THE NEED TO MARRY THE PRACTICALITIES of doing business with the drive to keep costs down applies equally to the public and private sectors, but the notable difference between the two is framework procurement.
A framework is a public sector procurement body that buys supplier services – car hire, travel, stationery – on behalf of any public sector entities that want to be part of it. However, this is no easy task. “They struggle with it because a framework is generally procuring on behalf of a vast number of organisations and all of them want something slightly different, so you end up with a tender that has been written by committee,” says managing director of Click Travel Jill Palmer. “This places quite a burden on the supplier, who is trying to procure in a way that’s price efficient and gives the best approach for everybody, but has to pay heed to these unique requirements.” It also means that travel management companies (TMCs) are answering to two masters: the buyer, who writes the brief; and the organisations who use the framework.
“From a supplier’s perspective,” says Corporate Travel Partners director Robert Daykin, “there is no guarantee of business from the framework because organisations that subscribed to it can use it, but do not have to. In my experience of the public sector, the departments that made arrangements that met their specific needs direct with the supplier were better off from a service, support and best value perspective.”
The tender process is also a nightmare. It could be an e-auction, where a price is set and there is a race to the bottom; or a best and final offer, which Palmer likens to pinning the tail on the donkey while blindfolded: “It is incredibly difficult to oust the incumbent, because they know what is being charged at the moment and have a pretty clear idea where they need to go with prices to win.” There are quality and price weightings, but given that public sector bodies are subject to scrutiny from the National Audit Office, it is difficult for them to justify choosing anything other than the lowest price.
TRAVEL GUIDELINES
The business of getting people from A to B is not vastly different from the private sector. Moving MPs around the UK and farther afield, for example, no longer has moat and duck-house implications: their expenditure is governed by the Independent Parliamentary Standards Authority (IPSA), which provides guidelines for travel.
Chambers Travel looks after the Houses of Parliament and NHS Scotland. “MPs can book what they like, but the IPSA guidelines say how much of that travel expenditure can be reimbursed,” says operations director, Julie Cope. “We invoice IPSA for what is within the guidelines and if there is anything outside, we invoice the MP directly. There is also a travel policy for employees within the House who are not Members of Parliament.”
For NHS Scotland, greater flexibility is required – for example, transporting patients from the islands to a hospital on the mainland. They may need nurses or doctors to accompany them, or breathing apparatus, or be disabled. And no one can predict being ill or being detained in hospital, so last-minute travel and attendant higher fares go with the territory. “The travel plan has to be fluid,” says Cope. “Sometimes travellers are not able to comply with policy and a restricted ticket can turn out to be a false economy if it has to be changed because a hospital keeps the patient waiting, they have to stay in or an appointment changes.”
Although hotels give government rates, best rate on the day is increasingly the norm. “We have a hotel programme with negotiated rates at properties around Westminster for MPs,” she says. “When members travel overseas, we tend to contact the local offices they are going to visit, to find out what rates are available. There are deemed government rates in the industry, but sometimes you can get a better rate on the day, so we always look for those.”
Mandating can be a thorny issue in the public and private sectors alike. The government is largely reluctant to mandate travel, so MPs do not have to book through Chambers, although most of them do because it holds negotiated rates. However, NHS Scotland mandates, and in the central government framework, use of the TMC is mandated.
Generally, the public sector sees bookers adhere to travel policy principles. “Controls across the public sector are fairly robust,” says CEO of Redfern Travel, Mark Bowers, whose company handles central government travel management services. “The number of people that use a centrally negotiated contract is much higher than in the private sector because it is easier to get travellers and bookers to comply with policy. “We can enforce policy through our online booking tool, Trips, or have looser controls that allow booking outside policy, giving reasons for doing so,” he says.
HRG has 530 government clients worldwide, ranging from NATO and International Red Cross, to 46 in the UK, the largest of which are the Ministry of Defence, and Foreign & Commonwealth Office. Best rate on the day applies because economy class travel is the norm. This makes it difficult to negotiate discounted air fares, because airlines will agree to only a limited number of discounted tariffs. In addition, there is a risk the TMC will commit to providing a volume of business it cannot meet.
“Corporate deals are changing. Long-haul still has value and relevance, but short-haul is a thing of the past where programme management is concerned. However, there are soft benefits, such as extra hold baggage, that make it more attractive,” says HRG’s global government services director Mike Holmes.
The same applies to rail travel, where booking lower fares prevails. “Fifty per cent of our rail tickets are the cheaper options, which equates to a saving of around £18 million across our UK public sector clients against fully flexible, anytime tickets,” he says.
Because hotels have not been subjected to the restrictions of air travel, there is still programme management of accommodation, with added-value extras such as wifi, parking or meals included, and properties are chosen according to best value to meet business needs.
PUBLIC BOUNDARIES
TMCs do not police government policy but, “we have added numerous reason codes to our online and offline booking to allow the booker to explain why they may need to go out of policy”, says Holmes. And according to Redfern Travel’s Bowers: “We have the facility to question the need to travel in the public and private sectors alike.”
Another boundary that exists in the public sector is investment in order to save. “Would the public sector support us in the investment of a new product or service to support their travel requirement or travel management needs? It is a difficult argument to sell in the public sector but in the private sector it’s possible,” says Mark Bowers, and others agree with him.
The main differences between public and private sector travel are not the booking process and actual travel, which are driven by best value and business convenience, but the procurement process, which is “very prohibitive”, as one TMC put it. Consider a shed-load of EU regulations and directives, and brace yourself for the long haul.
What can the private sector learn?
THERE ARE A NUMBER OF AREAS where the public sector leads the way and the private sector might do well to follow. One of these is in day-to-day procurement, which the public sector has embraced, making best available rate on the day the norm.
Another area for consideration is collaborative procurement. Both the charity and public sectors procure on a group framework basis, combining requirements to negotiate better rates. This is a missed opportunity in the private sector, where collaborative buying might command serious savings.
And in the public sector, the contract drives the relationship, leading to contract management rather than client management. As a result, the TMC is accountable to contract, which means it looks for every opportunity to drive down cost and realise benefits to the organisation.
Takeaways
• Public sector business is bought through a framework, but because a number of departments/organisations are subscribing to it, tender documents can read as though ‘written by committee’.
• Contrary to popular belief, the public sector is not living high on the hog, and there is a genuine desire to balance savings with the practicalities of getting the job done.
• Mandating is as problematic in the public sector as it is in the private, but because TMCs hold access to discounted fares, there are advantages to compliance.
• Even without mandating, travellers in the public sector have to justify going out of policy or, in the case of MPs, they can book what they like but have to pay any amount outside IPSA guidelines out of their own pocket.
•Best rate on the day is the norm, especially for rail and air fares (and often for hotels) as government rates do not always match up.
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