Karl Marx anticipated the Boom Bust cycle in the 19th Century …..it could be said that in 2023 the Budget of His Majesty’s Government has missed the opportunity to benefit from the experience of those that have gone before us and survived the cycle.
The rhetoric of the Budget is positive, and the Chancellor has sought to instil confidence through investment, including an extra £11bn for defence over the next five years and a big increase in childcare support. However, the devil is as always in the detail. Whilst the Budget provided clear direction for areas of interest and the Policies which would receive funding, it did little to address the continuing frustration of the supply chain. The fluctuation in GDP, caused in part from the impact of the Covid-19 Pandemic, the war in Ukraine and hyperinflation, has significant repercussions for supply chain resilience and the ability for Public Spending to achieve value for money…and yet the budget has done little to address this.
The Budget seeks, in part, to address the economic downturn through a continued focus on tracking efficiency savings (see Civil Service World article here) and driving continuous improvement using a new Government Efficiency Framework (GEF). This Framework is in addition to the 1998 government planning and performance framework and will include processes to:
- Set out how resources will be used to deliver against policy objectives
- Determine a budget allocation; and
- Provide a methodology to monitor and evaluate spend and progress transparently.
There are a number of risks that come with this, such things as recruitment freezes and stopping or delaying projects – which in the longer-term often lead to increased costs and reduced resilience in the supply chain. One way in which we believe this can be mitigated is through effective execution of the policies and processes set out in the Cabinet Office Sourcing Playbooks.
Now more than ever, the approach in the Cabinet Office Sourcing Playbooks (Sourcing, Construction et al) is key to achieving the desired improvements to public spending. As procurement specialists we have been supporting our clients in delivering efficiencies (through the application of the approach set out in these playbooks) which are driven out through the whole commercial cycle, especially in the preparation and planning and not just in the tendering element of the process. In our experience, this is particularly true in 3 key areas:
- The Delivery Model Assessment and Should Cost Modelling. This upfront activity really helps the buying organisation think through and understand the key components of the service it wants to deliver and how these need to be integrated for delivery. Key to a good DMA is understanding the market and its capability, such that cost isn’t built into the solution through unrealistic requirements. The Should Cost modelling work will identify the bigger cost drivers which help decision making on whether they are essential to delivering the outcomes;
- Preparing the Procurement Documentation. Striking the right balance between over and under specification is fundamental. Over specify and there is no room for the supplier to be innovative or utilise their existing processes and techniques, this driving in costs for bespoke approaches. Under specify and risk not getting the services expected, and then have to incur more costs through change control; and
- Manage the Contract. So much of the efficiencies that departments work hard for in the pre procurement activities are easily eroded throughout the life of the contract by a lack of commercial rigour in its management. More often we see contracts being managed operationally, but not commercially and more could and should be done by the Public Sector in this space.
At 4C we believe effective use of the Playbooks will help our public sector clients and their supply chains address economic imbalance and mitigate the traditional risks associated with the Boom Bust cycle.