2024 was widely reported as the most ‘elected’ year in modern history with voters going to the polls in more than sixty countries. Incumbent governments suffered as electors voted for change. One of the recurrent themes was dissatisfaction with critical public services. Many taxpayers feel that they neither meet expected satisfaction levels nor deliver value for money. They see major infrastructure projects being delayed with increasing costs while basic services fail to match increased demand despite rising taxes.
Having been the first Commercial Continuous Improvement Director for the UK Government Commercial Function, I understand the unique challenges and obstacles faced by commercial managers across public sector organisations. (Editor’s note: in the UK public sector, procurement is usually referred to as ‘commercial services’).
Commercial reforms in the UK Civil Service started in 2014 the late Lord Heyward recognised that professional acumen needed to be improved, and standards raised. Serious issues related to key Government contracts had become headline stories across the UK media and this needed to stop. To address this, a programme of work was launched that included attracting new talent and providing ongoing professional development and continuous improvement. This continues ten years later with employees being required to complete a minimum of 30 hours professional development to ensure they keep pace with the demands and evolving requirements for the profession. Annual benchmarking to identify best practice and areas for improvement now also occurs. A number of these efforts have extended beyond the Civil Service into the wider public sector and includes Local Government, Health-related organisations and other public bodies.
That said, the public sector is undeniably unique. Nowhere in the private sector does anyone buy school transport, nuclear submarines or social care for vulnerable individuals. The private sector is also not responsible for infrastructure projects on a similar scale to the HS2 high-speed rail link. However, public sector employees must work with commercially astute teams from suppliers, sometimes in limited or financially challenged markets, who have duties to their shareholders. The challenge for obtaining optimum value can be difficult.
With all this in mind, here are five considerations that I believe should be top of mind among policymakers and practitioners in public sector procurement.
1. Demonstrate Return on Investment
Public sector organisations are not monitoring and recording the return on their technology investments. In most commercial departments, the biggest cost is headcount. But after that, it will probably be technology. When I ask organisations “What is the ROI on your technology investments?” it is exceptionally rare that anyone can provide an answer. This is also very common with private sector organisations.
There is a major risk at the moment with all the hype around artificial intelligence. AI will deliver many benefits, for sure. But having seen how technology projects often miss their planned benefits and launch dates across private and public sector organisations, I fear huge sums of money could be wasted through badly conceived business plans and subsequent implementation, if indeed anything is implemented at all. The only way to avoid this is to set out clear metrics for ROI and then to monitor them on a continuous basis. My early career coincided with the emergence of the internet. At the time, organisations were understandably keen to capture the benefits but, in many cases, they took leaps of blind faith and dot.com became dot.bomb. After the days of ‘irrational exuberance,’ far greater scrutiny occurred around investments and more sober assessments of what could – and could not – be achieved with this exciting new technology took place. At the moment, entirely different categories of IT are labelled ‘AI’, and many are misled into thinking that this means they must be good, and they must serve useful purposes. It is vitally important that procurement professionals, particularly in the public sector where funding is limited, should be on their guard against this. In working with our customers, I want to bring a novel approach whereby we challenge our respective organisations on how we ensure value. And above all, this means establishing clear measures of ROI which can clearly explain whether the investment is meeting its intended goals.
2. Usability is not enough
Poor usability is one reason for low adoption, but it is not the only reason. You can implement the best and most usable technology on the planet, but without the sponsorship of senior stakeholders, individuals may continue to say that “The old ways worked fine, so why change?” It is human nature. People like to do what they have always done, even if they could save themselves time and effort by doing things differently. This is especially true in procurement! We talk a lot about the need to automate manual, routine tasks to produce opportunities to think and act strategically, and we have dozens of case studies to prove the point, but you need to provide real incentives to adopt new technology. All leaders, regardless of sector or organisation, need to champion and sponsor the technologies being implemented with a clear explanation on the benefits to the individuals and wider organisation, such as full transparency and cross-functional benefits, incentivising and encouraging employees to use the new solutions. These leaders need to be fully behind the solutions they have chosen to improve their organisation. Having personally driven best-in-class programmes previously in my career, I see my role as collaborating with our customers to do this.
3. Procurement leaders need to ‘get their hands dirty’ with the technology
It is unfortunately the case that many procurement leaders who do provide a mandate to implement and use new technologies are too distant from the design, development and implementation of the chosen solutions. This means that the people who become responsible for the implementation and success of new technology are several levels down the hierarchy, which creates frustration and disillusionment. Leaders are then surprised that what they get is not what the suppliers, and the champions of the new solutions, promised, while the majority of the userbase doesn’t have the broad perspective necessary to see what the new capabilities could deliver. I have found that many procurement leaders do not have a clear grasp of technology, and, because of this, they are too shy to get involved. The combination of lack of interest from the top and lack of vision lower down the organisation creates a vicious circle: the technology is not used to its full potential, so the organisation does not see the full benefits, so the incentive to use it is further weakened, and so forth. Thus, we come back to the first point – the need for a leadership mandate to track and record return on investment, backed up with clear KPIs.
4. Plug data utilisation and knowledge gaps
Large amounts of data remain siloed or incorrectly classified across the public sector. This means that organisations lack the ability to leverage their extensive data sets, missing opportunities for insights into procurement, service delivery, and supplier behaviour.
By investing in data lakes and advanced data analytics and making sensible use of AI to optimise procurement, public sector organisations will identify cost-saving opportunities and improve their strategic decision-making. These efforts require an ongoing commitment to ensure their success. All too often I have seen interest fade on projects focused on improving data access and quality once the initial implementation has been achieved. This is precisely when the hard work should start as this is the point when all involved start to see possibilities emerge and when strategies can be developed. Data is a valuable ‘asset’ for an organisation that needs ongoing attention and focus from all involved across the organisation to preserve its integrity for long-term success.
5. Conduct bottom-up analysis of cost drivers
One area where public sector organisations are learning from other sectors, notably manufacturing, is (to use McKinsey’s terminology) ‘clean-sheet analysis’ or blank-slate process design. In short, this means examining contracts and benchmarking costs to uncover hidden inefficiencies and negotiate better terms with suppliers, unlocking significant savings. Public sector organisations often under-utilise data that is readily available from their suppliers. By examining costs in more granular detail from the bottom up, public sector organisations will be better able to negotiate terms with suppliers. Again, cross-functional and cross-departmental visibility is of great help for internal benchmarking, but it can also help to deal cost-effectively with disruptions. It is only when you compare at a granular level that you can identify the similarities of interest and the differences. With the kind of scenario modelling used in clean-sheet analysis, we can simulate alternative service or supply configurations to assess how changes impact cost and service quality, ensuring informed decision-making.
Mark Roberts was previously Commercial Director for the Metropolitan Police Service in London, the largest Police Force in Europe, with income contracts of £300m and an expenditure budget of £850m. Prior to this, he was the first Commercial Continuous Improvement Director for the Government Commercial Function. Through these roles, Mark has formed an extensive and up-to-date understanding of processes, challenges and objectives for public sector procurement in both Government and the wider public sector.
