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In this guest post, Procurement Leaders invites Julian Young, CEO and Founder at Matrix SCM to examine how technology is transforming procurement in the public sphere
I want to be frank – the traditional public sector framework contract, conceived under the spirit of European Procurement Law, fundamentally doesn’t work. I believe it is impossible for public sector institutions to buy for the individual under their constraints. Trying to leverage spend and consolidate supply simply doesn’t work – the only loser is the general public. There has to be a better way.
’Procurement 101’ tells us that you must always aggregate your spend, leverage the market and consolidate your supply base. This is fine when buying products, but it simply doesn’t work when buying services like social care – in that context, public sector procurement is about buying for the individual.
When buying services to meet a specific member of the public’s needs, it is vital to buy on outcomes, not on a prescriptive and generic set of framework parameters. The current system has led to individuals having to add money to service packages because they are in need of individual services – we can all agree this is wrong.
There is a solution to be found in the form of a much longer supply chain, but only if we reverse years of leveraged and aggregated procurement and move to a more expansive and competitive buying regime. That reversal is only possible through sensible use of modern digital technology, up-to-date practices and the use of the web to engage a longer and more incentivised supply chain.
Amazon’s technology has created an open market whereby Amazon competes with other suppliers it enrols to its procurement platform. A buyer can see the prices for CDs, films, books and toys available through Amazon and through competing sellers. Though the challenges in public sector procurement may on the surface seem very different, our goal at Matrix SCM has been similar in some ways: to establish new software geared towards ’micro-procurement’ that will make care services in the UK and Europe more personalised and to help governments avoid making drastic public sector cuts through smarter buying of services.
In this ’Brave New World’ of transparent and interconnected public sector procurement, traditional framework contracts have become outmoded for some categories of services procurement. I passionately believe that procurement excellence in all sectors comes from the ability to create competition – and that creating competitive tension in a longer supply chain is what procurement purists must do.
To do this, procurement managers must spend time genuinely interacting with suppliers. They should be more available, more transparent and more amenable to the views of suppliers to get them into the program. When they do this, they will be able to publish opportunities and watch the market determine a rate.
A healthy and significantly larger supply chain enabled by the web will have the fundamental effect of reducing the cost of service by creating competitive tension amongst the enlarged pool of suppliers.
Procurement managers must think in terms of stimulating supply not in terms of consolidating it. Tesco and the other big supermarkets for a long time consolidated supply and leveraged spend. It worked well for a while but increasingly there is a new spirit in the air – the public increasingly demand the right to select products from a wider range of local producers.
The retail sector is increasingly embracing this approach and selling far fewer own brand goods and acting as a gateway for millions of suppliers. All procurement specialists need to consider this approach and public sector procurement is no different.
Frameworks had their moment in time but now don’t work – not for local councils, not for their suppliers and not for the individuals they are meant to serve. Expanding the supply chain and utilising smart web based technology has to be the way forward for public sector procurement.
Julian Young is founder and CEO of Matrix SCM.