Buying for good

Could collective procurement be the way forward? Jenny Howarth thinks so

Public procurement professionals are under pressure. Across the sector, state-funded bodies are looking to their buying teams to help generate the savings they must make to survive. It’s an exciting time for procurement staff to demonstrate their value but it’s also a time of major challenge. One of the biggest tests lies around sustainability. This is an area that often falls in to the buyer’s lap. With public procurement offices setting contract terms and managing the purchase of millions of pounds of goods and services, who better to control suppliers’ compliance to sustainability policies?

Now the Public Services (Social Value) Act is on the statute book, local authorities are legally bound to consider not only price when awarding contracts, but the deeper economic, social and environmental impact of the services they commission. But balancing the need to use large scale national frameworks to drive down costs against the need to support SMEs, deliver local jobs and reduce environmental impact requires a new and imaginative approach.

Last year, Neil Hopkins, who helped set up community interest company Buy For Good (BFG), and the purchasing team at Birmingham Council decided to tackle this dilemma. As the largest local authority in the UK, they were keen to use the council’s significant buying power to bring about social change in local communities. Although Birmingham was currently using its aggregated demand to negotiate better financial terms from suppliers, not enough was being done to guarantee wide-ranging sustainable outcomes. Buyers felt their leverage shouldn’t just be used to ensure environmental compliance. It should actively help to make local areas better places to live and work.

This new approach wasn’t just about creating jobs and training opportunities in the Midlands. The council wanted to enable other local public bodies to benefit from the low prices it could achieve. Traditionally, organisations from different parts of the public sector haven’t been keen on collective procurement, especially when they are based in the same locality.

Combining demand does happen between similar bodies – social landlords for example and councils. But it’s rare to see a school teaming up with a fire service, health trust or university. Cross-sector buying just doesn’t take place. Birmingham Council was keen to break down this resistance and demonstrate how other public bodies in the area could take advantage of joint working. But their motives weren’t entirely altruistic. The local authority believed that by developing a shared back office support system, they could also drive down their own cost base and generate regular income by providing the initial procurement resource that other organisations would pay for.

BFG was set up by five public and third sector organisations, representing both the procurement and supply side. They included Birmingham Council, two social landlords, a social enterprise and local SME business support association. As a community interest company, BFG was a standalone entity, separate from the five bodies that founded it.

This independence has been key to its success. BFG can trade freely as a company limited by guarantee and it’s not restricted by the heavy bureaucracy that governs many public authorities. It has a board of directors and it can make a surplus, although this is ploughed back into achieving the organisation’s social aims. These social aims underpin everything it does. Yes, it is a contracting organisation, developing and awarding EU compliant purchasing agreements on behalf of members. But embedded within that day-to-day business process is a system of creating social, economic and environmental outcomes.

This constant consideration of social, economic and environmental impact isn’t merely an add-on; it’s integral to how Buy For Good works.

Firstly, all contracts are locality-based. Where there are local supply markets, around services such as grounds maintenance, coach hire or the product installation, then it makes sense to purchase and collaborate locally. This is best in terms of financial outcomes for members, the impact on local economies and also for carbon reduction.

Secondly, all framework agreements have been designed to grow local supply markets, create local employment and boost skills. This means that members can buy at a lower price and tap into an expert purchasing resource but at the same time they can support local economic regeneration. There is a big focus on creating opportunities for SME organisations and social enterprises in the area.

Another key priority for BFG is reducing carbon emissions. Most of its frameworks have an environmental focus – from document storage and retrieval to electric vehicle charging posts. Four agreements are currently live and another four are at tender stage. On top of this, each contract is designed to keep to a minimum any adverse environmental impacts associated with providing good and services. This constant consideration of social, economic and environmental impact isn’t merely an add-on; it’s integral to how BFG works. Such an approach comes right at the beginning of procurement procedures and informs developments throughout the research, pre-qualification, contract award and review process.

And it doesn’t cost a lot to work this way. I am currently the only member of staff employed by Buy For Good and my role is to manage relationships with our four local and regional suppliers and eight members. Birmingham Council provided the procurement resource when the organisation was first established. This kept debt to a minimum and has allowed the council to earn income each time a new framework contract is set up.

Ongoing revenue is also generated through supplier rebates which are built into agreement prices and enable the organisation to recover procurement process costs. It’s a slow burn because we receive cash retrospectively from suppliers which means growth is organic and quite gradual until we build up cash reserves.

So does this model for shared back office support represent a new way forward for achieving social value? Bodies like the Social Audit Network are calling for wider community benefits to be weaved into processes to they happen as a matter of course. Buy For Good enables cross-sector organisations to use frameworks at costs far below those available in the open market and at the same time every penny spent is channelled towards social outcomes. It’s time this simple approach was replicated elsewhere.

• BFG will be at the procurement event PfH Live from 12-14 June