The announcement of public sector cuts in the latest budget (22 June 2010) will not have come as much of a surprise to many, given the state of public finances and the media hype surrounding the issue. By cancelling projects and significantly reducing the number of interim procurement staff, is the public sector capable of making the requisite cuts to their departmental budgets?
The immediate impact of the announcement around budget cuts has already been evidenced by permanent staff recruitment freezes. In addition to this, pay has been frozen for those on salaries of £21,000pa. plus. A number of projects have been scrapped with immediate effect, resulting in a drop in the number of interim procurement staff working within government departments. Recently the government has also started applying pressure on suppliers to reduce their prices.
As on-going projects eventually succumb to the Chancellor’s axe, we anticipate that there will be further reductions in the numbers of contractors working in government departments. The question is, with procurement contractors central to reducing spend and the number of interims working being reduced, how will government departments continue to make cuts?
Much has been made of the public sectors’ over reliance on contractors during the past few years. Many have pointed out that, once a project is completed and contractors leave, the level of commercial skills amongst procurement professionals within departments drops with the expertise walking out of the building. The attraction of using interim and consulting staff – instant expertise and experience – is also one of the main disadvantages as, all too often, a skills gap is the only legacy. Most instances where interims and consultants are used are simply wasted as the opportunity to up skill permanent staff is lost.
To remedy this, procurement will need to operate on a much more strategic level. When government departments are discussing how and where to cut costs they need to look more towards long term objectives. At the moment the public sector as a whole appears to be a much more reactive, operational and short term in its approach to leveraging procurement to cut costs.
Highly focussed category management will also help to not only reduce costs but also up skill procurement professionals in the public sector. By using more specialist knowledge within a specific category or commodity, better decisions will be reached on how to deliver efficiencies and savings.
If government departments collaborated better and joined all buying within a specialism they would be able to drive economies of scale better to increase their buying power and rationalise the number of suppliers that they engage with.
However much central government is able to change the way it buys goods and services one thing holds firm: while contractors and consultants do bring benefits in the short term there needs to be a guaranteed legacy in order to up skill permanent procurement staff. By ensuring that the skills and expertise hired in the short term are passed to its own staff, government departments will be able to strategically procure for central government in an efficient manner.
One Comment
I have been disappointed to see that all public sector projects appear to be tarred by the same brush- they are all assumed to have a net cost, and so are all targetted for cuts. Surely there should be a sensible distinction drawn between net cost projects and those run under good governance which have a solid business case with realisable net benefits? Stopping the latter has a net cost, since the identified benefits will never be realised (I have direct experience of this for one of my programmes), but it is seen in simplistic terms as cutting spend now.