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Public sector: top tips for stretching budget

Governments across the world are under pressure to improve public services while preventing spending growth, especially in the face of the cost-of-living crisis.
Authored by Jean Davies

Most recently, the UK government announced the much-anticipated budget for 2023/24, which further proves that public sector buyers are under increasing pressure to make the most of their budgets and ensure value for money. To achieve this, there are several tips that can help to streamline the procurement processes and identify opportunities for cost savings and efficiencies.

In this blog, I will be discussing my thoughts on the newly published budget and what this means for the public sector. I’ll also be sharing my top tips to make a penny stretch to a pound while ensuring key targets are still considered and met.

What does the new budget tell us?

The UK economic outlook is better than expected with lower CPI inflation and a shorter economic downturn predicted; and it’s clear that the country will avoid a recession in 2023, however the economy is expected to shrink by 0.2%. The Chancellor has announced budget measures to empower the local communities in need to support the much-anticipated Levelling Up agenda introduced by the Prime Minister back in 2020. These measures will deliver more jobs, better services, and more opportunities for local people.

The Spring budget proves that the UK is still committed to its Net Zero strategy, with policies and proposals in place to decarbonise all sectors of the UK economy by 2050.

How could this effect public sector procurement?

The rising costs in the supply chain and the tight public sector budget will make it challenging for decision makers to make budget stretch while ensuring value for money. Although budget increases put a strain on public sector buying, there is also the added pressure to consider sustainable purchasing to meet the governments Net Zero by 2050 target. It’s also crucial to consider a supplier who demonstrates ongoing savings throughout the contract's lifecycle rather than cost savings for the short-term. In order to make the budget last, long-term infallible plans must be curated, otherwise they run the risk of exhausting the 12-month budget in a fugacious timescale. 

Additionally, it's important to work with local suppliers who are able to give back to the communities they live and work in. With budget constraints, it’s easy to fall into the trap of partnering with large suppliers with a nationwide presence to lower overall costs, who often do not prioritise social value in local communities.

What changes can public sector buyers make to maximise budget?

One way to save costs is by combining volumes; this involves aggregating demand for goods and services to purchase them in larger quantities. The advantage of combining volumes is that it can lead to significant cost savings as suppliers often offer better prices for bulk orders, reducing the overall cost per unit.

Additionally, assessing operating costs and expenses associated with goods and services can help businesses identify opportunities to save costs. By auditing these expenses and evaluating suppliers, businesses can identify better options that can help them save costs.

Another approach to saving costs is by managing tail-end spend. In many cases, businesses use multiple suppliers to purchase the same service, so by consolidating orders, businesses can save costs by pooling resources and purchasing in larger quantities. This can lead to better prices, more favourable terms, and improved delivery times. It's worth noting that indirect spend typically accounts for only 20% of business expenditure, however, it can represent up to 80% of the supply chain. These costs can be challenging to track, and it takes a comprehensive strategy to allocate resources and manage them effectively.

My top tips in the current financial climate

To close, here are my top considerations for the public sector which could provide immediate cost savings.

One of my top tips is to review suppliers to ensure that the most appropriate and compliant services are being used; this involves evaluating whether the suppliers are meeting the required standards and providing good value for money. It may also involve identifying areas where new or alternative suppliers could offer better solutions or cost savings.

Another important tip is to evaluate credit card spending. This can often fly under the radar and result in multiple suppliers providing the exact same service, leading to unnecessary costs. By identifying these areas of overlap, public sector buyers can save money and streamline their procurement processes. Assessing suppliers' CSR strategies is also crucial. This involves evaluating how the suppliers align with the business and the values of the organization which can help to build a real partnership between the buyer and the supplier, leading to greater efficiencies and cost savings.

Finally, holding regular supplier account review meetings is essential to monitor savings plans, efficiencies, and spend data. By reviewing spending data and recognising areas for improvement, public sector buyers can identify ways to optimize their procurement processes and reduce costs.

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