COMMONS

Councils must get better value from billions spent on procurement

13 March 2014

The Communities and Local Government Committee calls on local government to step up to the mark and get better value from the £45 billion it spends each year procuring goods and services

The Report calls on councils and the Local Government Association to invest now to ensure procurement skills are embedded across councils. This requires in-depth skills from all staff involved in designing, commissioning and managing services, not just procurement officers.

Chair's comments

Clive Betts MP, Chair of the Communities and Local Government Committee, said:

"Procurement is too important to be viewed as a niche function conducted in back offices. It is central to delivering and managing the services that people rely on every day, from having their bins emptied to receiving social care. Without effective procurement local government will cease to operate.

We need investment now so that staff right across councils gain the skills needed for effective procurement. At times staff, unsure of the needs of local residents and business—especially small local businesses—fall back on wasteful bureaucracy. This has to stop."

Conclusions and Recommendations

The Report's conclusions and recommendations include:

Collaboration

£1.8 billion a year of additional savings could be made if councils improved their collaboration. The LGA should produce best practice guidance on the most effective means of joining up procurement to deliver savings [paragraph 33].  Clive Betts MP said:

"Significant additional savings can be made if collaboration on procurement between authorities becomes the default for certain purchases.

The LGA must take the lead and produce guidance on how councils can voluntarily join together to make savings in their procurement. Compulsorily centralising procurement operation would not only produce practical difficulties but also severely limit the flexibility of councils to deliver local objectives."

Adding social value and supporting small business

Councils must exploit the potential of procurement to deliver local priorities by letting contracts not just on the basis of price, but on the basis of wider social value. Councils should present an annual report to a full Council meeting setting out their strategy for incorporating economic, social and environmental value in its procurement, including the impact on local economies and small businesses.

The LGA should produce guidance on how procurement can be used to deliver social value, such as apprenticeships and trainee opportunities, and how it can better support small businesses. 

"When letting contracts councils must not only consider price, but how they can benefit the local area and support local small and micro-businesses. This can be achieved by including within contracts requirements that suppliers deliver a specified number of apprenticeships or trainee opportunities, for example. Precise methods must be for each local area to decide."

Cutting costs to business

Councils need to cut burdens on local businesses, imposed in part by a culture of over-zealous application of EU procurement guidelines. The LGA and Government should clearly spell out what is a proportionate approach that will both meet EU requirements and streamline approaches. Paperwork also needs to be standardised, particularly Pre-Qualification Questionnaires.

"The cost to companies wishing to bid for council business can be an eye-watering £50,000 per tender – higher than in most other EU countries.  Councils must become more confident in how procurement guidelines can be followed without imposing excessive burdens on businesses.

Suppliers wanting to work with more than one council often have to complete multiple, complex forms that demand excessive information. If Pre-Qualification Questionnaires are to continue they have to be simplified and standardised so companies can reuse a completed PQQ across the sector."

Fraud and transparency

As more services are put out to tender local authorities are at much greater risk of fraud.  Councils must not 'let and forget' contracts but should pro-actively tackle fraud throughout the lifetime of a contract, not just at the tender stage. More must also be done to encourage whistleblowers and an anonymous reporting channel should be created. 

The LGA should consider how to increase the transparency of commercial contracts and local authorities should make greater use of open book accounting and consider placing similar requirements on information provision by contractors as apply to a public body.

"We found little hard evidence of significant fraud in local government procurement. But councils must not become complacent. Unless those managing contracts are adequately trained the risk of fraud will increase as more services are put out to tender.

Those within an organisation often know much more about what is really going on than external agencies.  More must be done to support whistleblowers as it is one of the most effective way of tackling procurement fraud.

Outsourcing can dilute transparency if commercial confidentiality is used as an excuse for inhibiting scrutiny of outsourced contracts. Increasing transparency is essential if fraud is to be identified and the public is to see what value the council is getting from contracts."

Managing outsourcing

Recent failures of outsourcing arrangements in local and central government raise questions over whether all councils are taking adequate steps to ensure effective control of contracts being delivered by private and third sector organisations. The LGA should undertake an assessment of the level of contract and risk management skills and resources available across the sector.

Councils should consider when letting contracts whether they wish to take into account a bidder's policies on employment issues, including zero hours contracts.

Councils must ensure that residents have a clear point of contact with external delivery bodies so that they receive a seamless service, regardless of who is delivering it. 

"In outsourcing a contract councils must ensure that they do not outsource responsibility for the quality of local services. If further failures are to be avoided, it is vital that local government is equipped to manage complex contracts.

Residents must be provided with a clear point of contact irrespective of who is delivering a service."

Further information

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