Public sector procurement: the next wave of savings

Processes and strategies in public sector procurement need to be radically changed if governments expect more in their bank.

Image: COSPV

Any CPOs who have worked in government will know that effective procurement is a top priority in the public sector. But are we doing all we can to maximise the savings available?

Grosvenor surveyed hundreds of top procurement professionals in Australasia (including a large number of federal and state government organisations) to identify where the next wave of procurement savings will come from.

Here’s what we discovered:

The public sector is overly reliant on “Pay Less” strategies

The survey showed that the Public Sector relies heavily on keeping supplier costs down: what we call “Pay Less” strategies.

Now, this is no surprise, given running a tender process is required by regulation in most jurisdictions, but this over-reliance on Pay Less seems to divert attention away from more advanced levers, such as Buy Cheaper and Buy Less.

So why is that a problem?

The potential benefits of embracing other strategies are huge

Not so much a problem, as a missed opportunity. And a big one, at that.

Potentially, the public sector stands to save an additional 100 per cent from simply encouraging their colleagues to buy less, coupled with an additional 32 per cent from exploring new, smarter ways of buying, and leveraging supplier relationships.

Embracing just three simple advanced savings tactics alone could amount to a whole lot of savings

The survey found a myriad of different tactics to boost savings: these three alone have the potential to boost savings by 100 per cent, each:

  • Buy Less by putting initiatives into place to reduce the quantity of the goods and services consumed (Potential saving increase of 105 per cent).
  • Buy Cheaper by implementing initiatives to reduce the expenditure on nice-to-have features, add-ons and bespoke items. (Potential saving increase of 113 per cent).
  • Buy Smarter by streamlining the way goods and services are consumed in our business, reducing internal costs. (Potential saving increase of 100 per cent).

But only a minority of Public Sector CPOs are using advanced spend levers

Despite the fact that the public sector stands to save the most from advanced spend levers such as buying cheaper, buying less and buying smarter, the majority of Public Sector CPOs are still focused predominantly on paying less, which is an area of diminishing returns.

Only 50 per cent of CPOs are using ‘buy cheaper’ and ‘buy smarter’ strategies, and only 18% are using ‘buy less’ strategies, which our survey found to be the most effective of all.

Are you ready to seize the opportunity?

There is no doubt the public sector stands to gain huge savings from embracing advanced spend levers: and the CPOs that get there first will lead their field.

You can read more Public Sector procurement benchmarks in detail, find out more about advanced spend levers, and understand how to implement them, in the full report. It’s completely free and can be downloaded here.

Want to know how you compare to others in your industry? Find out with our free benchmarking tool.

View Grosvenor Management Consulting Profile

Grosvenor Management Consulting has over 20 years of experience in procurement for both the public and private sectors. We help clients decrease risk, control spend, improve efficiencies and optimise performance every step of the way. We have partnered with PASA to survey hundreds of top procurement professionals in Australasia. We wanted to understand which spend levers they are using, and which are the most effective. Advanced spend levers offer a host of untapped savings potential. Download Grosvenor’s 2015 CPO Study: Emerging trends in advanced spend levers, to find out more about these levers and learn how to implement them today.

Contact Dr Stefan Gassner, leader of Grosvenor’s Procurement and Contracting practice, to discuss how you can benefit from advanced spend levers in your organisation.

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