Procurement : a provocation The wrong tool for the wrong job? – Helen Chambers
We are currently in the eye of a perfect storm in providing services for our communities, be that within public, private or voluntary sector spheres. Services are cracking, many with insufficient funding. Processes are not fit for purposes in many instances – especially around commissioning and procuring services. We are seeing vast cost increases at at time when the public purse is contracting. Staff at all levels are toiling.
At times of such pressure it is hard to take step back and see how we can turn this situation round before it gathers its own negative momentum as staff burn out, or leave critical services.
Perhaps there is a way create a glimmer of hope.
Procurement was introduced to commission public services from the voluntary and private sector with a number of underpinning principles; transparency, and the theory that efficiency created by competition would drive up quality and drive (or hold) prices down. I would argue that amidst much rhetoric over the last few decades of evidenced based policy, we have in fact have very little evidence that using this tool to create social impact passes these tests and is in fact better than other models.
To my knowledge, whether procurement is actually the best way to select services that are focused around people and communities, and the needs that they have, has not been tested empirically at all. And it perhaps is debatable whether is is effective in the environments for which it was initially designed – the purchase of consumables or assets. Ferries or PPE anyone?
Let’s explore the potential to release funding for services in communities provided by the voluntary sector in Scotland – which are considerable and often a keystone for the delivery of many other services in the public sector, especially in health and social care.
There are over 40,000 voluntary sector organisations in Scotland with a combined annual turnover of >£6 billion. Collectively, the sector employs over 100,000 paid staff. Social care and health organisations employ over half of all the paid staff in the sector. Data from SCVO shows that c. £1.4bn comes from public sector contracts – of which pretty much all will have gone through a procurement process. How much of that is actually consumed by participating in procurement processes?
So let’s take a medium sized voluntary organisation bidding for a contact for a £100k per annum service. That will probably take 100 hours of work across the organisation. Averaging staff costs and time spent from CEO to admin that probably a comes in at £30 ph with all on-costs. So for one organisation to bid costs £3k. But not just one organisation will bid – that’s the whole point of this, so it’s likely that between 5 and 10 organisations bid. That’s a participation cost of £15-30K. For a £100k contract. That is a fundamental *inefficiency* rate of 15-30%. Unless you think that the process drives 15-30 % of the cost out. Which in services is mainly either staffing levels or salaries. And where does this money come from? Well it has to be costed into bids, grant proposals and philanthropic income generation, so basically it’s the funding cycle just eating itself.
And this does not include the cost of running procurement process and doing the diligence on submissions. So the act of choosing services to supporting our communities is running above 15-30%.
If we scale this up across the £1.4bn spent in this way we are heading for over £0.21-0.42bn spent each year in process rather than results. This is heading toward 1% of the Scottish budget – and this in only in services from the voluntary sector. We could probably easily double this if we were to add in privately supplied health and social care services.
These costings also ignore the ‘in kind’ cost of seen in smaller organisations where they need to rely heavily on trustee input and professional skill (law, accountancy, senior voluntary sector experience) to shepherd staff through unwieldy, complex and legalistically dominated processes.
Another dimension of the failure of procurement is the lack of finesse, skill and proportionality in how it is operated. Time and time again processes and contracts are offered for small to medium sized pieces of work with off-the-shelf ‘one-size-fits-nobody’ standard processes designed for larger, higher risk contracts. This takes disproportionate time to crowbar the actual project into a framework that is utterly inappropriate.
Outwith the sheer inefficiency in allocating public funding, procurement fails in many other ways. A siloed competitive process is hopeless in providing joined up whole system approaches to respond to complex individual and community needs. It drives down quality and costs – where much of that cost is the wages of health and social care staff. Who beside providing care to some of the most vulnerable individuals in our communities tend to have some of the lowest wages (which drives further poverty mainly amongst women, many of whom are likely to have children ). Another consequence of driving down cost is that we are facing a gaping hole in recruitment in critical services. You can now earn more as a shelf-stacker or dog walker than in providing care. And the short term procurement cycles that we have seen for the last decade hollows out the ability of organisations to build resilient, strong, innovative organisations.
Bluntly, procurement is not fit for purpose in these settings and it’s time to call that out.
It is a market based approach design for the cost effective purchase of goods, commodities and physical assets, not social impact.
A happy health thriving child is not a commodity
An bonded functioning community is not physical asset
Supporting a frail, isolated older person is not a the same of getting the best price for 10,000 screws.
In my view it is an inefficient, un-evidenced, ineffective process that has never been evaluated in Scotland against other models. We seem to consider that the need to use current procurement systems as either carved into laws of stone, or one of the universal laws of physics. They are not. We designed them and chose to implement them. We can have a better system. It is not beyond the wit of humans.
Let’s see if we can’t release a significant sum back into service provision by acting in a much smarter manner. An extra £0.4bn each year could go along way in supporting our most vulnerable people and communities.
Helen Chambers is an independent consultant focusing on strategy and turning ambitions and plans into real results. She has over 30 years experience in voluntary and public sectors creating significant social impact. She is also a Non-Executive Director for Scottish and UK wide organisations.