This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its May 2014 report entitled A review of collaborative procurement across the public sector, the United Kingdom National Audit Office found inefficiency and duplication in collaborative purchasing across government. While the report noted that collaborative procurement “has long been seen as a way to save money” through standardized specifications, aggregated demand, and reduced administrative costs, it noted deficiencies in the government’s use of central framework arrangements.
In fact, the report found a widespread failure to implement sound category management practices in key areas of procurement, which was caused by either a lack of procurement management information or a lack of understanding of end-user requirements. The report also noted that the public sector’s collaborative purchasing landscape was “fragmented” with “no overall governance.” For example, the report noted the existence of “nearly 50 professional buying organisations, as well as individual public bodies running commercial and procurement functions”, and that many of those organizations “manage framework agreements for similar goods and services, for example, stationery.”
The report also questioned the funding models used in these arrangements, stating that the “funding models of some professional buying organisations require them to produce revenue by charging suppliers a fee based on customer spend”, which reduced the “incentive to collaborate with other professional buying organisations and to limit brand choice.” In summary, the report found that government bodies were not maximizing their group purchasing potential and needed to co-ordinate their efforts more effectively to better achieve value-for-money for the taxpayer.
As this report illustrates, while in principle standardization and centralization should result in achieving greater efficiencies and cost savings, government institutions continue to face significant challenges in the execution of these objectives.
