A Procurement Strategy for Local Government
April 2011
This paper is the result of several months of work by the Lead Chief Executive for the
Procurement, Efficiency and Capital Workstream which forms part of the LGA response
to the Local Government spending reductions announced in the Corporate Spending
Review in May 2010.
The work has been informed by contributions from members, officers of DCLG, the
Cabinet Office, Chief Executives, LGA staff and advisers and consultants.
“. . . this is a strategy about joining up what works”
“this (strategy) plays to the further development of
existing arrangements. . . . . .”
“The model (proposed) rejects the notion of a large
scale organisation with functions and large
numbers of staff in favour of a more locally based
offer ”
Local Government Efficiency & Procurement (Parts I & II)
Introduction
Building on What Works
Principles
‘Nice Idea but So What?’
Phased Strategy with Workstreams (or how to eat an elephant on the move)
Workstreams
National Procurement Hub
Procurement Landscape – A Compelling Argument for Change
The Delivery Architecture
Phase I
Phase II
Phase III
Making It Happen
APPENDICES
I
Structure, Governance, Resources and Funding
II
Quick Wins Strategy
III
Big Wins Strategy
IV
Category Management Approach and Strategy
V
Financial Framework
Local Government Efficiency & Procurement (Parts I & II)
Part I
Introduction
The purpose of this paper is to set out the opportunities that exist for local government both
collectively, and authorities individually, to make greater efficiency gains and reduce costs by
more effective procurement.
The argument is simple, by improving efficiencies (i.e. reducing the cost) or increasing the
quality of what local government brings, a direct contribution is made by local authorities to the
grant reductions they face. By building capacity for the future, local authorities and local
government provide the basis for sustained improvements in efficiency – at the leading edge of
public sector provision.
The arguments around local authority sovereignty and the difficulty of adoption (“not invented
here”) are never far away from any discussion about national leadership on procurement. This
paper argues for making a virtue of best and improved performance, but suggests that a bigger
challenge arises by occupying space and exploiting collaboration at a national level that opens
up step changes in performance at the same time as shaping markets that local government
operates in.
A compelling argument cannot be made that leaves these opportunities out of the reach of local
government.
Part I of the paper sets out the opportunities for local government. Part II concentrates on the
delivery architecture and how the different phases could be implemented. Part II also describes
key leadership activities.
Building on What Works
This paper argues for an approach which recognises that much good work already takes place
and effective collaboration – a key to future success – is in evidence in certain areas and
sectors. This paper argues for the development of a coherent and comprehensive strategy
building on the basis of what works as Phase I. Phase II is concerned with the adoption of
systematic management and leadership to categories of activity focusing on creating greater
leverage and cost reduction for what the sector buys. The final phase is concerned with a sector
led category management strategy for local government built upon the premise that national
capacity and leadership is consistent with local choice and local action, recognising that capacity
and capability can be provided from within the sector. This is a strategy conceived on the basis
that localism and leverage provide the principles of a local government efficiency and
procurement strategy. It is a strategy, uniquely, about joining up what works, building on existing
capacity, people and groups. It is then about stretching local government and individual authority
contributions into performance and terrain that has not previously been achieved.
If the task is to buy £50 billion of local government commodities and services each year, it is a
job worth doing well.
Principles
Much has been written by the private and public sector about how to develop effective
procurement. A few examples of national success can be given. Some regional and
geographical models exist and some good local practice also exists. What works at one level
has not worked at another. Building on the characteristics of the sector and then on what does
work, then moving to adoption is the recommended way forward. Any strategy therefore has to
be built around a set of principles that make sense of local government.
Principle I
Effective and efficient procurement should sit alongside other public sector
reforms and local change
Principle II
Procurement and leverage need to be built upon evidence and data
Principle III
Collaboration and economies from a combined approach are not possible for
most authorities unless leadership makes sense of these issues
Principle IV
Adoption strategies require to be more than just recognising best practice
Principle V
An effective strategy for the sector built upon its characteristics has a higher
possibility of success
These principles suggest that for the strategy to be effective three things must happen in Phase
I:
 existing public bodies and delivery agents must work together more effectively than they
currently do

local authorities and delivery agents should have a clear framework within which they
operate

the framework should set a direction of travel
“Nice Idea but So What?”
Estimated third party spend on goods & services for Local Government in England.
Source: Spikes Cavell, 2010.
A preliminary assessment of the table above illustrates two key points. Firstly maximum benefit
and therefore savings will come for the lowest price leveraged out of the supply chain by greater
levels of collaboration. Individual local authorities (never) and consortia (rarely) can deliver at the
national level the opportunities that come from the highest leverage.
Secondly, much of the spend and sectors’ analysis and leverage has to be organised through
local authorities and existing consortia in Phase I. This plays to the further development of
existing arrangements, but sets a context for further collaboration and performance.
An Approach – Phased Strategy with Workstreams (or how to eat
an elephant on the move)
There is strong evidence in some sectors (construction, assets and commodities) that good
practice exists. There is growing evidence that in some sectors (transport) that increasing
national leadership is bringing benefits from collaboration. There is evidence that in some
sectors (waste) that the length of existing arrangements requires a medium term opportunity to
migrate to new more effective arrangements. There is national evidence that the work of the
Cabinet Office, built around volumes and common goods and services, provides a strong
starting point.
The recommended approach is for a phased strategy which produces waves of benefits:-

Phase I
adoption of the Quick Wins Strategy is an easy start for all authorities

Phase II
adoption of Big Wins Strategy and building delivery architecture at local,
regional and national level

Phase III
adoption of a segmentation (or category management) strategy is the
Final objective of this phase
Workstreams
Therefore the delivery architecture for this strategy is to set objectives in phases with the
delivery potential in the first instance built upon the capacity of exiting local authorities and
successful collaborations. The second phase involves aligning (new and existing) capacity with
market opportunities, and the final phase using national capacity to create new opportunities for
the sector. Delivering this strategy within each phase is therefore about the implementation of
different workstreams. Each workstream would have a small group of advisers drawn from
existing local government capacity.
National Procurement Hub
The implementation of this strategy would begin with the creation of a small procurement hub
with the immediate task in Phase I of:

strengthening and building on existing collaboration

connecting ‘delivery agents and capacity’ (e.g. existing purchasing organisations)

developing new networks across segments and sectors

identifying gaps in adoption and roll out of capacity to authorities and clusters
The model proposed rejects the notion of a large scale organisation with funding and large
members of staff in favour of a more locally based offer, sharing expertise and capacity in the
first phase and providing national leadership, within a national framework. The short term
biggest single financial gain will come from more widespread adoption of existing deals, ‘Quick
Wins’ and ‘Big Wins’. The success of Phase 1 will be to ensure greater take up on coverage of
existing high performance contracts across local authorities.
Procurement Landscape – A Compelling Argument for Change
The landscape of procurement and efficiency is littered with reports, tools and strategies. This is
an attempt to build from the sector recognising:

unprecedented financial pressures

removal of regional and national funding support

reductions in local authority capacity

the need for an effective approach by local government to shaping and making new
markets for its services

efficiency and effectiveness require the sharing of scarce capacity

national leadership that does not currently exist

the exploitation of the legacy from Centres of Excellence & Regional Improvement and
Efficiency Partnerships (RIEPs)
This paper advocates a compelling case for action and change providing local government with
an unprecedented opportunity to deliver a step change in what it buys, commissions, procures
and delivers.
Part II
The Delivery Architecture
The role and function of a National Procurement Hub
Primary roles:
-
national leadership for procurement across local government (and in
partnership with central government)
-
design and coordination of a national category management solution
-
identification for adoption existing solutions, networks and delivery
capacity
Secondary roles:
-
identification of a ‘gap analysis’ between capacity and opportunities
-
‘encyclopaedia’ of best deals and adoption strategies
-
workstreams to consider opportunities for greater standardisation of
requirements, intelligent respecification and product development
-
brokerage of support to local councils
-
development of strategies for the community and voluntary sectors
and the promotion of local economic development
-
adoption of Quick Wins and Big Wins
In Phase I and II the National Procurement Hub (NPH) should not deliver contracts and
procurement arrangements. It would promote adoption of existing delivery capacity from local
authorities and existing delivery agents. It should focus on ‘gaps’ in take up and roll out.
Local authorities should take all local decisions with their partners.
The NPH should in Phase I and II look at development of new capacity. The NPH should look in
Phase III to have available for the sector a segmentation strategy of national deals – capable of
providing local adoption and exploration of costs below Phase I and II offers.
PHASE I – Key Steps
Leadership
 establish member ownership
 establish governance arrangements
 establish availability of national and local capacity – an example is given in Appendix I
 communicate the strategy and its benefits to officers and members
 create focus nationally and support locally
 develop and identify local leadership
Activities
 coordination of existing arrangements into a coherent national pattern of ‘what works’
 develop the potential for a national category management strategy
 undertake ‘gap analysis’
 develop and evaluate ‘Adoption Strategies’
 build ‘spend and data analysis’
 promote opportunities for SMEs and voluntary sector
 drive adoption of ‘Quick Wins’ and ‘Big Wins’
 identify barriers to adoption
 ‘create an engine room’
 national lead members and Chief Executives identified
 define a business and operating model for implementation in Phase II and III
 cluster and local leadership and adoption of Quick Wins strategies
 production of annual report
PHASE II
Leadership
 develop an integrated procurement service from Phase I capacity and platform
 implement a sourcing and category management approach playing to the strengths of
existing capacity
 develop national category leadership arrangement (with central government)
 develop operating model and balance between local capacity and accountability and national
categories and opportunities
 develop opportunities for the wider public sector activities (e.g. police and fire)
 implement national category management strategy and capacity
 build further capacity and links to existing procurement organisations
 manage competition between organisations and authorities
 implement national savings and efficiency model complementary to local capacity and
operators
Activities
 implement a business and trading model
 production of Second Annual Report
 involve public – private sector capacity in the delivery of the strategy
 develop supplier engagement working group (s)
 adoption and implementation of ‘Big Wins Strategies’
 national lead advisers appointed
PHASE III
Leadership
 Implementation and adoption of national category management procurement arrangements
 Formalisation of operating model and governance for national procurement hub
 Local and central government ‘procurement accord’
 National support arrangement to individual authorities, clusters of authorities and
improvement delivery plan for specific categories and authority
 National Executive of federated procurement models
Activities
 Repayment of start up finance from national contract deals
 Development of national specification templates for low volume high value procurements
 Implementation of national supply chain arrangements built on and with local product
sourcing
 Establishment of national buying arrangements
Making It Happen
There will within local government (and from other sources) no end of opinion about how this
should be done. If it is to be delivered it should be done recognising the phasing and workstream
mentioned above, but with the leadership and activities created and delivered in a way that best
allows the approach to become embedded and sustained.
STEP 1
Build credibility through early success
STEP 2
Set ambitious targets and secure senior member and officer buy-in
STEP 3
Develop the foundation for future capacity – build on strengths
STEP 4
Roll out the activities in a way that makes sense to local government and
existing organisations
STEP 5
Finally define the structure of the new organisation
APPENDIX I
Structure, Governance, Resources and Funding
Resourcing and investment should be kept to a minimum. Within the central team there could be
a small core team of staff to be drawn from interested and willing authorities, perhaps on a
secondment basis (full or part-time). Local authorities would incur the cost of the secondments.
Obviously the hub would need to attract the best staff where possible, with a mix of procurement
and service / operational experience and expertise. In addition, a small programme office would
need to be funded to provide support to the central team and to the local networks / Chief
Executive workstream leads. A Member Board would be required.
The structure would build on existing local networks and national bodies (such as the LGG). An
outline high level structure is shown below.
National Procurement Hub
CX Lead
CX Lead
CX Lead
CX Lead
CX Lead
Highways
Waste
Social Care
Corporate Services
Cluster 2
Cluster 3
Cluster 4
Cluster 5
Property
Cluster 1
Consideration will need to be given as to whether the NPA would be a legal entity in its own right
or part of an existing organisation.
There may be a requirement to fund specific pieces of work (e.g. consultancy or analysis) from
time to time as identified through the work of the central team and local networks. The
mechanism for any payback of investment will need to be determined, particularly as the
proposal in this paper is that the NPA should not deliver contracts for use within the sector,
except at a major and national level.
A critical element of the NPA’s approach would be joint working with a vanguard of local
government Chief Executives to drive local adoption. This is illustrated above with a suggested
structure around leading key spend categories, although other options could be considered. In
terms of delivery, local or geographic clusters would support adoption and where appropriate
take on lead co-ordination roles with peer clusters – making sense of existing capacity and what
works.
Alternatively more resource could be included in the NPA and fully funded and whilst this may
increase the pace of delivery it may not provide best value for local government overall.
Phasing of Delivery
In order to keep the investment as low as possible and to build success and knowledge at a
sensible pace, a phased approach should be taken to the to the main categories of spend. The
NPA could start by focusing on categories where existing solutions are more widespread,
although spend may relatively low, then moving progressively into the more complex, higher
value categories, in which collaboration and best practice will be more patchy. This is illustrated
in the diagram below.
Complexity
and Value
Existing
Collaboration
New Big
Wins
Signposting
Existing
Deals