Martin Sykes Executive Director Supplier and Government Marketplace Development Directorate

Topics to be covered OGC – a brief history SMEs in the UK marketplace Aggregation E Procurement

NOVEMBER 1998: Review of Procurement in Central Civil Government “To review civil procurement in Central Government in the light of the Government’s objectives on efficiency, modernisation and competitiveness in the short and medium term and to report as soon as possible” Office of Government Commerce

Created in April 2000Created in April 2000 “Of” but not “in” HM Treasury“Of” but not “in” HM Treasury Chief Secretary of the Treasury is the responsible MinisterChief Secretary of the Treasury is the responsible Minister Supervisory BoardSupervisory Board New Chief Executive – John OughtonNew Chief Executive – John Oughton OGC GOVERNANCE

Value for Money OGC helped to realise £1.6 billion value for money gains in 3 years up to March 2003 Target for 3 years to March 2006 is £3 billion

SOURCES OF VFM IMPROVEMENTS Greater focus on quality & whole life costsGreater focus on quality & whole life costs Reducing process & transaction costsReducing process & transaction costs Co-ordinating departmental & Government purchasing powerCo-ordinating departmental & Government purchasing power Wider involvement of professional procurement staffWider involvement of professional procurement staff Gateway reviews - improvements in cost & schedule performance of major projectsGateway reviews - improvements in cost & schedule performance of major projects Better exploitation of assetsBetter exploitation of assets

Emerging role Our core area of operations is central civil government – not the defence or health areas Increasingly working across the wider public sector and local authorities

Government Marketplace Government needs to get more out of markets Kelly review – looking at long term capacity of industry to deliver and optimising competition We need to increase competition – partly by levelling playing field for SMEs Ensure drive for efficiency does not result in a narrow approach to aggregation Develop e procurement techniques

SME Procurement Pilots May 2003: Independent review of SME involvement in public sector highlighted key barriers: Difficult to find out about opportunities Limited SME understanding of public procurement Resource-intensive tendering processes Aggregation and bundling Perception of risk in engaging SMEs

Background to the Pilots Review produced 11 recommendations to drive creation of a more level playing-field in government marketplace June 2003: West Midlands & London Borough of Haringey Projects launched to pilot a number of the recommendations Representative cross section of UK SMEs Involvement of a number of central, regional & local government partners

Web portal for below threshold opportunities Practical training and advice  SME workshops on how to tender  Workshops to raise buyer awareness of SMEs Standardising pre-qualification process – self-certification model Encouraging prime contractors to provide visibility of subcontracting opportunities SME Procurement Pilot Selection of Activities

Aggregation Aggregation of demand does not necessarily lead to aggregation of supply

Aggregation Aggregating requirements can strengthen departments’ negotiating position with suppliers… …but aggregating across government could distort markets, by developing a situation where too few suppliers are operating…..and without people of the right calibre many of the potential benefits of aggregation can be missed

E Procurement – business drivers Improved control and lower risks Better knowledge of what we spend money on More efficient – so lower costs Better supplier relationships Enables procurement staff to focus on high value procurement – 80/20 But must be careful to reduce transaction costs – not increase bundling

E Procurement – aggregation issues  eProcurement gives us much better information on what we are spending and with whom  It delivers dramatically lower process costs  BUT – a danger that if we use information to bundle requirements we could distort competition  Process cost reductions sufficient to support many suppliers