Collaborative Procurement: Can we learn from public sector experience?

Reports by the Institute of Directors (IoD) and Sir Philip Green, have highlighted inefficiencies in the UK public sector’s £225 billion annual procurement spend. Clearly it faces challenges around duplication; failure to exploit the sector’s potentially huge commercial leverage; and a lack of reliable management information. However, the public sector has also made progress in improving its approach to procurement and has a particular expertise in collaborative procurement - there may well be lessons the private sector can draw from this.

Public sector collaborative procurement typically has taken the form of co-sourcing arrangements based on strategic partnerships where a broader operational alliance already exists. It delivers more competitive prices by cutting bigger deals, reduces effort through shared working and expertise and justifies investments in more specialised and highly skilled teams.

There are three key lessons that can be drawn from this experience:

Target categories which will deliver quick wins

Collaborative procurement should be targeted towards the products and services used by most organisations such as energy, agencies, financial services, IT or marketing. This approach delivers quick wins and creates a case for more collaboration. This has been seen in a collaboration between a number of London Boroughs which saved several million pounds on IT hardware and the group is now looking at how to tackle more complex service contracts and secure better value from strategic suppliers.

Create fair governance structures that are appropriate for the particular collaboration

Individual organisations within a collaborative procurement project inevitably face differing profiles of risks and benefits, given their differing requirements, spend values and levels of reliance on the product or service in question. The OGC’s collaborative eAuction programme, for example, has delivered savings of £57m for hundreds of public bodies, with support and funding coming from OGC and others. So it is vital that any collaborative procurement project establishes clear governance principles to manage these differences. Often the best solution is to appoint a lead to run the project which to some extent is independent and free to deliver the best result for the collaborating group as a whole.

Tailor capability to support the collaborative approach

The integration of procurement operations may allow individual organisations to rely on the collaborative network for their specialists, rather than having in-house capability. This helps build greater expertise in the specialists concerned. Public sector buyers in the UK routinely share expertise and insights on key categories of spend, supported by a structure of central government and wider public sector bodies. These structures as well as straightforward working between peer organisations support hundreds of initiatives delivering substantial efficiencies.

Next steps for private sector companies exploring collaborative procurement

Private sector organisations wanting to secure similar benefits need to understand their needs; current sourcing capability; and performance of potential suppliers. They can then use this analysis to identify the categories of spend suitable for wider collaboration and discuss this with a shortlist of likely partners. This will provide a safe environment for all parties to test appetites, identify the case for integrating procurement operations and how requirements fit together.

To find out how PA can help you secure the benefits from collaborative procurement, contact us now.