Local government procurement - Communities and Local Government Committee Contents


1  Introduction

Background to this inquiry

1. Local government spends around £45 billion annually on procuring goods and services from third parties.[1] In recent years there has been a concerted focus on public sector procurement reform, in part driven by the squeeze on resources and the consequent need for public bodies, including local authorities, to make efficiency savings as well as to cut costs for those doing business with them. The Cabinet Office is leading a programme of action in conjunction with other government departments, including the Department for Communities and Local Government (DCLG) and the Department for Business, Innovation and Skills (BIS). Local government itself is also leading a number of improvement initiatives. For example, the Local Government Association (LGA) has adopted a National Procurement Strategy and in 2012 launched a 'Local Government Procurement Pledge'. The Pledge commits local government to make every effort to "use procurement to help deliver value for public money", and to "drive local social and economic growth and regeneration, and provide inclusive services through a diverse supplier base".[2]

2. In July 2013, we launched an inquiry into how effective these policies have been in improving local government sector procurement approaches, and the potential for further development. Our terms of reference were:

    The central focus of the inquiry will be to assess the extent to which local government procurement is delivering good value for money and meeting the objectives of local authorities. The inquiry will highlight and examine good practice and initiatives within local authority procurement and elsewhere and explore how and to what extent local authorities can adopt and take advantage of them. To assist those making submissions the Committee has identified the following topics that it may cover, though the list is not exhaustive.

·  To what extent is local government procurement organised to deliver value for money and social, economic and environmental objectives, including stimulating the local economy? To what extent are local authorities achieving the involvement of local residents in delivering value for money? To what extent are local authorities able to develop long-term relationships with contractors?

·  Do authorities take sufficient advantage of collaborative and joint procurement opportunities, including those available from central government? In addition, the Committee would welcome information on PFI contracts and their operation with local government.

·  How can local authorities access the skills, expertise and capabilities to implement effective procurement strategies, including value for money and social and economic objectives? More specifically, does local government have sufficient understanding of its procurement expenditure and the markets for goods and services to deliver quality procurement strategies—locally and regionally. If not, how can deficiencies be addressed?

·  To what extent is risk in local government procurement and contracting understood and managed and contracting strategies adopted, which are tailored to product and supplier market places? More specifically, do local authorities maintain and operate effective client management functions and have they entered contractual arrangements which allow the flexibility to meet changing circumstances such as budget reductions or changes in the way a service has to be delivered?

·  How is regularity and propriety of procurement secured and are the arrangements for detecting and addressing impropriety and fraud effective?

·  Is local authority procurement fully transparent, audited effectively and does it provide appropriate mechanisms for redress? Specifically, are the arrangements for securing the accountability of procured services and goods to local authorities and local residents adequate and effective? More specifically, to what extent are local authorities able to provide assurance to central government that value for money (in the broadest sense of the term) is delivered?

We received 70 written submissions and held seven oral evidence sessions, including one in Sheffield Town Hall. We are grateful to all those who gave evidence. Colin Cram was appointed as the Specialist Adviser for this inquiry.

Structure of the report

3. In order to produce a comprehensive report our inquiry has addressed procurement in its widest sense, focussing not simply on the purchase of goods but also on the wider commissioning of services and the management of contracts including for outsourced service delivery. The chapters of this report examine the following issues;

·  Chapter 2 considers the scope for further improvement in council procurement approaches and the greater value for money this might bring, and assesses the relative merits of increased collaboration and/or centralisation of local government procurement. We received a wealth of evidence about good practice by many councils though some witnesses expressed frustration at the slow and patchy pace of reform across the country.

·  Chapter 3 addresses the effectiveness of procurement for delivering council strategic objectives, including supporting local and small/micro-businesses. A key tension in effective procurement is the need to balance cost efficiencies with ensuring that wider community objectives are met.

·  Chapter 4 considers the streamlining of processes to cut costs for councils and how burdens might be reduced for those organisations wishing to do business with them.

·  Chapter 5 addresses the challenges of managing risk as procurement becomes increasingly complex, with councils needing to ensure that cost savings are not achieved at the expense of security of, or standards in, service delivery.

·  Chapter 6 considers the employment challenges from outsourcing service delivery to third parties.

·  Chapter 7 addresses the extent to which councils are pro-actively ensuring that probity and effective governance of procurement are achieved. The level of transparency in private sector contracts for delivery of public services is explored.

·  Chapter 8sets out our conclusions on the avenues which should be pursued in order to make further progress in improving procurement, including through embedding excellence beyond procurement functions, improving the skills of those involved in commissioning services and procuring goods, and developing local government led and other programmes to support councils in their delivery.

4. The LGA told us that its mission is to "support, promote and improve local government" including through working with the sector to help councils maximise the benefits from their procurement spend.[3] We note the number of valuable initiatives the LGA is co-ordinating and, in acknowledgement of its leadership position, we propose that the Association should pursue a central role in taking forward the sector's work.

5. In early 2014 a new EU Directive on public procurement was approved.[4] We did not take evidence on this since details were finalised after we concluded our evidence gathering but, where pertinent to our recommendations, reference is made in this report to the new measures.

6. This inquiry comes at a time of financial constraint, with pressure on councils to maximise improvements in their procurement practices in order to cut costs for both local authorities and those wishing to do business with them. We make a number of recommendations in this report for actions to accelerate improvement in local government procurement approaches consistently across the sector. In contrast with many of our previous reports where the majority of our recommendations have been for central government, this report makes a number of conclusions that are essentially for local government, in partnership with central government and the private and third sectors, to improve its procurement approaches and disseminate best practice. We recommend that the Local Government Association and other bodies working with councils, as well as local authorities themselves, prioritise implementation of our recommendations in order to accelerate reform of local authority procurement across England. It is also important to have in place government policies that empower communities and local government to maximise efficiency and effectiveness in procurement. Hence we make a number of recommendations for the Department for Communities and Local Government to implement as a matter of urgency in conjunction with other relevant government departments.


1   Colin Cram (LGP 81) Of the £45 billion, £10 billion is spent on social care. A further £15 billion is spent by educational establishments Back

2   Local Government Association, Procurement Pledge for Local Authorities, June 2012 Back

3   Local Government Association (LGP 17) para 3 Back

4   Directive 04/18/EC will be repealed following adoption of the new Directive/2014/../EU of the European Parliament and of the Council on public procurement. The Directive will enter into force 20 days after publication in the Official Journal of the European Union, expected by mid 2014 Back


 
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Prepared 13 March 2014