Report on Department of Finance and Personnel – Collaborative Procurement and Aggregated Demand

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Executive Summary

Introduction

1. Public procurement in Northern Ireland accounts for around £2.7 billion of expenditure each year. It is governed by the Procurement Board which was created in 2002. The Central Procurement Directorate (CPD) within the Department of Finance and Personnel and seven Centres of Procurement Expertise (CoPEs)¹ report to this Board which is responsible to the Executive and accountable to the Northern Ireland Assembly.

2. The procurement of common goods and services (for example energy, Information Technology, facilities management, professional services) in the Northern Ireland public sector (excluding local councils) is estimated to cost around £900 million per year. In the current climate of budget cuts, savings will be demanded from procuring more efficiently, without compromising front-line services. The vast majority of procurement is organised by CPD and the CoPEs.

3. Collaborative procurement involves public bodies working together to jointly purchase goods and services. By joining forces, it enables the public sector to achieve economies of scale and get better deals from suppliers. This presents opportunities to the public sector to make genuine efficiencies and financial savings.

4. In taking evidence the Committee examined progress made on:

• the establishment of a collaborative procurement strategy;
• the quality of management information; and
• the impact of collaborative procurement on small and medium-sized enterprises (SMEs).

Overall Conclusions

5. The Committee was pleased to hear that the Procurement Board welcome the Audit Office report and that, in their view, its recommendations offer a good path forward. However it is of concern that the current procurement structures here are not creating enough opportunities for smarter procurement. In these austere times, better procurement should be capable of delivering financial savings without undermining front-line services.

6. The procurement structures as currently configured are operating without a collaborative procurement strategy which is a vital blueprint for success in this area. Allied to this, CPD is not capturing sufficient management information, which is an essential tool in identifying opportunities to collaborate. The Committee also found that DFP has set unambitious collaborative procurement savings targets.

7. The Committee heard that there is not enough collaborative procurement and that many CoPEs are buying the same common goods and services. The Committee was concerned to hear that there was not enough price benchmarking or standardisation of specifications for common goods and services leading to price and specification variations. Disturbingly, there is evidence of arm’s-length bodies paying several times more than the lowest prices for common goods like laptops and computer monitors.

8. The Committee recognises that there is a tension between increased collaboration and the desire to promote the development of SMEs. CPD needs to do more to encourage SMEs and micro-businesses to participate in public sector contracts and needs to ensure that main contractors treat their sub-contractors fairly and pay them promptly.

9. Given the lack of progress in collaboration over the last decade, the Committee is of the view that it may be timely to review the current procurement structures, examine potential alternatives and deliver better procurement outcomes.

Summary of Recommendations

10. The Establishment of a Collaborative Procurement Strategy

Recommendation 1

The Committee recommends that DFP and the other CoPEs develop a detailed implementation plan for the new Collaborative Procurement Strategy as soon as possible. This implementation plan should be complemented with detailed actions, responsibilities, timescales and stretching savings targets. Outcomes against these plans should be reported to the Committee on an annual basis.

Recommendation 2

The Committee recommends that, where it is not detrimental to SMEs, Departments and CoPEs should consult with CPD and if available, utilise CPD contracts when they are procuring common goods or services. If they do otherwise, their decision will need to be justified by their accounting officer. Where these contracts are not available, CPD should work to create them.

The Quality of Management Information

Recommendation 3

The Committee recommends that, as a matter of urgency, CPD develops a system that enables it to capture accurate, up-to-date and comprehensive procurement information from all its clients including those bodies that do not use Account NI. This would underpin the collaborative procurement strategy.

Recommendation 4

The Committee recommends that CPD specifies a common management information system for CoPEs that will enable the capture and sharing of information including all education procurement.

Recommendation 5

The Committee recommends that CPD and the CoPEs regularly benchmark the prices of common goods and services and share this so that they have up-to-date information to ensure that prices paid represent value for money.

Recommendation 6

The Committee recommends that DFP should encourage public sector bodies to harmonise specifications for a larger number of common goods and services in order to permit more collaborative procurement opportunities.

Recommendation 7

The Committee recommends that departments do more to ensure that arm’s length bodies use the services of CPD and the CoPEs in order to achieve value for money when procuring common goods and services.

Recommendation 8

The Committee recommends that, given the lack of progress in collaboration over the last decade, the current procurement structures should be reviewed in order to develop potential alternative delivery mechanisms.

The Impact of Collaborative Procurement on SMEs

Recommendation 9

The Committee recommends that CPD and the CoPEs adopt best practice approaches when dealing with SMEs and, in particular, implement the following aspects:

a. publish specific, targeted actions aimed to increase business with SMEs generally and micro-businesses in particular;

b. set targets for the take-up of public business and report annually on the value of contract spend awarded to SMEs and micro-businesses; CPD captures the value of contracts won by micro-businesses and also sets targets for their take-up of public sector contracts. The Committee would want to see these results reported annually;

c. strengthen steps to ensure major contractors pay subcontractors at least within 30 days, and preferably within 10 days, as part of contract terms and conditions;

d. establish and use more open frameworks which do not lock suppliers out of contracts for long time periods;

e. simplify pre-qualification questionnaires, tender documentation and financial assessments;

f. encourage major contractors to advertise sub-contracting opportunities in the local press where possible; and

g. undertake strategic dialogue between CPD/CoPEs and smaller suppliers.

Recommendation 10

The Committee recommends that CPD and the CoPEs implement mechanisms and controls to monitor departments’ selection process of companies from the Constructionline database who are offered tender opportunities.

¹ Roads Service, NI Water, Translink, Health Estates, Procurement and Logistics Service (PaLS) (for Health), Education and Library Boards (ELBs) and the Northern Ireland Housing Executive (NIHE)

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