Reforming procurement: the northern experience

Des Armstrong, Director of the Central Procurement Directorate, outlined how more centralisation and prioritisation – and an outcome-focused culture change – are changing the North’s approach to sourcing goods and services for government.

A drive to find more efficiencies in the North’s public finances is leading to a new focus on collaborative procurement within government, Des Armstrong has explained. The Director of the Central Procurement Directorate (within the Department of Finance and Personnel) was speaking at eolas’ seminar on public procurement.

Armstrong sensed that the public procurement profession had “a real desire to ensure that public money that is being spent is spent effectively for the citizen and also increasingly to ensure that business benefits from it as well.”

Central and local government in Northern Ireland spends around £3 billion per year on procurement, of which £2.7 billion was spent by government departments and their arm’s length bodies. This constitutes an important element of the local economy – where regional gross value added stands at £29 billion – and the CPD is also keen to ensure that local businesses can compete in open markets for contracts across the EU.

“We want our companies to be able to bid for work in Northern Ireland, win contracts and use that experience outside Northern Ireland,” he commented. CPD’s key priority, though, is to ensure that public procurement supports the project and business objectives undertaken by the Northern Ireland Civil Service departments.

“If we get into the importance of the procurement process first, that’s the wrong way round,” Armstrong stated. “We recognise the potential to maximise economic, social and environmental outcomes so we need a balanced approach as to how we address the sustainability issue.”

The budgetary constraints which limit direct social intervention by government are leading to an increasing focus on procurement as a vehicle for promoting social inclusion. CPD’s approach is shaped by EU directives, UK regulations which enforce the directives, and the Northern Ireland Public Procurement Policy – the latter applies to central government and is implemented by a system of procurement guidance notes (PGNs) rather than legislation.

The Executive’s overall aim is to deliver best value for money. The Procurement Board is chaired by the Minister of Finance and Personnel (Simon Hamilton) and brings together all heads of departments and a number of external experts. CPD works with centres of procurement expertise (CoPEs) across the public sector and accounting officers are briefed on best practice via the Managing Public Money guidance.

Best value for money “goes beyond simply price” and is formally defined as “the most advantageous combination of cost, quality and sustainability to meet customer requirements.” In practice, this involves:

• consideration of the whole life cost;

• meeting a specification which is fit for purpose and sufficient to meet the customer’s requirements; and

• considering economic, social and environmental benefits in support of the Programme for Government.

Armstrong added that a proper infrastructure for the province “is essential if we’re going to make progress, and provide for the citizen and improve the economy.” £1.6 billion was allocated for capital expenditure in 2014-2015. That said, the effectiveness of delivering projects has been criticised by the CBI and in a joint internal review by the CPD and the Executive’s Strategic Investment Board. The Minister has responded by outlining three priorities: more centralisation; better prioritisation; and a significant culture change in government.

Reform in practice

A centralised procurement and delivery service will be established within CPD and will oversee all capital projects except for those involving railways, roads, water services and social housing. Its role will be to support the projects and get them “on the go” with “a very clear indicator of where we are in terms of the likely success of a project moving forward.” Ordering, scoping and financial approvals will still rest with the relevant Minister and department.

The Executive will agree a portfolio of strategically significant projects, based on recommendations from the Department of Finance and Personnel and Strategic Investment Board. Progress will be measured by ministers on a quarterly basis, with a viewing to ensuring a “pipeline of products” for the industry.

Culture change will build on the existing success of infrastructure projects e.g. Titanic Belfast, the South West Acute Hospital in Enniskillen, and the new Ulster Rugby stadium at Ravenhill. The culture in government should focus on delivery and upskilling staff so that they focus on moving projects forward.

Ministers have also agreed an asset management strategy (December 2013) with the aim of reducing the cost of running the Executive’s estate. Collaborative procurement will support this strategy, maximise the potential for collaboration between the CoPEs, and establish a category management structure i.e. to improve the level of expertise and facilitate more informed decisions. Savings through process efficiencies, standardisation and economies of scale will also be identified.

Effective collaboration relies on good management information, including spend analysis, benchmarking and specifications. To take a small example, there should be “one black pen in the Civil Service” rather than different departments ordering a variety of makes.

Many SMEs appear in the supply chains for major government contracts. CPD wants to ensure that the good relationships that government enjoys with main suppliers extend into the supply chains. A single online procurement portal (e-sourcingni.

bravosolution.co.uk) is now up and running and advertises all contracts worth £30,000 or more. CPD has also worked with the CBI to draw up standard conditions of contract and a target to pay all invoices within 10 days has also been set.

Project bank accounts have been brought in for construction projects – a safeguard for situations where suppliers go out of business – and liability and insurance requirements have been reduced.

Importantly, Armstrong noted, processes must be proportionate and it’s “not a good idea at all” to run a process for a £10 million project for a £50,000 transaction.

Social clauses

As part of the Programme for Government, all contracts in Northern Ireland are to promote a social benefit. Departments can decide, on a project-by-project basis, whether to link this to the subject matter of the contract, introduce contract performance clauses, or use a combination of both measures. “The key thing here is to satisfy the best value for money definition as established by the Executive,” Armstrong added.

Scope of collaborative procurement

• Advertising and media

• Energy

• Facilities management

• Fleet

• IT commodities

• Office supplies

• Postal services

• Professional services

• Telecoms and networking

• Travel