The value of HE procurement in an uncertain world

With the UK Higher Education sector facing multiple pressures, Chester Uni's Tina Yu examines the strategic relevance and importance of procurement

Contemporary pressures in the UK HE sector

The UK HE sector exists to provide education, research excellence and regional economic regeneration, where activities are channelled towards stimulating social and community development to shape the futures of tomorrow’s generations. As reported by Universities UK, the sector, renowned for its significant economic and societal impact, generated £95 billion for the UK economy and supported more than 940,000 jobs. Of its £33 billion expenditure in 2015/16, £14.8 billion (45%) related to non-pay spend.

In recent years, as government policies have reduced public expenditure, the sector’s focus on effective utilisation of resources has heightened. Resulting in the pursuit of efficiency and modernisation, it has increased scrutiny and accountability and led to value for money principles becoming more prevalent. Inevitably, achieving efficiencies from procurement activities to fulfil institutions’ academic, financial and social goals have intensified.

What is the role of procurement within UK HE today?

UK HEIs have a very broad focus. To balance their corporate and social responsibilities, institutions must manage a multifaceted set of stakeholder obligations including students, senior management, staff, funding regulators, policy makers and the wider community. Against this backdrop, the role of procurement may be regarded as a business enabler with diverse and relatively intangible objectives central to achieving commercial efficiencies. Predominately, institutions may be regarded as hybrid organisations derived from an amalgam of private, public and non-profit influences operating autonomously. Ultimately, what is regarded of strategic relevance in one institution is likely to differ from another.

What are our institutions’ understanding of procurement effectiveness?

Is procurement effectiveness about securing the keenest prices; a means to an end, representing a process by which goods and services are acquired; or is it, as defined by the Chartered Institute of Procurement & Supply, responsible for ensuring the “identification, sourcing, access and management of the external resources that an organisation needs or may need to fulfil its strategic objectives?” These connotations highlight possible misconceptions associated with the role of procurement and the complexities of procurement effectiveness as being dependent on how stakeholders perceive value as fulfilling strategic objectives.

“If financial and capital resources remain constrained, what are we as institutional stakeholders going to do about making the most of it?”

Quantifying value from procurement effectiveness

The diverse scope and granularity of activities within UK HEIs can give rise to fluctuating perspectives of procurement contribution where value may range from being strategic, procedural, transactional or tactical. To tangibly demonstrate value, the ability of procurement to positively influence business efficiencies must be evident. Accordingly, procurement effectiveness may constitute:

 – leveraging scale economies by converging efforts and scarce resources towards achieving cost efficiencies

 – improving commercial negotiation of price, contract terms and performance specifications

 – increasing cost transparency through improved spend profiling in the quest towards achieving better value for money

 – capturing missed opportunities by reducing maverick behaviour

 – improving demand management through review of insourcing versus outsourcing decisions

 – identifying gaps in market and improving awareness of commercial drivers

 – improving category expertise through better interpretation of data and management of high risk or voluminous spend areas

 – enhancing commissioning, contracting and contract management

 – improving supply chain management and supplier consolidation

 – cultivating understanding between, and forming collaborative relationships with, internal stakeholders and suppliers

 – providing an auditable, consistent best practice framework

 – ensuring legislative, regulatory and statutory compliance

 – minimising reputational exposure by identifying, mitigating and managing business and supply chain risks

 – streamlining procurement processes and standardising procedures

 – minimising waste and rework by applying whole life costing approaches and considering social and sustainable criteria

Ultimately, value is realised when stakeholders have clarity over the institution’s vision, identify with its priorities and optimise the benefits from procurement efficiencies.

Are our institutions appropriately structured to optimise procurement effectiveness?

How our institutions are structured affects procurement effectiveness. To fulfil business priorities, have we considered whether:

 – the disparate array of procurement activities highlights a need to review technological processes or existing resources? If so, identify the business implications, what changes should be made and how these can be prioritised

 – there are sufficient numbers and capabilities of procurement competencies including business acumen, professional expertise, knowledge, experience and technical skills to fulfil our institutions’ overall mission, vision and goals? If not, would the return from investing to improve procurement efficiencies to achieve long-term financial, social and reputational benefits surmount any short-term concerns, costs and consequences? Undertake a costs-benefits analysis against existing competencies to devise an action plan to develop or introduce new skills or experience

 – any existing institutional practices are contributors or challenges to procurement effectiveness that impact business success? Can positive practices be increased and challenges be removed? If so, how?

 – our institutions are culturally prepared and willing to empower procurement effectiveness? If not, identify what needs to drive the positive change and who is best to instill it?

Ultimately, institutions configuring resources and competencies aligned to their corporate objectives may improve procurement effectiveness.

“Inevitably, achieving efficiencies from procurement activities to fulfil institutions’ academic, financial and social goals have intensified.”

Empowering procurement effectiveness

As an interdependent relationship exists between procurement leads and institutional stakeholders, consider the following recommendations:

 – identify if the value proposition is well communicated, understood and shared by stakeholders. If not, find out why and how it can be supported or improved;

 – senior management to reinforce clarity of the institution’s overarching vision, direction and objectives thereby reaffirming what constitutes strategic relevance;

 – procurement leads, senior management and institutional stakeholders to jointly commit to aligning corporate and procurement strategies;

 – stakeholders to adopt early incorporation of procurement considerations into long-term business planning activities;

 – senior management and wider stakeholders to commit to championing change initiatives and embedding new business and cultural practices. Objectives to be specific measureable achievable realistic and time-bound;

 – to future proof long-term business benefits and continually assure procurement competencies, institutions to identify and implement initiatives to improve procurement maturity, thereby empowering overall procurement effectiveness.

Conclusions

Fundamentally, whether or not procurement within the UK HE sector can add value of strategic relevance relies on:

 – an institution’s clarity of their pursuits and what they regard as value of strategic relevance

 – stakeholders’ understanding of what can be achieved from procurement effectiveness and their commitment to empower it

It also depends on overcoming internal institutional challenges perpetually affected by the increasingly complex and competitive forces of the external UK HE macro-environment.

With the challenges currently being experienced by today’s institutions, driving value through procurement effectiveness may be regarded as axiomatic and imperative. According to Universities UK, HEFCE has noted that in this financial year (2017/18), UK HEIs are expected to finance 75% of their capital expenditure from their own cash compared with 31% in 2014/15. If financial and capital resources remain constrained, what are we as institutional stakeholders going to do about making the most of it?

Tina Yu is Procurement Manager at the University of Chester and an advocate of achieving business efficiencies through aligning commercial, operational and strategic objectives. Tina has recently completed an MBA with a dissertation “Can Procurement Deliver Strategic Value? An Exploratory Study within the UK Higher Education Sector” on which this article is based.