Departments and Offices should make every effort to contain and reduce all administrative costs including both insurance and procurement costs. This approach unpins the current programme of reform of public procurement is one of the major projects of key strategic importance in the Government’s Public Service Reform Plan. Procurement of supplies and services accounts for around €9 billion of current spending by the State per annum. This represents a very significant portion of overall spending and it is, therefore, essential that the Public Service achieves maximum value for money and operational efficiency in its approach to public procurement.
In this regard, an external review of the central procurement function was commissioned by the Department of Public Expenditure and Reform. The report of the review, which was published in late last year, found that significant savings can be achieved through the implementation of a transformational change to the central procurement model. The report 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 on an addressable spend of €7 billion, depending on the approach taken.
In saving over the last two years the National Procurement Service as part of the newly formed Office of Government Procurement 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. I would point out that further work is underway within the newly established Office of Government Procurement to develop a more accurate methodology to measure savings.
In relation to plans for further reform of public procurement, the review also found that significant savings can be achieved through the implementation of a transformational change to the central procurement model. In December 2012, arising out of recommendations in the review of the central procurement function the Minister announced the appointment of a Chief Procurement Officer to lead a key element of the Government’s Public Service Reform agenda. The new approach to public procurement will involve:
- integrating procurement policy, strategy and sourcing in one office;- strengthening spend analytics and data management;
- much greater aggregation of purchasing across public bodies to achieve better value for money;
- examining the specifications set out for goods and services;
- evaluating demand levels to assess how demand and volume can be reduced; and
- strengthening supplier and category management.
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.