As the government changes the way it manages its travel procurement, what does it mean for those with smaller budgets? Bob Papworth reports...
According to its website motto, Copeland Borough Council is “leading the transformation of West Cumbria to a prosperous future”. One can only imagine the council dreamed up its little epithet before Chancellor George Osborne delivered his budgetary bombshell regarding public sector cuts – more than 50 per cent of the workforce in the borough is employed in said sector. But Copeland is not alone in its misfortune – Newcastle, Blackpool, Swansea and the London Borough of Greenwich, among others, are places where the public sector accounts for more than 30 per cent of local jobs.
Recent data from EconStats show that of the 29 million people currently in employment in England and Wales, more than 6m (nearly 21 per cent) are employed in the public sector. And things do appear to be getting tougher – in the fourth quarter of 2010, says the Office for National Statistics (ONS), there were 45,000 public sector job losses (24,000 in local government, 12,000 in public corporations, and 9,000 in central government).
Fewer public sector workers suggests, as the spending cuts bite deeper over the next three or four years, there will be fewer public sector travellers. And those that are travelling are being told to spend less.
Nowhere has that been more apparent than on the UK’s rail network. Speaking at the Guild of Travel Management Companies’ (GTMC) conference in Abu Dhabi in May, rail industry expert Jon Reeve, director of trade relations at Evolvi Rail Systems, spells out the harsh
facts. “We have seen significant reductions, double-digit percentage reductions, in first class travel,” he says, “which means that train operating companies are ferrying a lot of empty rolling-stock around the country – first class carriages that used to be full of civil servants.”
Another GTMC speaker, thetrainline.com’s sales and distribution director Adrian Watts, says: “After the election last year there was a rapid decline in public sector transaction volume. The rate of decline has levelled off since late autumn, though volumes are still substantially down on last year. First class travel has all but disappeared. I believe we are probably in the trough of demand right now, though I am expecting the period in the trough to be prolonged. This is in marked contrast to the private sector where demand continues to build, though we are not yet seeing any substantial movement back towards first class travel.”
Daryl Pinnington, managing director of NYS Corporate, which is part of the government’s Buying Solutions procurement framework, agrees that times are tough, and may yet get tougher. “Cutting the public sector out of first class has pretty much happened across the board,” he says, “and that isn’t going to change any time soon. What we have seen is an immediate cut in all expenditure that is even slightly discretionary – those cuts came straight after the election, with every organisation within the public sector questioning the need to travel at all, let alone in first class.”
Pinnington, however, noted that although times will get tougher there may be a glimmer of light at the end of the business travel tunnel. “The next thing to take effect will be the reduction in the actual number of people working in the public sector, which will have a further impact, but then I think they will be allowed to travel a little more freely,” he says. “There will be a slight easing of policy constraints where it can be shown that the cuts have been detrimental to business.”
It seems that there was an immediate plummet in travel once the cuts were announced – the government acted so radically and so quickly – but now there is a period of ‘flatlining’. Pinnington says: “Things need to even out a little. I think the situation will remain the same for the next two-and-a-half to three years – the life of this government – but then we will see some sort of recovery, although it’s never going to go back to where it was.”
The first hints that central government is trying to shift from ‘buying nothing’ to ‘buying smarter’ are already emerging. John Collington, appointed last year as head of procurement within the Cabinet Office’s Efficiency and Reform Group (ERG), was earlier this year named chief procurement officer across the whole of central government.
The Cabinet Office announced: “[Collington] will ensure that the Crown receives the best value for money by acting as a single customer, rather than separate departments, when buying commonly used goods and services... He will be responsible for the delivery of more efficient procurement across government and improving procurement capability.”
Collington’s new deputy is David Smith, commercial director at the Department for Work and Pensions (DWP), who has also been named as one of a new team of Crown Representatives, procurement’s version of a Star Chamber and another indication that government is beginning to get its purchasing act together.
Drawn from a range of government departments and from public sector bodies, such as HM Revenue & Customs and the National Offender Management Service, the Crown Representatives will initially deal direct with headline suppliers – for example, BT and Balfour Beatty, Accenture, IBM and Microsoft.
Minister for the Cabinet Office, Francis Maude, says: “Our priority is to make sure the taxpaying public gets the best possible deal – and one of the ways of doing this is to ensure we’re using the scale of government to push down prices. That is why any dealings with our big suppliers have to be coordinated and our approach has to be strategic – the new Crown Representatives will make sure this happens.”
Maude adds that the government had saved £800 million since May [2010] by starting to establish itself as a single customer but, in doing so, it also recognised the need for better, more efficient relationships with suppliers over the long term.
“The value of a single representative, acting on behalf of all departments, became apparent during the contract renegotiations. It brought benefits for both sides – bringing a complete picture of a supplier’s portfolio of contracts to the discussions and identifying opportunities for synergy and cost removal”, Maude explains.
Significantly, however, one of the new Crown Representatives, Stephen Allott, has been appointed specifically to build “a more strategic dialogue between government and smaller suppliers”.
Commenting on the appointment, Maude says: “[This] marks the end of what I call the procurement oligopoly – where innovative small businesses and organisations are too often shut out of contract processes early on because of ridiculous rules and unnecessary bureaucracy. This is not only bad for those affected, it’s also bad for government, as it stifles competition.”
Small businesses and voluntary sector organisations, he says, will be able to compete more fairly for government contracts, “helping to drive economic growth at national and regional level, while delivering better deals for the taxpayer”.
Mark Bowers, joint chief executive of Redfern Travel, believes that those “better deals” are already being struck, thanks to vast improvements in travel procurement processes brought about by a top-down behavioural change.
“I think the world has just changed. The idea of travelling first class, or staying at Claridge’s when there’s a Premier Inn just down the road, has gone – I think that mindset has gone for good,” he says.
“In the financial year to the end of March, we saw a significant drop in [public sector] spend, but that was not matched by the drop in the number of journeys taken. Spending was down by about 20 per cent, but volumes were down by only 4 or 5 per cent – and that is continuing.”
He’s not convinced that cuts in staffing levels will have much of an impact, either. “Whether or not the big reductions in head-count come about – and whether those reductions will have a significant effect on travel – remains to be seen, but I think we are through the worst of it.”
Bowers believes that, from a travel management company perspective, prospects are picking up. “I am aware that some of our peers in the industry have suffered significantly from a decline in journeys, but that’s not our experience,” he says. “We have been banging on about all the usual things – book in advance, take trains after 10.30am, the basics – and that message is getting home.
“Business isn’t going back to the old days, for those days will never come back. We are confident about the future because this is where the skills of a travel management company come in. We have got beyond flogging tickets – it’s about processes and about changing behaviour, and government is driving that change.”
Or, as Copeland Borough Council would put it, “leading the transformation... to a prosperous future”. The government seems set on transformation; the prosperous future may yet belong to the travel management community.
PUBLIC SECTOR IN NUMBERS
1.7 million: The number of people working in mainstream local government jobs. (Source: Local Government Association – LGA)
15,000 fewer people working in mainstream local government jobs than in 2008/09. (Source: LGA)
500,000: The number of people working for central government in the Civil Service. (Source: Office for National Statistics – ONS)
3.8 million: The number of people working in public corporations. (Source: ONS)
This article was first published in ABTN's sister title Buying Business Travel, the award-winning magazine for company travel & meetings buyers and arrangers.
To receive your free subscription, click the logo:
