As the Transport Secretary announced changes at Network Rail, with its £38 billion debt classed as a ‘public liability’ by the Office of Rail and Road, and, despite huge salaries and bonuses, major schemes behind schedule and over budget, there are echoes of Lord Carter’s report into the NHS wasting billions of pounds a year ‘on people, land and equipment’.

Carter studied just 22 hospitals, so the figure is surely the tip of a very large iceberg. A quick Google search highlights dozens of articles over the years pointing out the endless waste – especially on procurement and ’temporary staff’, including a Finance Director in London apparently being rewarded at the rate of £47,000 a month. How on earth can anyone think that is an appropriate use of public money?

Such waste isn’t confined to hospitals. Over-staffed PCTs reinvented themselves as the GP-led Clinical Commissioning Groups, and, judging from the public meetings I have attended, prudent financial management is not necessarily top of the agenda.

For example, you’d think that a Director of Change is something from ‘W1A’, BBC2’s spoof on how the Corporation is managed. Unfortunately not…it is the latest local CCG appointment. No doubt on a hefty salary. One change he or she could make is reviewing their expensive offices, and introducing joint procurement with the neighbouring CCGs.

The public sector is notorious for waste. I’m sorry to labour the point, when so many authorities are rigorously addressing this, but often find that the endless bureaucracy inhibits progress; a review of ‘officers’ delegated decisions’ would help, as would keeping tabs on contract renewal dates, to ensure that tenders are issued on time and local suppliers encouraged to bid, either individually or as part of a consortium. Too often, existing suppliers have their contracts renewed without proper scrutiny of the process.

It’s also a fact that publicly funded construction projects are especially vulnerable, being rarely delivered on time, on budget, because project management in the public sector is a big weakness, whereas it is an essential prerequisite across the private sector. If something is changed during the build, it will add to the cost, and cause delays! ‘It’s not their money, so they don’t worry,’ a contractor told me. He also said that publicly commissioned buildings are often over-engineered – no doubt adding to the cost.

We have wonderful people devoting their lives to public service – especially our world-class emergency services – but they, too, are frustrated when they see money wasted, knowing what a difference it would make if properly managed.

So, surely there is a way to improve efficiency and value for money across the whole of the public sector, including maintained schools and colleges?

I believe there is.

As a start, each LEP region could establish a joint public sector procurement company; its purchasing power would be enormous.

Everything from vehicles to paper, IT equipment and food would undoubtedly be purchased more efficiently, with a focus on local suppliers wherever possible to support the local economy. Of course the EU tender rules would apply, given the scale of budgets, but it’s always possible to package deals to attract two or three ‘preferred suppliers’ on equal financial terms for specific product lines. (This would be essential for high demand items, allowing for unforeseen circumstances which may cut supply at one time or other, as well as to ensure competitiveness.)

The whole of the NHS in each region, including GPs and dentists, would get drugs and equipment at the most favourable prices. It could also have a central store for sticks and crutches, which patients are often told not to return after the initial emergency because ‘they’re made to size’! How much does this cost?

The first stage of such a partnership would be to undertake a stock take and audit across each service and local authority, to rationalise where possible so that the number of contracts/product lines/services are minimised and co-ordinated. For example, rationalising photocopier usage in one authority saved a fortune, I’m told, and is now being adopted by a hospital’s management. (At the primary school where I’m a governor and have taken on the Premises Committee, I’ve just discovered that it has 12 different contracts for all maintenance/security/safety. How ridiculous is that?)

This preliminary work would form the basis of a business plan to maximise savings, without sacrificing quality. With phased implementation over, say, a couple of years, the structure would force greater service integration, ridding us of the silo mentality which still dominates in many areas, stunting change and allowing continued duplication.

Rather than creating another monolith, each procurement company would emulate the private sector by operating as a series of specialist cost centres, with tight financial controls monitored by the LEP.

Key to its success would be the management. Ideally, the company should be chaired by an independent businessperson with a strong track record running a multi-million pound business. They should not be from the public sector because a fresh, open-minded approach is essential.

As part of the project, some skilled staff could be pooled, allowing them to move around the region to meet demand in the various sectors during holidays, maternity leave and emergencies etc, saving on agency fees – one of the biggest costs to the NHS. Other central services could be incorporated: legal, financial, HR, and project management.

There could also be further moves towards integrated waste management across council boundaries, property management and grounds maintenance, sharing car pools (abolishing expensive mileage claims on private vehicles) and communications (just adding up the numbers employed in colleges, councils and the NHS in a single region is enough to give a normal person apoplexy; what on earth do they all do?)

We could learn a lot from those councils which have successfully amalgamated their top management, cutting costs and rationalising their property estates, whilst improving efficiency. Blue light services (fire and police) in Suffolk are sharing resources, and that model could be adopted elsewhere.

The opportunities are endless, and there is no reason why the various organisations would lose their sense of identity, although in some cases that would be no bad thing; changing a dysfunctional culture starts at the top.

12 comments for: Judy Terry: Regional procurement in the public sector could save millions

Leave a Reply

You must be logged in to post a comment.