Public sector procurement: the next wave of savings
Any head of procurement who has worked in government will know that effective procurement is a top priority in the public sector. But are you doing all you can to maximise the savings available?
This year, Grosvenor collaborated with PASA to survey 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% from simply encouraging their colleagues to buy less, coupled with an additional 32% 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 myriad different tactics to boost savings: these three alone have the potential to boost savings by 100%, each:
- Buy Less by putting initiatives into place to reduce the quantity of the goods and services consumed (Potential saving increase of 105%)
- Buy Cheaper by implementing initiatives to reduce the expenditure on nice-to-have features, add-ons and bespoke items. (Potential saving increase of 113%)
- Buy Smarter by streamlining the way goods and services are consumed in our business, reducing internal costs. (Potential saving increase of 100%)
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% 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.