Do you want your services localised or cheap?

Philip Green has discovered that the government wastes millions through being rubbish at buying stuff. His report is a case in point. It doesn’t tell us anything that wasn’t in the Operational Efficiency Programme or countless other reviews and expert reports. (Yes, I know Sir Philip didn’t get paid but you didn’t think he did all the legwork and writing himself did you?)

The recommendation, accepted by the government, is…..Stalinism! OK, Sir Philip didn’t actually use that term and neither, despite a quote in the Sunday Times, did Francis Maude. But the plan is to centralise procurement and impose strict rules on how much civil servants are allowed to spend without ministerial approval.

That sounds fine for central government but how is devolving the NHS to foundation trusts and 700 GP consortiums going to help achieve economies of scale? How do you centralise procurement at the same time as empowering frontline users of public services. And what of Total Place? How will collaboration between central government, the NHS, local authorities and central government work when any significant spending has to be signed off by Whitehall?

There is a contradiction between central control and the localism and community-based budgets that the government says it wants. As I have said before, it is extremely unlikely that devolution and localism will be cheaper than central control. Local empowerment might give people more control over their services (although I’m somewhat sceptical about that, and politicians tend to be reluctant to hand over any real control) but centralisation and standardisation are, as Philip Green points out, cheaper.

If you want cheap, have a centrally controlled bog-standard service. If you want localism and devolution, then you must accept that there will be duplication and many of the opportunities for efficiency savings will be lost. When organisations attempt to do both at the same time they usually end up with the worst of both worlds rather than the best. There is no reason to suppose that the public sector will be any different.

Update: Polly Toynbee has spotted the contradiction too.

Green’s report seems entirely non-political, and he seems unaware of the impossible contradictions he has landed on the government. To him this is just plain business sense: the government is one entity, national and local. For maximum efficiency it should behave like one entity. Individualistic localism and fierce competition between its components are simply not compatible with the idea of efficiency he expects from a single enterprise, with a single united objective – to produce the best services possible for the cheapest price.

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3 Responses to Do you want your services localised or cheap?

  1. Claire Walsh says:

    Hi Rick,
    Another issue with centralised procurement policies is that they cut out the small, local suppliers, so savings are made at a cost ie SMEs losing work. These things need to be considered in context.

  2. Pingback: Do you want your services localised or cheap? - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  3. Vince Lammas says:

    Clearly there are times when a centralised service can bring bigger discounts and some economies of scale (though take a look at John Seddon’s work on economies of flow for services) but centralised solutions aren’t always best.

    Clare’s point about SMEs is a valid one (political choice?) but one generally ignored by procurement people …. despite warm words from government!

    Also I have experienced being presented with no option but to use a pre-selected item of IT equipment which looked cheap but, in fact, gave poor value for money because machine components were older and less capable. Spending a little more to get what would make working life easier (longer battery life, screen size, keyboard quality) was just not an option.

    Central buyers shouldn’t assume users needs are homogenous. I confess to being a gadget freak and especially fussy but buying whatever was “procured” to save unit costs isn’t always best for the customer. Just because you can buy cheaper doesn’t mean I want to buy through you!

    Isn’t the customer always right?

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