This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its December 2018 report entitled Managing the Bank of England’s Central Services, the UK’s Auditor General found that notwithstanding recent efforts to centralize procurement and cut costs, the Bank of England needed to bolster institutional compliance with its central procurement processes. By way of background, the report noted that the Bank of England was in the process of a three-year initiative to update its procurement governance practices:
Procurement 2020 is a three-year programme to overhaul the Bank’s procurement between May 2017 and March 2020. The Bank has redesigned the central procurement function and strengthened its procurement expertise. It established two new commercial boards to oversee all procurement of technology and facilities management. It is improving management information and it plans to launch a new procurement policy and improve support and guidance. It expects to achieve annual savings of £12.5 million a year from 2021-22.
However, notwithstanding these attempts to centralize procurement practices, the report found a high-volume of ongoing decentralized expenditures that resulted in the lost opportunity to save £2 million in purchasing costs:
The Bank made £10 million of purchases without following its policy to consult its central procurement team, raising questions about the degree of buy‑in and compliance. The Bank has recruited additional procurement expertise to improve the performance of its procurement function but it will also need to improve compliance with existing policies if it is to reap the benefits of such change. The procurement team and the Bank’s Internal Audit identified up to 200 purchases above £25,000 made without Bank staff consulting the procurement team, despite there being a policy that staff should do so. We could find no evidence to suggest that individual staff were required to explain why they had not complied with the policy. Further investigation by the Bank, prompted by our examination, identified that procurement had not been consulted for £10 million of purchases. The Bank estimated that better value might have been achieved for £2 million worth of purchases and that this could have saved up to £200,000. The Bank is making further improvements to its procurement function and policy guidance. It informed us it intends to take follow-up action with individuals where there is future evidence of poor compliance with policies.
In light of these findings, the Auditor General recommended that the Bank of England clarify its centralization strategy, bolster senior-level support for its implementation, and obtain greater buy-in from staff across the institution by better explaining the benefits of the centralization efforts. The report also recommended that the Bank of England establish a framework for monitoring the delivery of expected centralization benefits over a five-year period and benchmark those savings against other organizations.
As this case study illustrates, to achieve successful implementation, procurement centralization efforts require top-down institutional support, organizational buy-in, and clear strategies for measuring and recording systemic improvements.
