Committee of Public Accounts finds need to catch up with modern procurement practice

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Further education colleges could save as much as £75 million through better purchasing practices according to a report released by the Committee of Public Accounts.

Based on evidence from the then Department of Education and Skills and the Learning and Skills Council, the report found that many FE colleges have treated procurement as a low priority and have not taken advantage of modern savings methods such as purchasing consortia and procurement cards.

The Learning and Skills Council (LSC), which funds England’s 384 further education colleges, estimated that from an annual purchasing figure of £1.6 billion, colleges could make savings of at least £75 million or the equivalent of 50,000 adult Level 2 qualifications by March 2008. The LSC admitted that while £75 million might be an unambitious target, it could easily grow as colleges became more sophisticated about savings potential.

In their report, the Committee of Public Accounts examined how FE colleges can manage procurement more effectively and improve processes so that they can make savings.

Edward Leigh MP, Chairman of the Committee of Public Accounts said: “Both the Department and the Learning and Skills Council have done some good work in providing advice to colleges. Many colleges now use procurement cards to reduce transaction costs. And the culture of complacency and reluctance to share good practice and financial information is being broken down.

“But there is a lot of room for improvements in information share and indeed, even more fundamentally, for developing the systems within colleges for generating the right kind of management information in the first place. Most colleges don”t even know the amount of business they do with particular suppliers. They need to catch up with modern procurement practice.”

The report comes three years after the Gershon Efficiency Review originally proposed procurement as one of the main sources of efficiency savings in the public sector. In 2004, the review found that three-quarters of colleges could not readily provide a breakdown of the amount spend on basic goods such as water, catering and energy.

In its latest report, the committee reported that though improvements had been noted, colleges can be reluctant to be open about their procurement arrangements. Many colleges traditionally see themselves as in competition and have been unwilling to share financial information. Also while colleges increasingly have staff that are capable of managing procurement, they are often let down by the low quality of the systems and the management information available to them.

In a greater push to sign up colleges to the government procurement scheme, the LSC revealed its policy of persuasion in an effort to get colleges to improve procurement by joining purchasing consortia and using procurement cards.

Appropriately used, the cards can improve expenditure controls by allowing transaction and monthly spending limits to be set and enforced, restricting the cards to business with particular suppliers and supporting regular reporting of transactions.

Julian Gravatt, Association of Colleges Director of Funding and Development agreed that progress was being made using the government procurement card scheme:”In barely a year more than three quarters of colleges have joined purchasing consortia and are using Government purchasing cards. The sector is making good progress towards the £75million target and will re-invest the savings for the benefit of learners.

“One of the toughest challenges for colleges is dealing with spending that can”t be addressed by the procurement techniques set out in the report ““ for example the £170 million spent on exam fees.”

Mark Hayson, Chief Executive of the Learning and Skills Council commented that while most colleges are involved with a procurement card scheme or in discussions to join, that the LSC was trying to encourage all of them to migrate to the government scheme and announced that it would name and shame the further 65 colleges that were not a part of any scheme.

While it is too early predict the amount that will be saved through greater procurement, the LSC assured colleges that savings made would then be available to be redeployed into front-line services for learners.

Matthew Sharp