Achieving CSR 07 targeted savings to administration costs of 5% year on year will require radical changes to the way departments procure external support. This typically represents half of the operating costs. Simply looking to “buy things better” will not be enough. Rather departments will need to look at how they do things and make radical changes to their business models.
The last spending round witnessed significant improvement to procurement practices. As a consequence, departments will reach a point where it will not be possible to deliver against the challenge by simply ‘buying better’. It will be necessary to consider the fundamentals of the business models that departments operate. Contestability is likely to be part of the solution. Due to functions being reviewed to ensure that their activities and outcomes are undertaken and delivered efficiently and optimally.
The commercial function needs to ensure it is at the forefront of the following evaluation processes:
- What does contestability really mean – should it be a question of in-sourcing and out-sourcing of functions, or is it something more fundamental?
- How can a process of contestability relate to wider Public Sector transformation programmes in a changing environment?
- How do you establish if your organisation is ready to contest services?
- What business functions need to be engaged in contesting services, and what role should they play?
- What are the stages that a Department should go through in contesting services?
- What should we consider while assessing the impact on the business of contesting services?
- To what extent is it appropriate or feasible to consider offshoring of services
- How do you establish if industry is really able to take on contested services?