‘Smart Buying’ Could Save Public Sector GBP11.3 Billion a Year’

LONDON -

- New Research Reveals How Better Procurement Skills Could Trim 3.1% From Public Sector Costs

A new report published today reveals how better procurement skills in the public sector could release a huge GBP11.3 billion a year equivalent to 3.1% per year in operating costs.

The research was carried out by leading consultant, The Gap Partnership and independent economic consultancy, the Centre for Economic and Business Research (cebr).

If procurement teams better understood how to negotiate “smart”, hard-working contracts the public sector could unlock: - GBP4.6 billion of total administration and defence operating costs (3.8%) - GBP2.2billion of total education costs (2.3%) - GBP3.4billion of total health services costs (3.3%); and, - GBP1.2billion of social work activities costs (2.6%)

Understanding the dynamics of a negotiating a contract is as important as monitoring its ongoing performance. This will ultimately help the public sector deliver more value per pound (GBP) spent - currently, according to the ONS, for every GBP100 spent on services, only GBP98.60 of value is delivered.

To put these savings into perspective, the improvements to profit ratios and cash-flow standings from these savings could fund up to 60,000 jobs in the public sector - 17% of the jobs predicted to be axed over the next five years according to the CIPD.

To create more value for the sector and Britain’s tax payers, now is the time for procurement teams to get creative and work closely with suppliers to scrutinise contracts terms beyond price - risk, length, volume, research and technical specification.

The report also estimates the central cost savings for British business is GBP75bn per year (3.9% of operating costs), which equates to a staggering 5.7% of GDP. The “Top Ten” sectors that have most to gain from more efficient contracts are:

1. Construction (GBP9.7bn) 2. Hotel, catering and pubs (GBP7.9bn) 3. Recreational services (GBP5.2bn) 4. Public administration and defence (GBP4.6bn) 5. Retail distribution (GBP3.6bn) 6. Health services (GBP3.4bn) 7. Computer services (GBP3.0bn) 8. Wholesale distribution (GBP2.5bn) 9. Ancillary transport services (GBP2.3bn) 10.Education (GBP2.2bn)

Building a savvy contract requires a high level of skill and clearly the lessons are as relevant to the private sector as they are to the government.

Steve Gates, founder and CEO of The Gap Partnership said:

“Today’s economic environment represents a mammoth challenge for the public and private sector alike and negotiation is an essential skill to help the government and company boardrooms to tighten up performance in this uncertain climate.

“Having braced themselves for higher taxes, hard-pressed citizens need to be reassured of value for money for their hard-earned cash.”

Ben Read, Managing economist, cebr said:

“Even the Treasury’s optimistic recovery projections result in a worsening deficit for the government and as a result it will be forced to face fiscal retrenchment.

“It will be politically difficult for the government to cut spending, but a tighter approach to procurement could go some way to plug the GBP60 billion of public spending cuts we estimate will be required to stabilise Britain’s debt GDP ratio by 2016.”

For further information:

Rebecca Glaze +44(0)7792-402-913

Source: The Gap Partnership

For further information: Rebecca Glaze +44(0)7792-402-913