CASE STUDY: e-Procurement
A London Metropolitan Borough Council was spending £200m each year on goods and services, but the management board did not really know what they were buying, from whom, and for how much. Each department had total control over how it used its allocated budget and Finance only knew about the expenditure when they paid the bills.
The council appointed a procurement manager, who signed up with an e-procurement portal and started to put the council’s contracts online. Unfortunately:
- The Finance dept wasn’t prepared to change the antiquated financial accounting system and the suppliers of that system wanted an unreasonable amount of money to develop the interface with the e-procurement portal, so the objective of end-to-end paper-free transactions was not possible.
- The service departments were prepared to buy office supplies via the portal but the system did not deal with their service requirements, so e-procurement remained a low priority and the number of users did not grow beyond a handful.
- Suppliers were reluctant to sign up, as they could not see the benefits with so few users, so the system only featured a small number of suppliers, which in turn dampened user interest in logging on and using the system.
This ‘chicken and egg’ scenario is a familiar one in public sector e-procurement, but some organisations fared better. Why? The reasons lie in their management culture, their process capability and the way they went about implementing their modernising project.
Councils are large, devolved multi-site, multi-department service organisations, which are prone to the negative characteristics of a structuralist management culture: silo working and distinct tribal cultures developing within departments and specialist groups. Senior management are reluctant or unable to impose mandatory change in this climate. Information does not flow readily across the organisation – knowledge is power. An interventionist, fire-fighting style of management has become the norm. The pressure on everyone in the organisation and the number of changes imposed on them over the years has taken its toll and any new initiative to improve efficiency is resisted.
The silo culture extends to the inability of the organisation to introduce standardised systems and processes – and get them used – so most councils are at a low level of process capability. This affects the level of efficiency and how well they can accommodate change. Those councils that have managed the transition to e-procurement, by contrast, have a more mature management culture, with higher levels of trust, greater cross-organisation knowledge sharing and better alignment between the objectives and needs of the organisation and the motivation and aspirations of its people. These organisations are able to introduce standardised systems and processes with some success, particularly if there is a strong lead from the top (but consultative, not ‘command and control’).
UK public sector ICT spending currently stands at £16.8bn and is set to grow to £20.2bn by 2011/12. Research suggests that less than a third of this will succeed in producing the desired performance improvements and cost savings.
If you are facing this situation, you might be interested to find out what actions we recommended to put in place some of the cultural and process capability foundations needed to enable successful implementation of e-procurement.
Take a look at our INPACT Project Readiness Assessment demonstrator and then contact us.
A full version of this case study is at: Fully worked case study: e-Procurement in Local Authority