Public sector procurement has been quite exciting of late. This is primarily due to the new Procurement Act, but there are some interesting little asides; the impact of the general election on procurement policies, for one, and inflation, for another.
There are currently five months to go before the Procurement Act comes fully into effect, so there’s plenty of time for even more excitement when it comes to developing and implementing procurement processes that align with the Act.
Meanwhile, we’re going to look at some of the biggest topics that have had an impact on public procurement for the first half of 2024.
AI, AI, and More AI
The adoption of AI in the UK’s public sector hasn’t exactly set any speed records. But in this instance slow and steady does not win the race.
According to stats from the National Audit Office (NAO), only 21% of public sector bodies have had an AI strategy. Furthermore, 37% of public sector bodies have deployed AI use cases (they use AI in one function or another).
The most commonly used function among bodies that have piloted or planned AI is to improve internal processes (87%). Among those that have deployed AI, 66% use AI to support operational decision-making. The focus is also on improving existing services, rather than developing new services (92% planned and 88% deployed).
Digitalisation of Procurement
It’s important to note that digital transformation goes hand-in-hand with AI. Of particular concern is the quality of data. Poor operational data, for example, makes transformation within departments difficult. Other challenges to digital transformation in government bodies include inconsistent data and impractical data-sharing agreements.
According to 62% of government bodies, poor-quality data is the primary barrier to the implementation of AI.
The Government has recognised the need to address these challenges to allow the speedy uptake of digital tools in public procurement. However, adopting digital systems is only half the battle. Buyers must be trained to use these systems in the supply market – and use them well.
Access to and the insightful interpretation of good quality data drive the digital transformation. One- or two-day courses might teach you the basics of data interpretation and how it works with procurement software. But only more in-depth courses will give you a deeper understanding of data analytics and how procurement software crunches data so that you can leverage every single benefit and develop solutions to problems that crop up.
Practicalities
Perhaps more important than mere digitalisation is consistency or integration of strategic sourcing systems. It’s not practical for central government and local council bodies to use digital technologies that are at odds with each other. The ideal would be a single system for all of the procurement processes and administrative tasks, but it’s ok to settle for software that is compatible across the board.
Anything less can result in inefficient supplier management, lack of transparency, and lack of actionable insights that drive informed decision-making and allow for the development of a successful procurement strategy.
Why is digitalisation so important?
Digitalisation has many benefits for public sector procurement.
1) Automation
Automation takes over time-consuming manual tasks, like purchase order processing, eliminating manual data entry and human error, and improving procurement performance.
2) Data management
Systems provide real-time data for up-to-the minute informed decision-making based on things like spend data and procurement trends. This is useful for contract negotiation – and other data-driven tasks in your purchasing strategy.
(AI can play an important role at this point in procurement strategies, especially when it comes to analytics and predictive analytics.)
3) Supplier management
Real-time data comes into it again, this time providing insights into various aspects of the supplier selection process and management, including performance, risk, and compliance.
Ethical and Strategic Procurement Strategy
Social value and sustainability have been getting a lot of press in public procurement. It’s now necessary to include ethical sourcing to the list of mandatory requirements.
New guidelines for ethical procurement don’t just address direct ethics, but include the importance of consumer expectations (consumers demand high ethics standards and visibility of ethical procedures and activities) and the need to align ethical procurement strategies with organisations’ corporate social responsibility goals.
Suppliers must step up and deliver the goods. They need to ensure that their contractors and subcontractors also uphold ethical practices in the procurement process.
A common theme is modern slavery and it could go back quite far down the list of subcontractors’ subcontractors’ subcontractors. Suppliers will have to dig deep to ensure their supply chains are 100% ethical.
Ethical procurement strategies encompasses
- Transparency and fairness in the tender process
- Unfair use of power or position to influence contracts or gain a competitive advantage
- Corruption, including bribery
- Social responsibility, including health and safety, discrimination, and working hours
- Forced labour, including modern slavery and child labour
- Compliance with national and industry regulations
- Fair remuneration – wages, salaries, and benefits
UK National Procurement Strategy 2024
The Government recently published the National Procurement Policy Statement (NPPS), a document that accompanies the Act and supports contracting authorities as they adapt to the changes contained in the Act.
That’s not all, though. The NPPS is legislated. Its word is gospel (more or less). Contracting authorities that fail to perform or act as described in the statement risk having their decisions and actions that lead to non-compliance undone. Contracting authorities are overruled and everything goes back to square one. where the procurement process started.
There are five national priorities that contracting authorities must consider and deliver:
1) Value for money – value for taxpayers – that is based on cost analysis, risk assessment, and performance evaluation and is conducted at the preliminary stage of the procurement process.
2) Social value ensures contracting authorities must make decisions in keeping with comprehensive social value, taken from a holistic view.
3) No obstructions for SMEs. The contract must enable SMEs to compete fairly in the public procurement marketplace.
4) Commercial delivery is a priority that focusses on contracting authorities’ ability to manage delivery using the correct processes and best practices.
5) Contracting authorities must have the skills and capability to actually engage in public procurement. This includes qualified staff and workable plans to ensure that contracts are efficiently and effectively delivered without wasting resources, especially taxpayers’ money.
Government Funding for SMEs
The Government has determined that 2024 will be the Year of the SME. To help its goal along, it created the Help to Grow campaign – a one-stop-shop that houses everything SMEs could possibly want to know about strategic procurement, including market analysis and informed purchasing decisions.
There are also several government grants to give SMEs a leg up in the public sector.
Funding options include (but aren’t nearly limited to):
- UK SMART Grants
- Green Business Fund
- Seed Enterprise Investment Scheme
- British Business Bank
- New Enterprise Allowance (NEA) – support for people who receive Universal Credit
- Start-Up Loans Scheme
- Growth Accelerator Fund
- Women in Innovation Awards
- Community Business Fund
Public-Private Partnerships (PPP)
Public-private partnerships are strategic relationships between public sector bodies and private sector companies that typically tackle high-value, long-term (20 – 30 years) contracts related to infrastructure, like public parks, municipal buildings, and roads.
In a PPP procurement strategy, the private company often benefits from tax concessions, operating revenue, partial ownership rights, or liability protection. The contracting authority doesn’t have to worry about various financial risks that stand in the way of an effective procurement strategy.
Procurement teams play a crucial role in developing and implementing these PPP procurement strategies, ensuring efficient acquisition of goods and services, trustworthy supplier partnerships, and maximising cost efficiency.
There are four types of PPPs
Below is a quick look at the types of public-private partnerships available.
1) Build Operate Transfer (BOT)
Private companies are responsible for all construction and operations for a set period (20 years or more) and then transfer responsibility (ownership) to the government.
2) Build Operate Own (BOO)
Similar to a BOT, but the private company can retain ownership of the projects – there is no transfer to the government.
3) Design-Build (DB)
The private company is hired to design and build the project but the government retains ownership.
4) Buy Build Operate (BBO)
A private company purchases an existing project from the government and assumes full ownership.
Impact of Inflation on Public Procurement
Inflation has a direct impact on procurement-related costs, especially up and down the supply chain. As a result, cost reduction must be included in procurement strategies to decrease operational expenses.
To keep rising costs in check, buyers need to adopt a detailed and agile approach to strategic procurement and be more vigilant when it comes to loosening the purse strings.
External and internal stakeholders work together to optimise spending and minimise potential risks.
Being prepared is being forearmed, which is why it’s recommended that supply chains conduct disruption scenarios to identify areas particularly vulnerable to inflation and then develop a robust procurement strategy to mitigate the risk and increase supply chain resilience.
Finally, regular comprehensive risk assessments are necessary to determine the risk that suppliers and subcontractors pose to the supply chain. Regular risk assessments also help identify the potential for cumulative risk and the resulting increased costs.
Once you have this information, it’s possible to develop and implement plans to cushion the blow to the supply chain.
General Elections and Public Procurement
The Procurement Act and general elections are linked on a national basis. Typically, in the runup to the elections, major public procurement decisions and projects are put on hold because there is a chance that they could be contrary to the newly elected Prime Minister’s agenda and could be scrapped. This is an unnecessary waste of time, precious resources, and costs.
Different rules apply
It’s interesting to note that this embargo really only applies to central government projects because they are more likely to be aligned with the national government’s agenda. Local council projects, on the other hand, are more likely to proceed as planned.
Goodbye The First Half, Hello The Second
It seems as though the first six months of the year have been about psyching up for the changes to come. Corralling your ducks, sharpening your pencils – generally getting geared up.
The next four-ish months should be more active. Getting your ducks in a row, putting pencils to paper – generally breathing life into new procurement strategies.
One of the most important things to remember is preparation for marketing. It’s a good idea to advertise your readiness for change. To assure all stakeholders, including taxpayers, that everything is under control and you’re 100% compliant with all new regulations, so there’s no risk in partnering with you.
Cadence Marketing has the experience and flexibility to adapt marketing campaigns to changes in the public procurement environment. We’re ideally situated to guide your ducks down the right stream, keeping those webbed feet paddling until you reach your marketing goals.
Contact us now for more information or to book a free consultation and talk to one of our specialists one-to-one.
