Peston: 'I'd be bust if I ran my business the way government does'

JasonLVC

On the subject of centralisation......the MOD has a centralised purchasing policy and yet that seems an abject failure. So not a vote of confidence of having a centralised purchasing unit for the whole government.

When I was in the civil service (many moons ago now), we had a centralised purchasing unit for large items like PC's but we had a devolved budget for printer paper, etc. It usually cost more to buy from the centralised unit than for me to go and buy it myself from a local shop.

What's needed is to keep the purchasing control local, but to implement a pricing infrastructure that basically says "you cannot pay more than £1.00 for 50 post-it notes or £400 for a laptop" or whatever.

The modern age of computers means a database of everything required can be easily maintained centrally and there are enough shopbots out there that can be used to ensure prices are automatically updated and kept current.

Then staff can go and buy stuff with their government credit card, keeping it local, but if they go over the thresholds they are punished for doing so.

ILW

Hauptmann wrote: »

Nothing to do with rules and laws introduced by Brown.
Philip Green has a pretty 'chequered' background by any standards. He has not run a quoted company since 1992 (when he was forced out by shareholders who were not keen on his 'unorthodox' financial manipulations).
Everything he's done since has been largely funded by private individuals (chiefly the Barclay brothers) and IIRC The Econimist described him as a 'front man' for the Barclays.
The 'tax avoidance' accusation came about when he borrowed money from the company to pay his wife £1.2bn and then set the loan against UK tax.
The report is only for the purposes of 'propaganda' though. He only had a couple of weeks to 'investigate' and most of the examples he cites are pretty specuous. It looks frightening stuff to the average Sun reader, but anyone with a bit of business nous would take it with a pinch of salt. I imagine if Green were to come and look at my business he would uncover similar horrors (yes, we sometimes pay widely different prices for the same product depending on time of year and which supplier can deliver quickest etc.).

As a supplier to the public sector in a past life, it is well known that in general they pay far more for products and services than you could ever get away with selling to private companies. It is no secret.

ILW

JasonLVC wrote: »

Then staff can go and buy stuff with their government credit card, keeping it local, but if they go over the thresholds they are punished for doing so.

I think that be be the heart of the problem.
If in a private company it came to lighty that a purchasing manager had paid way over the odds, he/she would probably get the sack for not doing their job properly. In the public sector, the chances are that it would not affect their career at all.

Hauptmann

JasonLVC wrote: »

I'd have thought that to save public money, you would need to appoint a shrewd, savvy business person who knows every trick in the book to legally save money and reduce overheads.

Sir Philip Green fits that profile perfectly.

Blair was quite fond of taking advice off another tax dodger, Sir Richard Branson.

The tax issue is neither here nor there.
Branson is in a different league to Green. He's innovated across a wide range of business sectors and has run quoted companies, so we know what he's been up to. Green has run one type of business (importing and retailing clothing from manufacturers in the third world).
Green has not run a quoted company for the past 18 years. We really know nothing about how successful he's been because the accounts are shrouded in mystery and we basically only know what we have been told by him (his accountants). For all we know Arcadia could have been running a loss, covered up by money pumped in from the Barclays.
The Green report is meaningless. Any trainee accountant could have come up with something similar. The general public understand little of complexities of business and procurement, so it will serve its purpose. I just wonder what Green's pay-off will be for agreeing to be used in this way?

Pennywise

CLAPTON wrote: »

I would certainly agree that there is considerable scope to improve procurement and reducing costs
but I can't at the moment see how centralising procurement for say railtrack, MOD and my doctors surgency all into one place is guarenteed to save any money

Very easy for bog standard items and consumables etc.

It's not centralised ordering, it's centralised negotiation. Most large firms already do it. For the bog standard items, like desktop PCs used for desktop applications, they negotiate with the big suppliers, like Dell, HP, Compaq, etc., and get the best deal.

Even the smallest businesses can get negotiated deals by membership of trade associations. For example, I get cheaper specialist insurance and cheaper software by quoting my membership number of a professional body than I would by trying to deal directly myself - simply because on my own I have no bargaining power.

Hundreds of quangos each ordering a box of paper from Viking Direct will mean they each pay the official price as per the catalogue/website. If the Govt negotiated and made Viking Direct the preferred supplier of paper, then they'd get a 10-20% discount which each of the individual quangos could benefit from.

That aside, though, what was really interesting is the reported chaotic control and reporting of expenses. Apparently is was virtually impossible to find out how much, in total, was spent on say London hotel rooms. Hundreds of different bodies all making separate reservations with dozens of different hotels. Again, centralised negotiation would mean a shortlist of hotels with specially reduced rates. It's not rocket science - big businesses already have preferred suppliers like hotels. Why on earth doesn't government do the same.

Just think of the waste. Each quango and govt body (hopefully) have someone ringing around and looking at catalogues to find the best deal (if they're not they're not doing their jobs properly). Think of all the wasted time. Replace that by say the govt negotiating a 10% discount for all public sector bodies with Viking Direct, and a 15% discount for all vodafone contracts, and you soon see massive savings in both money and procurement time. The the procurement officers could spend more time on the non-standard stuff that can't be centralised, i.e. specialist services, local contracts, etc.

Old_Slaphead

ILW wrote: »

I think that be be the heart of the problem.
If in a private company it came to lighty that a purchasing manager had paid way over the odds, he/she would probably get the sack for not doing their job properly. In the public sector, the chances are that it would not affect their career at all.

A few years back I had dealing with a medical supplier. They charged NHS approx twice the rate they charged big medical companies for a particular product. The big med cos used to send in an auditor to check costings, raw material prices, wage rates etc to verify that company was only making around 5-10% margin and not ripping them off (needless to say NHS didn't)

Hauptmann

ILW wrote: »

it is well known that in general

Nicely put!

Losing_the_way

Some of these savings will have an impact on the companies that supply the various departments and that many mean further job losses. Maybe it time to get the CEOs of companies which will be effected together to brain storm this rather than individually and at the same time ask them what tax changes would a, the boost overseas trade and b, increase their tax contribution to the state whilst causing the least damage.

ILW

Hauptmann wrote: »

Nicely put!

OK then, it is well known amongst companies that supply to the public sector then.

Hauptmann

Old_Slaphead wrote: »

A few years back I had dealing with a medical supplier. They charged NHS approx twice the rate they charged big medical companies for a particular product. The big med cos used to send in an auditor to check costings, raw material prices, wage rates etc to verify that company was only making around 5-10% margin and not ripping them off (needless to say NHS didn't)

Sorry, that sounds like BS. I don't believe the supplier would turn over all that information to a customer. It does happen in certain industry sectors (e,g, automotive) where there is a single supplier agreement, but not when there are a multitude of customers. The information would be far too sensitive.
Drug suppliers have been squealing loudly that they make almost no profit from the NHS and have actually been diverting supplies to other customers because they can make more profit.