1 Introduction
Procurement services in the public sector are under considerable pressure to deliver performance improvements and to achieve financial savings through more efficient and coordinated service delivery. The McClelland report set out a vision of increased efficiency and professionalism through structured collaboration and a national effort to adopt best practice.
The public procurement landscape is changing - through the Scottish Procurement Information Hub we now have detailed spending and supplier data from a significant number of high spending public sector organisations in Scotland. This is the first time that public sector spending analysis of this level of complexity has been developed at a national level, not only within Scotland, but across the UK and the rest of Europe.
From this data, we can now identify clear opportunities for regional, sectoral and national collaboration, negotiate a better deal through collective public spending, and eliminate inefficient buying behaviours such as duplication of effort and price variations caused by disconnected contracting arrangements.
In addition to this, the new National and Sectoral Centres of Expertise are a radical transformation in the way that the public sector will contract for goods and services. These Centres have a vital role to play in promoting best practice, delivering efficiencies, and in maximising the use of limited resources through collaboration.
The Cabinet Secretary gave us a clear message at Scottish National Procurement Conference in October 2007 - he expects all public sector organisations to embrace these changes and engage in this national effort to collaborate, become more efficient, and adopt best practice. As the public procurement reform programme progresses, organisations will be increasingly expected to consider the contribution public purchasing decisions make to sustainable environmental and economic development.
To track progress and to keep focus amidst this changing environment, managers and procurement staff will need to monitor, manage and report on their performance in a consistent, straightforward and cost-effective way.
The McClelland Report stated that 'the absence of consistent and reliable data will inhibit understanding, proper attention and essential action. Indeed, without the reported information … it is difficult to create an environment in which performance can be properly assessed and its improvement encouraged'.
To address this, it was agreed that a common, core set of National Procurement Best Practice Indicators ( BPIs) should be developed. The set of BPIs have been designed to be applicable and useful to procurement teams in all parts of the public sector in Scotland.
The fundamental objective of this project is to deliver measurable improvement in public procurement performance over time, across the whole public sector in Scotland. This can only be achieved if procurement teams in every organisation adopt a culture of collaboration and continuous improvement, create and actively use management information to inform strategic procurement decisions, embed best practice, and improve organisational processes.
This document outlines the key performance areas where procurement teams should aim to improve, and introduces the BPIs that will enable them to track their progress and seek out best practice elsewhere in the public sector.
Reporting - Method and Timings
Full and detailed guidance and definitions for each BPI are available on the Scottish Procurement Directorate website at www.scotland.gov.uk/BPIprocurementguidance
As procurement teams across Scotland face up to this challenge, they each will have different strengths to draw upon, and different weaknesses to overcome as part of that process. Some organisations may already have in place methods of scrutiny and reporting structures that go far beyond what is required for these BPIs. Such organisations will find reporting against the BPIs easier and will have much to teach the rest of the public sector as the reform agenda progresses. Other organisations may have procurement teams and processes that are under-resourced, and will find the move towards measuring their performance against the BPIs and using management information a more radical change, and onerous task.
To make reporting the BPIs as easy as possible, and to maximise the analysis that is available to organisations, a web-based reporting tool has been developed alongside the Scottish Procurement Information Hub. The reporting tool is available free to all publicly funded bodies.
For those organisations who currently use the Hub and have up-to-date spend data uploaded a'refresh-lite' methodology has been devised (with reporting tools in place) to facilitate updating of the Hub with spend data during the year. As neither enhancement nor validation of the core creditor record is required (this will still happen at the 'annual refresh') the process will be quick, efficient and easy to execute. Organisations that update their quarterly 'refresh lite' data on the Hub in a timely manner and provide up-to-date contract information will have some of the BPIs and Financial Indices generated automatically for them.
A summary of the reporting frequency and a breakdown of which BPIs and financial indices will be done automatically by the Hub or will require manual input by organisations is shown in Annex 1.
The BPI reporting mechanism will also be available free of charge to those who do not currently use the Hub - although such organisations will have to calculate all BPIs and Financial Indices manually.
After the first report, organisations will be able to track their progress over time, within their sector, region, and against the national average.
At a national level, the key trends will be reported to the Public Procurement Reform Board and Delivery Group, and will help ensure that the public procurement reform programme is kept on track, with areas of national weakness and strength identified for targeted assistance or action.
Existing Governance and Audit Arrangements within Organisations
Public bodies are already responsible for establishing arrangements to ensure the proper conduct of their affairs, including conformance to standards of good governance and accountability with regard to procurement. They will usually involve their audit committees or similar groups in monitoring these arrangements.
Internal Audit should provide an independent and continuing appraisal of an organisation's internal control system and continuing assurance that its internal control systems are accurate and effective.
Each organisations' audit committee should set the degree of assurance it requires concerning the management of procurement risk, and internal audit should plan its work accordingly. This should address the Review of Public Procurement in Scotland recommendation that organisations confirm annually that they comply with minimum standards of governance and accountability for procurement.
External Audit provide an opinion on public bodies' financial statements and the regularity of transactions. As part of the wider scope of public audit, each year they review and report on public bodies' corporate governance arrangements, including arrangements to achieve best value and value for money in the use of resources.
External audit may review and report on standards of risk management and governance with regard to procurement in any public body. Additionally, Audit Scotland's programme of performance audits may scrutinise and report on public bodies' procurement systems and effectiveness.