1 Introduction |
Background to this inquiry
1. Local government spends around £45 billion
annually on procuring goods and services from third parties.
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. 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
· 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 strategieslocally
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
· 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
· 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. 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. 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
Local Government Association, Procurement Pledge for Local
Authorities, June 2012 Back
Local Government Association (LGP 17) para 3 Back
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