David Smith CB FCIPS
PROCUREMENT SYSTEMS
PERFORMANCE
A UK GOVERNMENT CASE STUDY
David Smith CB FCIPS
Leading global excellence in procurement and supply
David Smith CB FCIPS
• Former Commercial Director
UK Department for Work and Pensions
• Former Deputy CPO UK Government
• CIPS Past President
Leading global excellence in procurement and supply
Why is Procurement
so important to
Public and Private
Sectors?
Leading global excellence in procurement and supply
Procurement is ‘Big Business’
Leading global excellence in procurement and supply
Procurement is ‘Big Business’
• UK Central Government spends over £66 billion per year
on Goods and Services (non military)
• UK Public Sector spends over £250 billion per year on
Goods and Services
“from paperclips to prisons”
Leading global excellence in procurement and supply
Government Policy touches its citizen’s lives and
defines them
…..and can save them
Procurement is often at the forefront of delivery
of key services
JUSTICE, HEALTHCARE AND HOSPITALS, SOCIAL
CARE, CULTURE, TRANSPORT, EMERGENCY
SERVICES, WELFARE REFORM
Leading global excellence in procurement and supply
Old Thinking
The commercial function in Government
used to be seen as:
• A Barrier
• A Process
• All about requisitions
• Just Negotiation!
• Limited Added Value
Leading global excellence in procurement and supply
The General Election in the United Kingdom
in 2010 brought
• The first coalition government since 1945
• The worst financial position in generations
• An agenda to tackle the financial deficit first and
foremost
• An agenda to reduce expenditure
• An agenda to address waste and inefficiency
• An agenda that promoted procurement as a key
enabler to deliver efficiencies and savings yet
improve public services
Leading global excellence in procurement and supply
Top suppliers asked to contribute to
Government’s efficiency drive
Procurement at the heart of
Government’s efficiency
drive
Leading global excellence in procurement and supply
Delivery of best value for money
Cost Reduction
Efficiencies
Quality Services
Propriety
How are we being measured?
Absolute reduction in Spend
Reduced staff numbers and overheads
Speed of delivery
More sustainable outcomes
Leading global excellence in procurement and supply
Pre 1980
1980s
1998-2014
Effectiveness
Collaboration
Efficiency
Procurement –an
established
profession
Introduction of
Professional
Purchasing
Making a business
Contribution
Board Level
Recognition/Presence
Policy through
procurement
Requisitions - Low
Level Activity
E-enabled solutions
Minister for
Procurement
Leading global excellence in procurement and supply
2010-14
The Key Features of Procurement Reform
• Key Suppliers
• Controls and Approvals
• Capability
• Common Commodities
• Growth
• Organisation & Shared Service
• Demand Management
Leading global excellence in procurement and supply
The role of procurement in ‘Growth’
•Small & Local Businesses
•Lean Process
•‘Licence to Operate’
•Early Engagement with Market
•Transparency,
•Reducing Expenditure and delivering vfm
Leading global excellence in procurement and supply
Issues!
• Implementing cultural and behavioural change
quickly
• Transforming the ‘Centre’s capability ’ to give
Departments the confidence to centralise
• Delivering more with less!!!!!
Leading global excellence in procurement and supply
What’s Gone Well?
• Government/Ministerial commitment given
procurement higher profile than ever.
• Crown management of key suppliers.
• Level of efficiency savings.
• Freezing discretionary spend, reducing
demand.
• Simpler, faster procurements.
Leading global excellence in procurement and supply
‘The Enablers to Change’
•Systems , Processes, Technology
and Knowledge - Data
•Influence
•Suppliers
•People
Leading global excellence in procurement and supply
‘The Enablers to Change’
•Systems , Processes, Technology
and Knowledge - Data
•Influence
•Suppliers
•People
Leading global excellence in procurement and supply
Basic Data
• How much do we spend?
• Who do we spend it with (and why)?
• What do get for our money?
• Then make informed choices!
Leading global excellence in procurement and supply
‘The Enablers to Change’
•Systems , Processes, Technology
and Knowledge - Data
•Influence
•Suppliers
•People
Leading global excellence in procurement and supply
Leading global excellence in procurement and supply
Measurement!
•Delivering!!
•Cost of Function
(absolute and %)
•Third Party Expenditure against total
Headcount
•Reduce cost of function and improve Rate on
Investment
Leading global excellence in procurement and supply
‘The Enablers to Change’
•Systems , Processes, Technology
and Knowledge - Data
•Influence
•Suppliers
•People
Leading global excellence in procurement and supply
Working with our Suppliers
• Out of every £100 we have we spend £50 with our
suppliers (65% of this is with our top ten) Our
suppliers play a crucial role in delivering both front
line as well as support services
• Our challenge is to ensure that our suppliers can stay
long enough to contribute to delivering VFM and
improving our efficiency
Leading global excellence in procurement and supply
Suppliers
• Government being seen a single customer
• Getting Better Value
• Competition and the role of Local & Small Businesses
• Supply Chain Management
•Who is being managed?
Leading global excellence in procurement and supply
Supply Risk Management
Is this the most important thing that we do?
• Understanding dynamics of key
suppliers
• Understanding their Supply Chain
• Contingency planning
• Understanding the Risks
• Risk Mitigation
• Supplier Relationship Management
Leading global excellence in procurement and supply
Who are your key Suppliers?
•By Value?
•By Criticality?
•By Vulnerability?
Who are their key Suppliers?
What are their risks?
Who is a more important customer than you?
Leading global excellence in procurement and supply
‘The Enablers to Change’
•Systems , Processes, Technology
and Knowledge - Data
•Influence
•Suppliers
•People
Leading global excellence in procurement and supply
Our People!
Leading global excellence in procurement and supply
What do we expect from the next
generation of public sector procurers?
• Act with Propriety
• Know what they want to buy and why
• Market Aware
• Commercially and financially aware
• Act on behalf of the public sector
Leading global excellence in procurement and supply
What do we expect from the next
generation of public sector procurers?
• Improve and drive value from existing contracts
• Manage corporate demand,
• Understand the future supply chain
• Is not averse to risk in procurements but knows
decisions must be managed, commercially
advantageous and legally sound
Leading global excellence in procurement and supply
Leading global excellence in procurement and supply
Ambition?
• ‘World Class’ Commercial
Function
• Staff 100% ‘Commercially
Aware’
• 100% decisions ‘Sustainable’
• An organisation that
understands and wholly manages
supply risk and delivering value
Leading global excellence in procurement and supply
Current Issues keeping Procurement at the
‘Top Table’
• MONEY!!!!!!
• The Economy
 Supplier Vulnerability
 Understanding dynamics of key suppliers
 Contingency planning
 Global Market
• Data Management
• Delivery!
Leading global excellence in procurement and supply
Issues being addressed
personally by CPOs
• ETHICS & FRAUD
• SUPPLY CHAIN RISK
Leading global excellence in procurement and supply
Is it our time
and our
opportunity to
make a
difference!
Leading global excellence in procurement and supply
Thank you for listening
and enjoy…
Leading global excellence in procurement and supply