Collaborative procurement is a hot topic in today’s public sector.
With pressure to deliver more for less, collaboration has in recent years become increasingly embedded in the way the sector works. From the largest Whitehall department to the smallest district council, leaders and managers are finding that effective collaborative procurement can cut costs and lead to major efficiencies.
As Eugene Sullivan, former Chief Executive of the Audit Commission, said in a 2010 review of collaborative procurement across the public sector:
“With all public service costs under pressure, better procurement provides an opportunity to make significant savings that don’t cut into front line services.”
But what exactly is ‘collaborative procurement’, and how can you use it to reduce costs of public sector procurement?
Procurement expert Colin Cram made one of the clearest definitions in a 2003 article for Government Opportunities. In it he said:
“Collaborative procurement is when two or more groups of people or organisations, engaged in procurement, work together for mutual benefit. It is most commonly thought of as a collaboration between independent bodies. However, it also applies to organisations that have a federal structure with devolved decision making.
Collaborative procurement, therefore, can take place between different public sector organisations such as councils and central government departments, or within larger structures such as NHS England, the Ministry of Defence or the Police. It’s an approach that works particularly well for the public sector because organisations are not in competition with each other.
Cram also identifies six main benefits to collaborative procurement. They include increased leverage, better service and value for money, improved efficiency and quicker progress.
However, Cram also points out that there are different models of collaborative procurement, and that it’s important to select one that meets the procurement objectives of your own organisation – and those of your partners. To summarise, they are:
1. Purchasing Networks
These are essentially information exchanges for purchasers. They allow participants to share information about markets and suppliers, and to ask for help in resolving problems. Cloud collaboration software like Kahootz allows you to quickly set up an information exchange of this kind by linking different organisations’ buyers via a secure online workspace.
2. Benchmarking Groups
Traditionally, these groups involve organisations with similar interests and relied on meeting to compare procurements and practices within their sector. It is now possible to use cloud collaboration to drive this kind of work forward, but it still requires strong leadership to keep the group on track.
3. Affinity/ Commodity Groups
These generally tackle a single issue or commodity. Cram uses the example of the Research Equipment Affinity Group, which brings together academics, procurers and administrators with the aim of obtaining more research equipment from their combined budgets. They can be highly effective, but they favour larger organisations – smaller ones may not be able to guarantee levels of business or be able to commit to an agreement until they know how good it will be. As a result, suppliers may not be willing to offer the same prices as they do to larger organisations.
4. Centre Led Action Networks
These are usually procurement teams within organisations that have a federal structure. Cram defines their role in this way:
“A small central team acts as a catalyst for collaboration; it may undertake some contracting/negotiating for major common areas and may also be responsible for procurement policy. Alternatively it may persuade different parts of the federal structure to take the lead role for particular areas. Thus the benefits of collaboration can be achieved without compromising the independent decision making.”
5. Purchasing Consortia
Purchasing Consortia bring together organisations such as local authorities or higher education institutions to deliver major cost and quality benefits via aggregation of procurement budgets. A good example of this is the Association of London Transport Officers collaborative vehicle procurement portal, Fleetcol. Powered by Kahootz, it allows local authorities to register their future requirements for commercial and specialist vehicles, then uses their combined buying power to deliver discounts of around 10%.
This approach is when organisations fully merge their procurement functions, giving them much greater leverage when procuring in all areas.
As you can see, collaborative procurement covers a spectrum with information sharing at one end, and the merger of procurement departments at the other. However, since Cram’s paper was published, all approaches to procuring collaboratively have been transformed by technology like Kahootz – helping the sector deliver even better savings, quality and efficiencies.
To find out how collaborative procurement can benefit your public organisation, download our free guide Collaborative Procurement and the Art of the Possible. It’s a fully modern guide on using the Cloud to involve suppliers, staff and partners at every stage of the procurement cycle.