Can changes in practice transform public sector companies' often-outdated methods? Bob Papworth finds out how much it's possible to teach – and if anyone actually wants to learn...
Let's face it, one has to feel more than a tinge of sympathy for the Right Honourable Eric Pickles MP.
Apart from the fact that his name conjures up images of a long-forgotten comedian in an end-of-the-pier variety show, he is also Secretary of State for Communities and Local Government, which is hardly the most exciting of Cabinet positions.
Nevertheless, it was in that latter capacity, in June last year, that Pickles decided that local councils should embrace “transparency”.
Any transaction worth £500 or more, he advocated, should be open to public scrutiny.
Indeed, according to his own department’s website: “He makes clear that transparency and openness should be the default setting for the way councils do business, and calls on local government to move at speed to adopt this new approach.”
Leaving aside the fact that “local government” and “move at speed” are phrases that have absolutely no history of coexistence in the same sentence, the exhortation rather misses the point.
The odd corruption scandal aside, local authorities are not generally inherently opposed towards the concept of transparency; push hard enough, and they’ll tell you precisely how they spend your council tax.
What they won’t do, by and large, is tell you the process costs involved, let alone challenge the town hall culture of inertia to seriously consider less expensive alternatives.
There is a local public sector body in the north-west of England, Buying Business Travel has been told, whose annual travel spend exceeds £340,000. The process costs come to nearly £180,000. Another public sector organisation still insists on receiving paper invoices, in stamped, addressed envelopes. Those bills are then checked, manually, against each and every expense claim (and the accompanying receipts, along with verification of the pre-approval of the expenditure in the first place) and a cheque – presumably made out in copperplate, in green ink, and drawn on some Dickensian bank – is then posted to the appropriate creditor.
Transparency is not the issue; practice is.
Daryl Pinnington, managing director of York-based NYS Corporate – who, it should be stressed, was not the source of the above inside information – agrees that there is room for improvement. “A lot of local public sector bodies have very arcane systems, which adds a lot of cost. They are not necessarily worse [than central government departments and larger public sector bodies] at keeping tabs on the travel spend, but the way they do it tends to be very laborious.
“Central government departments are actually very organised when it comes to travel spend and have it managed very tightly on the whole. Your local authorities tend to have more old-fashioned systems in the way they push paper around, so they are actually cost-effective in that they try not to spend money, but in terms of processes they are pretty old-fashioned.”
And that, says Neil Hopwood, joint chief executive of Bradford-headquartered Redfern Travel (which, like NYS, is part of the government’s Buying Solutions preferred supplier framework), represents a massive opportunity for travel management companies (TMCs), and for travel managers looking for a real challenge.
Local councils, constabularies, NHS trusts and the like, are all eager to do their best for the communities they purport to serve, and they have all fallen victim to chancellor George Osborne’s fiscal chainsaw.
As a result, public sector purchasing people are assiduously checking every last price-tag to shave a few pence off a paper-clip here or a cycle-path there; meanwhile potholes remain unfilled and wheelie bins remain unemptied.
Behind the scenes, however, nothing much appears to be changing. Grassing over the floral clock as the bedding-plant budget withers doesn’t cost much; the paperwork involved costs a fortune.
“A lot of these people [in government] just don’t get it,” says Hopwood. “Not only do we save them money at the point of sale, we give them all the management information, we provide a track-and-trace service, we do their carbon reporting for them, all as part of the fee, but at the end of the day a lot of them still don’t see the value in using a travel management company.
“The council leader sees money going out, and decides that they can do it cheaper themselves – ‘We can just go on to the internet and get the best deals’ – but what is the cost to their organisation to have their people playing around on the internet all day?
“And once they think they’ve found what they want, how are they going to pay for it? With a travel management company, you get one centralised invoice, with all the relevant supporting data, and you make one payment. That in itself saves huge amounts of money.”
It’s not all doom and gloom. “Spending cuts are falling on different organisations in different ways,” says Pinnington. “I guess it’s like any major change – some people have planned for it and are going in the right direction, so whilst it’s painful, it’s not disastrous.”
And Hopwood concedes that there are some bright procurement sparks out there. “Some of them are really switched on and highly motivated,” he says, “but others see travel as just too difficult to meddle with. Of course it’s a very emotive area – staff members tend to take it personally if you put a policy in place and make them stay in a Premier Inn instead of a Crowne Plaza.
“They don’t see that a policy needs to be flexible enough to give a bit of choice but rigid enough to save money.
“Some councils, particularly the big spenders, have realised they have got to get a handle on it, but a lot of the smaller ones just let it go because it’s too difficult – and they’re the ones that ultimately will be called to account. It’s a question of getting them to listen.”
NYS’ Pinnington says that the smarter public sector bodies are already making inroads into their transient travel, but the real impact is on the meetings side.
“Hotel overnights are down by about 30 per cent,” he says, “and although rail bookings are only down a tad, maybe 5 to 10 per cent, of course there’s no first class travel any more.
“However, conferencing within the public sector has dropped by 80 to 90 per cent because they feel that the public relations of it is so negative. When you’re making cuts that affect front-line services, you can’t be seen to be taking people out for days at a time.
“That’s perfectly understandable – in terms of my own business planning, I do take people offsite when I feel it’s appropriate, but I’m not expecting to do anything for the next 18 months. And of course there’s a balance to be struck – you may be saving on the actual cost, but then you have the invisible cost of people not being motivated.”
That “18 months” remark prompts the obvious question: when, and to what extent, will local and regional public sector bodies start to travel again?
“I think you can safely say there will be no recovery while the cuts are going through over the next two or two-and-a-half years,” says Pinnington.
“I think there will come a point, when the new shape of the reduced size of the public sector becomes clear, when it will start to come back, but it won’t regain anything like the volumes of the past.”
Meanwhile, as Redfern’s Hopwood tirelessly repeats, there’s a huge back-office job of work to be done to reduce process costs.
Achieving those savings will be a real cause for celebration – time to book those end-of-the-pier show tickets?
Changes in EU procurement laws
Already struggling to implement government-imposed spending cuts, UK local authority procurement chiefs will soon have to come to terms with potentially-sweeping changes to European Union (EU) procurement laws.
The likely extent of the changes will be revealed at the end of June at an EU public procurement conference to be held in Brussels. While many local public sector bodies are less than happy with the existing rules, any amendments – positive or otherwise – are bound to be time-consuming and costly to implement.
And for travel management companies, that could offer significant opportunities to sell their services to beleaguered council officials.
Michel Barnier, European commissioner for the internal market and services, has said that he wants to cut through a lot of existing red tape, insisting: “We need to clarify public procurement rules to make life easier for both public authorities and companies bidding for contracts in Europe.”
Under EU law, any public sector contract above a pre-set value has to go out to tender across the whole of Europe – it seems unlikely that a Greek refuse collection company would bid to empty bins in Macclesfield, Maastricht or Malmö, but the law says they have to have the opportunity to do so.
In January this year, the European Commission published a green paper inviting comments on proposals to “modernise” public procurement, and at the same time launched a separate consultation on e-procurement.
The proposals, and the responses – the deadline was April 18, after Buying Business Travel went to press – will provide the basis of the June 30 conference, which will in turn lead to new legislation next year.
The most recent amendments to EU procurement law were introduced in 2006, with mixed results.
A Local Government Association (LGA) survey, conducted last winter, reveals that while 68 per cent of council procurement officer respondents believe that the 2006 directive has improved transparency, 58 per cent say it has not resulted in greater competition between suppliers, and a similar percentage say it has had no impact of the cost of goods and services.
Two-thirds of the respondents, however, agree that the administrative burden on procurement departments has increased, and process costs have gone up, as a direct result. And while 36 per cent say the 2006 directive has led to “more efficient and effective procurement practice”, 50 per cent say it has done no such thing.
Speaking at an EU summit in Brussels in January, Chris Holley, Regeneration and Europe spokesman for the Welsh Local Government Association and leader of Swansea Council, called for greater legislative flexibility. “In these difficult economic times, local authorities can no longer only assess EU policy on the basis of whether it is good legislation, but rather on the potential cost to local councils,” he said.
“Current EU procurement and competition rules are acting as barriers to local government attempts to cut back on costs through increased efficiency and joint working. We will be pressing the Commission to recognise that local government simply cannot continue to provide adequate services to local communities in the current economic climate if such restrictive rules are not made more flexible.”
One big area of concern, it appears, is that unsuccessful bidders have the right to challenge any contract award. While roughly half those challenges are resolved without recourse to law, some disgruntled bidders do take legal action – adding substantially to council costs.
The situation is further complicated when a group of local authorities join forces and form a consortium to buy goods or services – when the challenges come in, consortium members have to agree to share the workload and the cost.
This article was first published in ABTN's sister title Buying Business Travel, the award-winning magazine for company travel & meetings buyers and arrangers.
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