Can Green gain true visibility of government spend?

In an interview with Radio 4’s Today programme last week Sir Phillip Green, billionaire owner of the Arcadia Group, told how he felt procurement offered a real “opportunity” to save money for the government in its bid to reduce costs, describing how he and his world-class team would be scrutinising government spend as part of the external efficiency review that David Cameron has asked him to conduct.   

With short timescales and deadlines Sir Phillip’s first goal is to identify where funds have been spent. “We need to obviously accumulate a large amount of information across some key areas of spend.....It’s all a question of what availability of information there is, how good the information is, that we’re able to respond”. He added “I think what we need to do is, we need to get ourselves focused on the big spends in which departments, where is the money actually being spent?”  The question now is – will Sir Phillip and his team gain clear visibility of government spending in order to truly analyse where efficiencies can be made?  

In our recent ‘doing battle with the deficit’ survey into the opinions and attitudes of public sector procurement professionals we discovered that 82% of survey respondents believed that savings are most likely to come from spending efficiency, but only 6% believed their spend management processes were ‘highly efficient’.  Over 25% of procurement professionals in the public sector questioned did not know what proportion of their organisations overall spend was ‘maverick’ or off-contract’ and an indication of the wide and varied manual, part-manual and fully automated spend management processes could also be adding to the lack of visibility and accurate reporting.  

Process automation and purchase-to-pay solutions provide clear and accurate visibility – the first step towards analysing spend and identifying where savings can be made. Without solutions such as these in place across all areas of the public sector – how will Sir Philip meet his challenge?

Alongside Durham University, Wax Digital recently undertook a research programme to investigate the opinions and outlooks of public sector procurement and finance professionals towards deficit repair. Somewhat surprisingly the findings revealed a positive and pragmatic viewpoint from those leading the charge into battle with the deficit.

Although it was acknowledged that times ahead are going to be difficult with 78% of respondents anticipating budget cuts of more than 5% this year and 69% expecting these cuts to increase the following year; the individuals at the frontline are still keen to forge ahead with cost-saving initiatives and processes. It was evident that public sector procurement and finance teams want to simply get on with the challenge and recognise that they need the freedom and the tools to do so although this is not always possible. Bureaucracy and lack of automation were highlighted as obstacles that they face.  

Process automation and technology was highlighted as key enablers to drive efficiencies, cost savings and help achieve the targets set by the new coalition government; findings also revealed that where eProcurement solutions have been introduced savings have been realised. 53% of the sample saved between 10% and 50% from new IT solutions.  

From working with both public and private organisations we have seen the difference that these types of solutions can bring and how those forward thinking organisations that drive change and purchasing initiatives reap the benefits. This is in stark contrast to only 6% of the public sector survey respondents who felt that their spend management processes were “highly efficient”.  

With the challenge clearly set by the new government it is time for public sector procurement and finance professionals to lead the charge into the battle with the deficit, but do they have the armouries to fight a good fight?

Download your copy of the research report and post your comments, sharing your thoughts about the emergency budget and the challenge of deficit repair for the public sector.

Immediate Whitehall cuts of £6bn have now been tabled by the new government as the first stage of deficit repair, with savings expected to be made in three areas: reduced public sector recruitment, scrapping IT projects and renegotiating contracts with dozens of Whitehall suppliers.

But swift and rapid savings don’t necessarily need to mean swingeing service cuts, nor should they impact on IT expenditure where there is a swift and highly tangible ROI case.. It’s possible within the space of weeks to achieve contract savings of over 10-20 percent in many areas through well targeted supplier auction events for example, yet many government departments still don’t have a consistent e-auctions policy.

Some of the realised savings from auctions could then be invested in automating public sector buying, ensuring that all spend is on contract and enabling buyers across multiple public sector bodies to collaborate more effectively on purchasing to create a win-win situation of lower prices for buyers and higher volumes for selected suppliers, with process cost savings for both.

Addressing the complexity of purchasing and spending is the real challenge the new government faces but that will not be solved by a slash and slice mentality. There is a proven path to rapid cost savings without bringing valuable long term initiatives to a halt and forcing unnecessary headcount cuts.