Next year is set to be quite challenging for many councils across the UK following last week’s financial settlement announcement, particularly for those with a 6.4% cut in spending power – 4.6% higher than the national average.
As expected, the reactions of several local MPs have been of concern and even a sense of despair over how those hit hardest will cope under increased financial pressure. Although many public sector figures have highlighted different ways in which councils could save costs and make budgets work harder, there has been a lack of instruction for how this could be implemented.
However, it is quite clear that there is a long term solution that will not only help councils currently buckling under financial strain, but also keep councils afloat as budgets continue to be slashed in line with deficit repayment plans.
This long term solution calls for a review of all procurement processes and activities with a focus on increasing effective spend management through streamlined policies and engagement with all involved stakeholders. Believe it or not, even a small percentage in saving can have a large impact directly on fund development and the bottom line, thus increasing reinvestment opportunities and return on investment.
The main stages of public sector procurement analysis include:
Review Procurement: Although many local and district councils have small procurement teams, they often allow other departments and personnel directly into the buying and contract management process. As a result this can negatively impact best purchasing practices, creating an inconsistent approach that is both ineffective from a financial and operational perspective.
By streamlining operations, councils can introduce measurable targets that effectively drive cost reduction and improve value across all spend areas.
Needs Analysis: In facing budget cuts, councils require the support of all stakeholders which include community members. By assessing the true needs of each council and its community, spend wastage can be reduced and all budgets can be utilised to a far greater effect.
Supplier Rationalisation: Professional and carefully structured tendering process’ should be viewed as a time to make all budgets work harder, where choosing the fewest number of suppliers for any given spend category can help ensure the best return on investment and value for money. Consolidating suppliers optimises spend and decreases risks and can enhance council supplier relations moving forward.
Improved supplier relations and gain-share agreements: From the consolidation process it is important for councils to maintain excellent working relationships with suppliers and to increase the potential for gain-share agreements. Gain-share agreements reward increased productivity and profitability.
Effective project management and stakeholder engagement: Engaging all stakeholders within a streamlined buying and budgeting process quickly improves both operations and spend management, particularly if effective project management is in place.
In implementing a contract management system, the day-to-day management of the entire council’s spend will prove to be far more effective and efficient. This provides a real opportunity for fund development and increased return on investment – even for councils hit hardest with spending power cuts.
Jenny Powell is director of JDP Procurement Services Ltd.
