having only arm’s length interactions risks missing the more open thinking and conversations that lead to transformational improvements.
- A drive for greater co-operation between buyers as this is seen a highly effective route to drive savings and efficiency improvements. Roughly, 5% of public sector expenditure is currently aggregated through public sector buying organisations today which is a good start but hasn’t had significant customer adoption yet. Spend aggregation will play its role, but is to going to deliver broad transformational outcomes?
Is there a different approach?
Yes. Where we see transformational results in any sector we often see that this comes from thinking about the business need differently. This ability to think differently isn’t achieved in isolation and it’s the deep relationships with business users and suppliers which enable you to focus on buying differently and not the same thing cheaper. How often have you or your team started a project by walking in the shoes of the operational team to understand its demands? I believe that a rich understanding of the needs combined with collaboration from suppliers will bring about the innovation needed to deliver transformational change.
It’s often said that commercial teams in the public sector have their hands tied by process, but I believe we can be both compliant and commercial. I’d encourage public Sector buyers to think about the following:
1. Thinking more commercially, upfront.
Commercial solutions start from a deep understanding of what you buy, how you buy 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 a little more time understanding the organisational requirements and scenario planning alternative solutions to meet the needs.
If you just accept as-is specifications, you will not create change.
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. Creating different and ground-breaking solutions will involve difficult conversations and procurement needs an ability to win trust and influence others.
Talk to your stakeholders about their needs and suppliers about their solutions. The best conversations and ideas are unlikely to stem from a rigid process.
3. Setting ambitious targets.
If you think big then you will deliver big. Think about setting challenging targets and then open up the thinking to how you can achieve them. It sounds obvious but it’s a very different approach to thinking about how you simply get more from the way you do something today. We’ve found that if you give yourself a savings target of 20% to 30% it will push you to develop innovative solutions and be creative.
