L4.2 Analyse the impact of the public sector on procurement and supply chain activities

Question 1

3 main objectives of public sector org.s
+ examples of CSR opp.s within public sector

Case study: multi £bn cuts in NHS’ budget prevent hospitals from affording new equipment and equipment repairs, which impact the level of care they can provide and put patient lives at risk

Case study: a local council had to put a former care home and a children’s centre up for sale (ie. sell community assets) to raise money for other core services
- ie. funds available to meet objectives are dependent on the economy and govts/local authorities face tough decisions

Answer 1

1. Improving services
   - important that services provided are fit for purpose and the public are satisfied since funded by TAXPAYERS’ MONEY
   - difficulty with achieving this objective is in FINANCING when the public are reluctant to accept tax increases and govt.s are hesitant to raise taxes if they wish to be re-elected
   - proc. workers within the public sector have to work on cost avoidance (=limiting potential cost increases) w/o impacting value for money
   eg. public sector facilities: public toilets, libraries, recycling plants
2. Supporting communities and social value
   eg. investing in social housing, providing children play areas, creating elderly meeting centres
   - social value: how proc. activities can contribute towards a +VE SOCIETAL IMPACT
   - stringent CSR policy as a duty of care to the ppl and the environment
   eg. sourcing and evaluating suppliers for sustainability
   eg. initiating projects that give sth back to the community
   eg. cleaning up polluted areas
   eg. undertaking biz in an ethical way
   eg. promoting the interests and employment of disadvantaged members of society
3. Equality, diversity and inclusion (ED&I)
   - to ensure FAIR TREATMENT & OPPORTUNITY for all, free from prejudice and discrimination
   - Equality Act 2010
   - taking into account the diversity of the SUPPLIER BASE when soliciting bids and awarding contracts

Question 2

Regulations that impact on proc. and supply chain operations
+ how to define value for money in public procurement?
+ 4 common themes of regulations

Answer 2

• Public Sector regulations (and audits) within procurement and supply chain operations are considerably STRICTER than those in the Private Sector b/c need to ensure TAXPAYERS’ MONEY is being spent in an efficient, ethical and effective way
• value for money: the best mix of quality and effectiveness for the least outlay over the period of use of the goods/services bought

Common themes of regulations
1. Non-discrimination
2. Free movement of goods
3. Equality of treatment
4. Transparency

Question 3

Regulations that impact on proc. and supply chain operations
1. 4 procurement procedures / tenders in the public sector
+ Framework agreements

Answer 3

1. Open procedure
   - single-stage process; any org. wishing to bid can do so
2. Restricted procedure
   - two-stage process
   i) potential suppliers are asked to complete a QUESTIONNAIRE and SHORTLISTED if they meet the criteria
   ii) shortlisted suppliers receive full info on the contract and are able to SUBMIT A BID
3. Competitive dialogue
   - several stages
   i) suppliers indicate INTEREST in bidding for a contract
   ii) successful suppliers SHORTLISTED and invited to enter into dialogue with the buyer
   iii) potential suppliers ELIMINATED throughout DIALOGUE process based on pre-determined criteria and their suitability to meet it
   iv) when REQUIRED NO. of suppliers reached, FULL DETAILS of contract are ISSUED and suppliers are INVITED to SUBMIT THEIR BIDS
4. Competitive with negotiation
   - similar to competitive dialogue, with added negotiation to take place with the WINNING BIDDER

Framework agreements
= an arrangement put in place with 1 or more suppliers for the supply of a range of supplies/services in which the PRICES (or a pricing formula) and TERMS AND CONDITIONS are all AGREED for the DURATION of the period of the arrangement
- main benefit: buyers don’t have to go through the full tendering procedure every time they have requirements

Question 4

Regulations that impact on proc. and supply chain operations
2. Procurement policy notes + examples of public sector regulations
3. 5 advantages of public sector regulations
4. 7 disadvantages

> > see Notion for public sector procurement policies from gov.uk

Case study: auditor KPMG failed to correctly audit the figures of govt contractor Carillion and permitted it to continue its reckless greed, which ultimately caused Carillion’s collapse

Answer 4

Procurement policy notes (PPNs)
- UK procurement document providing guidance on BEST PRACTICE
- prepared and maintained by the Crown Commercial service (CCS) to help public sector procure goods/services fairly and transparently

eg. Public Contract Regulations 2015, Utilities Contract Regulations 2016, Public Procurement Regulations 2016, Equality Act 2010, etc.

Advantages
1. Promotes uniformity of processes
2. Enhances control
3. Reduces risk
4. Provides accountability and traceability
5. Can open up contracts to wide market

Disadvantages
1. Suppresses innovation
2. May reduce competition
3. Time-consuming
4. Costly
» {eg. need to hire legal experts to ensure that org’s processes are in line with regulations?}
5. Strict evaluation process may remove best supplier
6. One regulation does not always suit all genres
7. Inflexible

Question 5

Role of…
1. competition,
2. public accountability, and
3. value for money (incl. NAO’s 4 Es, see pg. 219)
in public sector proc. and supply activities

Case study: Kent District Council talks about transparency and accountability but have been ‘gagging’ workers in the last 5 years.
- COMPROMISE AGREEMENTS aka GAGGING ORDERS are made between departing employees facing redundancy issues and an employer who wants to protect the firm’s reputation
- caused public to lose trust in the council b/c it is a cost to taxpayers!

Answer 5

1. Competition
   - increases value for money by encouraging suppliers to compete against each other, to lower prices and to offer added value with their bids + AVOIDS monopolies
   - levels of competition are much lower than in the private sector
   - strict regulations often DISCOURAGE NEW ENTRANTS to the sector, acting as a barrier to entry
   !! A MONOPOLY is a company or group with LITTLE to NO competition.
2. Public accountability
   - OBLIGATION on org.s that provide services to be ANSWERABLE to those who fund it
   - includes transparency, efficiency, responsibility, integrity, trustworthiness
3. Value for money
   - paramount in the public sector and audited by the National Audit Office (NAO)
   !! 4 Es used by NAO to establish whether value for money is being obtained
   » Efficiency - spending well - the RELATIONSHIP between the output from goods or services and the resources to produce them
   » Economy - spending less - minimising the cost of resources used or required (inputs)
   » Effectiveness - spending wisely - the RELATIONSHIP between the intended and actual results of public spending (outcomes)
   » Equity - spending fairly - the extent to which services are available to and reach all people that they are intended to