National Procurement Strategy for Local Government

Local authorities spend over 40bn pounds each year providing essential services. A tradition of individual purchasing decisions by over 400 separate councils, often buying the same thing, means that they don't take advantage of their collective buying power to negotiate lower prices or work with suppliers to develop better products and services. The National Procurement Strategy sets out how central and local government, working together with partners from the public, private and voluntary sectors intend to set about improving local government procurement. The most innovative councils have already found ways to deliver significantly better services at lower costs. They have streamlined their procurement, worked in partnerships, redesigned the delivery of services, shared systems and pooled their buying power.

The Strategy has been written jointly by central and local government and involved many other partners. The central message of the Taskforce chaired by Sir Ian Byatt (Delivering Better Services for Citizens) was to improve local services to citizens in affordable ways through better procurement.

The National Procurement Strategy sets out how councils can improve the delivery and cost effectiveness of high quality services through more effective, prudent and innovative procurement practices. The Strategy illustrates the scope for potential cost savings through more efficient procurement practices and partnership working, to release resources to the frontline

What do we mean by procurement?

"Procurement" is the process of acquiring goods, works and services, covering both acquisitions from third parties and from in-house providers. The process spans the whole cycle from identification of needs, through to the end of a services contract or the end of the useful life of an asset. It involves options appraisal and the critical "make or buy" decision, which may result in the provision of services in-house in appropriate circumstances.

In the context of a procurement process, obtaining "best value for money" means choosing the bid that offers "the optimum combination of whole life costs and benefits to meet the customer's requirement".

This is not the lowest initial price option and requires assessing the ongoing revenue/resource costs as well as initial capital investment. The council's requirement can include social, environmental and other strategic objectives and is defined at the earliest stages of the procurement cycle. The criterion of best value for money is used at the award stage to select the bid that best meets the requirement.

Procurement is also about making choices. The choice that members make about a particular contract or form of partnering is a very clear signal of what type of authority the council wants to be and how it wants to be seen now and in the future.

Why procurement matters

This is a key message of the Strategy: Procurement is an essential element of cost effective and efficient services; the vision of better quality, cost effective services by 2006 will only be achieved if the Strategy is acted upon, and councils need to take responsibility for action. Getting procurement right is about improving the delivery and cost effectiveness of quality public services to citizens.

• For improving value for money and identifying economies of scale?
• For partnerships that will improve your capacity and skills?
• For new organisational models?
• For stimulating new markets to improve the range and choice of services for the public?

The National Procurement Strategy for Local Government illustrates how to use innovative ways to procure, work in partnership with others, and manage services that will:

• Better achieve community plan objectives
• Deliver consistently high quality services that meet users' needs, with a range of partners from other sectors
• Provide savings and better value for money, thereby improving the cost effectiveness of the council
• Build social cohesion and promote equality of opportunity for service users, businesses and council staff
• Be sustainable for the communities and areas served and benefit local citizens
• Support delivery of the council's e-Government agenda
• Enable councils to manage and assess risks in the market place
• Be delivered through different structures and in new forms.

This Strategy is aimed at key decision makers

• Council leaders and members with responsibility for procurement
• Chief executives and senior officers
• Officers involved in procurement and the delivery of services
• Voluntary and not for profit sectors
• Partner agencies
• Suppliers.

The National Procurement Strategy is intended to raise the profile of procurement in councils and is therefore aimed not only at the more traditional audience of procurement professionals (purchasing officers and those involved in managing big contracts on a day to day basis), but also those in local government who have strategic responsibility for procurement or a corporate responsibility for budgets, services and policy. This includes executive members with responsibility for procurement, chief officers with strategic responsibility for the procurement function, those involved in best value reviews and in scrutiny of the council's functions. It will also be of interest to those in the public, private, social enterprise and voluntary sectors seeking to engage with councils as suppliers, service providers, and partners.

What is in it for councils?

The principal benefits to councils of adopting the approach set out in the National Procurement Strategy are:

• You will establish partnerships with private, voluntary and public sector suppliers to help you deliver improvement of public services and the renewal of public assets like schools, libraries and highways, on time and to cost.
• You will build quality design into procurement of assets to improve the built and natural environment for local citizens, including the learning environment for school students.
• You will make more creative use of buying power to stimulate innovation in the market, including innovations in service delivery and products, for example, that make use of recycled materials or fair trade products.
• You will make savings realised through more efficient procurement that can be channelled into priority services or into council tax reductions.
• You will achieve economies and efficiencies and improve effectiveness through procurement, so that you fulfil your obligation under Best Value to improve continuously.
• You will comply with the procurement regulations (EC rules) to reduce the likelihood of legal challenge.
• You will implement good practice in procurement to reduce the likelihood of time and cost overruns, poor quality and contract failures. You will remove unnecessary 'red tape' to reduce time and costs for councils and suppliers alike.

Key Messages

The Government has developed a policy agenda of freedoms and flexibilities to encourage councils to experiment with procurement and take calculated risks to achieve better, more significant results including cost savings and improved services.

• The Local Government Act 2003 enables freedoms and flexibilities.
• Performance indicators have been developed to help councils measure year on year improvement and to compare performance with other councils and partners.
• The Government has invested in a Capacity Building fund that will be used to help councils implement this Strategy.

E-procurement the new technology

Key Theme: Doing business electronically.

The strategic objectives are:

• To achieve efficiencies in the procure-to-pay cycle including reduction in cycle time and reduction in transaction costs. This will free resources that can be directed into front line public services.
• To use e-Marketplaces to assist councils to access framework agreements and contracts.

Benefits

• Potential reductions of up to 70% in time spent and costs incurred in the order processing, goods in receipt, and invoice processing
• Reduction in off-contract purchasing
• Cost effective single source of supply

E-procurement

• Pool Buying Power with other authorities
• Better Services at Lower Prices
• Supplier Partnerships
• Delivering better services to citizens
• Actively seek out partnering and collaborating opportunities

Wider Implications of the National Procurement Strategy EC Public Procurement Regime

In addition to the UK local government legislation mentioned above, there are legal requirements that govern procurement by public authorities, including councils, right across the European Union. In the UK these are set out in public procurement regulations that implement EC directives on supplies, services, works and procurement by utilities. The regulations provide remedies for aggrieved suppliers if the rules are flouted, including the ability to seek redress in the UK courts.

Modernisation and simplification of the EC public procurement regime has been on the agenda for some years. EU member states recently agreed a package of changes to the EC public procurement directives.

Final adoption is awaited. These changes will streamline and simplify the rules for both public bodies and utilities. The IDeA/4ps proposed indicators will all comply with the principles of SMARTIE.

They are:

• S Specific
• M Measurable
• A Achievable
• R Realistic/Relevant
• T Time-based
• I Intelligent
• E Environmentally aware

Improving procurement - measuring progress

Councils can monitor their progress against the milestones in this Strategy.

The IDeA, 4ps and SOPO are consulting on a set of key performance indicators (KPIs) for incorporation into the Library of Local Performance Indicators, a joint Audit Commission/IDeA initiative. Councils will be able to choose KPIs relevant to their own corporate procurement strategy.

The proposed indicators cover three areas:

• Implementation of the National Procurement Strategy and the council's corporate procurement strategy
• Operational buying (buying goods and non-complex services)
• Major projects, partnerships, PPPs and projects procured under the Private Finance Initiative (PFI).

Councils can use the indicators in two key ways:

• To measure year on year improvement
• To compare performance with other councils and other organisations.

The role of overview and scrutiny members might encompass:

Conducting inquiries into new models of service delivery

Challenging the progress of major procurement projects

Reviewing the performance of partnerships

Ensuring that lessons are learnt from major projects and partnerships.

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