Public procurement is a key part of the Government’s reform agenda. Stephen Dineen talks to the Director of the National Procurement Service, Vincent Campbell, about the reforms taking place.
In these times of fiscal difficulty, one of the Government’s focuses is reforming the way in which it spends money. With the state having spent approximately €7 billion on goods and services and €8 billion on capital works last year (projected to be 10-15 per cent less in both categories this year), it is a major purchaser. Vincent Campbell is the man charged with implementing changes in public procurement.
The National Procurement Service (NPS) was established by the Government in 2009 under the auspices of the Office of Public Works. “We’ve been tasked with centralising public sector procurement arrangements for common goods and services, excluding the construction sector,” says Campbell, who is based in the OPW headquarters in Trim. “By identifying key markets and analysing procurement trends, we’re developing a more integrated approach to procurement across the public sector,” an approach he says is “achieving real savings and value for money.”
The challenge to reform practices and procedures across a multitude of government departments and agencies is big. “The procurement landscape is constantly changing,” says Campbell. “One of the main challenges for public sector buyers is the requirement to remain up to date with the legal complexities surrounding procurement. They must also balance the complexity of the procurement environment with delivering best value in a timely manner,” he explains. Campbell adds that “there can also be tension in achieving best value while also adhering to other Government policies such as green procurement, innovation, improving employment and sustainability.”
Over the past two years NPS has made progress in a number of areas. There is now a standard suite of tender documents for public sector purchasers, which is available on NPS’s website (www.procurement.ie). Launched in April the website acts as a one-stop-shop for public procurement managers. It has established networks of public service procurement officials and has provided training to NPS staff and public sector buyers in conjunction with the Chief State Solicitor’s Office. “We’ve also undertaken major inter-sectoral meetings with key players in public procurement to identify markets to strategically target for collaboration,” adds Campbell.
The service has established an education and development group to inform the public procurement training curriculum and the local authority procurement liaison officer group to ensure best practice.
In fiscal terms, the Expenditure Reduction Initiative yielded €29.3 million in savings in 2009 and €8.8 million in 2010. This is in addition to the €39 million reduction in all procurement budgets last year.
“Since it [NPS] was established in 2009, we’ve overseen savings in the order of €91 million across the public sector,” Campbell calculates. “This doesn’t include the administrative savings associated with the availability of centralised contracts.”
The establishment of NPS contract and framework agreements has been a major part of the action to reduce procurement costs. These frameworks are central agreements with individual suppliers which guarantee certain goods (such as stationery, printing services, vehicles and state advertising) at a particular price for any public sector purchaser. The agreements were the product of mini- competitions and stand-alone contracts.
The frameworks cut costs through a reduction in tendering processes, improved specification of requirements and stock management. Out sourced legal services are reduced and diverse contract practices is eliminated.
“The contracts and agreements are being used by over 173 public sector bodies,” says Campbell. These include “central government, local authorities and third level education bodies. Between March 2009 and the end of last year we established 41 framework agreements and contracts, 35 of which were in place by the end of 2010,” Campbell explains. The estimated potential value of the agreements is €430 million per annum. A big cost for all organisations (for the public and private sector) is energy. National energy contracts for electricity, gas and oil will be in place and used by 80 per cent of public bodies by the end of 2011.
Campbell adds that there might be a need to go further. “In the event of insufficient participation by public sector bodies with these contracts, mandatory use of NPS frameworks or contracts must be considered as an option for the future.”
Supporting SMEs
Campbell, the NPS and others are aware of the difficulties being experienced by SMEs at this time, and the need to allow SMEs compete for contracts.
Without doubt “the most significant development [in this area] has been the introduction of new guidelines [Circular 10/10] from the Department of Finance.
The new arrangements include greater open advertising, a reduced requirement for paperwork, accounts etc. and an assurance that all criteria used would be proportionate and appropriate.” An example of proportionality is having a minimum turnover threshold that is realistic for SMEs trying to tender.
A tangible example of this facilitation has been over 35 supplier and buyer education events which the NPS has hosted across the country. These workshops reached over 1,000 SMEs, and the service is collaborating with InterTrade Ireland, Enterprise Ireland, Irish Small and Medium Enterprises Association and others on the issue.
There are certain complexities involved in this area. National and EU procurement directives have to be adhered to, and before undertaking any major procurement project or entering a new procurement category, NPS examines the market to identify the most effective approach to take.
“Although we view aggregation of requirements across the public sector as a significant contributor to delivering better value,” Campbell states, “the aggregation of demand is not suitable for all markets and categories.” He says that where appropriate and practical, NPS uses framework agreements or divide requirements into lots when tendering.
One example of an SME succeeding in the new framework process is Glasnevin- based firm, Codex, which won the stationery agreement. By winning this contract, the company will be able to create up to 35 new jobs.
Amongst the current priorities for Campbell and NPS is e-procurement such as e-invoicing. He says development of this strand of procurement will help in the “standardisation of processes and administrative efficiencies for both public sector buyers and suppliers.” NPS is planning to upgrade the eTenders website and the new national multi-stakeholder forum is expected to see the development of initiatives such as eAuctions, eContract Management and eInvoices. A European report this year on e-billing claimed Irish businesses could save two per cent of turnover by using e-billing, which could mean €246 million per annum to Irish businesses. In May the Department of the Environment, Community and Local Government published the draft National Action Plan for Green Public Procurement for public consultation.
Focus for the future
There is a lot more on NPS’s agenda. The Minister of State in charge of the OPW, Brian Hayes, has said he will initiate discussions with top su
ppliers to Government (based on monies expended) to negotiate a dividend (reduced price) to the state. Hayes plans to tell suppliers that Government is a single customer and expects to see an elimination of multiple prices charged to its agencies and bodies.
As well as focusing on common procurement of goods such as energy, stationery and ICT consumables in the short term, Campbell says “in the long term the NPS will also focus on categories such as office equipment, procurement cards and eInvoicing,” subject to the availability of resources and the absence of legal challenges. He says areas of high spend “have been identified and will be systematically targeted for savings.”
Fundamentally, this pursuit of targeted cost savings through aggregation of contracts and public sector bodies collaborating continues. With international research stating that each procurement process avoided saves an average of €6,000, and with the biggest purchaser of goods and services in the country in immense fiscal difficulty, it is clear that this pursuit will continue for some time to come.
Before being appointed Director of the National Procurement Service in April 2009, Vincent Campbell was director of corporate services in the OPW for 8 years.
He has an MBS in Strategic Management from Trinity College, and in 2010 completed an MBS in Strategic Procurement in DCU.
In his spare time he enjoys fishing and gardening.
