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Councils could save at least £3.2bn over the next three years if they were forced to procure all of their goods and services through regional purchasing ‘hubs', the Institute of Directors has claimed. As all public bodies scour their finances seeking a new round of efficiency savings following the Budget, a report by the IoD published on 19 March, concludes the UK public sector could save £15bn over three years through a radical three-stage restructuring of its procurement function. Miles Templeman, IoD director general, said: ‘The economic situation demands immediate action to reduce public expenditure through implementing the proposals in this paper. There is a lot of talk among politicians about the need to introduce efficiencies into the public sector, but very little detail on how this will be done. [This] report provides a vital blueprint.' As a first step, the IoD calls on ministers to compel local authorities to join regional procurement hubs, which would ‘provide expert contracting support to all bodies in the region'. The idea is that the new hubs – set up to reflect similar boundaries to the Regional Development Agencies – would co-ordinate all purchasing within an area: thereby improving contracting, identifying greater economies of scale and achieving more effective distribution of goods and services. Many local government bodies already join forces to procure goods and services but, under the IoD's model, all local public bodies would be compelled to participate in regional hubs, making collaborations between local government, NHS and other local authorities mandatory. Local government currently procures £45bn worth of goods and services annually, and the IoD estimates that at least 7% of that money could be saved within three years under the reformed system. The UK public sector as a whole procures goods and services worth £220bn annually. Areas where the money is likely to be saved include IT, legal services and human resources, as well as more traditional procurement of goods. To assist national public bodies, the IoD report also calls for the establishment of ‘centralised buying organisations to handle all key supplier relationships and all national and major contracts on behalf of the whole public sector'. Oversight of these mandatory functions should then be passed to the Office of Government Commerce, which has already helped public bodies reduce procurement bills by billions of pounds. IoD researchers believe their system could also save £10bn through greater use of shared services and outsourcing – bringing total savings over the three-year period to £25bn. ‘Despite some areas of excellence and good collaborative initiatives, the majority of public procurement spending is so fragmented that huge potential savings are being missed every year,' the study states. ‘This is because most of the public sector still organises itself on the "corner shop" model, with the majority of purchasing organised in small scale silos – local authorities, NHS trusts, and small central government departments, for example, each doing their own thing.' Towards Tesco - improving public sector procurement

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WHITEHALL

Regional procurement hubs 'will save billions' claims IoD

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