A few weeks ago,
Finance Minister, Jane Hutt (Lab, Vale of Glamorgan), released areport by John McClelland on the future of public procurement in
Wales. John carried out a similar review for the Scottish Government
in 2006.
What was the report's purpose?
The Welsh public sector as a whole (Wales : An Economic Profile IV) currently purchases between £4-5billion of services every year. Some of these services will be direct ongoing contracts, others might be one-offs. Because of the numbers involved, it's worth looking at the report in more detail.
As public spending is under strain, the review was to find out how effective current Welsh Government procedures are and how "outcomes can be maximised blah blah blah."
John took evidence via interviews, and took various Welsh Government reports and initiatives into account, including a proposed "National Procurement Service", the Micro-business Task & Finish Report and feedback from the Economic Renewal Plan sector panels.
What were the report's main findings?
Implementing/Drafting Procurement Policy
The first focus was on the "Buying Smarter in Tougher Times" report, published in 2011. McClelland said that this report "addresses virtually all of the key issues and opportunities for public sector procurement in Wales." McClelland also says that the advice surrounding EU procurement policy "couldn't be better."
High praise on both counts.You have to ask why the Welsh Government decided to launch yet another report/review?
Then you realise why. McClelland says that some public sector organisations don't accept or implement policy recommendations from the Welsh Government.
We have an officer-led culture in Wales, and considering the high wages and free reign many of them have, I wouldn't be surprised if many of them would think "I know best" on a whole range of issues.
I'd go so far as to say if public bodies are hiring officers who don't understand devolution, are used to working with Westminster alone, or don't "approve" of devolution, they might not accept the Welsh Assembly or Government's authority in this. It's pretty serious if people don't recognise the chain of command. Is that down to weak leadership?
Procurement Skills
McClelland has "serious concerns" about procurement capability in the Welsh public sector. It's the whole "spending too much because you lack negotiating skills" thing. McClelland says that investing in procurement skills "saves overall costs". He cites various schemes, including : the creation of a single NHS procurement body, the ongoing work of Value Wales and joint purchasing in Welsh local government.
He suggests that for every £10million of spending, there should be one procurement professional (defined as a qualified/studying member of the Chartered Institute of Purchasing and Supply), based off findings in Scotland.
McClelland says that when procurement is seen as "administrative" rather than a "valuable role", you end up with skills shortfalls and poor value for money.
Economic Impacts
The number of Welsh procurement opportunities for small and medium sized businesses (SMEs) has increased from 24% of all Sell2Wales opportunities in 2009/10 to 30% in 2010/11. It's around 45% in Scotland for want of comparison. As one of the Welsh Government's priorities is growth, then McClelland says that SME's need to play more of a role in procurement, as they have a bigger impact on the Welsh economy (most of our businesses are SME's).
However, only 52% of of public procurment spend in Wales went to companies with a base in Wales (which has actually improved from 30% in 2005). The Welsh NHS however, still only spends 36% within Wales and local authorities vary wildly.
Many of the other findings/conclusions in this area are about ensuring as much information is provided to potential suppliers as possible. It's also about ensuring the Welsh Government has the "right methodology" to provide value for money, while at the same time "minimising complexity" for potential bidders – in particular SME's.
The Operating Model
The report says that while "collaborative procurement....cannot, and should not, apply to all forms of procurement," McClelland suggests that at least 50% of total public procurement spend should come from collaborative contracts, primarily to take advantage of economies of scale.
Local government is said to have a "lower than adequate" staffing level in procurement (with authority-to-authority variations), and - echoing what was said further up - that there's a "procurement skills deficit" within certain parts of the public sector.
McClelland says that 15 local authorities have lower than recommended numbers of specialist procurement staff compared to spending. He suggests a link between lower numbers of expert staff and poor "economic impact" from procurement.
Greater collaboration could be one way to solve this problem, but only if public authorities actually take it up. Only 6.6% of spending by the Welsh Purchasing Consortium (made up of 16 local authorities) was collaborative, while the North Wales Procurement Partnership was just 2%. McClelland says that while the Welsh Local Government Association are making a "strong effort" to increase collaborative procurement, only "10.5% of local government spending is collaborative".
The Welsh Government itself is generally praised, with several central initiatives serving as an example of "developing and transferring skills", however just 4% of the £471million spent by the Welsh Government was conducted via "collaborative contracts", compared to 68% in the health service.
Once you include all public bodies, McClelland says the model "is structured and reasonably robust", but there "are also some really weak areas" – in particular local government.
The Role of Value Wales
Value Wales is the Welsh Government arm responsible for ensuring efficiency and value for money in public services, supporting various Welsh Government aims, including those mentioned above.
McClelland says that Value Wales have "a very challenging set of assignments....given the level of staffing....because of high expectations from the Welsh Government." He says that the group "finds it a challenge" to cover these expectation because the Corporate Procurement Service (CPS) Unit only have 15 members of staff working on non-transport procurement, which is worth £350million.
McClelland acknowledges that there has been some "extraordinary, pioneering, outstanding work in many areas" – in particular research, social care procurement and some aspects "e-procurement". He does suggest though that many people/bodies had no idea of Value Wales' role or responsibilities.
Some specific weaknesses he points to within Value Wales are its record-keeping and how it supplies simplified/uncomplicated information to prospective tenders (called SQuID)– in particular SME's. He also says that take up of the Welsh Government's sustainability frameworks in procurement (SPAF – I'll leave the jokes to you) have been "weak".
The overall impression given is that Value Wales "adds significant added value to Welsh public sector procurement."
What are the recommendations?
There were 28 recommendations in total, which you can find at A Change of Personnel.
The key ones, in my opinion, are:
What was the report's purpose?
The Welsh public sector as a whole (Wales : An Economic Profile IV) currently purchases between £4-5billion of services every year. Some of these services will be direct ongoing contracts, others might be one-offs. Because of the numbers involved, it's worth looking at the report in more detail.
As public spending is under strain, the review was to find out how effective current Welsh Government procedures are and how "outcomes can be maximised blah blah blah."
John took evidence via interviews, and took various Welsh Government reports and initiatives into account, including a proposed "National Procurement Service", the Micro-business Task & Finish Report and feedback from the Economic Renewal Plan sector panels.
What were the report's main findings?
 |
| Value Wales was praised, but not without some reservations. (Pic : WLGA) |
The first focus was on the "Buying Smarter in Tougher Times" report, published in 2011. McClelland said that this report "addresses virtually all of the key issues and opportunities for public sector procurement in Wales." McClelland also says that the advice surrounding EU procurement policy "couldn't be better."
High praise on both counts.You have to ask why the Welsh Government decided to launch yet another report/review?
Then you realise why. McClelland says that some public sector organisations don't accept or implement policy recommendations from the Welsh Government.
We have an officer-led culture in Wales, and considering the high wages and free reign many of them have, I wouldn't be surprised if many of them would think "I know best" on a whole range of issues.
I'd go so far as to say if public bodies are hiring officers who don't understand devolution, are used to working with Westminster alone, or don't "approve" of devolution, they might not accept the Welsh Assembly or Government's authority in this. It's pretty serious if people don't recognise the chain of command. Is that down to weak leadership?
Procurement Skills
McClelland has "serious concerns" about procurement capability in the Welsh public sector. It's the whole "spending too much because you lack negotiating skills" thing. McClelland says that investing in procurement skills "saves overall costs". He cites various schemes, including : the creation of a single NHS procurement body, the ongoing work of Value Wales and joint purchasing in Welsh local government.
He suggests that for every £10million of spending, there should be one procurement professional (defined as a qualified/studying member of the Chartered Institute of Purchasing and Supply), based off findings in Scotland.
McClelland says that when procurement is seen as "administrative" rather than a "valuable role", you end up with skills shortfalls and poor value for money.
Economic Impacts
The number of Welsh procurement opportunities for small and medium sized businesses (SMEs) has increased from 24% of all Sell2Wales opportunities in 2009/10 to 30% in 2010/11. It's around 45% in Scotland for want of comparison. As one of the Welsh Government's priorities is growth, then McClelland says that SME's need to play more of a role in procurement, as they have a bigger impact on the Welsh economy (most of our businesses are SME's).
However, only 52% of of public procurment spend in Wales went to companies with a base in Wales (which has actually improved from 30% in 2005). The Welsh NHS however, still only spends 36% within Wales and local authorities vary wildly.
Many of the other findings/conclusions in this area are about ensuring as much information is provided to potential suppliers as possible. It's also about ensuring the Welsh Government has the "right methodology" to provide value for money, while at the same time "minimising complexity" for potential bidders – in particular SME's.
The Operating Model
The report says that while "collaborative procurement....cannot, and should not, apply to all forms of procurement," McClelland suggests that at least 50% of total public procurement spend should come from collaborative contracts, primarily to take advantage of economies of scale.
Local government is said to have a "lower than adequate" staffing level in procurement (with authority-to-authority variations), and - echoing what was said further up - that there's a "procurement skills deficit" within certain parts of the public sector.
McClelland says that 15 local authorities have lower than recommended numbers of specialist procurement staff compared to spending. He suggests a link between lower numbers of expert staff and poor "economic impact" from procurement.
Greater collaboration could be one way to solve this problem, but only if public authorities actually take it up. Only 6.6% of spending by the Welsh Purchasing Consortium (made up of 16 local authorities) was collaborative, while the North Wales Procurement Partnership was just 2%. McClelland says that while the Welsh Local Government Association are making a "strong effort" to increase collaborative procurement, only "10.5% of local government spending is collaborative".
The Welsh Government itself is generally praised, with several central initiatives serving as an example of "developing and transferring skills", however just 4% of the £471million spent by the Welsh Government was conducted via "collaborative contracts", compared to 68% in the health service.
Once you include all public bodies, McClelland says the model "is structured and reasonably robust", but there "are also some really weak areas" – in particular local government.
The Role of Value Wales
Value Wales is the Welsh Government arm responsible for ensuring efficiency and value for money in public services, supporting various Welsh Government aims, including those mentioned above.
McClelland says that Value Wales have "a very challenging set of assignments....given the level of staffing....because of high expectations from the Welsh Government." He says that the group "finds it a challenge" to cover these expectation because the Corporate Procurement Service (CPS) Unit only have 15 members of staff working on non-transport procurement, which is worth £350million.
McClelland acknowledges that there has been some "extraordinary, pioneering, outstanding work in many areas" – in particular research, social care procurement and some aspects "e-procurement". He does suggest though that many people/bodies had no idea of Value Wales' role or responsibilities.
Some specific weaknesses he points to within Value Wales are its record-keeping and how it supplies simplified/uncomplicated information to prospective tenders (called SQuID)– in particular SME's. He also says that take up of the Welsh Government's sustainability frameworks in procurement (SPAF – I'll leave the jokes to you) have been "weak".
The overall impression given is that Value Wales "adds significant added value to Welsh public sector procurement."
What are the recommendations?
There were 28 recommendations in total, which you can find at A Change of Personnel.
The key ones, in my opinion, are:
- There should be a single "Policies and Practices Document" for Welsh public sector procurement.
- It should be a "duty" to ensure there are enough skilled procurement staff to ensure delivery of Welsh Government obligations.
- Local Government in particular should address its "skills deficit".
- The Welsh Government should commission a survey of procurement/professional skill levels in the Welsh public sector.
- It should be a mandatory duty for all public bodies to accept Welsh Government procurement policy.
- Procurement should be directly linked to economic development by the Business/Economy department.
- There should be a replacement for the IT element of Sell2Wales as soon as possible.
- The establishment of a "National Procurement Service" to address national and repetitive categories of spending.
- Greater collaborative spending at national and local government levels, with local government actively participating in any National Procurement Service.
- The mission and structure of Value Wales should be reviewed to ensure its current responsibilities are consistent with policies and their implementation.
Plaid's "Plan C"
Coinciding with the release of the McClelland report, Leanne Wood revealed Plaid Cymru's response, which they've dubbed "Plan C". £4.5billion in public procurement is a lot of money to play with, and Leanne says that it's an "opportunity we cannot afford to miss". Procurement was also a focal point at their party conference last month.
As said earlier, just 52% of public procurement in Wales is spent on companies with a base in Wales, and it's even worse in some parts of the public sector – in particular the NHS (36%).
Leanne points to Germany (98.9% of procurement goes to German companies), France (98.5%) and the UK as a whole (97%). Scotland alone is 75%. I think it's safe to assume that the bulk of the procurement "leakage" from Wales will be to English firms.
Borthlas has also said, quite rightly, that one reason why Germany et.al. can procure so much internally is because the have the economic diversity, expertise and the companies, that can provide services to the public sector for the cheapest rate. The Welsh NHS, for example, could be buying specialist equipment/services that they simply couldn't get in Wales.
Leanne wants to match Scotland – a 75% internal procurement rate before 2016, and 90% by 2020 – which Plaid Cymru believes would create up to 48,000 new jobs, and increase GVA by an extra 0.5% year on year, helping to close the productivity gap (Offa's Gap) with the rest of the UK (Wales : An Economic Profile - Part V).
It's not as easy as that. The Welsh Government have often hidden behind EU regulations, which state that once the value of a contract is above a certain level, it has to be open to competition – regardless of where a bidder is from - to prevent protectionist "buy national" policies and maintain free trade.
There might be a way around it, and Plaid have noticed it.
One of the recommendations in the McClelland report is that new procurement policy should be considered a "duty" rather than an optional extra. Plaid are going one step further, calling for a Procurement Reform Bill similar to one the Scottish Government are working on.
The insertion of "community benefit clauses" in contracts above a certain value is permissible under EU regulations to "deliver wider social benefits". For example : considering the impact on SMEs and social enterprises, increasing apprenticeships and local food sourcing for things like schools and hospital. Whichever way you look at it, such targeted investment would result in Welsh job creation.
Leanne says that there are "barriers within the Welsh Government" and that successive Welsh governments gave ignored advice relating to using procurement to "pump-prime" research and development in particular (which is where the high-value added stuff originates from).
I've criticised Plaid in the past for coming up with ideas that sound reasonable, but are then loaded with a needlessly "radical" suggestion that derails it. Although I think the job potential whiffs of Carwynisation (I'd like to know where Plaid got 48,000 jobs from), this isn't "one of those". Although this isn't original (because they're nicking the idea from the SNP) it's hard to argue against in principle.
Plaid have come out with a meaningful, realistic, coherent response before the Welsh Government have. The Welsh Government should be embarrassed, though fortunately for them it'll pass relatively unnoticed. If this is the scale of their thinking and ambition, then Plaid are starting to offer credible economic solutions, and we should look forward to what they can come up with over the next few years. It can only mean one thing:
Leanne means business.
