The best way to achieve savings and to reduce the college’s administration is to buy through consortia or other bodies that set up contracts with suppliers. If the right contract or framework is not in place, you can join forces with other organisations including colleges, schools and universities.
Buy through consortia and contracting bodies
Procurement consortia and other contracting bodies carry out collective purchasing on behalf of a number of different organisations. By leveraging their buying power they are able to deliver value for money, professional and cost-effective purchasing, and support services.
Many colleges buy from contracts that have been negotiated and are managed by consortia. The products and services are delivered to the college, which pays the suppliers directly.
By using a consortium or contracting body colleges stand to benefit from:
- Better prices and quality.
- Reduced duplication of time and effort.
- Reduced transaction, administration and sourcing costs.
- Access to procurement expertise.
- Compliance with legislation and regulations.
- Good management information.
- Pre-agreed service and delivery conditions.
Using a consortium or a contracting body
In terms of volume, colleges should be able to buy most of their commonly and frequently bought items through consortia. These include routine categories of spend such as IT equipment, stationery and energy, together with many less frequently bought items, which involve significant spend exceeding EU public procurement thresholds.
As with any other supply source, you will need to review the consortia you use on a regular basis to ensure they continue to deliver value for money.
Use framework agreements
Many consortia and contracting bodies such as Crescent Purchasing Consortium (CPC) negotiate and operate framework agreements which allow colleges to buy routine items and create contracts with suppliers within the terms of the agreement. These agreements can be used to ‘call off’ goods and services on a regular basis or as and when they are needed. The benefit is that the contract has been negotiated and pre-agreed by professionals, ready for college use. Other benefits include:
- Better prices.
- Flexibility – colleges are not committed to buy.
- Reduced administrative costs.
- Fosters long-term relationships with suppliers, leading to better service and value for money.
- Legal compliance assured.
Some framework agreements use rankings that allow the top ranked supplier to be selected directly without a mini competition. Or alternatively a mini competition is conducted amongst the suppliers on the framework to determine which supplier offers the best value based on your specific requirements. If you cannot find a framework agreement that meets the college’s requirement, use the CPC’s ‘Suggest a Framework’ tool to recommend a new framework is established
Join forces with others if a consortium is not available for specific items, find out if other colleges, schools, universities or local authority offices in your area have a similar need. Collaborating with other institutions can deliver major benefits:
- Lower unit prices through ‘bulk buying’.
- Lower transaction costs from sharing tasks such as ordering, negotiation and design of specifications.
- Improved quality as a result of better procurement expertise and processes.
- Sharing expertise and market intelligence.
Your region has its own CPC Procurement Advisory Group Representative to facilitate procurement networks which allows local colleges to share information, source items jointly and establish price and service benchmarks.
Make good use of benchmarking
By benchmarking high value contracts against those of consortia, colleges can gauge whether they are receiving value for money and switch to the best contract if necessary. If a consortium does not offer better value, provide them with feedback so they can improve their offering.
The CPC provides a benchmarking service on some of the main commodity areas of college spend. Colleges can complete templates for certain commodities and the CPC benchmarks this data against their framework agreements. The results are fed back to the college.
Procuring one-off, high value items
Colleges also procure one-off, high risk, high value items such as a new building or a strategic project. This would be handled by the head of the department concerned, with support from the procurement liaison officer to ensure both internal and external compliance.
If your college is embarking on such a project, talk to the Procurement Team or raise it at the local regional procurement network meeting. It may be worth consulting other related establishments about either joining forces to achieve economies of scale or for advice on best practice.
HR, ICT, catering, facilities management
Procurement is not just about how colleges manage buying commonly and frequently required goods and services, it is relevant to all commercial decisions. The decision whether to deliver a service such as HR, ICT support, catering and facilities management in-house using college staff or to contract it out is a procurement decision that involves a procurement ‘strategic options appraisal’.
A strategic options appraisal involves identifying and evaluating options that will deliver and meet the agreed specification. Once an option has been identified it may be necessary to run a tender.
Total cost of ownership
The total cost of any goods or service is rarely the ‘label price’. The components of the ‘total’ cost are:
- Environmental cost.
- Specification cost.
- Installation cost.
- Running cost (consumables, energy and maintenance).
- Disposal cost.
For a surprising number of purchases the ‘running costs’ can exceed all the other costs combined. Good procurement practice will help to ensure that the college takes into account the total cost.
Put procurement processes in place
Even if you are doing most procurement through consortia, you will still make some purchases direct with suppliers and need to have robust processes in place. In addition to being aware of the various regulatory requirements, including EU public sector tendering rules, you also need to ensure college policies are followed. These will probably include:
- A competitive process that involves seeking three quotes and a full tender for all orders over a certain amount.
- Reviewing contracts on a regular basis. Ensuring budget holders only purchase within the limits of their authority.
- A list of approved suppliers.
Also available to colleges are online systems for managing the tendering process; more information can be found in A Guide to E-Tendering.
Agree procurement methods
There are a number of different procurement methods. Each needs to be suited to the type, value and inherent risk of the products or services you are purchasing. All staff members involved in procurement should stay up to date with the uses, limitations, risks and techniques of these methods.
If you are currently using a system that is mainly paper-based, opting for e-procurement requires a wholesale change. This procurement method involves embedding an electronic system into every stage of the purchasing process across a wide range of contracts.
Installing an e-procurement system does require upfront investment. However, it can gradually be phased in and applied to different parts of the procurement cycle such as transactional or payment processes.
- Improves efficiency and financial rigour – spend limits are imposed consistently at departmental level.
- Saves time – eliminates paper-based requisitions and duplicating data handling.
- Faster order-to-delivery times – users know exactly where their request is in the process.
- Purchasers are automatically directed to approved suppliers, improving compliance and reducing time sourcing items.
- Greater price leverage.
- Reduced costs of stationery, postage, copying and associated administration.
- A more environmentally friendly way to procure.
- High quality, detailed management information.
Procurement cards are charge cards that authorised staff can use to make college purchases direct with a supplier. They are a relatively simple and cost-effective method of procurement that work best for purchasing low value items, such as books or small items of equipment, where the cost of processing the transaction is disproportionate to the cost of the item itself.
Procurement cards work much like a credit card, although the outstanding balance has to be paid in full each month. Each card has an individual transaction limit and a monthly expenditure limit, and it can only be used to purchase certain categories of goods and services.
- Budget holders can order directly with suppliers, without having to raise and get approval of purchase orders.
- Strengthen expenditure controls and reduce the risk of improper purchasing and fraud.
- Better access to online goods and services, resulting in better prices and deals.
- Simplify the purchasing process and significantly reduce the number of low value, paper-based transactions, and the associated time and costs processing them, resulting in better use of resources and reduced staff costs.
- Savings from reduced cheque payments and associated postage:
- prompt payment of suppliers, improving relationships;
- monthly statements and better management information that can be linked to college systems, especially when supplier codes are used;
- less need for petty cash; and
- provides a clear audit trail with open and transparent procedures.
Once procurement cards have been rolled out it may be possible to redefine some staff roles and responsibilities as tedious, time-consuming tasks will have been reduced or even eliminated.
National Audit Office reports have estimated that an average saving of £28 per transaction has been made by some central government departments that switched from paper-based purchasing to procurement cards.
Step 4 Action points
- Decide which categories and sub-categories would be suitable for procurement through consortia or another contracting body.
- Research the different consortia and contracting bodies and decide which would fit the college’s requirements and offer the best value for money.
- Ascertain which goods/services you could buy in collaboration with other colleges and public sector organisations based on either geographical – local, regional or national – needs or areas of specialisation. Investigate suitable procurement ‘partners’ or framework agreements
- Draw up a collaboration agreement and set out the terms and conditions with your collaboration partner.
- Decide which procurement methods will maximise efficiency and value for money for particular categories.
- Consider e-procurement and procurement cards, tenders and mini tenders.