Thursday, 4 October 2012

Public procurement reform & Plaid's "Plan C"

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?

Value Wales was praised, but not
without some reservations.
(Pic : WLGA)
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:
  • 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 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.


  1. I agree - Leanne does mean very serious business. And I have to say that I am impressed so far. Good ideas, well presented, and an unassailable passion for improving the lot of the people of Wales using powers we have, and not hanging about waiting for something to turn up. which is Labour's strategy.

    It can't be long, despite the relentless negative personal attacks on her an other Plaid AMs, by the Western Mail, signing the Labour tune, before the penny drops with the Welsh people, as it did in Scotland in 2011. #YMLAEN!

  2. Interesting post on an interesting topic. Although I don't think plaid are as ahead of the game as you think. The recent procurement debate showed how there is a large degree of consensus amongst all parties on this issue. Plaid's proposal for a procurement bill probably originate from the mcclelland report that strongly hinted to the creation of a statutory duty and not from the snp. Remember mcclelland carried out a similar study in Scotland which led to the snp bill proposals and it's likely that's why Jane Hutt brought him to Wales. That said, there is an issue around the transposition of national policy and the national procurement service could start to address this. It's vital that supplier voids are filled though, otherwise the 75 % figure is meaningless. That means the nps working closely with BETS to foster welsh companies.

  3. Owen, good post. You wrote "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?"

    In my opinion this is right on point. Welsh politics will be in a constant state of flux and dispute over process until we have a completely clear, confederal UK system of government. We need to be able to assume that everything is devolved and that foreign affairs, immigration, customs and whatever else isn't. At the moment it's a joke. We can't even make a law on local byelaws without disrupting the Secretary of State for Wales' power- a power that has never ever been used in Welsh history! I'm sure sorting out devolution and giving us a proper strong settlement would also help procurement.

  4. "Although I don't think plaid are as ahead of the game as you think. The recent procurement debate showed how there is a large degree of consensus amongst all parties on this issue."

    I also agree with this point. Plaid are really preaching to the converted. But by calling for legislation first and by making such a public show over a 'boring issue' like procurement they give the impression of being in front of everyone else. They probably knew that Jane Hutt wouldn't want to commit to legislation right now but that she probably will eventually. This suits Plaid to try and develop an aura of reasonable and common sense policies around Leanne Wood, especially ones that will eventually get implemented.

    I also agree that if there is legislation and an NPS it should be under the BETS portfolio, rather than finance. What I was glad to read is that McClelland thinks Wales has good legal advice on the EU regulations. This should enable procurement managers to exploit the loopholes correctly, as happens in Germany and France.

  5. How can I get in on this ie a never ending supply of tax-payers money?

  6. Thanks for the comments everyone, there's a lot to chew on.

    Plaid have clearly been thinking about this for some considerable time - perhaps going back to points raised in the Collective Entrepreneur report (co-authored by Adam Price, coincidentally) - and spotted the opportunity before the WG did. As Anon 11:14 puts it, "giving the impression of being in front of everyone else."

    That is, in my opinion, "ahead of the curve". But taking credit for ideas doesn't matter. What matters is that something's done. If I were heading to the negotiating tables for the budget, for example, then a Procurement Reform Bill would be at the top of my list of potential deal-makers.

    What Anon 23:18 says about BETS and the proposed NPS working with companies to ensure they can get the contracts in the first place is critical. There's no point coming up with procurement reforms if there are no companies with the stature/capabilities to take advantage.

    Anon 11:10 - I'll have something to say on the Byelaws Bill controversy next week, and you're right in my opinion. However, the Scots haven't had any problems with procurement within their settlement (I know it's different to Wales'). I also think it's optimistic to expect any sort of constitutional settlement within the UK that undermines "parliamentary sovereignty". It's either going to be drip-drip of further powers, "devo-max" or independence. I think we can forget confederal solutions while England lacks a settlement of its own.

    Anon 11:42 - Running a business that can provide services to public bodies cheaply and effectively, I presume. It'll probably involve quite a bit of arse-kissing and rubber-stamp abuse too I'd imagine. Or, as Pads suggests, just open a bank and squeal like a piggy.

  7. There is clearly an issue in local government with over powerful officers unsympathetic to Welsh interests. (And this is not restricted to Carmarthenshire.) The best way to remedy this is a) drastically reduce the number of councils and councillors and b) have professional councillors of a much higher standard than we suffer at present.

    But that still leaves the problem of the civil servants who control devolution, the top administrators in the NHS and elsewhere; too many of whom come over the border with contacts already established and believing that Wales has little to offer (except good jobs for them).

    I'd like to say this is a job for the Welsh Government but that shower uses the excuse of 'EU legislation' all the time when refusing to serve Welsh interests. And if the EU didn't exist they'd find another excuse so as to avoid 'pandering' to 'narrow nationalism'.

    At the end of the day that's the fundamental problem: the mindset that thinks serving Welsh interests is 'nationalistic' and must therefore be resisted. This thinking dominates the Labour Party in Wales. And Wales pays the price.

  8. I pretty much agree with that, Jac.

    Where I differ, is that I don't really care where the officers come from as long as they're good at their jobs - but that clearly isn't the case, is it?

    I've always got the impressions that within the EnglandandWales civil service, the Welsh Office (now Welsh Government) is where "humps" are sent to before being put out to pasture. Within local government, I think councillors are too easily over-awed by Chief Executives who've spent time in exotic-sounding local authorities instead of looking closer to home and promoting talent from within, creating a "Taff ceiling".

    I think there's a case for elected mayors with the executive powers unelected officers & chief executives currently hold. As for the number of councillors, if New York City can cope with 51, then most of our local authorities could probably cope with fewer than 30. I wouldn't be opposed to full-time councillors in principle if there were significantly fewer of them (and fewer councils).

  9. It's not just the councils though, so many of their functions have been farmed out to 'third sector bodies' such as housing associations which are expanding into other areas - these are commercial companies in all but name, albeit funded by government grant. RCT Homes (Rhondda Cynon Taff council houses privitised by Welsh Labour) and its subsidiaries Meadow Prospect and Penrhys Development. A perfect example of a Taff Ceiling (Like that term) I've never come accross any Welsh people above a certain level and I've heard at least one senior officer (background in the English third sector, brought in lead us benighted Welshies) describe Welsh people for being the 'thickest in Europe' and unable to govern ourselves.

    Unless these bodies are abolished - and their English leaderships have demonstrated that they will allways apoint their countrymen over better qualified natives, then reform of our hollowed out local govt will achieve nothing.

    We need a revolution, and most importantly Welsh people need to get over our inferiority complex and misplaced desire for respectability and start kicking up an allmighty a fuss.

  10. It doesn't help, WA, when a good chunk of Welsh people don't think we can govern ourselves. Judging by some of the "whoopsie-daisy" antics down the years, you can't blame people for thinking that.

    If the problem of talent is going to be turned around, it needs : better quality "home-grown" civil servants (I've proposed a civil service academy before), more accountability at local government level (give elected councillors more sway over decisions and reduce the power of officers) and, as you say WA, a wholescale societal attitude change.

    The battle for the last one - and it's the most important one - may have already been ground out of us.