Leading procurement reform
Chief Procurement Officer Paul Quinn discusses the procurement reform journey to date, the lessons learned and the next steps with Owen McQuade.
Reform, as Paul Quinn recalls, became a key part of government policy when the financial crisis took hold. The ministers at the newly-formed Department of Public Expenditure and Reform (DPER), Brendan Howlin and Brian Hayes, were therefore “at the core” when looking at all aspects of government efficiency.
“One of the areas that they identified as an opportunity was the procurement space,” he comments. Back in 2012, Accenture was commissioned to scrutinise procurement across the public sector – a six-week study which covered universities, hospitals, the Defence Forces, local government and the justice sector.
The report proposed a “centre-led” model to government, bringing policy and operations together. Quinn was then appointed as Chief Procurement Officer in January 2013 with a remit to reform the system and deliver better value for the State: €500 million in efficiency savings over the next three years.
This would build on good work that has already been done in several sectors “but pull it together in a more cohesive function.” The various parts of the public sector typically acted independently of each other with “absolutely no co-ordination” but the new model creates “one voice to the market.”
This means that in future everything that the Public Service buys such as energy services, ICT products and vehicles will be purchased out of one office.
Structure
Asked how he overcame the difficulties involved, Quinn notes firstly that the governance model was agreed by the Cabinet.
“At the top tier, we have a board which includes executive sponsorship from across the system,” he continues. The board is chaired by the Minister of State and includes some of the key secretaries-general from across the public sector.
Below that, the “steering level” of the governance model is more “operational and customer-focused” and includes executives from across the system e.g. An Garda Síochána’s Chief Administrative Officer.
The next tier is operational i.e. the Office of Government Procurement (OGP) and the heads of the sector procurement functions. The OGP procures common goods and services such as cleaning, catering, vehicles, fuel and energy. This accounts for €4 billion: about 60 per cent of the total spend.
Four sectors then have leads for sector-specific spend:
• health (e.g. surgical equipment and drugs);
• defence (e.g. armaments);
• local government (e.g. plant hire, water treatment chemicals); and
• education (e.g. laboratory equipment).
“We sit around the same table,” he emphasises. “Our remit is to make sure that, as the procurement leaders of the Public Service, we implement the transformation, we implement the savings programmes and we manage the operations in a cohesive way.”
The next layer down is the 16 ‘category councils’ which bring together procurement and business leaders to talk about commercial strategy. These councils – which cover themes such as energy and ICT – are “procurement-led but business-owned.” Senior business leaders agree the strategies rather than having these imposed from government.
The department’s former Chief Operations Officer, Paul Reid, has said that officials decided to be more ambitious with procurement after the first reform plan (2011-2014). Quinn remarks that a “significant amount” of the first plan focused on efficiency and labour costs, and procurement has become “more front and centre as the next big enabler for significant financial reductions.”
Whereas the implementation of the Haddington Road Agreement on pay and conditions was relatively swift, procurement is “a longer road in that you can’t address every item of spend in a very short period of time.”
In ICT, for example, procurement staff could review software licensing in the first year, followed by support and maintenance services: “There are things that you have to do iteratively because of just the resource constraints but also the fact that the market couldn’t absorb it all if you were trying to do it all in one go.”
The OGP is increasingly using framework contracts which cover the whole Public Service. The energy framework covers the large hospitals – very significant users of energy – right through to the one-room school on Tory Island.
These contracts will be increasingly used as they “provide a lot of flexibility for users and they reduce costs both for bidders but also for the public sector as well.”
A standard suite of tender and contract documents is already in place and the OGP plans to customise these according to the “nuances” of the items being purchased.
Stationery requires a very different contract than one for an ICT solution.
As for quick wins, the ICT framework on PC consumables has delivered savings of 30 per cent over normal prices, totalling over €1 million. The contract was also won by an Irish SME.
Management
Turning to the challenges in implementing any reform programme, he says: “The challenge is always about people. It’s always around making the changes work with people and there’s an old rule of thirds.
“A third of people will absolutely recognise and embrace because they see it as the right thing to do – they’re enthused by it, they think it’s a good thing and they naturally ‘graduate’ to it. Then you’ve typically a third of people who need to be convinced, who are somewhat sceptical but with a bit of work, with a bit of engagement and communication and convincing, actually will come on the journey as well. And then you’ve always got a third of people who will always resist and find it difficult to accept that the change is required.”
This way of thinking reminds him of the need to engage with and convince people along the journey of change.
The OGP has a “very broad stakeholder group” ranging from politicians through to business contacts, middle managers and representative organisations. “It’s a very broad programme as well,” he comments, pointing out that it touches almost every part of the Public Service and the Cabinet wants to see this happen. The momentum within OGP is increasing with 70-75 staff today and the aim of growing this to 230 by the end of the year.
€500 million sounds ambitious but he points out that the Public Service spends €8.5 billion each year on goods and services. The target for 2014 is €127 million in savings but gathering up the savings is hard in itself because of the large number of public bodies which need to report back. A data analytics team is gathering the spend information from all financial systems in the public sector. More than half of procurement spend is now recorded in a central database.
“Information is the oil of the procurement machine,” he remarks. “If you don’t have data, you can’t make meaningful decisions.”
The Irish Government recognises SMEs as a significant enabler for economic recovery and ministers want to make sure that there are “no unreasonable barriers” for SMEs doing business with government.
A major circular, published in April, gives officials clear guidance about dealing with SMEs e.g. encouraging the publication of tenders above €25,000 on the national e-procurement platform. Contracting authorities are also being encouraged to “break larger contracts down into smaller lots.” The stationery contract, for example, was broken down into four lots – the largest being worth €2 million and the smallest around €400,000.
ICT procurement, it is put to him, seems to be a difficult area. The OGP, he responds, is setting up a specific team for looking at ICT. Secondly, Quinn works with the Government’s Chief Information Officer – based in the same department – to align the technological and commercial aspects of strategy.
DPER also has extensive experience of managing ICT projects: “Everybody hears about the things that go wrong. Nobody really points to the things we got right. It’s not unique to the public sector. If you look at large IT projects, my own experience is that they are often fraught with difficulty but they can be controlled.”
The new procurement directives were delivered under the Irish Presidency of the Council of the European Union in early 2013 and Quinn maintains that they would not have happened otherwise. “It did come down to the wire politically to get them achieved,” he recalls.
Transposition into national law does take a considerable amount of time. Working with its stakeholders, the OGP identified the key elements to implement through the circular which went out in April: “There’s a very solid recognition that the right steps are being taken in that regard.”
Profile: Paul Quinn
An engineer by training, Paul completed a diploma in accounting and finance and an MBA. He worked with eircom for 28 years. Most of this work focused on the operational aspects of the business but it later involved process and systems development and shared services functions e.g. procurement, property, warehousing and transport.
“eircom was very much a rollercoaster from when I joined it in 1984,” he recollects. “It had been a Civil Service department up until 1 January 1984 so I’ve seen an evolution from this kind of environment and culture right up to being a plc and being owned by venture capitalists.” The company had a “massive drive on efficiencies” and the 2012 insolvency process was also a major learning process.
Outside work, he sails dinghies off the County Dublin coast and enjoys kite-biking in Donegal.
“I like a lot of adrenaline-type sports,” he quips. “They stop you thinking about anything else.”
