Minister for Public Expenditure and Reform, Brendan Howlin, T.D. and Minister of State with special responsibility for Public Service Reform and the Office of Public Works, Brian Hayes, T.D. have today published the
Report on the Review of the Central Procurement Function.
It is estimated that €9 billion is spent by public bodies annually on the public procurement of supplies and services and Minister Howlin has highlighted the importance of addressing such a significant area of public expenditure, stating that "This is a very significant portion of overall spending and it is essential that the Public Service is achieving maximum value for money and operational efficiency in its approach to public procurement. It is for this reason that public procurement is one of the Major Projects of key strategic importance under the Government’s Public Service Reform Plan, published in November 2011."
In May, the Department of Public Expenditure and Reform engaged Accenture to undertake a capacity and capability review of the central procurement function to identify the actions required to realise substantial savings in public procurement in the short and medium term. The final report on this review has now been published on the Department of Public Expenditure and Reform website.
Following the review, proposals were submitted to Government this week by both Ministers which Minister Howlin states "represent a radical new consolidated and integrated approach to public procurement". This includes the establishment of a National Procurement Office (under the aegis of the Department of Public Expenditure and Reform), which will be headed by a Chief Procurement Officer. The new approach will also involve:
§ integrating procurement policy, strategy and operations in one office;
§ strengthening spend analytics and data management;
§ much greater aggregation of purchasing across public bodies to achieve better value for money (i.e. centrally purchased);
§ examining the specifications set out for goods and services;
§ evaluating demand levels to assess how demand (volume) can be reduced; and
§ strengthening vendor and category management.
These proposals have now been agreed by Government.
Setting out the key objectives of this new phase of public procurement reform, Minister Hayes stated that "The planned integration of public procurement policy, strategy and operations and the much greater level of centralisation represent a major strategic re-positioning of public procurement". The Minister added that "It is planned that this will lead to reductions in the cost of goods and services; better procurement services at lower cost; introduction of technical standardisation; greater attention to contract management and better problem resolution; greater levels of professionalism among staff responsible for procurement; and better performance management of the central procurement function."
Of the estimated €9 billion spend referred to above, the Accenture review found that there is a procurement addressable spend of approximately €7 billion. The review estimates that implementation of its recommendations, over a three-year period, could yield potential annual savings in the range of €249 million to €637 million, depending on the approach taken (see notes for editors and the report itself for the detailed recommendations).
A detailed implementation plan and governance arrangements for the reform of the central procurement function, in line with the strategic recommendations of the recent report, will be developed over the coming months and will be submitted to Government by the end of Quarter 1, 2013. In addition, an open TLAC competition for the appointment of a Chief Procurement Officer will be advertised shortly.
Minister of State Hayes also acknowledged the work of the National Procurement Service since its establishment in 2009 saying that "the NPS has brought a real focus to the issue of better public procurement across the Public Service, not least the need for central framework agreements and the need to build capability for effective procurement within and across sectors."
NOTES FOR EDITORS
In order to realise the significant savings identified, the following actions were recommended in the Accenture review:
(i) Establishment of a Chief Procurement Officer role and a National Procurement Office:
-Appoint a new Chief Procurement Officer (CPO) accountable for national procurement strategy, policy, implementation and an effective compliance framework.
- Establish a National Procurement Office (NPO) under the aegis of the Department of Public Expenditure and Reform.
- Transition the current National Procurement Service (NPS) and National Public Procurement Policy Unit (NPPPU) procurement functions, including responsibility for all aspects of procurement policy (including EU and National procurement law). Related Centre for Management and Organisational Development (CMOD) processes should also be considered.
(ii) Organisational alignment
- NPO to manage all strategic spend for common categories of goods and services and to be responsible for strategic and operational procurement policy and implementation of an effective compliance framework across sectors.
- Transition some experienced resources from individual procurement teams within each sector to the new NPO.
- Establish a fulltime Procurement Officer within each sector (Health, Education, Local Government, Justice and Defence) to be responsible for procurement across relevant Departments and Agencies.
- Establish a robust governance model for procurement with Assistant Secretary level involvement and sponsorship from sectors.
(iii) Savings delivery and compliance
- Implement Spend Analytics to capture, cleanse and accurately categorise all State spend by type, location and vendor.
- Develop detailed spend and savings targets across sectors with detailed integrated plans for delivery by the NPO and sector procurement.
- Secretaries General to be accountable to provide monthly reports to the CPO.
(iv) Programme and transition management
- The report recommends five major implementation workstreams be established to complete the transition to the new structure:
Establishment of governance and operating model;
Creation and transition of NPO function from current organisations;
Planning and implementation of Strategic Sourcing;
Design and implementation of Spend Analytics; and
Planning and implementing Procurement Operational Shared Services.