Procuring for Place

August 4, 2009

Nigel Keohane, Senior Researcher, NLGN
Public Servant

Recent controversies in the press surrounding reverse e-auctions for care services have opened up the debate on exactly how we should be seeking to drive financial efficiencies. Through reverse e-auctions any bidder that meets a minimum standard can compete with fellow bidders to provide the lowest price. In turn, the contract is awarded to the lowest bidder. But what are the knock-on impacts on quality, many have asked?

It has not helped that one of the first winners (the lowest bidder) for these types of contracts subsequently failed to provide an adequate standard of care and was struck off the national register.

Ultimately, however, the issue comes down to a balance of cost versus quality. Are we getting it right in this very sensitive service where society quite rightly has high expectations for how we look after our most vulnerable citizens?

But, more broadly, we must ask ourselves whether we are striking this crucial balance between bottom line price against the wider service quality and qualitative values and benefits that providers can bring to local communities? Are good innovative design, environmental sustainability, added public value and local economic resilience being factored into the way that we procure our schools, care services and environmental services? New research from the New Local Government Network indicates that we have some way to go.

Few would question that the public sector has come a long way since the days of Compulsory Competitive Tendering. Established in the 1980s and 1990s, under this tendering process, a bureaucratic and inflexible system dictated a crude emphasis on cost and undermined more subtle evaluations of what a supplier could bring to the table. The ‘Best Value’ regime, introduced in 1999, introduced a more qualitative and sophisticated basis for assessment that underlined wider effectiveness across the community.

Yet, for a number of reasons, we are now faced with an ever-finer balance between cost and quality. First, the medium and long-term financial prospects for the public sector indicate towards a significant contraction in expenditure. This creates new forces to deliver savings and efficiencies through procurement.

Second, there are an increasing number of potentially competing demands on procurement, which must be harmonised and considered strategically. The Equality Bill currently before parliament is just one of many. Procurement is also becoming a key route to achieve environmental sustainability (through the design-methods for constructing our public buildings and spaces), for generating employment in localities and regions, and for developing innovative solutions to our public service problems and a more innovative and competitive business sector across the board.

More generally, the challenge for local government procurement is to respond to the emerging strategic commissioning role of local government. Under this approach, councils are moving away from simply delivering a service to residents. Instead, they are leading a more place-focused commissioning role that seeks to identify the broad outcomes and ambitions of a community, and seek to cultivate new ideas as to how to deliver these with and through partners. The ultimate result is more holistic and more citizen-focused, personalised and responsive.

Delivering on these demands requires us to learn lessons from the best in the field and as a wider public community develop more mature approaches to appropriate risk-taking. For, traditional approaches to risk and probity are being challenged: where future success is harder to quantify but ultimately more profound; where we must rely on more mutualism across the public sector and also with providers, and must genuinely start to trust and empower our partners to respond to citizens’ needs; where innovative new ideas can be allowed to flourish early and failing ideas be killed off quickly; where we can trust residents to design and commission their own services.

The stakes are higher, therefore. But, the uncertainties and risks are also greater.

A number of leading councils are showing the way on some of these challenges – Kent County Council has introduced new mechanisms to support its local supply market; Birmingham City Council has introduced new standards for sustainability and design in its public buildings.

However, two wider transformations must characterise our response.

In the first place, local government must think afresh of the types of skills that are needed and how to mobilise them. For too long, procurement has suffered from a low profile and insufficient capacity. We now need a more outward-facing and commercially-intelligent procurement function that can develop vibrant markets, identify with potential providers and even ‘make’ new markets. And, the economic downturn may be an opportunity to bring in experience and talent from the private sector that can help inform approaches into the longer term. Equally, as the role of procurement broadens within councils so its officers should be given more prominent positions, with a new focus on strategic procurement, higher pay bands where appropriate and with a commercial director heading up responsibility at the top table.

But, the second change is simpler yet more acute. Our research discovered that procurement officers believe that local government does not represent an environment within which innovation can thrive, with more than half considering local government ineffective and only a third considering it effective at innovation.

In large part, this risk-aversion stems from a legal straitjacket imposed by European law that has shifted the pendulum away from innovation, empowerment and community-focus towards a risk-aversion that constrains public procurement. Reforming these restrictions must, therefore, be our priority, so that we can unlock a more qualitative approach to procurement which places the community’s needs at its heart. Only then can we get the balance right between cost and quality of service.


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