This article is about large-scale, collective, public-sector procurement. It is written mainly for the technical and managerial people responsible for these procurements. The aim is to describe the obstacles in the way, and show how to overcome them. It uses laptops as an example, but the same ideas could apply to other categories.
We start with the proposition that a buyer should be able to achieve better value with a larger volume of goods procured. Most people would think that self-evident. It is how a supermarket works. In the public sector, organisations vary greatly in size. We might assume that the larger organisations achieve, or could achieve, better value than smaller ones. Therefore we might assume that smaller organisations might also achieve better value if they procured goods collectively. And we can go on from there to assume that a collective of smaller organisations might achieve even better value if it joined forces with larger organisations.
It is obvious that this might apply, for example, to schools, NHS Trusts, local authorities and police forces. By extension the same approach might also apply to universities and charities. If it were adopted across the whole of the public sector, and across a range of product categories, then we might expect to achieve better value worth hundreds of millions of pounds a year.
But, if it is so obvious, why do we not already do it? Could it be, for example, that public-sector organisations value their autonomy more highly than the potential savings from a collective procurement? Or perhaps they have tried and it didn’t work. Or perhaps the assumption is wrong and larger organisations are not paying appreciably less than smaller and more nimble ones.
This article proposes that none of those is a sufficient explanation. Organisations do collaborate, for example through the Government Property Agency. They have tried collective procurement, successfully, in Scotland. And larger organisations do, by and large, obtain lower prices than smaller ones. Instead, the article sets out a case that achieving better value through collective public-sector procurement is much more demanding than it might first seem. It concludes that better value is achievable, but only by recognising and overcoming the obstacles.
The article only erects the scaffolding of the case. I have found that each part explodes into hidden complexity, so I have chosen to cover each part of the argument as a separate topic. Does it need to be so complex? The tidy mind dislikes complexity and tries to reduce it to simple propositions. But simple propositions can hide immense complexity. Each topic starts with a simple proposition and develops it into the necessarily more complex solution.
The first topic is the expression of the requirement. It seems simple enough to buy a laptop. Most of us have done it. Can’t we just scale that up a bit? That is, in fact, mostly what happens. Many organisations currently express their technical requirement in a few lines. Even large ones may use a spreadsheet with only 10-20 lines (although the full tender document is much larger, of course). But these are not open procurements. For the most competitive procurement, open to any seller, we need to be able to accept any solution that meets the requirements, even a solution we do not yet know of, and exclude only those that do not. This makes expressing the requirements accurately a considerably more demanding task.
The second topic is user needs. As a private individual, I can assert my requirement to be whatever I please. But a commercial buyer is trying to provide goods that will meet the overall needs of the organisation. Usually these needs are implicit, but I find it a good discipline to express them explicitly. When doing that, it becomes apparent that there are requirements beyond the technical specification of the laptop alone. Most organisations want to achieve not just a delivery of laptops, but a supply of laptops into a provisioning and support service. They might, for example, want to buy a model of laptop early in its 12-18 month lifecycle, so that the same model can be supplied for the longest period of time. These user needs also need to be expressed as requirements.
Next are the rules of the game. A public-sector buyer is constrained by statute: the Procurement Act 2023, supplemented by the Procurement Regulations 2024, and elaborated in guidance from the Cabinet Office. This is well known, but nevertheless stranger than it first appears. The State has created a legal regime such that a seller may sue a public body if the rules are not followed. In some cases the procurement may need to be run again. In others, the organisation might find itself paying damages and subject to public criticism. So the procurement needs to take account of the additional constraints imposed on it by law.
Next is the question of collective buying. If specifying the requirements of an organisation is not straightforward, then doing it collectively adds a further degree of difficulty. Even when organisations want to cooperate, they may have different requirements. Those differences may be necessary, or they may be historic. It might take time for an organisation to adapt to a new type of procurement. But, if a collective cannot demonstrate that it achieves better value at the outset, why should people join it? So there is a collective action problem, and we need a plan to deal with it.
Then there is the economic case. The question is: does it really follow that significantly better value would be achieved by collective procurement? If we knew that the margins of the industry were low, where would the better value come from? Conversely, unless there is a significant advantage for the seller, why would they sell for less? There are further more complicated arguments about security of supply, innovation, and market behaviour. In brief, we need to be able to demonstrate that there is an economic case for collective procurement, rather than assume that economies of scale will produce better value.
These are the substantive topics. Beyond this is a question about the nature of large-scale, collective, public-sector action and its limitations. If the problem is difficult but solvable, why do organisations, from health trusts to police forces, find it so difficult to do? The individual organisations may understand their own requirements very well. The difficulty may instead lie at the centre: how does an organisation recognise and make use of knowledge that it does not itself possess? This leads to a consideration of the organisational structures needed to make collective procurement work.
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