Public sector procurement: Meeting the challenge (Contract Journal conference report)
17:29 23 Oct 2006
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David McMeehan, Office of Government Commerce
Contractors must take the initiative in helping public sector clients deliver their construction projects more efficiently and not wait for clients to lead the way, said David McMeehan of the Office of Government Commerce (OGC) this week.
Speaking at Contract Journal's conference "Public Sector Procurement: Meeting the Challenge", McMeehan, director of the OGC's construction efficiency division, told delegates that the Gershon Efficiency Review, published last year, had put public sector clients under increasing pressure to deliver substantial savings in public sector procurement costs. Contractors that can help local authorities and Government departments deliver those efficiencies, said McMeehan, would have the edge over their competitors.
"Many suppliers see the client's predicament much more clearly than the client. The reward given to these suppliers is now being noticed. You have got to understand clients better because they will be looking for those efficiency ideas from you," he said, adding, "Stop saying, tell me what to do. Rather, start saying to the customer, do you realise you can do this to be more efficient."
McMeehan insisted that the efficiency targets would not be achieved by cutting costs. "This is a value driven agenda,” he told delegates. Nor is it about inventing new efficiency mechanisms, McMeehan added, "The aim is to spread best practice across the market place. Some may do this already but plenty do not and it is our job to raise the barrier consistently."
This drive for efficiency, McMeehan said, will see a much greater use of framework contracts, with integrated teams, regular performance management, greater cost clarity, greater use of e-procurement, sustainable reviews and whole life costing.
Chris Gilmour, marketing director, HBG
Contractors will improve their delivery if clients create the right procurement environment, Chris Gilmour, HBG's marketing director, told conference delegates.
Gilmour said the construction industry had made great strides in delivering clients better value for money in recent years. He pointed to the NAO's 2005 report "Improving Public Services through Better Construction" which shows that 55% of public sector contracts were delivered to budget in 2005 compared to only 25% in 1999 and 63% delivered on time compared to 34% in 1999. However, Gilmour added, there is still room for improvement from both the supplier and client.
Gilmour gave three examples of successful procurement programmes. These are ASDA's construction programme, ProCure 21 and the Welsh Health Estates framework, which have all achieved significant time and cost savings.
"The environment for procurement is not set by us but by the customer base," Gilmour told delegates. “If the client sets the environment for people to work together, allowing early engagement with the team, setting targets for improvement and allowing supply chain collaboration then we will continue to improve our delivery."
However suppliers also have to step up to the mark, said Gilmour, by developing their supply chains for the long term and by training their staff to better understand the customers' needs. "It is our collective responsibility to improve," he concluded.
Michael Ankers, Construction Products Association
Government plans to introduce reverse e-auctions for commodities risks the introduction of a lowest price culture, Michael Ankers, chief executive of the Construction Products Association (CPA) warned this week.
Ankers told conference delegates the Office of Government Commerce's (OGC's) recent launch of a reverse e-auction framework for housing commodities via the Northern Housing Consortium flew in the face of current Government policy on collaborative working. He said the OGC's decision was especially disappointing as it came shortly after it had invited the CPA to come up with recommendations on how construction product manufacturers and suppliers could help clients procure more efficiently. The working group identified savings of up to £3bn. One key recommendation was for much greater involvement of the manufacturers and distributors much earlier in the procurement process. Ankers told delegates significant savings could be gained, pointing to one hospital project where a manufacturer advised the client to replace 153 different diffusers that had been specified by the designer, with just three types, resulting in a 17% reduction in costs for that phase.
"Clients are not aware of how small changes like these can make huge cost differences," Ankers told delegates. He added: "We delivered our action plan which set out these savings but sadly the OGC decided to do reverse e-auctioning of commodities. This was disappointing particularly as we had hoped to work cooperatively with the OGC, especially as commodities involve quite complicated processes," he said.
Ankers said the CPA was fully supportive of the OGC's drive for greater procurement efficiencies apart from its plans for reverse e-auctioning of commodities. He said reverse e-auctions risked compromising service and delivery and could introduce a lowest price culture, driving out quality and reliability. He also said the move contradicted current Government policy. "This is not consistent with other Government mantra and is not helpful when greater unity of approach is what is needed."