PracticePeople In PracticeNetworking – Local government goes global.

Networking - Local government goes global.

Internet procurement is revolutionising the way local government buys

Local government and cutting edge are words usually found in the same sentence as regularly as UK farmers and clean bill of health. But that could change with the introduction of an online shopping mall for all 409 English and Welsh councils.

By as early as this summer, IdeaMarketplace, an internet-based system set to revolutionise the way councils buy goods and services, should be up and running.

Potentially it could save local authorities billions of pounds each year, put councils ahead in e-commerce terms of the public and vast parts of the private sector, and also mark Britain’s town halls as public sector world leaders in the use of web-based technology to aid procurement.

IdeaMarketplace will let councils choose, with just the few clicks of a mouse, from entire ranges of goods and services offered online. It will allow them to buy things as diverse as stationery to motor vehicles online.

They will also be able to hire temporary staff or specialist contractors.

Ordering, invoicing and payments will all be electronic.

IdeaMarketplace will also provide a clear audit trial allowing a purchaser to verify that goods or services have been received.

Councils will be able to use existing browser technology to search the web for goods and services to buy and use IdeaMarketplace to integrate with their back office demands when it comes to placing an order.

If successful it could save town halls as much as #4bn annually. Every year councils nationally spend #25bn on goods and services, making up to 35 million buying transactions.

On top of that they spend a further #2.5bn on transaction costs. This works out as #200,000 spent on goods and services every minute by council officers plus a further #20,000 on paperwork.

If IdeaMarketplace proves successful councils could find themselves sharing a timely e-procurement windfall that could be used to fund other local government services.

IdeaMarketplace is the creation of the Improvement and Development Agency, the organisation established to improve local authority performance in all service areas.

The solution it has come up with has, it claims, has two unique aspects.

First, it has a ‘best buy’ feature that allows councils to take account of local policy priorities and costs before buying anything.

And second, it will promote ‘centres of excellence’. This will allow local authorities that are seen as market leaders in certain areas of procurement to buy all goods in that area for all local authorities on a nationwide basis.

Gary Richardson, the agency’s director of business development, says these centres of excellence make Britain ‘unique in the world’ and will help cement its position in the vanguard of public sector procurement.

Richardson predicts IdeaMarketplace will be more advanced than anything seen in local government in the USA, although the influence is definitely American.

Richardson went on a fact-finding mission to North America last December and cites federal agencies such as NASA as the inspiration behind the system that will emerge later this year. ‘E-procurement is very new for public sector organisations on both sides of the Atlantic and we are ahead of the game. The UK is very well equipped to move into this new area,’ he says.

But this is no flag waving exercise. The company eventually chosen to operate IdeaMarketplace will be led by consortia from either Canada of the United States.

The switch to using the internet comes at the same time as ministers have commissioned a taskforce to carry out a review of local government procurement. Headed by Sir Ian Byatt, former director general of OFWAT, the taskforce will report their findings in May, and e-procurement is certain to feature.

Richardson has already given evidence to the taskforce. Similar moves are afoot within the National Health Service, although they could take several years to bear fruition.

The NHS Purchasing and Supply Agency (PASA) has just announced plans to introduce an e-commerce system to help all English trusts to order goods and services electronically. Approximately #6bn is spent every year by the health service, though most of this is still done through paper purchasing.

PASA says that it thinks more than #1bn could be saved each year on switching procurement to the internet. The Department of Health expects to award a contract within the next 12 months. The issue of electronic procurement is one being taken more seriously by central government.

Last year, ministers established the Office of Government Commerce. Based within the Treasury, the OGC aims to become another procurement centre of excellence for the 200 departments, agencies and non-governmental bodies.

Annually the government spends #13bn on civil procurement.

Chief executive Peter Gershon says he is looking at making #1bn annual savings, although this will not all be delivered by e-procurement but also through things such as the private finance initiative.

Gershon, who at #180,000 a year plus performance pay, is the country’s highest paid civil servant and is also thought not to favour a one procurement system for all government departments. He would like to see which ones work best and try to spread good practice throughout Whitehall.

Ironically it is the private sector which is causing the public sector most concern.

Although Richardson is confident the technology is in place across the public sector, he fears some suppliers may not be up to speed. And if the suppliers are not in place and do not have internet based procurement systems, then all sides will have to revert to paper to order goods and services.

Several surveys published have shown an inconsistent approach among companies when adopting e-procurement methods.

The latest call to arms comes from the Confederation of British Industry and KPMG Consulting who, in a report published last month, called on companies to realise that e-business was ‘not a passing fad but is on the brink of revolutionising the UK economy’.

Fears are growing that a huge digital divide may develop over the next few years in the UK between those companies and organisations that embrace the internet as an essential business tool and those that do not.

If this divide develops then any revolution in e-procurement could be short-lived.

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