Practical Law

In February 2012, the Minister for Finance and Leader of the House appointed John McClelland CBE to conduct a review into how the Welsh Government’s (WG) public procurement policy could be strengthened to maximise the impact of procurement in Wales.  His remit was extensive, looking as it did at the operating model and resources in place, whether central resources were being effectively deployed and whether public sector procurement in Wales delivered value for money and was having an optimal impact on its economic growth.

The key findings of the review and his recommendations make interesting reading and not just for those in Wales, as many of the issues highlighted will apply equally to contracting authorities throughout the UK.

Key findings of the review

The review found:

• Significant progress had been made in public procurement in Wales with effective communication of the WG’s policies and its ambitions for public procurement to positively impact on the Welsh economy. Development of these policies was based on research and advice from Value Wales (VW), the division of WG charged with helping the public sector deliver more from its annual expenditure by improving practice and outcomes.
• Significant weaknesses in procurement capability and performance of staff. Although the review cited local authorities with resource levels that compared well to benchmarks from within and outside Wales, the staffing levels at a number of authorities, when compared to such benchmarks, were completely inadequate even though the spending per procurement staff member exceeded that of authorities with adequate staffing.
• Based on available information and sampling, that there was a relatively low proportion of part or fully qualified professionals. This skills deficit impacts on procurement capability and has to be addressed before progress in public procurement can be made. In the case of some local authorities, the review questioned whether minimum standards can be met given the lack of skilled procurement staff. Therefore, the review advocated the introduction of a programme of procurement capability assessments for organisations to demonstrate to the WG that they have adequate skilled stafffor effective delivery.
• A correlation between the procurement capability of individual organisations and the results they deliver. In the context of its impact on the Welsh economy, this is apparent from the data behind the increase in the proportion of total spending conducted with Welsh-based companies. Within an average of 54% for all local authorities, there was one authority spending 70% with such companies and another spending 37.9%. These statistics suggest that the weaker and less centralised the procurement capability, the lower the proportion of spending with Welsh-based companies.
• An examination of the operating model showed that approximately 20% of Welsh public sector spend is through collaborative contracts. Within this overall total, the Health Service reported 63.4% of its total spending was collaborative, whereas the local government equivalent was assessed to be around 11%.
• Not using, or only partially using, programmes supporting the implementation of Welsh public procurement policy has lead to lost financial savings, lower benefit to the Welsh economy and increased complexity and cost for Welsh businesses, arising from a lack of standardisation.
• Focusing on implementation, particularly by those organisations lagging behind others, requires investment particularly by local government where there is not only a shortfall in skilled resources at a number of individual authorities but also under-investment and low participation in collaborative procurement.
• Additional investment by the WG in supplier development will encourage more businesses to compete for public sector business. Consideration should be given to the WG investing in supporting the start-up phase of a new national procurement service. Given the WG’s high expectations, compared with resource-allocation, investment may also be required in VW’s capability if it is to act more formally and effectively on behalf of the WG to ensure that its public procurement policy is fully implemented. This approach should also address weaknesses in data and key performance indicator collection to help drive progress. 

The recommendations

 On the five key issues set out below, the review makes the following recommendations.

 Government policy and deployment

To ensure that government policy acceptance, deployment and implementation is consistent across the public sector, the review recommends:

• The WG consolidates its procurement policy into a single policy and practice document to be available as a handbook to be used as a blueprint by leaders and executives and procurement professionals for the conduct of all public procurement.
• Implementation of the public procurement policy should be regarded as a duty and made mandatory by the WG including it as a grant condition for all public sector funding.
• The WG formally adopts the content and recommendations of Buying Smarter in Tougher Times Report into Welsh procurement policy, making its acceptance and implementation mandatory.

 Procurement capability

To counteract the overall deficit in procurement resources in Wales and to ensure a consistent spread of resources, the review recommends:

• Every public sector body is staffed with sufficient skilled procurement resource in order to adequately support the public body’s obligations for governance and delivery of the WG’s policies and required practices. This requirement should be made a duty.
• Local government takes urgent steps to address its skills deficit, particularly the serious shortfalls in resources at some authorities.
• The WG examines the patterns and breakdown of spending by the WG Corporate Procurement Service to establish where it should be benchmarked for resources.
• The WG sponsors the reintroduction of regular “procurement capability assessments”.
• To counteract the scale of the skills deficit, expansion of the Home Grown Talent Programme to provide a greater number of trainees (currently only 24 trainees are planned) and the WG should commission a full and formal survey of procurement resources and professional skill levels in the public sector.

Economic, Social and Environmental Impacts

To further develop progress in delivering wider benefits from public procurement in Wales, the review recommends:

• It becomes a mandatory duty for all funded bodies to adopt the WG procurement policy.
• There should be a requirement for all Welsh bodies funded by the WG to include in their annual reports a statement describing how they have delivered on the WG’s policy of wider benefits. The statement should also comment on the value and percentage proportion of the body’s total procurement expenditure that has been spent in Wales.
• The development of new mechanisms to work directly with procurement operations across Wales by the appropriate participation of individual and collaborative procurement units.
• A review of the budget for investment in supplier and development, and a possible increase in the budget. If an increase is not possible, available resources and finances should be concentrated on priority areas in order to provide the greatest and potentially quickest return.
• A review should be conducted with the third sector to understand its concerns about public procurement and the contribution that it can make to wider benefits.
• The recommendations of the Barriers to Procurement Opportunity should be implemented as soon as possible.
• A replacement IT solution for Sell2Wales should be introduced at an early date.

 Operating Model

One of the foundations of the operating model, which  has been built and sponsored by the WG, is a memorandum of understanding and a vision of all-Wales sourcing. Although the model has a clearly identifiable and distinctive system of governance, ensuring Ministerial engagement and oversight throughout the network of activities down to day-to-day operations performed by procurement professionals, the review picked up that there were some very weak areas.  These weaknesses could be improved by more effective operations and some incremental investment, particularly within local government. Therefore, the review recommends: 

• Local government organisations address their failure to conduct the local procurement operating model consistently, including correcting contributing weaknesses in staffing.
• The WG sponsor and provide funding support to establish a new national procurement service, in order to improve the collaborative coverage and that local government participates actively in the new service.
• A review of the Procurement Board’s membership to ensure a 100% representation of all procurement operations in the public sector so that the Chairs of the two local government purchasing consortia in Wales are appointed to the board.
• The model of governance should be used more effectively to drive progress by examining and measuring performance. In particular, the Measurement Framework should contain a relatively small number of data driven performance indicators addressing the critical success factors for procurement, which should be adopted by every Welsh public sector organisation.

 Value Wales and its programme

Given that only 11 of VW staff are associated with procurement policy, it appears that the WG’s policy expectations of VW exceed the resource allocation.  However, the tools and programmes that have been developed by VW to support the implementation of the policy are capable of supporting the ambitious transformation the WG seeks.  Therefore, the review recommends: 

• Mandatory implementation of the programmes and tools that support the WG procurement policy. Early action should be taken to use the Sell2Wales advertising channel for all OJEU, and above threshold sub-OJEU contracts.
• A core part of VW’s activities should be overseeing, examining and intervening across the public sector in order to drive implementation of the public procurement policy.

Conclusions from the review

 What is apparent from the review is that, despite a recognition that there has been significant progress in recent years in Welsh public procurement, there is scope for further improvement given that not every public sector organisation is effectively implementing the WG’s policy and that a number of local authorities need to make a far greater investment in professional procurement skills.  As stated in the introduction, if a wider review was carried out of all UK contracting authorities, it is likely that similar results conclusions would be drawn.

 The challenge is that, whether in relation to Wales or the UK as a whole, it is difficult to see how that the money can be found for greater investment but the issue of how public money is spent, in these economically challenging times, is a vital one.  It will be interesting to see how the WG drives forward the recommendations that have been made, particularly with one eye on whether any successes can or will be rolled out on a wider basis.

One area where procurement policy in Wales could be distinguished from the rest of the UK is the clear over-riding focus on targeting public sector spend with Welsh companies, which suggests that the promotion of the Welsh economy generally outranks the immediate need to secure best value.  While politicians of all political persuasions throughout the UK have been keen to talk up the importance of buying British, outside Wales concerns over need to obtain value for money, and the need to ensure a level playing field for potential bidders from other European member states have led to a lack of explicit encouragement or authorisation to favour local suppliers merely due to the fact they are local.  However, when under pressure in a BBC Radio 4 interview earlier this year on why the UK government had not taken a similar approach to the Welsh, Francis Maude conceded that they would be glad to look at the Welsh approach.