As I indicated to the Deputy in my reply to his Parliamentary Question on this subject on 10 October 2012, I agree that Departments and Offices should make every effort to contain and reduce all administrative costs including both insurance and procurement costs. This approach is in line with Government’s overall reform and efficiency agenda. In light of the need to accelerate the reform agenda, my Department published the Public Service Reform Plan in November 2011. This plan identified procurement reform as a key instrument that can assist the public service to deliver services in an efficient manner.
The reform plan includes specific measures to ensure that:
1. aggregated procurement arrangements are utilised across the public service;
2. public bodies have appropriately trained staff to implement reform and to ensure the State is getting value for money; and
3. greater emphasis will be placed on analysing what the State purchases in order to assess other savings that can be made through more efficient procurement methods.
Since its establishment in 2009, the National Procurement Service (NPS) has put in place a number of national arrangements designed to secure better value for money from leveraging the public service’s buying power in relation to a range of goods and services that are commonly purchased across the public service. These national arrangements have benefits that include: cash savings; administrative savings from reduced duplication of tendering; greater purchasing expertise; improved consistency; and enhanced service levels. In some instances the take up of the NPS arrangements has been low. In order to increase the usage of the NPS arrangements and thereby secure best value for money, the Government decided that it should be mandatory for public service bodies to use specified national procurement arrangements.
The NPS has reported procurement savings to the end of 2012 under its frameworks of €93.1m, comprising of €7.5m in 2010, €46.5m in 2011 and a further €39.1m for 2012, which include administrative savings. A breakdown of these procurement savings is not readily available by sector. The NPS has established a Working Group to develop the saving methodologies and reporting of procurement savings in the future.
Circular 06/12 implements the Government decision by making it a mandatory requirement that public service bodies avail of specified national arrangements put in place by the NPS. The list of categories subject to national procurement arrangements includes: electricity; natural gas; stationery and office supplies; paper; ICT consumables; managed print services; print media advertising; and, motor vehicles. These national arrangements will secure best value for money and facilitate contracting authorities to deliver services within their budgetary constraints.
It is estimated that €9 billion is spent by public bodies annually on the public procurement of supplies and services. This is a very significant portion of overall spending and it is essential that the Public Service is achieving maximum value for money and operational efficiency in its approach to public procurement. It is for this reason that public procurement is one of the major pillars of key strategic importance under the Government’s Public Service Reform Plan.
In order to ensure that the necessary elements are in place to implement these ambitious reforms, my Department engaged Accenture to undertake a capacity and capability review of the central procurement function to identify the actions required to realise substantial savings in public procurement in the short and medium term. Of the estimated €9 billion annual spend on public procurement of supplies and services, there is procurement addressable spend of approximately €7 billion. The review estimates that implementation of its recommendations, over a three-year period, could yield potential annual savings in the range of €249 million to €637 million, depending on the approach taken. The final report on this review is available on my Department’s website.
Following the review, proposals were recently submitted to Government. These proposals represent a new consolidated and integrated approach to public procurement that includes integrating procurement policy, strategy and operations in one office through the establishment of a National Procurement Office (under the aegis of my Department) which will be headed by a Chief Procurement Officer; strengthening spend analytics and data management; examining the specifications set out for goods and services; evaluating demand levels to assess how demand (volume) can be reduced; and strengthening vendor and category management.
These proposals have now been agreed by Government and the Chief Procurement Officer is preparing a Procurement Reform Implementation Plan, which will be submitted to Government by the end of Q1 2013.
These reforms will lead to reductions in the cost of goods and services; better procurement services at lower cost; introduction of technical standardisation; greater attention to contract management and better problem resolution; greater levels of professionalism among staff responsible for procurement; and better performance management of the central procurement function.