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Improving the strategic contribution of Purchasing: A local government perspective.
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Improving the Strategic Contribution of Purchasing:
A local government perspective
James Gordon Murray MSc
Faculty of Social Sciences of the University of Ulster
Thesis submitted for the degree of Doctor of Philosophy
November 2003
Table of Contents
ACKNOWLEDGEMENTS………………………………………………………..…………………..9
SUMMARY………………………………………………….…………………….………………... 10
NOTE ON ACCESS TO CONTENTS. …………………...………………….……………………...11
1 INTRODUCTION.......................................................................121.1 Background to the research...................................................................................................121.2 The research problem............................................................................................................131.3 Methodology.........................................................................................................................151.4 Outline of the Thesis.............................................................................................................151.5 Terms used within the thesis.................................................................................................171.6 Conclusion.............................................................................................................................18
2 LITERATURE REVIEW AND DEVELOPMENT OF THEORETICAL MODEL........................................................................................192.1 Introduction...........................................................................................................................192.2 Local government..................................................................................................................19
2.2.1 Local government structure...........................................................................................202.2.2 Local government power...............................................................................................222.2.3 The 6th Force and towards a definition of business success..........................................222.2.4 Stakeholder Accountability...........................................................................................252.2.5 Local democracy...........................................................................................................252.2.6 Policy creation...............................................................................................................262.2.7 Local objectives............................................................................................................272.2.8 The ‘Best Value’ regime...............................................................................................282.2.9 The objectives of local government..............................................................................31
2.3 Purchasing Strategy...............................................................................................................322.3.1 What is strategy?...........................................................................................................322.3.2 Corporate Strategy and alignment.................................................................................322.3.3 Strategy development....................................................................................................352.3.4 Strategic Purchasing and Purchasing Strategy..............................................................412.3.5 The foundations of Purchasing Strategy as an academic discipline.............................442.3.6 Purchasing objectives....................................................................................................492.3.7 Purchasing strategies.....................................................................................................612.3.8 Purchasing tactics..........................................................................................................662.3.9 Government purchasing strategy...................................................................................662.3.10 The cascading of central government purchasing strategy to local government..........752.3.11 Delivering Better Services for citizens – A review of local government procurement in
England...................................................................................................................................762.4 Economics perspective..........................................................................................................78
2.4.1 Resource-Based View...................................................................................................792.4.2 Transaction cost economics..........................................................................................802.4.3 Principal/Agency Theory..............................................................................................812.4.4 Resource-based view and institutional economics; clash or complementary?.............822.4.5 Implications of the economics perspective...................................................................83
2.5 Models of Purchasing’s Strategic Evolution.........................................................................842.5.1 Reck and Long..............................................................................................................842.5.2 Cammish and Keough...................................................................................................852.5.3 Syson.............................................................................................................................852.5.4 Implications for local government................................................................................86
2.6 Change Management.............................................................................................................872.6.1 Types of change............................................................................................................882.6.2 The change agent...........................................................................................................892.6.3 Overcoming resistance to change..................................................................................892.6.4 The change process.......................................................................................................912.6.5 Lessons for achieving effective change........................................................................93
2.7 Structure and organisation.....................................................................................................942.8 Critical review of the literature.............................................................................................96
2
2.9 Theoretical model for improving the strategic contribution of local government Purchasing100
3 RESEARCH METHODOLOGY.................................................1073.1 Introduction.........................................................................................................................1073.2 Research agenda..................................................................................................................108
3.2.1 Purpose........................................................................................................................1083.2.2 Analytical framework..................................................................................................110
3.3 Research methodology........................................................................................................1123.3.1 Epistemological arguments and ontological approach................................................112
3.4 Investigative approach........................................................................................................1173.4.1 Literature review.........................................................................................................1173.4.2 Methods of data collection and triangulation..............................................................1173.4.3 Documentary analysis.................................................................................................1193.4.4 Postal surveys..............................................................................................................1223.4.5 Single in-depth case study...........................................................................................1303.4.6 Mini case studies including semi-structured interviews.............................................133
3.5 Summary of Limitations.....................................................................................................1363.5.1 The phenomenological methodology..........................................................................1363.5.2 Unreliability of documents..........................................................................................1363.5.3 Size of the sample.......................................................................................................1363.5.4 Collusion within councils in responding to surveys...................................................1373.5.5 The mini-case studies are atypical..............................................................................1373.5.6 Use of prompts in both the pilot survey and the interviews........................................1373.5.7 The validity of the in-depth case study.......................................................................1383.5.8 Confusion of definitions..............................................................................................1383.5.9 The passage of time.....................................................................................................139
3.6 Conclusion...........................................................................................................................1394 ANALYSIS OF NORTHERN IRELAND COUNCIL CORPORATE STRATEGIES................................................................................140
4.1 Introduction.........................................................................................................................1404.2 Methodology.......................................................................................................................1404.3 Analysis...............................................................................................................................141
4.3.1 Explicit references to Purchasing’s strategic contribution..........................................1424.4 Conclusion...........................................................................................................................142
5 ANALYSIS OF BELFAST CITY COUNCIL DOCUMENTS........1445.1 Introduction.........................................................................................................................1445.2 Methodology.......................................................................................................................1445.3 Organisation........................................................................................................................1445.4 Vision and Strategy.............................................................................................................1455.5 Environment Policy.............................................................................................................1465.6 Corporate Goals..................................................................................................................1475.7 Conclusion...........................................................................................................................148
6 TRIPARTITE SURVEY OF U.K COUNCILS.............................1496.1 Introduction.........................................................................................................................1496.2 Methodology.......................................................................................................................149
6.2.1 Survey response..........................................................................................................1506.2.2 Test for non-respondent bias.......................................................................................1506.2.3 Tests for representativeness........................................................................................1506.2.4 Tests for significance and reliability...........................................................................1526.2.5 Comments...................................................................................................................152
6.3 Findings...............................................................................................................................1526.3.1 The objectives of local government............................................................................1526.3.2 Presence of documented Purchasing Strategies..........................................................1556.3.3 The perceived current and potential strategic contribution of Purchasing..................1556.3.4 The ‘fit’ between the current objectives of local government and Purchasing objectives
1566.3.5 Purchasing Performance Measures.............................................................................159
6.4 conclusions..........................................................................................................................1597 IN-DEPTH SINGLE CASE STUDY...........................................161
3
7.1 Introduction.........................................................................................................................1617.2 Methodology.......................................................................................................................1617.3 Case study findings.............................................................................................................162
7.3.1 Moving from a ‘Clerical position’..............................................................................1627.3.2 Participation in high-level cross-functional teams......................................................1637.3.3 Involvement beyond purchasing.................................................................................1647.3.4 Marketing....................................................................................................................1647.3.5 Professionalising Purchasing......................................................................................1657.3.6 Development of an aligned Purchasing Strategy........................................................1667.3.7 Accommodating external impacts on the documented strategy..................................1697.3.8 Purchasing Performance Measures.............................................................................1707.3.9 Improved strategic contribution through alignment....................................................174
7.4 Analysis of case study.........................................................................................................1767.4.1 Can contribution be improved? (Research Question 1)..............................................1767.4.2 The importance of aligned Purchasing objectives (Research Question 2)..................1767.4.3 The importance of an aligned Purchasing Strategy (Research Question 3)................1787.4.4 The importance of aligned Purchasing performance measures (Research Question 5)
1787.4.5 The lead in repositioning Purchasing (Research Question 6).....................................1787.4.6 The appropriateness of existing evolutionary models (Research Question 4)............1797.4.7 Explanation of model..................................................................................................182
7.5 Conclusions.........................................................................................................................1848 MINI CASE STUDIES.............................................................185
8.1 Introduction.........................................................................................................................1858.2 Methodology.......................................................................................................................1858.3 Improving Purchasing’s strategic contribution...................................................................188
8.3.1 Current strategic contribution.....................................................................................1888.3.2 The importance of a Purchasing Strategy...................................................................1908.3.3 Key steps in improving contribution...........................................................................191
8.4 The strategic alignment of Purchasing objectives...............................................................1928.5 The presence of strategically aligned Purchasing Strategies..............................................1978.6 Evolutionary development..................................................................................................2008.7 Strategic alignment of Purchasing Performance Measures.................................................2038.8 The lead in repositioning Purchasing..................................................................................2048.9 Conclusions.........................................................................................................................207
9 CONCLUSIONS, CONTRIBUTION TO KNOWLEDGE AND IMPLICATIONS.........................................................................2099.1 Introduction.........................................................................................................................2099.2 The knowledge gap.............................................................................................................2109.3 Conclusions and research issues.........................................................................................212
9.3.1 Need for strategic alignment.......................................................................................2139.3.2 Need to develop an aligned Purchasing Strategy........................................................2159.3.3 Classification of Purchasing objectives......................................................................2179.3.4 Need for aligned Purchasing Performance Measures.................................................2189.3.5 Need for Purchasing change agents............................................................................2199.3.6 Need for incremental change......................................................................................2209.3.7 Professionalising Purchasing......................................................................................222
9.4 Implications for improving the strategic contribution of local governemnt Purchasing... .2229.5 Summary of answers to the Research Questions and implications for further research...........228
9.5.1 Research Question 2: ‘Are Purchasing objectives aligned with the objectives of the council?’......................................................................................................................228
9.5.2 Research Question 3: ‘Are strategically aligned Purchasing Strategies in place?’.....2309.5.3 Research Question 4: ‘Are the existing models of evolutionary development applicable
to local government?’..................................................................................................2319.5.4 Research question 5: Are strategically aligned Purchasing performance measures
utilised?.......................................................................................................................2329.5.5 Research Question 6: ‘Within councils, who leads the repositioning of Purchasing?’
233
4
9.5.6 Research Question 1: Could local government Purchasing improve its strategic contribution, and if so, how?.......................................................................................233
10 REFERENCES......................................................................235
5
Appendix 1: Tripartite Questionnaire ................................................................................................
................................................................................................................................................................252
Appendix 2: Covering letter to Leaders of councils .....................................................................................
................................................................................................................................................................261
Appendix 3: Covering letter to Chief Executives (1) ...................................................................................
................................................................................................................................................................262
Appendix 4: Covering letter to purchasing managers....................................................................................
................................................................................................................................................................263
Appendix 5: 1st Reminder letter....................................................................................................................
................................................................................................................................................................264
Appendix 6: 2nd Reminder letter....................................................................................................................
................................................................................................................................................................265
Appendix 7: Extract from Belfast City Council Purchasing Strategy: Value for Money Strategy ................
......................................................................................................................................266
Appendix 8: Extract from Belfast City Council Purchasing Strategy: Development of SMEs and ‘Ease
of Access’ Strategy .............................................................................................................
......................................................................................................................................268
Appendix 9: Belfast City Council Mini-cases .............................................................................................
......................................................................................................................................270
Appendix 10: Comparative analysis of Belfast City Council ‘intended’ and ‘realised’ Purchasing
Strategy ..............................................................................................................................
......................................................................................................................................277
Appendix 11: Council purchasing managers semi-structured interview questions .......................................
................................................................................................................................................................288
Appendix 12 Covering letter to Chief Executives (2)....................................................................................
................................................................................................................................................................291
Appendix 13: Chief Executive Questionnaire (2)..........................................................................................
................................................................................................................................................................292
Appendix 14 : Mini case study analysis of Purchasing Strategies.................................................................................................................................................................................................................................294
6
LIST OF FIGURES
Number Page
2.1 The Six Forces 23
2.2 A Stakeholder map for local Councils 24
2.3 Strategy development routes 35
2.4 The evolution of strategic thinking in local government 40
2.5 Forces governing competition in an industry 45
2.6 The Value Chain 47
2.7 Determinants of National Competitive Advantage 48
2.8 Some objectives of Purchasing 53
2.9 Kraljic’s Model 57
2.10 The local government strategic purchasing process 99
2.11 Time-line of Purchasing’s strategic objectives 103
2.12 Theoretical model for improving the strategic contribution of local government Purchasing
106
3.1 Triangulation and the investigative approach 119
6.1 Representativeness of Chief Executives responses by Council type
151
6.2 Political persuasions of councils from which Chief Executives responded.
151
6.3 The perception of actors on the objectives of local government 155
6.4 Strategic gap analysis: The Chief Executive’s perception of Purchasing’s contribution to the achievement of local government objectives
156
7.1 References in Belfast City Council Minutes to purchasing/procurement
176
7.2 Timeline of strategic evolutionary model characteristics in Belfast City Council
180
7.3 Evolution of Belfast City Council’s Purchasing objectives 181
7.4 Draft model of local government Purchasing’s evolution 182
9.1 Theoretical model for improving the strategic contribution of local government Purchasing
211
9.2 Local government Purchasing development model 223
7
LIST OF TABLES
Number Page
2.1 Council Responsibilities 21
2.2 The objectives of Purchasing 50
2.3 Potential Purchasing strategies 62
2.4 Customer – Supplier Relationships 64
2.5 Local Government Lean Supply Model 65
2.6 Potential Purchasing strategies alluded to in Government Purchasing
68
2.7 Typical change models 92
3.1 Features of the two main paradigms 112
3.2 Comparing features of Qualitative and Quantitative research 113
4.1 The strategic objectives of the Northern Ireland councils 141
6.1 The perceived objectives of local government: A comparison of two investigations
153
6.2 Fit between Corporate objectives and Purchasing objectives 158
7.1 Linkage between Corporate Plan key issues and Purchasing objectives
168
7.2 Purchasing objectives 169
7.3 Belfast City Council Purchasing objectives and performance indicators
172
7.4 Belfast City Council Purchasing performance indicators (post-1996)
174
7.5 Chief Officer’s perception of the strategic contribution of Purchasing
175
7.6 Summary of Belfast City Council case study analysis 177
8.1 Chief Executives examples of strategic contribution made 189
8.2 Chief Executives views on the importance of a Purchasing Strategy
189
8.3 The perceived importance of a Purchasing Strategy 190
8.4 Comparison of purchasing managers objectives, perceived strategic contribution and explicit Purchasing objectives
194
8.5 Presence of aligned Strategies 197
8.6 Purchasing performance indicators 204
8.7 Purchasing change leaders 205
8.8 Summary of mini-case study analysis 208
8
9.1 The contribution to knowledge 213
A7.1 Short-term Value for Money Opportunities 267
9
ACKNOWLEDGMENTS
I wish to thank and credit Professor Andrew Erridge, University of Ulster
(Jordanstown), for early encouragement to embark upon this research and for his
support throughout.
I am grateful to my current and former employers, IDeA (The Improvement
and Development Agency for local government), the Chartered Institute of Public
Finance and Accountancy/Institute of Public Finance and Belfast City Council for
their support and assistance.
Thanks are also due to the Members and staff of the following councils who
provided input to this research: Angus Council, Armagh City and District Council,
Belfast City Council, Brent Council, Barnsley Metropolitan Borough Council,
Blaenau Gwent County Borough Council, Carmarthenshire County Council,
Castlereagh Borough Council, Cheltenham Borough Council, City of York Council,
Congelton Borough Council, Edinburgh City Council, Essex County Council, Fife
Council, Flintstone County Council, Hastings Borough Council, Leeds City Council,
London Borough of Enfield, London Borough of Havering, London Borough of
Islington, London Borough of Richmond-upon-Thames, New Forest District
Council, Newtownabbey Borough Council, North Norfolk District Council, North
Somerset Council, Tamworth Borough Council, Scottish Borders Council,
Shewsbury and Atcham Borough Council, Southampton City Council, St. Albans
District Council, The Borough of Basingstoke and Deane, Vale of Glamorgan
Council, Warrington Borough Council, Wokingham District Council, together with
those who preferred to remain anonymous.
Patricia O’Neill and Leah Murray are given particular thanks for their
conscientious proof reading of the thesis at its various stages. Naturally full
responsibility for all errors and omissions rests solely with the author.
By no means least I am grateful to my wife Leah who never doubted my
ability to complete the investigation, and my children Hannah, Phoebe, James and
Maeve who let the research capture so much of our home life.
10
SUMMARY
Key words: Local government, Purchasing Strategy, Strategy.
This investigation is exploratory and makes use of a phenomenological approach to
identify how the strategic contribution of local government Purchasing could be
improved. The investigative techniques used include documentary analysis, a
tripartite postal survey, a single in-depth case study and mini-case studies.
The UK Best Value regime emphasises the need for councils to review how
they provide services and to ensure that all functions of the local authority, including
Purchasing, are strategically aligned with the ultimate needs of citizens. This places
a responsibility on Purchasing to consider its strategic contribution and to identify
whether that contribution could be improved.
Confirmation is found that the local government Purchasing function could
improve its strategic contribution and a theoretical prescriptive model for improving
contribution is developed.
The research demonstrates that Chief Executives have a wider view of
Purchasing’s potential strategic contribution than practitioners do. The lack of
effective use of performance measures is also highlighted.
The research challenges the need for a Purchasing Strategy and the
timeliness of its alignment. It is argued though that an aligned Strategy, authored by
practitioners, which sets out Purchasing’s programme for contributing to the
council’s objectives, embraces change management and has Member ownership,
would be helpful, as would aligned performance indicators.
The appropriateness of existing models of Purchasing’s strategic
development is also challenged; it is argued they fall short of the needs of local
government. A staged incremental approach to change in objectives progressing
from a ‘Clerical’ stage, through a ‘Private Sector Imitator’ stage, to a ‘Strategic
Breakthrough’ stage is advocated.
The investigation classifies Purchasing objectives into four discrete and
progressively stretching schools of Purchasing objectives, namely, ‘Classic’, ‘Cost
reduction’, ‘Cost reduction/Quality Improvement/Innovation transfer/Delivery
improvement’, and ‘Contingency’ schools.
11
NOTE ON ACCESS TO CONTENTS
I hereby declare that with effect from the date on which the thesis is deposited in the
Library of the University of Ulster, I permit the Librarian of the University to allow
the thesis to be copied in whole or in part without reference to me on the
understanding that such authority applies to the provision of single copies made for
study purposes or for inclusion within the stock of another library. This restriction
does not apply to the British Library Thesis Service (which is permitted to copy the
thesis on demand for loan or sale under the terms of a separate agreement) nor to
the copying or publication of the title and abstract of the thesis. IT IS A
CONDITION OF USE OF THIS THESIS THAT ANYONE WHO CONSULTS IT
MUST RECOGNISE THAT THE COPYRIGHT RESTS WITH THE AUTHOR
AND THAT NO QUOTATION FROM THE THESIS AND NO INFORMATION
DERIVED FROM IT MAY BE PUBLISHED UNLESS THE SOURCE IS
PROPERLY ACKNOWLEDGED.
12
1 INTRODUCTION
1.1 BACKGROUND TO THE RESEARCH
U.K. local government provides a process for delivering public services to local
populations through a democratically elected and publicly financed structure. It
exists to ensure that each U.K. citizen is delivered essential services in a way that
best reflects the diverse needs of their locality (Stewart, 2000, pp. 26-27; DTLR,
2001, para. 2.10). In fulfilling those needs U.K. local government is a major
purchaser, spending in the region of £75 billion each year, which represents
approximately 25% of public spending (Byrne, 1994, pp. 2-4; DETR, 1998, p. 13, p.
44; Stewart, 2000, pp. 90-91). Yet while local government has received significant
scholarly attention (for example, Rhodes, 1988; Byrne, 1994; Caulcott, 1996;
Corrigan and Joyce, 1997; Hill, 1997; Joyce, 2000; Rao, 2000; Stewart, 1999 and
2000) that interest has not extended to the local government Purchasing function and
how it carries out its activities in a way which contributes to the strategic objectives
of the council.
The Best Value regime (Local Government Act 2000) has emphasised the
need for councils to review how they provide services to citizens and to ensure that
all functions of the local authority, including Purchasing, are strategically aligned
with the ultimate needs of the citizen. This places a responsibility on Purchasing to
consider its strategic contribution and to identify whether that contribution could be
improved.
Beyond local government the importance of strategic alignment or ‘fit’ has
been emphasised by a number of authors. Porter (1996) has argued the need for
three-dimensional fit, between corporate and functional objectives, across functions
reinforcing each other’s strategies, and collaboratively through better coordination,
creating synergies and eliminating waste. In a Purchasing context Virolainen (1998)
and Cavinato (1999), while reiterating the need for strategic alignment, have
highlighted that Purchasing must sit within the wider context of the organisation as
opposed to being a ‘stand alone’ functional unit.
There is a significant body of knowledge on purchasing both in the context
of a function and as a process (for example, Lamming, 1993; Monczka et al, 1993;
Ellram and Carr, 1994; Gadde and Hakansson, 1994; Saunders, 1994; Carter and
13
Narasimham, 1996; Carr and Smeltzer, 1997; Cavinato, 1999). Most of that
literature though has been either conceptual (Ellram and Carr, 1994), focused on the
private sector, manufacturing industry (Brandes, 1994) or written from the
perspective of narrowly defined operating strategies (Virolainen, 1998).
Comparatively little attention has been given to the role of the local government
Purchasing function. This situation has created a vacuum which only a few authors
have sought to fill (for example, de Boer and Telgen, 1998; Erridge and Murray,
1998a and 1998b; Murray, 2000, 2001b and 2002) and these discussions have
tended to focus on the practice of local government purchasing as opposed to its
strategic contribution.
There is therefore an absence of literature on local government Purchasing
and specifically how its strategic contribution could be improved. Yet cognisant of
the significant sums of money spent by local government and the Best Value
imperative to ensure all functions are strategically aligned, it is appropriate to
challenge the strategic contribution of local government Purchasing.
1.2 THE RESEARCH PROBLEM
This thesis therefore explores an under-researched area and answers the question:
‘Could local government Purchasing improve its strategic contribution, and if so,
how?’
Extant theory has provided a foundation on how strategic contribution could
potentially be improved. On that basis the following secondary research questions,
derived from the wider body of knowledge, are utilised:
‘Are Purchasing objectives aligned with the objectives of the council?’
‘Are strategically aligned Purchasing Strategies in place?’
‘Are the existing models of evolutionary development applicable to local
government?’
Are strategically aligned Purchasing performance measures utilised? and
‘Within councils, who leads the repositioning of Purchasing?’
14
The investigation is confined to U.K. local authorities even though local government
is a worldwide phenomenon. U.K. local government provides a homogeneous
research sample with similar local priorities, a common language and common
pressures from U.K. central government. From a practical perspective, confining
the research to the U.K. increased the range of investigative techniques available, for
example, face-to-face interviews.
The thesis provides confirmation that the local government Purchasing
function could improve its strategic contribution, challenges the appropriateness of
existing theory and proposes an incremental prescriptive model for improving its
contribution.
The context for investigation is set through consideration of local
government and its objectives. The thesis draws upon existing theory relating to
strategy development, Purchasing Strategy and Purchasing objectives, economics
and change management. The literature relating to issues of staffing, competence
and structure are also considered.
The thesis makes a contribution to knowledge through confirming that the
strategic contribution of local government Purchasing could be improved, and
outlining how that improvement could be brought about, particularly through
improving the level of professionalism and better alignment with the wider
objectives of local government. The research demonstrates that council Chief
Executives have identified potential strategic contributions beyond those that
Purchasing is currently contributing to - pursuit of those objectives, it is argued,
would improve contribution.
The thesis classifies Purchasing objectives into four schools. Such a
classification adds to the body of knowledge and contributes to an incremental route
map which Purchasing could follow to improve its strategic contribution. In parallel
the research challenges the applicability of existing models of Purchasing’s strategic
evolutionary journey (Reck and Long, 1988; Cammish and Keough, 1991; Syson,
1992) and through the stages of the investigation develops an alternative model
which it is argued better reflects local government.
Further contributions are made through identifying: that while documented
Purchasing Strategies may be important they are not critical in improving local
government Purchasing’s contribution; that while Purchasing objectives may be
aligned with the strategic objectives of councils they are not uppermost in the minds
15
of purchasing managers on a day-to-day basis; that strategically aligned Purchasing
performance measures are not widely utilised in local government – all these areas it
is argued through the thesis provide opportunities for local government Purchasing
to improve its strategic contribution.
1.3 METHODOLOGY
The investigation is exploratory and makes use of a phenomenological approach.
The investigative techniques utilised include documentary analysis, a tripartite
postal survey, a single in-depth case study and mini-case studies. The rationale for
adopting the phenomenological paradigm is that it is an accepted approach for
exploratory areas of enquiry, offers the opportunity to ‘really understand’ the
dynamics of what happens in local government Purchasing, is informed by theory
but not constrained by it, encourages reporting of findings using the language of the
researched and offers flexibility in research designs and methods.
Throughout the investigation a prescriptive model for improving the strategic
contribution of local government Purchasing is developed. A theoretical model is
first developed as an outcome of the literature review. That model is then redefined
at the end of an in-depth case study before further development as an outcome of the
mini-case study empirical research.
1.4 OUTLINE OF THE THESIS
Chapter 2 sets the foundation for the thesis. It commences by setting the context of
the investigation and providing background information on the role and scope of
U.K. local government prior to discussing its strategic objectives and decision-
making processes. Theory relating to strategic purchasing is then reviewed,
followed by a discussion on central government purchasing strategy. An economics
perspective is then considered prior to a review of theory relating to change
management. Chapter 2 closes with a critique of the theory and then develops a
theoretical model of how local government Purchasing may be able to improve its
strategic contribution.
Chapter 3 develops the research agenda and methodology. The research
questions are then formulated. The chapter considers alternative research paradigms
16
and techniques. It sets out the justification for the adoption of a phenomenological
approach and the qualitative techniques utilised prior to explaining the detail of how
the investigation was carried out.
Chapters 4, 5, 6, 7 and 8 set out the findings of the investigation.
Chapter 4 reports the findings of a documentary analysis of N.I. council
Corporate Strategies. It suggests the strategic objectives of local government and
signposts some of those objectives to which it was anticipated Purchasing would
contribute.
Chapter 5 provides further validation of the strategic objectives of local
government through an analysis of Belfast City Council documents. The analysis
confirms a potential strategic contribution for Purchasing.
Chapter 6 reports the findings of a tripartite survey of U.K. councils. It
provides insights of a potential contribution identified by Chief Executives which is
not currently being realised, provides information on the presence of Purchasing
Strategies, the ‘fit’ between council and Purchasing objectives, and the type of
Purchasing performance measures used.
Chapter 7 comprises the findings of a single in-depth case study of Belfast
City Council. The case study demonstrates that it is possible to align Purchasing
Strategy, objectives and performance measures with the higher-level objectives of
local government. The case study demonstrates that it is possible to improve
Purchasing’s strategic contribution through adopting a more professional approach
and adapting private sector good practice. The case study provides the basis for the
development of a model for improving Purchasing’s contribution which is
subsequently tested in Chapter 8 and further developed and explained in Chapter 9.
Chapter 8 reports the findings of the nine mini-case studies. Findings from
face-to-face interviews, analysis of Purchasing Strategies and a postal survey of
Chief Executives are utilised to not only test and further develop the model but to
identify the scope for improving local government Purchasing’s contribution,
through professionalisation, better strategic alignment and effective use of
Purchasing performance measures.
Chapter 9 draws together the investigation and makes recommendations for
improving the strategic contribution of local government Purchasing. The
contribution to knowledge is set out and suggestions for further research made.
17
1.5 TERMS USED WITHIN THE THESIS
Outlined below are the key terms which will be used in the thesis; these terms will
be substantiated in the ensuing discussion:
‘strategic’, refers to those issues which are non-routine, have an impact on the
council’s long-term direction and are likely to have an impact beyond the
function;
‘strategic objectives’, refers to principal priorities which the council has set
out and is trying to achieve, these will have been developed as an outcome of a
political process and are likely to be based upon the dominant party’s political
manifesto;
‘Purchasing’ (capital ‘P’), refers to the specialist functional unit or section in
the council;
‘purchasing’ (lower case ‘p’), refers to the activity of acquisition;
Purchasing acts as a strategic function when it “directs all activities of the
purchasing process toward opportunities consistent with the organisation’s
capabilities to achieve its long-term goals”(Ellram and Carr, 1994; Carr and
Smeltzer, 1997);
‘local government strategic purchasing’, is the process of determining the
corporate purchasing strategy, mapping and overseeing the high-level
purchasing portfolio, defining and challenging the desired purchasing
outcome, determining and managing specific purchasing plans, identifying,
evaluating and challenging purchasing service delivery options, contract
award, post-contract management and review;
a ‘Purchasing Strategy’ (capital ‘P’ and ‘S’), is a document that sets out the
specific actions Purchasing, as a function and a process, may make to achieve
its objectives and how it intends to get there”(Ellram and Carr, 1994; Carr and
Smeltzer, 1997). The Purchasing Strategy document is differentiated from the
implied but not explicitly stated ‘purchasing strategy’ (lower case ‘p’ and ‘s’)
which refers to specific actions the Purchasing function may take to achieve its
objectives which need not be documented;
‘value’, is either a qualitative or quantitative net benefit gained;
‘value for money’, is the optimum mix of quality and cost to match the
18
customers needs.
1.6 CONCLUSION
This chapter laid the foundations for the thesis. It introduced the research problem
and provided the justification for the investigation. The methodology utilised was
briefly described and the report structure outlined. On these foundations, the thesis
can proceed with a detailed description of the literature review.
19
2 LITERATURE REVIEW AND DEVELOPMENT OF THEORETICAL MODEL
2.1 INTRODUCTION
This section of the research builds a theoretical foundation for the investigation. It
seeks to establish the background of local government, its purpose and the
environment within which it functions. The review then identifies the strategic
objectives of local government since it is against those objectives that the strategic
contribution of local government Purchasing should be measured (Fitzpatrick, 1995;
Carter and Narasimhan, 1996; Virolainen, 1996; Cavinato, 1999).
Having identified the strategic priorities of local government the research is
in a position to ask ‘How could Purchasing improve its contribution to those
objectives?’ A discussion on strategy follows which seeks to provide a grounding
on the theory of strategy. In the absence of a significant body of knowledge on local
government Purchasing, a detailed analysis of how private sector and central
government seek to improve Purchasing’s strategic contribution is considered
together with comments on the DTLR/LGA review of local government
procurement in England (Byatt, 2001).
That is followed by an economics perspective which suggests potential new
roles for Purchasing. Since the investigation implies a change will be required,
literature on change management is reviewed along with a discussion on staffing,
competence and structure.
The concluding section presents a critique of the literature before drawing
upon the key signposts from the review and on that basis, suggests how local
government Purchasing could improve its contribution.
2.2 LOCAL GOVERNMENT
This section reviews the role, purpose and strategic objectives of local government.
It sets the context for the investigation and the backdrop against an improved
strategic contribution from Purchasing would be compared.
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2.2.1 Local government structure
Local government provides a process for delivering public services to local
populations through a democratically elected, publicly financed structure. It ensures
that each U.K. citizen is delivered with essential services in a way that is most
appropriate to the specific locality (Stewart, 2000, pp. 26-27; DTLR, 2001, para.
2.10).
Although local government has undergone many changes, until 1996 a two-
tier system existed, with England and Wales having county and district councils,
Scotland having regional and district councils, and Northern Ireland having district
councils. Since 1996 however, there has been a progressive shift towards the
creation of unitary councils, which have greater responsibilities and replace some of
the smaller councils. Each of the different types of council has slight variations of
responsibilities. While a detailed discussion of the various responsibilities would
add little to this research, Table 2.1 shows the particular services each of the local
councils provide.
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English County
English District
English Metropolitan
District
English Unitary
London Borough
NI District
Scottish Unitary
Welsh Unitary
Arts
Baths & Public Halls
Car Parks
Caravan Sites
Car Parks (off street)
Cemeteries & Crematoria
Consumer Protection
Development Control
Education
Education & Youth Employment
Electoral Registration
Environmental Health Services
Food & Drugs Act
Highways
Housing & Slum Clearance
Housing (reserve powers)
Leisure
Licensing & Registration
Local Authority Airports
Local Roads
Markets & Fairs
Museums & Arts Galleries
National Parks & Countryside
Offices, Shops & Railways Act
Parking places for vehicles
Parks & Open Spaces
Passenger Transportation
Planning
Police, Fire & Civil Defence
Public Libraries
Refuse Collection & Street Cleansing
Refuse Disposal
Social services
Strategic Planning
Traffic & Transportation
Traffic Management
Weights & Measures
Table 2.1: Council Responsibilities. (Source: Municipal Yearbook and Public Services Directory 1998)
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2.2.2 Local government power
Collectively U.K. councils spend in the region of £75 Billion each year, which
represents approximately 25% of public spending (Byrne, 1994, pp. 2-4; DETR,
1998, p. 13, p. 44; Stewart, 2000, pp. 90-91), yet on their own, local authorities have
no power (Caulcott, 1996, p. 36). Their authority is delegated, usually from
Parliament (Harvey and Bather, 1973, pp. 468-477), who provide enabling
legislation through the introduction of ‘Acts of Parliament’, ‘Orders in Council’ etc.,
(Harvey and Bather, 1973, p. 470; Hill, 1997, p. 178). The authority may take the
form of enabling the council to raise a certain amount of money in order to deliver
specific ‘public goods’ (for example, ‘The Miscellaneous Provisions (Northern
Ireland) Order 1992’ which permitted spending of “2p in the pound product of rates”
on local economic development). Alternatively the authority may take the form of a
detailed set of instructions/restrictions leaving little room for interpretation or
flexibility (for example, ‘The Public Supply Contract Regulations 1995’).
Given the above, it is therefore clear that some authority is ‘obligatory’,
while some is ‘permissive’ (Harvey and Bather, 1973, p. 470; Caulcott, 1996, p. 36-
46; Hill, 1997, pp. 177-195; Stewart, 2000, pp. 36-39). Of specific relevance to this
research, local councils may choose not to take action on local economic
development issues, while they must conform to public procurement legislation.
Equally, in the absence of an obligation to produce and act upon a Purchasing
Strategy setting out Purchasing’s contribution, councils can ‘opt out’ of such
perceived good practice.
The 6th Force and towards a definition of business success
Power cannot be exercised in isolation. Porter (1980) has presented the argument
that organisations are shaped by ‘5 Forces’, while Freeman (1984) has argued that a
‘6th Force’, the power of stakeholders must also be recognised (Figure 2.1):
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Rivalrous activityin the industry
Relative Powerof customers
Relative Powerof other
stakeholders
Relative Powerof suppliers
Threat ofnew entrants
Threat ofsubstitutes
Figure 2.1: The Six Forces (Source: Freeman, 1984, p. 141)
… a stakeholder is any group or individual who can affect, or is affected by, the achievement of a corporation’s purpose. Stakeholders include employees, customers, suppliers, stockholders, banks, environmentalists, government and other groups who can help or hurt the corporation. The stakeholder concept provides a new way of thinking about strategic management – that is, how a corporation can and should set and implement direction (Freeman, 1984, p. vi).
Recognising the importance of the stakeholder concept within local government,
stakeholders could be viewed as assets and stimuli for continuous improvement.
Equally important, the concept suggests that unless strategies are
customer/stakeholder driven, waste will be generated as a result of misdirecting
resources from the areas of priority (Osborne and Gaebler, 1993, p. 184).
Furthermore interest groups drive politicians and ‘political satisfaction’ is a primary
measure of performance for council officials (Osborne and Gaebler, 1993, p. 20).
That being the case a definition of local government business success (Cox, 1997a)
and its subsequent functional strategies must be stakeholder focused and driven.
This perspective on business success is fundamentally at variance with that of Cox
(1997a, p. 105), who is of the opinion that “companies exist to appropriate and
accumulate value for themselves”.
Within a local government environment, stakeholders could be identified and
mapped as in Figure 2.2.
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LocalCouncil
Government
Central European
Global
othercouncils
Ratepayers
Business
Domestic
Suppliers
non local
local
localcommunity
organisations
Politicians
EnvironmentalistsOfficers
Media
Specialinterestgroups
Figure 2.2: A stakeholder map for local councils.
Each stakeholder has a specific vested interest in the activities of the council,
consideration of the Purchasing function may provide elucidation:
Politicians may want to show patronage to their favoured local constituency suppliers and in parallel want to ensure that political policies are being implemented.Central government may want to ensure that purchasing is carried out in line with national policy to encourage the growth of SMEs, that competition is the core ethos, that environmental impact is minimised or that contracts are not awarded on the basis of ethnic bias. European government may want to ensure freedom of movement for goods and services between member states, while also aiming to assist the growth of SMEs and minimise environmental impact.Global government, for example the ‘1992 Earth Summit’, may wish to ensure that local government facilitates local communities in reducing environmental impact but not at the expense of non-developed countries.Local suppliers could be expected to have self-interest in local sourcing.Non-local suppliers could be concerned that they have a fair opportunity to compete for council business.Ratepayers would be expected to have a concern that local services are delivered cost effectively, to appropriate quality standards while at the same time reducing local unemployment and environmental impact.Media could be expected to show concern for a newsworthy story, particularly one that undermines public confidence as a result of highlighting inefficiencies and inappropriate behaviour of council officials.Officers are likely to be concerned that they receive operational support but also that contracts are awarded to suppliers who match their needs.
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The above overview illustrates potential conflict and trade-offs between
stakeholders wishes. A political process has therefore evolved to achieve consensus
through bargaining or sufficient power to drive preferred policy through the decision
making process (Pfeffer and Salancik, 1998, p. 94). Nevertheless cynics would
claim that stakeholders tend towards personal needs as opposed to the ‘greater
good’. It has therefore become necessary to build in suitable policing and protective
arrangements for stakeholder accountability.
2.2.3 Stakeholder Accountability
Prior to the nineteenth century, local community government lay in the hands of the
aristocratic elite who were criticised for corruption and protecting their own interests
(Hill, 1974, pp. 25-27; Rao, 2000, pp. 8-20).
Faced with urban deprivation, the Victorians set about introducing
democracy in the hope that it would not only reduce corruption but also improve
efficiency (Hill, 1974, p. 131). Concern with the avoidance of corruption and the
resultant need for bureaucratic procedures still dominates the ethos of public
accountability.
Local councils, as stewards of the public purse, have a responsibility to
behave in a manner that is professional open, transparent, free from undue influence
and demonstrates value for money. Consequently the Purchasing function in local
government has become regulated, process defined and controlled by innumerable
laws, rules and regulations, judicial and administrative decisions, and policies and
procedures (Dobler and Burt, 1996, p. 747).
2.2.4 Local democracy
A fundamental democratic principle is that individuals should have their views taken
into account. To provide that mechanism, local government operates through a
system whereby the local population elects its overseers and representatives – the
local councillors.
It would be naïve to suggest that local councillors are elected as mere
‘overseers’. They are elected on the basis of a manifesto presented to the electorate
to act as ‘change agents’ and ‘catalysts’. Indeed Joyce (2000, p. 83) argues that
politicians are the main source of change in the public sector. At the very centre of
local democratic principles is the view that local people should determine how and
26
by whom they should be governed (Hill, 1974, p. 1). This may vary at different
hierarchical levels of government, for example, local, national or European (Rhodes,
1988, p. 115; Joyce, 2000, p. 58).
2.2.5 Policy creation
Although currently in a state of flux as a result of the modernisation agenda (DETR,
1998), the key process for putting political manifestos into effect is the committee
system (Caulcott, 1996, p. 41; Rao, 2000, pp. 163-190). The committee system is a
fundamental aspect of local democracy since it is the forum for making decisions,
based on the recommendations of professional officers (Joyce, 2000, pp. 39-50;
Stewart, 2000, pp. 43-49).
The committee process enables a unique, diverse mix of essentially lay,
elected representatives, with varying political opinions, and professional
administrators to come together and arrive at a consensus which best fits the locality.
At the committee meeting, the professional administrators responsible for giving
advice are required to justify that advice (Hill, 1974, p. 89; Caulcott, 1996, pp. 56-
62). This creates a somewhat unique and challenging arena for the purchasing
manager, since he must communicate best practice to the ‘lay elected members’, in a
jargon free manner. A further unique quality of local government is that, since the
minutes of meetings are published, the local government purchasing manager is
somewhat more exposed to public criticism than his private sector or central
government counterpart (Caulcott, 1996, p. 84). This could be a major contributor to
officers being risk-averse and reluctant to innovate (Cox, 1995, p. 19; Gershon,
1999, para. F5; National Audit Office, 1999, para. 1.14).
The committee system has fundamental implications for this investigation.
Firstly, the committee system limits the centralisation of control and strategy
(Worrall, Collinge and Bill, 1998). As a result, while central government may well
be able to exert strategic pressure throughout its own departments, such pressure
may be strongly resisted at the level of the local council seeking to guard their
autonomy and independence. Secondly,
Strategies in local government cannot be drafted in a vacuum if they are to carry weight in the organisation but must be developed through a process of deliberation in which the key power holders will own the ‘outcome’ … because of the seriousness of these issues the strategy formulation process will give rise to conflict, and so the process of developing the
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strategy must allow for disagreement, and must be robust enough to cope with this (Worrall et al., 1998).
It is contended that such an environment lends itself to the rational approach of
decision making as espoused by Simon (Augier, 2001) since the mandate for change
can only be gained at committee level. A third implication of the committee system
and its role in strategic management is that it has been designed primarily to enable
the managers to be held accountable for their performance by politicians (Joyce,
2000, p. 4).
2.2.6 Local objectives
Choi (1999, p. 159) highlighted that the 1980s and 1990s led to a rediscovery of the
customer perspective in U.K. local government with councils having to identify their
customers and provide services that are of value to them. As the U.K. government
tended towards the creation of the ‘enabling authority’ (Clarke and Stewart, 1988),
local government began switching its own emphasis beyond the mere statutory
provision of services, to the exercise of its discretionary powers in other areas that
are of specific concern to local stakeholders. Specifically, Caulcott (1996, pp. 16
and 37) claims that within a span of twenty years local economic development
sprung from nothing to become a major goal of local government. This view was
supported by Mills (1994) who, reporting on 1992 research, claimed local
government was innovating its service provision in the areas of local economic
development, environment and Europe.
The marriage between two of these areas, local economic development and
the environment, has become known as sustainability. This reflects the growth of
importance within local government of Local Agenda 21, a non-statutory role.
Mills’ (1994) research found that:
• 72% of Chief Executives agreed or strongly agreed that ‘the environment is a
key policy issue in this authority’
• 78% of the authorities had, by September 1992, adopted an economic
development strategy.
The findings of Mills set alongside those of Bateman (1995) who reported that more
than half of U.K. local authorities had committed themselves to Local Agenda 21,
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suggest a shift in local government objectives. This is consistent with the U.K.
government’s wish that councils “… have a duty to promote the economic, social
and environmental well-being of their areas” (John Prescott, Deputy Prime
Minister, DETR, 1998, p. 5) and the 2002 White Paper (para. 2.8):
Strong community leadership means providing the economic infrastructure needed by local businesses to compete successfully on the local, regional or wider stage. It means developing social capital by supporting civic engagement and networks of neighbourhood organisations. It means enhancing environmental quality … and it means safeguarding the interests of future members of the community. These are not separate goals – sustainable development means addressing all of them at the same time.
However, when one considers that the origin of local government lay in
improving the quality of life and health of the local population through, for example,
the Public Health Act 1848, perhaps this is more indicative of a return to their raison
d’être.
Stewart (2000) presents an extensive argument that local government is as
much about diversity as uniformity. Stewart rightly highlights that the raison d’être
of local government is to match local needs. Therefore as local needs differ, so too
must local objectives (DTLR, 2001, para. 2.10). Equally one would expect that the
diversity of political ideology would also be reflected in differing objectives. This
need not be seen as contradictory to the findings of Mills (1994) and Bateman
(1995), but instead as acceptance that even though some objectives may be
consistently pursued, they may be given varying levels of priority, while other
objectives will only be pursued in a minority of areas.
2.2.7 The ‘Best Value’ regime
Uppermost in the minds of many local councils during the early 1990s was the need
to comply with the Compulsory Competitive Tendering (CCT) legislation
introduced by the Conservative government of the time (Choi, 1999). The Labour
government, newly elected in 1997, indicated their intention to switch from CCT to
Best Value. That led to Best Value becoming a statutory obligation on English and
Welsh councils in July 1999 (Local Government Act 1999).
The ethos of Best Value is that local government exists only to serve its
primary stakeholders, the public (DETR, 1998, p. 65). That being the case the
council must identify the priorities of the local population, how it matches their
29
needs and demonstrates that, in delivering those needs, it provides Best Value (Local
Government Act 1999). It was hoped, from that informed position, that the council
would form its strategic objectives or ‘corporate view’ (DETR, 1997) and that in
turn would create the overarching agenda from which functional strategies, not only
of Purchasing, but also other specialisms, should flow.
Fundamentally Best Value differs from CCT in that it removed the
‘compulsory’ element, while expanding the remit for accountability to all issues of
importance to the local population (Babcoe, 2001). As a result the Best Value
regime supports ‘discretionary’ actions taken in local government.
Filkin (1997, p. 11) illustrates the characteristics of a Best Value authority as
one which will:
Find out what the public wants and then commit to delivering this to the
highest quality at the best price
Constantly search for improvements in its services and believe that this is
possible with good political leadership and management
Want to find evidence that others can provide better services as this opens up
the possibility that it too can do so
Want to compare its current performance in each service with other service
suppliers.
On that basis it could be said that Best Value is the manifestation of the quality
movement within local government. Echoing the Modernisation Agenda, Corrigan
and Joyce (1997) see the quality movement as providing an opportunity to provide
the long-term survival of local government, indeed,
for leading politicians and managers it means the possibility of using the issue of quality to reconstruct the whole nature of state/civil society relationships.
…If the services do become responsive they will be the realisation of a commitment to change services in a way that improves users. This matters in part because public service quality, defined as fitness for purpose, cannot be left to professionals or managers to define. Users have a distinctive stake in service quality and bring an important voice to the judging of quality. Thus, services need to be evaluated with a direct input from users and then changed in line with this input, subject to the political direction of elected representatives (Corrigan and Joyce, 1997).
Best Value places on councils an obligation to challenge and justify how services
are currently delivered (Armstrong, Minister for Local Government and Housing,
30
26.6.97). This has implications not only for strategic contribution but also
operational delivery. That being the case it is argued that councils should consider
whether Purchasing could improve its contribution.
Initially Best Value required benchmarking against other councils, the
purpose being to create an environment of continuous improvement (Local
Government Management Board 1998, Section 3; DETR, 1998; Local Government
Act 1999 Pt I para. 3 and 4). The initial aspiration of councils voluntarily to adopt a
culture of continuous improvement was subsequently mandated in a requirement
placed on authorities to set “cost and efficiency targets over five years that, as a
minimum, are consistent with an overall target of 2% pa efficiency improvement for
local government as a whole” (DETR, 1999a, para. 29).
Early indicators also suggested that Best Value would require a change of the
local council’s role “to one of community leadership and advocacy, requiring much
more time and profile for members and staff out in the community” (Filkin, 1997, p.
15). Aligned with these higher-level impacts on councils are the predicted
implications for purchasing managers “(g)ood procurement practice is essential if
local government is to obtain real improvements to service cost and quality”
(DETR, 1998, p. 71).
Filkin expects that the procurement activities of councils will switch to:
Greater dialogue with suppliers
Output specifications
Less adversarial supplier relationships
Longer-term relationships.
Best Value can be expected to have a major impact on the local council since the
views of stakeholders, beyond officers and elected members, will be provided with
new opportunities for expression. Equally so, Best Value could provide an
opportunity for Purchasing to participate in the now mandatory ‘make or buy’
(Babcoe, 2001) decision on the delivery of council services.
The key strategic choice for local authorities is whether to provide services directly themselves or to secure them through other sources (DETR, 1998, p. 72).
The duty of best value requires local authorities to make decisions on what services should be provided and how much they should pay for them, after consulting service users and others with an interest, within certain national constraints. Without an effective
31
procurement strategy a local authority will not achieve best value. A Best Value Performance Plan is required to incorporate a strategic view of how procurement will be used to help meet the council’s objectives. Best Value reviews should be directly linked to the procurement strategy of the council and incorporate procurement expertise (Byatt, 2001, p. 21).
Bovaird’s (2000) analysis of the Best Value Pilots would suggest though that during
the early pilot phase of Best Value, the ‘buy’ question did not appear to be
sufficiently addressed. Having said that, as will be argued later in the thesis, if
Purchasing participate in those decisions there would be grounds for claiming it is
truly strategic (Cox and Lamming, 1997; Ramsay, 2001). Unfortunately previous
research (Murray, 1996; de Boer and Telgen, 1998; SOPO, 1999) would indicate
that many local government Purchasing professionals are likely to be excluded from
such significant decisions. That being the case an opportunity to improve strategic
contribution is being missed.
2.2.8 The objectives of local government
From the foregoing review it can be concluded, at a theoretical level, that the
objectives of local government are public accountability, political advocacy,
sustainability (namely, local economic development, environment, quality of life),
customer focus in service delivery, quality improvement and Best Value. However,
it must be acknowledged that within specific local authorities the diversity and
priority of differing political and social objectives are likely to be reflected. This
investigation picks up on these themes, questions whether Purchasing is contributing
as much as is potentially possible to local government objectives, and aims to
suggest how the existing contribution could be improved.
32
2.3 PURCHASING STRATEGY
While local government has been the subject of extensive debate over the years,
little has been written on local government Purchasing’s contribution. Indeed, from
a research perspective, local government Purchasing appears a neglected area and
therefore offers plenty of potential. It is against that background the research aims
to add to the body of knowledge.
This investigation confines itself to how the Purchasing Unit can improve its
contribution to local government. It is therefore appropriate to review the role of
Purchasing. Acknowledging that little has previously been written regarding local
government purchasing strategy, consideration is given to Purchasing as generally
portrayed in literature. Unfortunately even that literature suffers from being largely
conceptual (Ellram and Car, 1994), manufacturing based (Brandes, 1994), or from
the perspective of narrowly defined operating strategies (Virolainen, 1998).
2.3.1 What is strategy?
Stuart (1996) expressed the opinion that the state of knowledge on how Purchasing
contributes to corporate strategy is primitive. Similarly, others (Steele and Court,
1996, p. 13; Marshall and Lamming, 1997) have concluded that some companies are
confused about what exactly is meant by strategic purchasing and there is still a long
way yet to go before Purchasing becomes truly strategic.
This section aims to set purchasing strategy in context. Firstly the meaning
of corporate strategy is discussed. Having identified the organisational framework
in which Purchasing is positioned, working definitions of Strategic Purchasing and
Purchasing Strategy are presented.
Finally the review discusses current literature relating to strategic Purchasing
and argues that at present four schools exist, namely, Classic, Cost reduction,
Cost/Quality/Innovation/Delivery and Contingency.
2.3.2 Corporate Strategy and alignment
The realm of strategy is considered to be the high point of managerial activity and
yet it is also one surrounded by confusion (Mintzberg, Ahlstrand and Lampel, 1998,
p. 9; Worrall et al., 1998). That confusion may be as a result of the term ‘strategy’
being freely given a variety of meanings, for example:
33
A plan which provides direction and sets out the route map for achievement of
objectives
A pattern of consistent behaviour over time
A position pursued in the marketplace
A perspective of how the organisation views itself
A ploy or manoeuvre aimed at gaining an advantage over a competitor or
adversary.
(Mintzberg, et al., 1998, pp. 9-15; Worrall, et al., 1998)
The confusion is compounded when one considers that within the organisation a
hierarchy exists, within which each tier will have its own level of strategy. At the
top echelon of the strategic hierarchy are the corporate objectives of the
organisation. Those objectives are the ends that the firm is seeking to achieve
(Ansoff, 1985, p. 104).
Theoretically, taking a ‘planning’ approach to strategy (Ansoff, 1985;
Mintzberg, 2000), a tightly scheduled, formalised and systematic approach is taken
to identify a gap between the organisation’s current position and the desired
performance. By implication, this approach suggests that if a gap can be identified
between Purchasing’s potential contribution and its current contribution, there exists
an opportunity to improve its strategic contribution. To close that gap and achieve
the corporate objectives, hierarchies of strategies are developed (Ansoff, 1985, pp.
45-47; Joyce, 2000, pp. 72-73). On that basis it has therefore been argued that it is
only after an organisation has developed its core objectives that functional strategies
including those of Purchasing, can be developed (Carr and Smeltzer, 1997). That
creates a dilemma in that it assumes a top down approach to strategy development
and suggests that, in the absence of a clear corporate strategy, functional strategies
cannot be developed.
Given that, strategies are subsequently cascaded to the various divisions,
business units or functions as their functional objectives. (Leenders, Fearon, and
England, 1989, p. 607; Baily, Farmer, Jessop, and Jones, 1994, p. 19; Carr, 1994, p.
17; Hines and Rich, 1997; DETR, 1998). For example, to achieve a corporate
objective of profit maximisation, functional objectives may be set for each function -
Manufacturing, to improve the efficiency and output of machines and labour,
34
Marketing, to increase sales, while Purchasing could be expected to reduce the costs
of bought-in goods and services. However, while a corporate strategy may be to
utilise Purchasing’s cost reduction ability, at a functional level, cost reduction
becomes an objective. “Elements of strategy at a higher managerial level become
objectives at a lower one” (Ansoff, 1985, p. 104).
An alternative view, that of Porter (1996), considers that strategy is primarily
about sustainable competitive advantage gained from positioning in the marketplace.
Such a strategy makes sense in a competitive private sector environment but does
not sit comfortably within local government which is concerned with the strategic
delivery of ‘services’, regardless of the ‘means’ (Osborne and Gaebler, 1993, pp. 25-
48).
Porter also argues that ‘fit’ between functions and the synergy produced is
one of the key tenets of strategy. ‘Fit’, according to Porter, is at three levels. First,
consistency between the functional objectives and the corporate strategy. Second,
functions reinforcing each other. Third, ‘optimisation of effort’, which refers to the
co-ordination and exchange of information between functions with a view to
eliminating waste.
Strategy is creating fit among a company’s activities. The success of a strategy depends on doing many things well - not just a few - and integrating them (Porter, 1996).
Porter’s view of strategic fit has also been recognised in the context of Purchasing:
Procurement cannot operate in isolation from other elements of the business. It is important that all functional area strategies and capabilities, including procurement, be consistent with business unit goals and strategy (Virolainen, 1998).
It is imperative that we view purchasing within the context of the firm, rather than as a stand-alone entity. In an age of downsizing, outsourcing, cross-functional team processes, increasingly sophisticated information and communication systems, and assessing every function in terms of how much value it adds to the firm, it is vital to examine how each group fits within the strategic orientation of the firm as a whole (Cavinato, 1999).
Significantly Cousins (1999a, and with Hampson, 2000, p. 238) argues that without
strategic alignment it will not be possible to effect change in Purchasing as a
strategic function. It would therefore follow that, if Purchasing is to make a
strategic contribution, it should have strategic ‘fit’ and be consistent with the issues
important to the rest of the organisation.
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2.3.3 Strategy development
Acknowledging that corporate strategy sets out to achieve the strategic objectives of
the organisation, it is appropriate to question ‘How is such a strategy developed?’.
Bryson (1988) argues that rather than an organisation making a ‘one off’ major
strategic change it is frequently more effective to adopt a strategy and then work
within that strategy to bring about long-term change. Johnson and Scholes (1993,
pp. 34-37) recognise a number of different types of strategy development routes,
which are illustrated in Figure 2.3:
Figure 2.3: Strategy development routes (Source: Johnson and Scholes, 1993, p. 38)
The classic/logical type of strategy development was typified by Ansoff
(1985) in which a planned or rational approach is taken. Although the planning
approach has largely been discredited (Mintzberg, et al., 1998, p. 63; Mintzberg,
2000), some aspects of the framework are still widely accepted in the public sector
(Joyce, 2000; Stewart, 2000) and particularly in local government as a result of its
committee system (Worrall, et al., 1998). In its purist form the approach is based on
logical reasoning (Ansoff, 1987; Piercy and Giles, 1989), led by a central planning
unit who follow a systematic process of analysing the internal and external
environment to determine the strengths, weaknesses, opportunities and threats that
36
confront the organisation. Based on that assumed ‘comprehensive’ understanding,
the ‘planners’ then aim to make a rational judgement on how the organisation should
move forward (Ansoff, 1987; Bryson, 1988; Mintzberg, 1990; Mintzberg, et al.,
1998, pp. 48-79).
To achieve functional objectives, various short, medium and long term
functional strategies are developed, the most widely recognised being that of the
Marketing Strategy (Ansoff, 1985, pp. 111-112). The Marketing Strategy will focus
on a peculiar mix of products and customers (Ansoff, 1985, pp. 108-111;
MacDonald, 1989, p. 291), prior to determining which of Porter’s generic strategies
namely, cost leadership, niche focus or differentiation (Porter, 1980; MacDonald,
1989, pp. 123-126) should be pursued to achieve those objectives. Unfortunately an
equivalent accepted view of purchasing strategy does not appear to have been
developed although one might argue that if one had been, it would focus on the
parallel variables of suppliers and products.
Using this approach the cascade from corporate objectives continues via
functional strategies (Ansoff, 1985, pp. 180-192; Johnson and Scholes, 1993, pp. 11-
14; Cox, 1997a, p. 50), with tactical objectives being set, in a Marketing context,
relating to communications, distribution, pricing, etc.. In turn these are further
cascaded to tactical plans and operational objectives.
Even though widely accepted in local government (Worrall, et al., 1998;
Joyce, 2000; Stewart, 2000), the ‘rational’ approach suffers from considerable
criticism, for example,
1. Social, cultural and political dimensions of organisations are critical factors in
determining the successful implementation of a strategy - they are not considered
in the planning view.
2. The model suggests strategy is a process of ‘conception’ as opposed to ‘learning’.
3. It is introverted, inward-looking and reinforces existing culture.
4. It is cumbersome and further, the fragmented approach may end up with
individuals not actually understanding the whole.
5. There is a high likelihood that the plan is owned only by the ‘centre’ or ‘top’ but
not by the rest of the organisation.
6. It suggests that real planning is orderly and rational.
37
7. There is a danger of assuming that strategy is a document as opposed to the
direction the organisation is moving in.
8. It can become an intellectual exercise removed from the reality of operation.
9. It can become too detailed and miss the major strategic issues.
10. It can reduce the ability to cope with day-to-day responsiveness to the
environment.
11. It is unsuitable for a complex or unstable environment.
12. The planning process itself may become little more than the financial
extrapolation of resources rather than being used for the long-term development
of the firm.
13. An explicit strategy can create a barrier to change.
(Piercy and Giles, 1989; Mintzberg, 1990; Johnson and Scholes, 1993, pp. 42-43).
The primary criticism of the ‘planning’ approach though is that it remains
conceptual and there is a lack of empirical evidence to demonstrate that it actually
works (Mintzberg, 2000, pp. 91-158).
Mintzberg, in an extensive critique identified three ‘fundamental fallacies of
strategic planning’ (2000, pp. 221-322). Firstly, the fallacy of ‘predetermination’
(Mintzberg, 2000, pp. 227-254) which suggests that it is possible for a group of
central planners to systematically conceive a future view of the world and on that
basis predetermine the appropriate course of action, the strategy the organisation
must follow. Mintzberg argues that approach is flawed as organisations are
constrained by bounded rationality and therefore within the limits of their own
knowledge cannot consider all relevant factors. Furthermore most organisations do
not work in a stable environment and therefore will be faced with unpredictable
change.
Mintzberg argues that the second fallacy is that of ‘detachment’ (2000, pp.
254-294). The planning approach assumes those devising the strategy are separate
from those responsible for delivery of the operations. Mintzberg (2000, p. 258)
argues that:
Effective strategists are not people who abstract themselves from the daily detail but quite the opposite: They are the ones who immerse themselves in it, while being able to abstract the strategic messages from it.
38
In other words, Mintzberg believes that those responsible for developing strategy
should be those practitioners responsible for implementing the desired change – it is
they who, as possessing a high level of ‘soft knowledge’, understand what will and
will not work. Equally strategy formulation must accommodate a ‘bottom up’ flow
of suggestions as to the way forward. Related is the assumption within the planning
approach is that once the planners have developed and predetermined the plan there
should be no deviation from it. Such a situation is counterproductive and assumes
the organisation cannot identify better approaches during implementation, or indeed
seize opportunities which may become evident only after the plan has been
developed.
The third fallacy is that of ‘formalisation’ (Mintzberg, 2000, pp. 294-321)
“that the strategy formulation process can be formalised… innovation can be
institutionalised” and that systems “can detect discontinuities, comprehend
stakeholders, provide creativity, programme intuition”(p. 294). Such a ‘robotic’
approach assumes that the process itself can yield the solution, while anecdotal
evidence suggests that the creativity and ‘nous’ of individuals are critical ingredients
for successful strategy development.
Mintzberg’s critique (2000) provides some explanation for the observation of
Johnson and Scholes (1993, p. 38) that many intended strategies are only partially
realised, if at all - the ‘unrealised strategy’ (Figure 2.3). In a similar vein Piercy and
Giles (1989) claim that few companies even manage to close the gap between the
theory and practice of planning.
Mintzberg advocates an emergent and incremental approach to strategy
development. The incrementalist view (Quinn, 1982; Ansoff, 1987; Piercy and
Giles, 1989; Johnson and Scholes, 1993, pp. 38-39; Mintzberg, et al., 1998, pp. 175-
231; Mintzberg, 2000) accepts the need for planning but recognises that there is no
certainty in the future. As a result it is considered better for the organisation’s
leaders to have a broad view, the ‘vision’ of where they would like the organisation
to be and then try to move towards that position in an evolutionary way (Bryson,
1988). On that basis, strategy is seen to evolve or emerge through action (Bryson,
1988) as the organisation’s managers continually experiment and build upon
previous successes to find what works best. Quinn (1982) detailed five basic
reasons for using incrementalism in strategy development:
39
1. To improve the quality of information available for strategic decisions
2. To deal with the different lead times and sequencing problems in major
decisions
3. To stimulate flexibility, creativity and opportunism in pursuing desired goals
4. To overcome political and emotional barriers to change
5. To create the personal and organisational commitment needed to implement
strategies effectively.
As discussed above Mintzberg (2000) found the planning approach,
in its purest form, flawed, however he recognised that for certain types of
organisation ‘strategic programming’ may well be appropriate. Mintzberg saw such
an approach as appropriate in organisations which operate in a generally stable
environment and have comparatively simple operations in an elaborate structure –
conditions which one could argue are exemplified by local government. Strategic
programming moves the emphasis of formal planning, from the flawed early
development of strategy, to programming how strategy would be delivered.
Strategic programming entails codifying the strategy, elaborating it into sub-
strategies and action plans, including functional strategies; then converting those
sub-strategies with the inclusion of performance measures to assist in controlling
implementation. Given strategic programming, ‘Plans’ can then act as methods of
communicating intention and as devices for control, two of the attributes most
sought after in the political environment of local government. Thus what are
generally known as Purchasing Strategy documents, in Mintzberg’s parlance, would
be recognised as Purchasing Programmes – how the strategy will be implemented.
In a parallel vein Worral, et al., (1998) concluded that an evolutionary
approach to strategic thinking takes place in local government (Figure 2.4). In the
first phase the council recognise that it is insufficient just to ‘muddle through’, the
council then progresses to adopt a ‘scientific management’ approach (rational
strategic planning). The council then find the ‘planning approach’ impractical in the
highly politicised local government context and adopt an ‘emergent approach’,
evolving to meet the needs placed upon it by the council. The council then “find
fragmentation, loss of coherence and policy/programme synergy and the creation of
an organisation without a clearly defined common purpose or identity”. At that
stage they “become more mature strategically and put in place the processes and
40
structures which will embrace emergence with design and learning with the rational
approaches to strategy development.” Worral, et al.,’s final stage of development is
then reached, “one of guided learning or perhaps soft strategy”.
Figure 2.4: The evolution of strategic thinking in local government (Source: Worral, et al., 1998)
A further form of strategy development is the opportunistic way (Johnson
and Scholes, 1993, p. 39). This route is similar to the emergent route, and
acknowledges that opportunities will present themselves to the organisation from
time to time. The business strategist will take an opportunity, cognisant of the
organisation’s objectives, and in so doing change the strategy of the firm.
The final strategy development model illustrated in Figure 2.3 is that of the
imposed strategy, this is a strategy the organisation is forced to accept through a
company take over or indeed as a result of government intervention. In the local
government context an example would be the implementation of CCT. Imposed
strategies are frequently resisted at the local level. While organisations may
understand, at a conceptual level, their own resistance to an imposed strategy, it is
important to realise that, internally, an imposed strategy could be received with just
as much consternation.
It could be argued that no one single route of strategy development is
exclusive and all may be complementary to the achievement of success. Indeed,
Piercy and Giles (1989) hold that ownership of the strategy is the key to success,
regardless of the development process, or indeed the technical excellence of the
41
Muddling through
SoftStrategy
Learning
ScientificManagemen
t
strategy. Nevertheless, within local government the need to gain a mandate for
change at committee level seems to be a major factor.
… To be effective ‘strategic management’ must be viewed as a political process which over a period of time identifies and resolves decisions about overall direction, locates leadership in important areas of policy, and focuses resources upon agreed priorities. A ‘corporate strategy’ is therefore to be seen not as a ‘thing’ made of words and paper that can be produced in a few weeks, but as a series of overall decisions, decisions which are recorded and publicised by means of a strategy document. This document serves as an important but ancillary purpose, and is a by-product of active policy planning not an end in itself (Worrall, et al., 1998).
In summary, the rational approach to strategy assumes that if sufficient analysis has
been carried out the future can be predicted with a high degree of certainty and on
that basis plans can be developed which will address the predicted future. The
incrementalist view accepts the need for planning but recognises that it is not
possible to adequately predict the future, on that basis the organisation develops a
broad vision of how it would like the future to be and then seeks to work toward that
position in an evolutionary way. The emergent approach has similarities with the
incremental approach except that managers are encouraged to experiment and learn
from and build upon the lessons of the past in moving towards a future desired
position.
2.3.4 Strategic Purchasing and Purchasing Strategy
It is acknowledged that confusion exists as to what exactly is meant by strategic
purchasing (Steele and Court, 1999, p. 13; Marshall and Lamming, 1997). Ellram
and Carr (1994) and Carr and Smeltzer (1997) seeking to remove the confusion
between a ‘purchasing strategy’ and ‘strategic purchasing’, offer some of the more
succinct definitions:
… it is critical to understand that there is a difference between Purchasing strategy and Purchasing performing as a strategic function … when Purchasing is viewed as a key decision maker and participant in the firm’s strategic planning process … in addition, Purchasing will participate in strategy formulation and suggest ways that the Purchasing function can help support and enhance the firm’s strategic success.
A Purchasing strategy relates to the specific actions the Purchasing function may make to achieve its objectives…
When Purchasing is linked to the corporate strategic planning process, it is described as Strategic Purchasing.
For strategic Purchasing to exist, corporate and functional strategies must be
consistent:
42
Strategic Purchasing refers to the planning process Purchasing follows as part of the strategic management process. The strategic management process refers to the process of setting goals, establishing strategies, analysing the environment, evaluating strategies, implementing and controlling strategies.
(Strategic Purchasing is) (t)he process of planning, implementing, evaluating, and controlling strategic and operating purchasing decisions for directing all activities of the purchasing function toward opportunities consistent with the firms capabilities to achieve its long-term goals.
Expanding those definitions Carr and Smeltzer proffer three indicators of strategic
Purchasing:
The Purchasing function have a formally written long-range plan
Purchasing’s long-range plan is reviewed and adjusted to match changes in the
company’s strategic plans on a regular basis
Purchasing’s long-range plan indicates the kinds of materials or services to be
purchased.
Other relevant hypotheses presented by Carr and Smeltzer regarding Strategic
Purchasing include Purchasing being viewed by top management as a functional
peer, that Purchasing will pursue corporate objectives relentlessly, despite the reality
that such commitment may bring opposition from those in other functions, and
Purchasing’s long-term focus may involve risk and uncertainty.
Yet Cousins (1995) reported that only 42% of service and manufacturing
organisations had a strategy and of those only 24% were directly linked to the
Corporate Strategy. Further research carried out in 1998 by Tamas (2000) found, in
a cross section of industries, only 13% of those surveyed had supply chain practices
fully aligned with their business unit strategy.
Frequently purchasing strategies are not explicit (Cousins, 1995). Yet Steele
and Court (1996, p. 13) hold the view that unless a clear Purchasing Strategy can be
set in place, it will not be possible to undertake effective Strategic Purchasing and
that a Purchasing Strategy provides the foundation stone of strategic purchasing.
Carr and Smeltzer’s definitions clearly indicate that the scope of Purchasing
Strategy is dependent on the Purchasing function’s sphere of influence.
Interestingly, evidence (Murray, 1996; SOPO, 1999; Birch, 2001, para. 2.2.1)
indicates that, within local government, a considerable amount of the organisation’s
43
expenditure is outside the remit of the Purchasing function with an array of part-time
purchasers making these decisions. Also some of the definitions appear to be at
variance with the preceding discussion on strategy which implies that merely being
‘linked’ to the corporate planning process could not be described as Strategic
Purchasing since the literature emphasised not merely the vagueness of being linked
but also the need for alignment. A further issue is that being ‘linked’ does not
suggest being fully integrated in the major strategic decisions facing the organisation
but instead an involvement in what has previously been identified (Mintzberg, 2000)
as a flawed, systematic planning approach. Having said that, a formal plan does
appear to be necessary for local government as an instrument of gaining a political
mandate (Worral, et al., 1998, Joyce, 2000, Stewart, 2000) and as a change
management tool (Levin, 1938 and 1951; Moran and Avergun, 1997; Bechtel and
Squires, 2001).
An alternative view of strategic purchasing, which will be discussed in a
later section, is that put forward by Cox and Lamming (1997) and Ramsay (2001).
While they fall short of providing a definition it could be inferred from their
discussion and that of Cox (1997b), that strategic purchasing relates to those senior
executive ‘strategic’ decisions which determine the ‘make or buy’ option. Clearly
within local government, cognisant of the Best Value regime, such positioning
would include involvement in defining the desired outcome as a result of
stakeholder consultation, evaluating options for service delivery, determining the
procurement plan, contract award and post-award management and review (Hughes,
1998; Babcoe, 2001; Byatt, 2001; Audit Commission, 2002). Such participation
would demonstrate that Purchasing was contributing to strategic decisions but does
not necessarily mean that Purchasing’s strategic contributions cannot be improved in
other ways.
For the purpose of this research Ellram and Carr (1994), and Carr and
Smeltzer’s (1997) view of a strategic function will be paraphrased insofar as
Purchasing acts as a strategic function when it “directs all activities of the
purchasing process toward opportunities consistent with the organisation’s
capabilities to achieve its long-term goals”. A Purchasing Strategy will be accepted
as a document which sets out “the specific actions the Purchasing function may
make to achieve its objectives”.
44
2.3.5 The foundations of Purchasing Strategy as an academic discipline
Resource Management
Taylor discussed the need for a Purchasing Strategy as long ago as 1975. Taylor’s
concern lay in the anticipation of demand outstripping supply, although that was
against the backdrop of supply market turmoil resulting from the then recent oil
crisis, commodity boom, shortages in semi-manufactures and rising inflation.
Taylor’s answer, which at the time would have been considered radical, was the
development of a Purchasing Strategy - a strategy designed to address supply market
shortfalls ensuring that the organisation would have sufficient resources to match its
needs.
Particularly significant, Taylor felt the need to develop a new skill, namely,
‘Resource Management’ (1975, p. 42). “Resource management should be
concerned with the management of physical resources from their origin, through the
various stages of production, and distribution, to their final consumption, recycling,
or re-use”. Two points are worthy of note. Firstly, a prescient recognition that
Purchasing should have a concern for the organisations environmental impact some
25 years before it became widely accepted. Secondly, Taylor saw Resource
Management, as a role for Purchasing, pre-dating Lamming’s ‘External Resource
Management’ (1993 and 1996), although Taylor was concerned with ‘what was
bought’ while Lamming referred to managing ‘suppliers’ as an external resource.
45
The ‘5 Forces’
While Taylor can be credited with early recognition of the need for a strategic
approach to Purchasing, Porter (1979) raised the strategic profile of Purchasing by
linking purchasing strategy to the needs of the organisation’s long-term objectives
through his ‘5 Forces’ model (Figure 2.5). The ‘5 Forces’ model facilitates an
analysis of the relative positioning of the organisation and includes the relative
bargaining power of buyers alongside that of suppliers, the threat of substitutes and
new entrants, and competitive rivalry. These ‘Forces’, Porter argues, shape the
structure of the industry. It will be recalled, as discussed above, Freeman (1984)
effectively added a ‘6th Force’, ‘relative power of stakeholders’.
46
Figure 2.5: Forces Governing Competition in an Industry (Source: Porter,
1979)
Building on the model, Porter (1980, pp. 113-125) argued that the buying
organisation is in a relative position of weakness when they:
Purchase small quantities relative to sales of sellers
Lack qualified alternative sources
Face high shopping, transactions, or negotiating costs
Lack a credible threat of backward integration
Face high fixed costs of switching suppliers.
The converse of the above reflects the buying organisation in a position of relative
strength. With that in mind Porter presents the need for a purchasing strategy (1980,
pp. 122-125), not a document but a position (Mintzberg, et al, pp.9-15), which
would:
Spread purchases
Avoid switching costs
Help qualify alternative sources
Promote standardisation
Create a threat of backward integration
47
Threat of new entrants
Bargaining power of suppliers
The industry:Jockeying for
position among current
competitors
Bargaining power of customers
Threat of substitute products or
services
Use tapered integration.
If the above are the purchasing strategies it must be assumed the aim is to place the
purchasing organisation in a position of relative power - but power to achieve which
objectives?
Porter continued to give strategic recognition to purchasing in developing of
the ‘Value Chain’ (with Millar, 1985), and ‘Diamond’ (1990 and 1998) for
improving the competitiveness of domestic industries, both of which provide a solid
conceptual base for the development of high-level purchasing strategies, as
discussed below.
The ‘Value Chain’
The ‘Value Chain’ (Figure 2.6) represents how the various activities of the firm
interact to create value. Porter and Millar (1985, p. 77) define ‘value’ as the amount
that buyers are willing to pay for a product or service; although in the context of this
study, ‘value’ will be defined as either a qualitative or quantitative net benefit. The
primary activities within the ‘Value Chain’ are those concerned with the physical
creation of the product and its delivery to the customer, whereas support activities,
which include procurement (ergo purchasing), enable the primary activities to take
place. The ‘Value Chain’ recognises the fundamental ‘cross-cutting’
interdependency of the firm’s internal activities, the need to deliver something of
value to the customer and suggests that purchasing, as a process, can never be a core
activity of the firm.
48
Support
activities
Firm
infrastructure
Human
resource
management
Technological
development
Procurement
Inbound
logistics
Operations Outbound
logistics
Marketing
and sales
Service
Primary
activities
Margin
Figure 2.6: The Value Chain (Source: Porter and Millar, 1985)
The ‘Diamond’
The ‘Diamond’ (Figure 2.7) approach has as its objective improving the
competitiveness of nations/regions. It radically claims that one of the keys to
improving domestic industry is a demanding pool of domestic customers who not
only encourage local competition, but also ensure exposure to quality external
competition. Interestingly, this approach was also advocated in ‘Setting New
Standards’, the government’s 1995 Purchasing Strategy as part of the government’s
competitive policy.
While Porter argues strongly the advantage of local sourcing he does not
encourage the ‘protectionism’ frequently utilised by governments through local
preference schemes, etc. (Todaro, 1994, p. 483 and 491). The ‘Diamond’ once
again presents a strategic role for Purchasing, which although at a level generally
beyond the realm and concern of the firm, may well be relevant to a council’s local
economic development objectives.
49
Figure 2.7: Determinants of National Competitive Advantage (Source: Porter,
1990).
Implications of Porter’s theories for local government purchasing strategy
Taken collectively Porter’s view of Purchasing seems to add to the confusion
previously discussed regarding purchasing strategy. The ‘5 Forces model’ (1979
and 1980) appears to reflect a Resource-Based View (Barney, 1991) and positions
Purchasing as a ‘core competency’, yet the Value Chain (1985) positions purchasing
as a supportive process. Finally it could be argued the ‘Diamond’ (1990) takes a
national perspective and positions Purchasing as a tool of public policy. That said,
it may be possible to draw these strands together within a local government context
and conclude that in order to improve the contribution to local government,
Purchasing should:
Spread purchases
Avoid switching costs
Help qualify alternative sources
Promote standardisation
50
Firm strategy, structure
and rivalry
Factorconditions
Demand conditions
Related and supporting industries
Create a threat of backward integration
Use tapered integration
Work across the firm
Encourage local companies to expose themselves to quality external competition.
Such a discussion seems to be based on a generalisation that local authority
Purchasing’s dominant objective is cost reduction. If though the rational model
(Ansoff, 1985) and Porter’s (1996) arguments regarding ‘fit’ and ‘alignment’ though
are accepted, such a presumption would appear flawed in that until such times as the
core objectives of local government have been identified, it would not be possible to
prescribe any mix of tactics.
2.3.6 Purchasing objectives
Purchasing objectives provide not only a useful indicator but also suggestions of
Purchasing’s perceived contribution. With that in mind a literature review was
carried out to establish the current hierarchy of objectives and strategies pursued by
Purchasing. The review aimed to be as comprehensive as practicable and covered
literature spanning over a quarter of a century. An overview of the literature and its
stated objectives for Purchasing is set out in Table 2.2.
From the literature it is possible to generalise that there are four schools of
Purchasing objectives, namely, ‘Classic’, ‘Cost Reduction’, ‘Cost/
Quality/Innovation/Delivery ’, and ‘Contingency’.
51
Cost reduction
Quality improvement
Innovation transfer
Delivery time improvement
Security of
supply
‘5 rights’
Customer orientation
Maintain ethical
standards
Standardisation Profile promotion
Increase leverage
Envir. Matching supplier
capabilities
Co-ordination
Taylor, 1975 Kraljic, 1983 Baily, 1987 Chaddick & Dale, 1987
Burt, 1989 Leenders, et al., 1989Scheuing, 1989 Heinritz, 1991 Syson, 1992 Keough, 1993 Lamming , 1993
Monczka, et al., 1993
Rajagapol & Bernard, 1993
Bailey, et al., 1994
Gadde & Hakanson, 1994
Saunders, 1994 Spekman, et al., 1994
van Weele, 1994
Cox, 1995, p10 Watts, et al., 1995
Dobler & Burt, 1996
Fitzpatrick, 1996
Hines, 1996
Steele & Court, 1996
van Weele & Rozenmejer, 1996
Table 2.2: The objectives of Purchasing
52
Cost reduction
Quality improvement
Innovation transfer
Delivery time improvement
Security of supply
‘5 rights’
Customer orientation
Maintain ethical
standards
Standardisation Profile promotion
Increase leverage
Envir. Matching supplier
capabilities
Co-ordination
Ellram & Krause, 1997
Cox & Hines, 1997. P6
Bowen et al, 1998
Chaddick & Dale, 1998
Cox & Thompson, 1998
Cox, et al., 1998
Debruyne, et al., 1998
Dooley & Yeow, 1998
Gibbs, 1998 Hughes, et al, 1998a & 1998b
KPMG, 1998 Supply Management, 1998
Tomas, 2000 Telgen & Sitar (2001)
Krause et al., 2001
Key: explicitly stated objective of Purchasing * implied objective of Purchasing
Table 2.2 (contd.): The objectives of Purchasing
The Classic School
53
The ‘Classic’ school (for example, Baily, 1987; Scheuing, 1989; Dobler and Burt, 1996) consider Purchasing’s raison d’être to be delivering the
optimum mix of the ‘5 Rights’ namely, right price, time/place, quantity, quality and supplier. Most of the strategic evolutionary models (Reck
and Long, 1988; Syson, 1992; Cammish and Keogh, 1991) view this as the foundation position for further development.
Keogh (1993) argues that without Purchasing satisfactorily delivering against the baseline criteria of the ‘5 Rights’ - the ‘nuts and bolts’
of Purchasing - it is unlikely it will be permitted a greater, higher risk, strategic role. Of particular concern though, as will be highlighted later,
Cox and Lamming (1997) imply such a role has little future yet Hines (1996) would suggest that it is representative of 80% of the profession.
The Cost Reduction School
The ‘Cost Reduction’ school views Purchasing’s primary strategic role and objective as being to reduce costs. Cost reduction has almost
invariably been cited in literature as an objective of Purchasing (for example, Taylor, 1975; Kraljic, 1983; Baily, 1987; Leenders et al., 1989;
Syson, 1992; Lamming, 1993; Gadde and Hakanson, 1994; Speckman, et al., 1994; van Weele, 1994; Dobler and Burt, 1996; Hines, 1996) but
in an apparent contradiction of Hines (1996) view of the ‘Classic’ school being typical, some commentators (for example, Fitzpatrick, 1996)
have gone so far as to state that cost reduction is the primary objective of Purchasing. Those beliefs appear to be supported by research on a
sample of forty organisations reported in Supply Management (4 June 1998, p. 12), research on the automotive industry of the West Midlands
(KPMG, 1998) and an expert opinion survey focusing on Belgian and Dutch firms (Debruyne, et al., 1998). Furthermore the findings of
Debruyne, et al., have indicated that it is senior management’s pursuit of cost reduction which has driven change in Purchasing’s role and in only
a few instances has that change been driven by practitioners.
The objective of cost reduction recognises that the cost of bought-in goods and services represents a significant impact on the financial
performance of the organisation. For example, within manufacturing industry, which has received considerable attention within the literature
(Brandes, 1994), these costs are cited as representing 50-90% of turnover (Burt, 1989; Baily et al., 1994, pp. 7-8; Gadde and Hakansson, 1994,
54
p. 2; van Weele, 1994, p. 12; Steele and Court, 1996, p. 8; Dearlove, 2001, p. 4). With a view to demonstrating the ‘bottom line’ impact and
arguing the strategic significance of Purchasing, authors frequently cite how much easier it is to improve profit as a result of improving
purchasing performance, than in other functions (See Box for a typical example):
… (S)uppose that a company has a total annual sales of £1m and that it makes a profit on that turnover of 10 per cent, equalling £100,000. The company spends 50 per cent of its turnover on materials and services and is able to effect a saving of 5 per cent on its material costs. The effect of efficiency (or inefficiency) with regard to the company’s management of materials can then be shown in the following way:
£1m sales @ 10 per cent £100,000On £500,000 purchases, a 5 per cent saving in material costs = £25,000 Giving a total profit of £125,000
Now if the saving in material costs were not achieved while the profit ratio was maintained at 10 per cent, it would be necessary to increase turnover by £250,000, or 25 per cent, to produce the same profit figure. Thus a 5 per cent saving in material costs in the average manufacturing company can equate with an increase in turnover of 25 per cent …
The Profit impact of Purchasing (Baily, et al., 1994, pp. 7-8).
Cost reduction at a simplistic level can be achieved by following two generic strategies, paying less and reducing the cost, as illustrated in Figure
2.8:
55
Figure 2.8: Some objectives for Purchasing (Baily et
al., 1994, p. 24).
However, Debruyne, et al., (1998), ask the question:
What will happen if the lemon is squeezed to its limit, and the Purchasing department has been completely restructured and realised the maximum cost savings at the minimum loss of quality and flexibility. Will attention for Purchasing then diminish again?
It’s time for Purchasing to move forward and take the next step to reveal their true value for the company. Instead of a cost-saving activity, Purchasing should be value-adding. We therefore wish to argue in favour of an increasing emphasis of Purchasing people on innovation and customer orientation.
This concern with an over-dependence on cost reduction is given greater weight by Leenders (1998) who voiced the opinion that the pursuit of
savings alone can actually be at variance with corporate objectives and conflict with corporate strategy. Such a worry is based on Purchasing
having savings as a primary performance indicator and as a result compromising on quality, innovation transfer, security of supply, etc..
Spekman, Kamauff and Salmond (1994) express a similar concern:
A Purchasing organisation that is driven by measures of efficiency and that is rewarded by a singular focus on cost reduction or initial purchase price is out of touch … and is, over the long-term, a detriment to its firm.
56
A further problem with the ‘Cost Reduction’ school is that it implies Purchasing can pursue this role in isolation of others within the organisation
which is unlikely as Purchasing frequently cannot deliver cost reductions without the cooperation of others.
The Cost/Quality/Innovation/Delivery School
The ‘Cost Reduction’ school is implicitly challenged by the bulk of literature, which appears to emanate from the ‘Cost/
Quality/Innovation/Delivery’ school (CQID) (for example, Lamming, 1993; Monczka, et al., 1993; Spekman, et al., 1994; van Weele, 1994; van
Weele and Rozemijer, 1996). That school focuses on objectives, not only of cost reduction, but also quality improvement, innovation transfer,
security of supply and reduced delivery time. These objectives also include the somewhat amorphous objective of flexibility which although
given reference (Spekman, et al., 1994; Watts, et al., 1995; van Weele and Rozemijer, 1996), is not given substance, appearing to be an amalgam
of the core components.
The ‘CQID’ school does not denigrate the importance of cost reduction but argues that cost reduction is only part of a value mix and that
value is determined not only by the internal market but by the external competitive position of the market place. It could also be said that if the
‘Classic’ school focuses on operational performance and the ‘Cost Reduction’ school has a narrow, although strategic focus, the CQID school is
concerned with value adding.
In this new business environment, Purchasing must bring increased skill and value to companies. Purchasing must find a way to add value or disappear (van Weele and Rozemeijer, 1996).
In delivering ‘value’ the CQID school differentiates itself from the previous two schools through Purchasing taking on the role of ‘External
Resource Management’ (Lamming, 1993 and 1995), utilising suppliers as collaborators (Macbeth, 1994) with the firm not only reducing cost,
but also improving quality, transferring innovation, reducing lead time and providing security of supply. It can therefore be said the principles of
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lean production (Womack, et al., 1990; Womack and Jones, 1994; Womack and Jones, 1996) sit comfortably with the CQID school. In such a
role, to use Porter’s description, suppliers are an intangible asset of the firm (1992).
Porter (and Millar’s) ‘Value Chain’ (1985) would find some resonance with this school, insofar as it acknowledges, albeit in a general
way, that Purchasing has a direct input on the performance of all the firm’s primary activities.
During the 1980s quality became a primary concern of business (Burt, 1989; Syson, 1992, pp. 133-134) and that emphasis brought with it
the development of new approaches such as Total Quality Management (TQM) and Quality Functional Deployment (QFD) (Syson, 1992, p. 131;
Cali, 1993). Quality improvement is seen as complementary to cost reduction and not a compromise. Since quality failure leads to increased
waste, and waste is a cost driver, improvements in quality should lead to reductions in cost.
Quality improvement is not the same as the passive ‘right quality’ of the Classic school, instead quality improvement is a proactive
objective with Purchasing seeking out opportunities, perhaps through participation on cross-functional teams (Fitzpatrick, 1996; van Weele and
Rozemeijer, 1996) and concurrent engineering (Cali, 1993, pp. 130-131; Carbonara, et al., 1998, pp. 283-287). The development of
specifications, sourcing of suitable suppliers who can provide quality assured processes and contract management (Burt, 1989) are among some
of the tactics available to Purchasing.
Innovation transfer goes hand-in-hand with the quality improvement approach of drawing on the suppliers’ expertise but recognises the
value of supplier participation in the new product development process and product modification. While few would now argue that Purchasing
should be technically expert regarding the specifically technical aspects of the products purchased by the organisation, many would consider that
that technical expertise should be within the firm. Yet this fails to recognise and harness the sometimes much more up-to-date, product specific
knowledge possessed by suppliers. Focusing and facilitating earlier supplier involvement, perhaps through concurrent engineering, provides
synergy and competitive advantage.
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Delivery, as an objective of Purchasing, has two components. Firstly reducing lead-time, not just in the Classic sense, but also in the
wider sphere of compressing the process of new product launch from conception to delivery to the customer. Secondly delivery is concerned
with ensuring continuity of critical resources.
Shortening product life cycles has led to competitive advantage being gained as a result of ‘getting there first’ (Lamming, 1995, pp. 36-
37). If suppliers can be utilised as part of that development process (as discussed above) or lead times reduced, for example, through the
introduction of J.I.T. and integrated information systems, meaningful advantages could be achieved.
Security of supply became a strategic objective of Purchasing during the oil crisis of the early 1970s. In response Taylor (1975)
advocated the radical repositioning of Purchasing and the development of purchasing strategies. However, since Taylor viewed security of
supply in isolation of the other factors of this school, namely quality improvement and cost reduction, his categorisation within this school is
perhaps open to challenge, though he does reflect the general spirit of the school. A similar view could be expressed on Kraljic (1983) who
echoed Taylor’s position, arguing that Purchasing’s role is to “ensure long-time availability of critical materials and components at competitive
cost”. In consequence he developed a portfolio approach to purchasing strategy, which along with its various spin-offs, is probably the most
widely recognised conceptual Purchasing tool (see Figure 2.9).
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Bottleneck items
Strategic items
Non-critical items
Leverage items
Supplymarket
complexity
Supplystrength
risk
Company attractiveness/strength
Figure 2.9: Kraljic’s Model
As with most tools, the portfolio approach needs to be applied in the correct context; belief that a comprehensive approach to purchasing strategy
flows from it is flawed since it is only designed to address the specific objectives of cost reduction and security of supply.
The Contingency School
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If there exists one major collective criticism of the Classic, Cost Reduction and CQID schools, it is that they predominately suffer from
‘manufacturing myopia’ and have failed to give sufficient consideration to Purchasing within other sectors. That criticism is partly addressed by
the Contingency school (for example, Rajagopal and Bernard, 1993; Watts, et al., 1995; Carter and Narasimhan, 1996; Carr and Smeltzer, 1997;
Cox, 1997a). The School holds a contingency view that Purchasing’s role should directly flow from the wider objectives of the firm and not be
limited or restricted by former traditions. Purchasing’s strategic contribution, according to the Contingency school, lies in integration with the
explicit objectives of other functions (Carter and Narasimhan, 1996) and developing appropriate synergistic strategies. Fitzpatrick (1995) holds
the view that this integration should be pursued even if it is initially at the expense of Purchasing’s own functional excellence:
… an effective purchasing system (i.e. strategy) is not necessarily one that promises maximum efficiency or least total cost, but rather one that fits the needs of the business and strives for consistency between its capabilities and the competitive advantage being sought. In essence, purchasing activities take on the very nature of the competitive strategy and thus are able to make a direct contribution to the marketing of the firm.
Such an integrative role challenges purchasing managers to think beyond areas currently pursued by the Classic, Cost Reduction and CQID
schools. It is only then, Fitzpatrick (1995) argues that a strategic orientation will be manifested. It is therefore self evident that it is impossible
to boldly state the specific objectives by which to characterise this school.
The goals and objectives of all purchasing strategies will differ significantly, due to the fact that structures of purchasing are never identical, but more importantly the role played by purchasing within an organisation is never the same (Frewer, et al., 1998, p. 88).
Observations on Purchasing objectives
The analysis indicates that it is possible to identify four general schools regarding the objectives of Purchasing, namely, the Classic, Cost
Reduction, Cost/Quality/Innovation/Delivery, and Contingency schools. From these schools it could be generalised that the strategic objectives
of Purchasing are:
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Cost reduction
Quality improvement
Innovation transfer
Delivery (Security of Supply/ Lead-Time Improvement).
Having said that, the achievement of operational, baseline objectives of securing the ‘5 Rights’ is also important.
The literature review also indicates that the following are sometimes referred to as Purchasing’s objectives:
Maintain ethical standards
Maintain effective supplier relationships
Standardisation
Co-ordination
Increase leverage
Profile promotion
Environmental management.
One can therefore understand why some commentators, as discussed above, have highlighted the confusion within the profession regarding
purchasing strategies. In an effort to clarify, the following comments are offered.
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Maintaining ethical standards and effective supplier relationships are axiomatic. The creditability of a profession would be compromised
if it did not carry out its role in an ethical manner. Likewise the maintenance of effective supplier relationships is fundamental in any Purchasing
role.
Standardisation, increasing leverage and co-ordination are merely means to achieving a higher objective of cost reduction. They are
therefore not Purchasing objectives but Purchasing strategies.
Profile promotion and environmental management are considered different. These can be considered objectives but only insofar as they
are consistent and relevant to the particular organisation’s corporate objectives. They are therefore potential objectives of the ‘Contingency’
school.
Lamming, et al., (1996) echoing an opinion previously expressed by Taylor (1975), viewed the environment as an opportunity for
Purchasing to make a strategic contribution. Porter and van der Linde (1995) pursued a similar theme arguing that greening firms through
‘resource productivity’ would lead to cost reductions and therefore enhance competitiveness as organisations innovate to improve their
environmental performance. Porter and van der Linde saw resource productivity as a constructive response to business and the environment
rather than a reactive compliance response to environmental legislation. Green, New and Morton (1995) progressed the argument, suggesting a
role of Purchasing in reducing environmental impacts and presented eight potential strategies, namely:
• Use less
• Green specifications
• Product design process
• Supplier development
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• Supplier process improvement
• Supplier evaluation
• Tender evaluation
• Transaction processes.
Meanwhile Lamming appeared to have reconsidered his positioning of environment as an opportunity for Purchasing (et al., 1996) arguing that
like all social objectives, it should be seen in the context of commercial gain (Lamming, et al., 1999). It is of interest that Lamming, et al.,
consider environment to be a social objective. Within the context of Local Agenda 21 clearly social objectives, while complementary to
environmental objectives are discrete. It is therefore significant that Hughes, et al., (1998b, p. 170) believe that:
As businesses become more global, and access to supply chains virtually unrestricted it becomes more important that companies are seen to be good corporate citizens.
Hughes, et al., (p. 171) cite the examples of ‘Nike’ and ‘Marks and Spencer’, who received significant adverse media attention when their
upstream suppliers were seen to practice, what was considered to be, exploitation. Some firms now seek to adopt a stakeholder view of their
upstream supply chain and seek to satisfy themselves that those on whom they are dependent are treated to fair and reasonable conditions of
employment. Such concerns will cover issues relating to child labour, forced labour, health and safety, trade union rights, discrimination,
discipline, working hours, and pay (Hughes, et al., p. 172). These issues find resonance with Lamming, et al., (1999) who advocated that
government should:
Ensure activities are consistent with moves towards social justice
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Implement policy to further social justice
Promote mechanisms to further social justice.
While such ‘quality of life’ concerns may not be purely altruistic, it is certainly enlightened and significantly beyond what one would expect
from a profit maximising firm.
In parallel New (1997) recognised a failure in Supply Chain Management research to address the ‘just supply chain’ and that the
traditional research agenda must be extended to include “ethical, political and economic implications”.
It has therefore been deduced that objectives stretching beyond the CQID school are characteristic of the Contingency school.
Relevance to discussion on improving local government’s contribution
From the discussion on Purchasing objectives it would be easy to generalise that Purchasing’s objectives should be Cost Reduction, Quality
Improvement, Innovation Transfer, and Delivery. If Hines (1996) is correct that so few organisations are pursuing those objectives, then, it
could be inferred that for the majority of local authorities, adopting those objectives would in itself improve Purchasing’s contribution. But local
authorities must be cautious of such generalisations for a number of reasons. Firstly, “the tyranny of experience” (Cox, 1997a, p. 29)
What this means is that practitioners have knowledge of particular practices and, when they move from one supply chain and market structure to another, they believe that, because things worked in one environment, they will always work in others.
Secondly, a related point is that Purchasing practitioners’ drive for strategic status may cause a loss of focus and take them away from the
strategic direction needed by their organisations (Hines and Rich, 1997). When that is set in the context of local government and the Best Value
regime, then the objectives of the council should flow, not as a result of what is generally perceived as best practice but beyond that to what
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stakeholders have identified as their priorities (Freeman, 1984). It would therefore appear that while a shift from the ‘Classic’ and ‘Cost
Reduction’ schools may well improve contribution, optimal contribution can only be identified through a ‘contingency’ model, driven by the
unique and defined objectives of the council. It is that ‘fit’ (Porter, 1996; Virolainen, 1998; Cavinato, 1999) which should logically set the
agenda for local government Purchasing.
2.3.7 Purchasing strategies
Discrete Purchasing strategies
To achieve Purchasing objectives appropriate strategies are developed that are planned to achieve the objectives. Strategies can only be
identified as a result of considering the array of available options and making an informed decision as to which combination of these choices is
most likely to achieve the core objectives (Scheuing, 1989, p. 138; Baily, et al., 1994, p. 28).
Despite the categorisations of the literature on Purchasing objectives into the four schools hypothesised above, there is a high level of
consensus regarding the various choices available (Porter, 1980, pp. 122-125; Leenders, et al., 1989, p. 621; Scheuing, 1989, p. 140; Heinritz, et
al., 1992, p. 62; Rajagopal and Bernard, 1993; Monczka, et al., 1993; Baily, et al., 1994, p. 23; Saunders, 1994, p. 152; Cox, 1995, p. 13; Essig,
1999):
Potential Purchasing Strategies Make/Buy/Lease Internal/External (industry) Standardisation Domestic/Overseas
Forward/Spot buying Quality/Cost Short/Long term contracts Earlier supplier involvement
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Single/Multiple sourcing Stockless/JIT Annual Blanket Orders/ Systems
contracting Partnership/Adversarial Distributors/Manufacturers Vertical integration/Arms length Supplier rationalisation Consortia/Co-ordinated Purchasing
Supplier Development Suppler Councils Supplier Certification Reverse Marketing Supplier Assistance Value Analysis/value Engineering Centralisation/decentralisation Utilisation of IT/IS Internal marketing Skills development
Table 2.3: Potential Purchasing Strategies
The strategic options provide a range of choices (Table 2.3). The appropriate mix of Purchasing strategies will differ from organisation to
organisation dependent on the priority given to particular objectives and the peculiar supply market position held by the firm (Porter, 1980).
Composite Purchasing Strategies
Lean Supply and Partnerships are considered particularly effective mixes of Purchasing strategies associated with the objectives of the CQID
and Contingency schools. Lamming’s (1993, pp. 153 and 194) breakdown of Customer-Supplier relationships (Table 2.4) also includes the
‘Traditional’, ‘Stress’ and ‘Resolved’ models of composite strategies. However, despite the ‘lean’ approach now being considered the dominant
paradigm (Cox, et al., 2000, p. 2), it would be incorrect to assume that the various models presented by Lamming are the most effective options
for every scenario.
It is possible that some relationships will never need to reach a full lean supply state. It is also possible that the partnership stage may be a prerequisite step in the development towards lean supply.
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This leads to the idea of a portfolio of relationships on the part of the customer. This is a strategic plan, to operate differing levels of developed relationships with various suppliers. The relationships interrelate and support each one another on a continually reviewable basis. Thus a critically important supplier might be part of a fully developed lean supply relationship, providing technological solutions through collaboration etc., whilst a source of commodity items might be run on a more arm’s length basis - still with excellent service but without the need for such intimate working practices (Lamming, 1993, pp. 242-243).
It is also possible that other composite strategic templates will emerge over time that lead to superior Purchasing performance. Of particular
interest in the context of this research Erridge and Murray (1998a and 1998b) considered the applicability of Lamming’s Lean Supply model
within a local government environment. Their conclusion was that the model could be transferred and practiced with minor alterations in local
government (Table 2.5).
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Model Nature of Competition
Basis of Sourcing Decisions
Role of data/ information exchange
Management of Capacity
Delivery practice Dealing with price changes
Attitude to quality Role of R&D Level of pressure
Traditional before 1975
Closed but friendly; plenty of business
Wide; enquiries; lowest bid; price-based
Very restricted -minimum necessary
Few problems; some poor scheduling
Large quantities; buyer’s choice: steady
General negotiation (annual); a game win/lose
Inspection; arguments/laissez-faire
One-sided: either assembler or supplier
Low/ medium: steady: predictable
Stress 1972-85
Closed but deadly; chaotic
‘Dutch Auctions’; price-based
A weapon; one-way; supplier must open books
Spasmodic; no system to deal with chaos
Unstable; no control; variable; no notice of changes
Conflict in negotiation; a battle lose/lose
Aggressive campaigns; SQA, etc.
Shared, but only for cost reductions
High/ unbearable: volatile
Resolved 1982 onwards
Closed; some collaboration; strategic
Price; quality & delivery Two-way; short-term e.g. est. demand
Gradually improving; linkages appearing
Smaller quantities; buyer’s demands stabilising
Annual economics plus; negotiation; win/lose
Joint effort towards improvements
Shared for developments
Medium: some sense of relief
Partnership/ Japanese 1990 onwards
Collaboration; tiering; still dynamic
Performance history; long-term source; costs
Two-way; long-term e.g. knowledge of costs
Co-ordinated & jointly planned
Small quantity; agreed basis; dynamic (JIT)
Annual economics plus planned reductions win/win?
Joint planning for developments
Shared: some black or grey box
Very high: predictable
Lean Supply Global operation;local presence; Based upon contribution to product technology; Organic growth & merger & acquisition;Dependent upon alliances /collaboration
Early involvement of established supplier in new product development;Joint efforts in target costing/value analysis; single sourcing;Supplier provides global benefits; Re-sourcing as a last resort after attempts to improve
True transparency; costs, etc.;Two-way: discussion of costs and volumes; Technical & commercial information; EDI; Kanban system for production deliveries
Regionally strategic investments discussed; synchronised capacity; flexibility to operate with fluctuations
True just-in-time with kanban; local, long distance and international JIT
Price reductions based upon cost reductions from order onwards: joint efforts
Supplier vetting schemes become redundant; mutual agreement on quality targets; Continual interaction and kaizen; perfect quality as goal
Integrated: assembler and supplier; Long-term development of component systems;Supplier expertise/assembler systems integration
Very high for both customer and supplier; Self-imposed; Not culturally specific
Table 2.4: Customer -supplier relations (per Lamming 1993, pp. 152& 194)
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Factor Lean Supply CharacteristicNature of Competition Systems buying/tiering
Local presenceGlobally competitive
Basis of Sourcing Decisions Single sourcingPolitical objectives incorporating ‘best value, environmental impact, etc.Total acquisition costs, ‘most economically advantageous offer’, qualityCross functional teamsEarly supplier involvement in development of functional/performance specifications
Re-sourcing as a last resort after attempts to improve failure
Two stage tendering: 1st quality of supplier, 2nd MEA offer
Role/Mode of Data/Information Exchange True transparency of costsTwo-way discussion of costs & volumes, technical & commercial informationTransaction costs minimised in the most appropriate manner e.g. purchase cards, eCommerce, blanket orders, standing ordersEasy access to and transparency of information from identification of need through award to conclusion of contractLegal form of contractClarity of best value mix both internally & externally
Management of capacity Openness & clarity of requirementsDelivery practice Tending to zero stock, small batch delivery to
point of useDealing with price changes Cost reductions sought from placing of order
onwards
Joint efforts at cost reduction & openness to suggestions Rise & fall contract prices
Attitude to quality Supplier appraisal to identify preferred suppliersQuality of relationship drives quality of supplyQuality includes socio-economic factorsContinuous improvement
Role of R&D Supply market involved in development of functional/performance specifications & value engineering
Level of pressure Very high for both customer & supplierSelf imposed, incentivised & acknowledgedRight first time
Table 2.5: Local Government Lean Supply Model: Erridge and Murray, 1998a and 1998b NB Highlighted text indicates additions & amendments to Lamming’s 1993 Model.
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2.3.8 Purchasing tactics
Tactics are the various short-term actions which Purchasing put in place as sub-
divisions of strategies. For example, assuming a strategy of supplier development is
pursued, the various Purchasing tactics would be the initiatives which are taken as
part of the supplier development strategy (for example, debriefing, supplier
workshops, etc.).
2.3.9 Government purchasing strategy
Having considered the wider body of literature on Purchasing, it is appropriate to
review the primary statements from the U.K. government relating to purchasing
strategy. U.K. central government has a longer legacy of articulating its purchasing
policy than local government. Equally, it is important to appreciate the background
against which some local government purchasing policy is set. A later section will
separately consider Purchasing in local government. What becomes apparent through
the review is that central government has not sought to use Purchasing as a strategic
tool aligned with wider government objectives. Accepting that, government has
experienced problems in changing Purchasing performance.
Government Purchasing
Purchasing objectives
The government’s first major statement on purchasing strategy was set out in a report
to the Prime Minister in 1984, ‘Government Purchasing: A multi-department review
of Government contract and procurement procedures’ (Cabinet Office, 1984).
Fundamentally the review stated that there are two objectives for government
Purchasing (para. 1.4):
1. Provide end-users with what they need, when they need it, at the lowest cost
2. Provide the Accounting Officer, and through him Parliament and the taxpayer,
with value for money from expenditure on procurement.
On that basis one can therefore paraphrase those objectives as characteristic of the
Classic school referred to above, that is, the ‘5 Rights’ linked with Value for Money
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and Public Accountability. However, a third objective was implied, that of delivering
5% cost reductions over two years (para. 1.13).
The Review recognised that Departments attached relatively low importance
to purchasing (para. 5.1) and that in only a few Departments was Purchasing treated
as a specialism (para. 6.3). The review did however, place on each department an
obligation to develop a Purchasing Strategy (para. 3.13). Having said that, the
strategies could be assumed to be ‘product driven’ insofar as the objectives they
sought to achieve were not aligned with political objectives. The Review broke
significant new ground in the public sector since it legitimised the use of some
purchasing strategies, as illustrated in Table 2.6 below, which previously would have
been considered inappropriate for this sector.
Of particular relevance to this research, Chapter 9 (of the Review) addressed
government policies on procurement:
Public Purchasing Initiative
The ‘Public Purchasing Initiative’ (PPI), it was alleged, encouraged Departments to
develop relationships with suppliers to ensure VFM and stimulate innovation (para.
9.2).
Small Firms Policy
The ‘Small Firms Policy’, hinted at local economic development objectives:
It is government policy to encourage the development of small firms. One way of doing this is by improving access to government business. We do not interpret this as favouring small firms irrespective of their competitiveness (para. 9.6).
Preferred Supplier Policy
The Preferred Supplier Policy was a form of awarding a preference to sheltered
workshops for handicapped people and prison workshops. Similar preferences were
also given to firms in development areas (para. 9–12) - subsequent interpretation of
EU Public Procurement Legislation prohibited such a preference.
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Other Policy
No reference was made to either the environment or quality of life, although quality
was clearly an interest and there was an implied objective of local economic
development.
Strategic Options
The Review identified a number of strategic options open to government. To ease
comparison with those identified earlier in the literature, the Table previously used
(Table 2.3) has been cross-referenced, where applicable to references in the Review
(see Table 2.6). It appears clear that, at the time of the 1984 Review, most purchasing
strategies identified in the literature were also considered appropriate to central
government.
Potential Purchasing Strategies alluded to in ‘Government Purchasing’ (1984) Make/Buy/Lease (not explicitly referred to) Internal/External (industry) (Chapter 8) Standardisation (para. 1.4, 2.7, 2.8, 2.9) Domestic/Overseas (para. 9.16) Single/Multiple sourcing (para. 3.28) Stockless/JIT (para. 3.14, 3.18) Annual Blanket Orders/ Systems contracting
(not explicitly referred to) Partnership/Adversarial Distributors/Manufacturers (not explicitly
referred to) Vertical integration/Arms length (Chapter 8) Supplier rationalisation (not explicitly referred
to) Consortia/Co-ordinated Purchasing (para 1.4,
2.7, 2.8, 2.9)
Forward/Spot buying (not explicitly referred to)
Quality/Cost (para. 1.13) Short/Long term contracts (para.3.27) Earlier supplier involvement (para. 3.18) Supplier Development (para. 7.21) Suppler Councils (not explicitly referred to) Supplier Certification (para. 3.26) Reverse Marketing (not explicitly referred to) Supplier Assistance (not explicitly referred to) Value Analysis/value Engineering (not
explicitly referred to) Centralisation/decentralisation (Chapter 7) Utilisation of IT/IS (para. 5.4, 5.5, 5.6, 7.29) Internal marketing (not explicitly referred to) Skills development (para. 1.15)
Table 2.6: Potential Purchasing Strategies alluded to in ‘Government Purchasing’ (1984)
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Setting New Standards
Purchasing objectives
In May 1995 the Government published its second Purchasing Strategy in the form of
a White Paper ‘Setting New Standards: A Strategy for Government Procurement
(1995)’. ‘Setting New Standards’ differed from the 1984 Review in that the Strategy
was considered appropriate, not only to central government, but also non-
departmental public bodies (para.1.8) and therefore widely interpreted to include local
government.
From a strategic perspective two primary objectives were stated (p. 1):
Value for money
Enhance competitiveness of suppliers.
This statement of objectives is significant in that the traditional ‘5 Rights’ perspective
appears to have been taken for granted and did not require restatement. Most
important though is the second objective of using Purchasing to enhance the
competitiveness of suppliers. At a philosophical level, this presented a new challenge
for Purchasing; the challenge of being used as a mechanism to achieve political
objectives.
Although not a great deal was said about how Purchasing would “contribute
to the creation and retention of a sound industrial and commercial base” (para. 2.6),
some guidance was given. Firstly, supplier development, secondly, supplier surveys
to identify purchasing practice causing suppliers difficulties (para. 6.10) and thirdly
“a positive approach to debriefing suppliers after procurement decisions are made”
(para. 2.56).
A secondary objective was also stated, that of “throughout government at all
levels of management, to achieve world class standards in procurement” (para. 1.8).
This secondary objective reflects what has been described as the transfer of private
sector approaches (Erridge and Greer, 2000) and is of itself interesting, firstly, in that
it appears to represent a stage of development ‘the private sector imitator’ and
secondly, in that a belief existed that the heavy regulation of the public sector could
prohibit world-class practice (Marshall and Humby, 1998).
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While the objectives of Purchasing were clearly stated it was also
acknowledged that Purchasing does not operate in a vacuum within a decentralised
structure.
Departments may have other objectives, such as those included in their environmental strategies, which affect their requirements. When meeting those requirements they will keep in mind the primary procurement principles of seeking VFM (para. 2.7).
The above statement is particularly relevant to this investigation in that it implies a
need for ‘fit’ with wider objectives.
Scope
The Strategy took another leap forward by extending the traditional remit to cover all
non-pay spend, non-transfer expenditure (para. 1.7) therefore adding, for example,
construction, I.T., marketing services and payment of grants and subsidies (para.
2.39). These categories of expenditure had been traditionally difficult areas for
Purchasing to gain any influence.
PX Review
Purchasing objectives
With the change of government in 1997 a further review was considered timely
(Erridge and Greer, 2000). As a result, in January 1998 the Ministerial Cabinet
Committee on Public Expenditure (HM Treasury/Cabinet Office, 1998)
commissioned a study.
Government policy was restated simply as “all procurement of goods and
services should be based on value for money” (HM Treasury/Cabinet Office, 1998,
para. 2) with no reference made to other objectives.
Purchasing strategies
The study proposed four major areas for improvements, namely, electronic commerce,
collaboration and joint procurement, performance measurement and procurement staff
development - this was merely revisiting the detail of the 1984 and 1995 strategies.
However it was believed that focusing on these areas would
Enable government to maximise procurement efficiency and effectiveness. The result (by releasing resources of time and money throughout departments) will contribute to the government drive towards Better Government (para .4).
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It could be argued this is flawed in that if one accepts the definition of effectiveness as
'doing the right things’, Better Government objectives could be achieved in a more
effective manner if value for money were not the raison d'être of the improvements.
Equally while Chapter 1 was entitled ‘A new agenda for procurement’, it
contained nothing which was not previously advocated in 1984 and 1995 apart from:
The findings were deemed to be “highly relevant” to those which are outside
central government including local authorities (para. 1.20),
A number of innovations were presented for the tactical use of information
systems within procurement (Chapter 2), and
The review team were predominately civil servants (Annex A) as opposed to
external advisers.
Gershon Report
Barriers to progress
In 1998 Peter Gershon, then Managing Director of GEC Marconi (and subsequently
Chief Executive of the Office of Government Commerce) was invited to review “civil
procurement in Central Government in the light of the governments objectives on
efficiency, modernisation and competitiveness in the short and medium term”.
Fundamentally Gershon echoed the previous reviews, indeed his findings and
recommendations appear little different from those detailed in 1984. The reason for
such an implied lack of progress, Gershon concluded, was that both properly
resourced implementation plans and the necessary top-level commitment had been
lacking (para. G1). Clearly in central government there appeared a very real problem
of putting theory into practice (Erridge and Greer, 2000).
Setting that criticism aside, Gershon provided a useful insight: “Despite
declared Government procurement policy being based on value for money rather than
lowest cost” the perception of industry is “that the culture of the Civil Service is risk
averse and the ‘safe option’ is justifying the lowest up front cost” (para. F5).
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Purchasing objectives, strategies and tactics
Like the 1984 and 1995 reviews, Gershon alluded to the role of Purchasing in local
economic development, specifically by attracting more bids from SMEs. This would
be achieved through:
Being more sensitive to the burdens which government procurement procedures place on suppliers. The OGC [a variation on the 1984 CPU] should consult with industry to identify common causes of those burdens and take appropriate action with Departments (para. F8).
... stimulate the interest of potential suppliers (para F9).
Invitations to tender should provide a prioritised list together with an indication of the relative weightings of the value for money criteria that will be used in the evaluation process (para. F12).
Modernising Procurement
Change enablers
In October 1999, six months after the Gershon Report, ‘Modernising Procurement’
(National Audit Office, 1999) was published. The report repeated the previously
addressed theme that there was considerable room for improvement. The emphasis
throughout the report was given to providing practical examples of how best practice,
referred to in the previous reviews, had been implemented with particular reference to
procurement cards and electronic commerce. Such a pragmatic approach may well
have been necessary since the report, once again, acknowledged that government
procurement is carried out in a risk averse culture, which is rule driven and resistant to
change (para 1.14). That said, to achieve the objectives of Modernising Government
(para. 11.3) “would require new methods of working”. Against that background,
support for “well thought through risk-taking and innovation” (para. 11.3) was stated.
Such a statement could be expected to need clear demonstrable evidence before
changing a culture reinforced over decades.
Content of Purchasing Strategy
Six value for money principles were detailed (p. 28), one of which was the need for a
Procurement Strategy. The need for a Procurement Strategy, as discussed, had been
highlighted as early as 1984, yet the findings of the Auditors were that only one of the
twenty-two Strategies examined addressed more than routine matters (para. 2.11).
Clarification was therefore given that:
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A comprehensive procurement strategy should include an analysis of the key goods and services, and their cost, which the department or agency needs to deliver its outputs; an assessment of the way in which these goods are purchased; and the scope for price reductions and improvements in quality of service. The strategy should also consider the performance of the departments purchasing unit and the potential to reduce costs through for example, using electronic commerce, procurement cards and framework agreements. The strategy should consider the scope to adopt innovative approaches to improve procurement while reliably managing associated risks (para. 2.9).
While at face value these guidelines for a ‘comprehensive procurement strategy’ are
good things to consider, they do not reflect the criteria for a Purchasing Strategy
(Ellram and Carr, 1994; Carr and Smeltzer, 1997) referred to (in Section 2.3.4) above.
Indeed it would appear they represent little more than what would normally be
included in the preliminary stage of developing a strategy, the analysis (Johnson and
Scholes, 1993, pp. 75-110).
Particularly intriguing though is, despite the obvious cascading of
Modernising Procurement from Modernising Government (Cm 4310), no linkage was
made or alignment sought between procurement strategy and one of the central tenets
of Modernising Government, namely environmental and social improvement (DETR,
1998, p. 5).
Purchasing objectives
Appendix 6 of the report comprised a commissioned paper on ‘Supply Chain
Management and Public Procurement’. In the Appendix it was claimed the objectives
of public sector procurement are not only value for money/commercial, but also
regulatory compliance and social responsibility. Although it is acknowledged that
there is a trade-off between the objectives
... can government use public procurement to support local economic development while at the same time taking advantage of efficiency savings through open competition or complying with regulations or transparency?
In answer to that question a Supply Chain Management approach was proposed.
Indeed, it argued that Supply Chain Management is likely to be appropriate where,
among other characteristics,
Government has to ensure compliance with legislation e.g. Procurement Directives, TUPE, or wishes to promote wider social or economic goals through contract compliance e.g. Employment equality, environment, SMEs etc.
Apart from the implications arising from the Appendix, no mention was made of the
previously stated objective of improving the competitiveness of suppliers (1995, p. 1).
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‘Setting New Standards’ had also acknowledged the need to incorporate other
departmental objectives.
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Barriers to progress
When discussing the obstacles to supply chain management being adopted, a number
of barriers were cited, namely, risk of too close collaboration with suppliers
associated with impropriety and insufficient staff with practical experience (para.
2.26).
Reference was once again made to the need for further research on effective
purchasing performance measurement. In that context the Treasury’s Procurement
Excellence Model (1999) was advocated.
Procurement Excellence Model
Purchasing objectives
The comments contained within the guidance for applying the Procurement
Excellence Model, provide insights of potential but not explicit government
procurement strategy. Under the heading ‘Leadership’, for example, managers are to
take a leading role in ensuring the procurement management systems and processes are effective and efficient. They continually seek to make improvements in order to enhance Procurement’s contribution to the overall organisation’s strategic objectives (p. 5).
While comments relating to ‘Policy and Strategy’ (p. 8) state:
Excellent organisations recognise the value of involving Procurement at an early stage in the development of policy and strategy. Equally, the Procurement Organisation’s own policy and strategy must support those of the overall organisation of which it is a part and recognise and support wider government procurement policies and practices.
The Procurement Organisation’s policy and strategy should be fully integrated into and supportive of the overall organisation to which it provides a service.
The policy and strategy should take account of customer and stakeholder current and future needs and recognise wider government initiatives and strategies.
The above indicates that when measuring the effectiveness of government
procurement, the wider objectives of government need to be taken into consideration.
Implicit within the view is that; pursuit of a value for money/cost reduction strategy,
despite being government procurement objectives, may well be dysfunctional and
therefore inappropriate.
This argument is further supported through the Procurement Excellence
Model’s comments on Society Results (pp. 27-30).
This section examines how the Procurement Organisation is viewed by the outside world. It involves perception of the organisation’s approach to quality of life, the environment, the
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preservation of global resources and the organisation’s own internal measures to assess this (p. 27).
As a centre of excellence the Procurement Organisation is in a position to use its expertise for the benefit of the community in which it operates (p. 28).
Since the Model was only recently developed and a local authority version published
in 2001, it is perhaps too early to expect demonstrable examples of best practice
which show how Purchasing has contributed to the wider objectives of government
and in turn made a contribution to Society.
2.3.10 The cascading of central government purchasing strategy to local
government
It is clear that two strategic central government purchasing documents, namely,
‘Setting New Standards’ (1995, para 1.8) and the PX Review (1998, para 1.8) were
deemed relevant to local government, yet anecdotal evidence suggests that ownership
was not gained in local government. Three reasons could be put forward as to why
this has been the case. Firstly, local government treasures and fiercely guards its
independence from central government and any suggestion of enforcing a non-
statutory requirement inevitably meets resistance (Calcott, 1996; Worrall, et al.,
1998). Secondly, local government is about diversity (Calcott, 1996, p. 62; Stewart,
2000); while local councils may arrive at a general level of consensus regarding their
objectives, each council at a local level is likely to have not only differing priorities
but seek different means to address those needs. Third, but related, is that while the
apex of central government accountability is the Minister of each department at
Cabinet level, within local government no such single accountability exists and the
diversity and autonomy of each council reinforces that difference (Calcott, 1996, p.
85).
2.3.11 Delivering Better Services for citizens – A review of local government
procurement in England
A landmark in local government was reached in 2001 when Sir Ian Byatt completed a
review of English local government procurement and commissioning at the request of
the local government minister and Local Government Association (Byatt, 2001). The
Report was accompanied with a supporting research paper (Birch, 2001) based on the
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findings of a literature review, postal questionnaire survey (65% response rate) and
eleven case study interviews. Although the report and research paper tended to rely
on evidence from ‘leading questions’ and made sweeping generalisations, useful
insights were provided.
Positioning of procurement function
As a function, the case study research acknowledged that, while traditionally viewed
as a 'back office function', signs of improved profile were emerging, probably driven
by the Best Value requirement to consider high-level service delivery procurement
options and approaches (Birch, 2001, para. 2.1). Significantly Byatt also
recommended that procurement expertise should be incorporated into the Best Value
review process, by which he meant the strategic ‘make or buy’ decision. This has
clear resonance with Cox and Lamming (1997) and Ramsay’s (2001) perceived
strategic role of Purchasing.
Purchasing objectives
Not seeking to be prescriptive, explicit Purchasing objectives were not stated,
although it was made clear that a Procurement Strategy needs to be developed by each
Authority. The starting position for that Strategy is "a vision of how procurement will
help the council meet its corporate objectives, including any broader objectives such
as economic and social regeneration" (Byatt, 2001, para. 2.1). Indeed, among the
suggestions for inclusion in the Strategy are "the strategic aims of the authority and
their relevance to procurement activities" (Byatt, 2001, para. 2.2). Furthermore, it is
advocated that:
Good procurement will play a positive role in meeting the needs of specific groups within the community, including those who need most support. This can be done most effectively by good contract design and specification and by developing a corporate procurement strategy which will deliver the objectives of the authority, including its social objectives (Byatt, 2001, para. 3.7).
... local authorities may wish to take account of wider objectives such as protection of the environment or the encouragement of local businesses, support for the local economy and local employment (Byatt, 2001, para. 3.88).
Elected Members were only found to have strong involvement in the development of
the Procurement Strategy in 13% of councils (Birch, 2001, para. 2.2.4); that said, it
was recommended that "... there should be clear political responsibility for
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procurement…” (Byatt, 2001, recommendation 10). Procurement Strategy
development was found to be the responsibility of the corporate procurement manager
(Birch, 2001, para. 2.3.1).
Confusion of definitions
Having said that Byatt gave prominence to the need for a Procurement Strategy, one
significant criticism is that the report appears confused as to what exactly is meant by
a Procurement Strategy. As referred to above, Byatt clearly recognises the need for a
Procurement Strategy (‘plan’) which is aligned with the strategic objectives of the
council (Byatt, 2001, paras 2.1, 2.2, 3.7). However, within the report, two other
distinctly different descriptions are given. Firstly, and almost unique to local
government, is a procurement strategy (‘policy’/‘position’) which sets out the
organisation’s approach to the best value review, the ‘make or buy’ decision. In this
context Byatt merely echoes the call for such a ‘procurement strategy and evaluation
policy’ by DETR (1999, Circular 10/99, para. 45 and 46). In that context the
‘strategy’ is really the policy/procedure for carrying out the strategic service delivery
options appraisal – not a Purchasing Strategy as defined by Ellram and Carr (1994)
and Carr and Smeltzer (1997) and discussed in Section 2.3.4 above. The other
description of a strategy is much more recognisable within the profession, it being the
specific strategy (‘approach’) to be pursued for a specific procurement project. For
example, how will the council approach the procurement of a specific contract (Byatt
2001, para 2.3 and Executive Summary). While this may be called a strategy it is at a
lower tier than the focus of this investigation.
The result of these variations of descriptions is potentially added confusion
within local government – it cannot therefore be assumed during this research that
when local government practitioners or indeed Chief Executives, refer to their
Purchasing Strategy they are talking about the same thing, in turn this places a
limitation on the investigation.
Observations on Byatt
Byatt (2001) clearly recognises that procurement is a strategic issue for local
government and something which should be of importance to elected members.
Furthermore he echoes the view of Cox and Lamming (1997) that Purchasing has a
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part to play in the council’s strategic ‘make or buy’ decision. A view is also
expressed of the need for an aligned Purchasing Strategy which seeks to contribute to
the wider objectives of the council. Such an agenda for action reflects a number of
the themes of this investigation, whose policy relevance is confirmed by their
inclusion in the Byatt review, published during the concluding stages of this
investigation.
2.4 ECONOMICS PERSPECTIVE
The preceding literature approached the role of Purchasing in the context of
responsibility for a process and the objectives which that process could satisfy. Cox
and Lamming (1997) consider that role may be short-lived and, drawing on the
complementary Resource-Based View of economics and institutional economics
(Transaction Cost Economics and Principal/Agency theory), see Purchasing as
potentially taking on a new role, that of ‘supply management’. In the role of supply
management, Purchasing would be responsible for determining the procurement
option on the spectrum between internal or external sourcing. Ramsay’s (2001)
critique of Purchasing acknowledges that such a role is truly strategic but doubts if
Purchasing practitioners will be involved in the decision.
The ‘make or buy’ decision, traditionally applied in the private sector, became
a statutory requirement for local government during 1980s and 1990s through
Compulsory Competitive Tendering and more recently through the Best Value regime
(Walsh, 1997; Choi, 1999). Both regimes expect the council to identify a range of
procurement options for the services it will provide to the local community (DETR,
1998, p. 72; Hughes, 1999; Babcoe, 2001; Byatt, 2001; Audit Commission, 2001).
While the Resource-Based View and institutional economics provide a theoretical
basis for the ‘make or buy’ decision, much of that rationale is expressed by Osborne
and Gaebler (1993) who consider that public bodies should switch their emphasis to
steering as opposed to rowing (1993, pp. 25-48). Steering relates to policy and ends,
while rowing is concerned with the means of service delivery. Effectively, elected
members should not be shackled in defining service outcomes through the constraints
of their own workforce, on the contrary, the option of in-house delivery would be only
one of an array of options which should be considered.
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Steering requires people who see the entire universe of issues and possibilities and can balance competing demands for resources. Rowing requires people who focus intently on one mission and perform it well. Steering organisations need to find the best methods to achieve their goals. Rowing organisations tend to defend ‘their’ method at all costs (Osborne and Gaebler, 1993, p. 35).
2.4.1 Resource-Based View
As opposed to the traditional neo-classical economic theory that assumes elasticity of
supply (Hanson, 1997, pp. 192-203; Newell, 1984, p. 52) the Resource-Based View
recognises that some resources, on the contrary, have an inelasticity of supply
(Peteraf, 1993; Barney, 2001) and on that basis the holder of those resources may be
able to generate economic ‘rents’ (Milgrom and Roberts, 1992, pp. 248-287) or above
average profits (Porter, 1980). The Resource-Based View therefore has clear links
with the literature on strategy, particularly the work of Porter (1980) and, Hamel and
Prahalad (1994). At its heart is the achievement of sustainable competitive advantage
gained through the ownership of resources and capabilities – ‘core competencies’.
Such core competencies must have value, be rare, imperfectly imitable and not
substitutable; they can include the organisation’s management skills, organisational
processes and routines, and, the information and knowledge it controls (Barney,
1991). Core competencies may be a product of the organisation’s history, that is, its
‘path dependency’, they may be intrinsic, or they may be developed, but it is also
conceivable that they can be acquired or complemented through strategic alliances
(Lockett and Thompson, 2001). Indeed White and Hammer (1999) argue that a
potential role for Purchasing would be identifying suppliers who possess
competencies which could provide a source of competitive advantage and as a result
make a significant contribution to the organisation’s strategic management.
It is argued that on no account should core competencies be outsourced
(Hamel and Prahalad, 1994; Cox, 1997) but any activity beyond the core
competencies should be to sub-contracted to the most economically advantageous
source (lowest total cost, balanced risk of market failure or market power (Cox and
Lamming, 1997)) regardless of whether from an internal or external provider.
Ramsay (2001) has argued that the identification of core competencies is a truly
strategic decision but Purchasing at present only becomes involved once core
competencies have been identified by others. At that stage Purchasing, by default,
must be responsible only for sourcing ‘non-strategic activities’, that is, activities on
respect of which it is strategically irrelevant whether they are sourced internally or
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externally. Ramsay (2001) does however acknowledge that if Purchasing were
involved in identifying the core competencies, it would indeed take on strategic
significance.
2.4.2 Transaction cost economics
Transaction cost economics has its origin in the work of Coase (1937) and
acknowledges that when exchanges occur, either internally or externally, there are
costs incurred; these costs are referred to as ‘transaction costs’. Transaction costs fall
into three main classifications: information costs, negotiation costs and monitoring
costs (Hobbs, 1996). Theoretically, organisations aim to structure economic activity
and relationships so as to minimise transaction costs (Williamson, 1975; Milgrom and
Roberts, 1992, p. 50; Walsh, 1995, pp. 33-34; Hobbs, 1996; Choi, 1999, pp. 135-183).
On that basis on some occasions in-house delivery (‘make’ or ‘hierarchies’) will be
the optimum solution and on others it will be external sourcing (‘buy’ or ‘markets’).
It was Williamson’s view (1975) that the decision would be dependent on a number of
factors, namely, uncertainty and bounded rationality, complexity, opportunism and
asset specificity. ‘Uncertainty’ refers to the ability to predict what will happen in the
future and its potential impact on the activity. ‘Bounded rationality’ relates to the
inability to ‘know all things’ (Milgrom and Roberts, 1992, pp. 126-165; Hobbs,
1996). A high level of uncertainty, bounded rationality and complexity restricts the
ability to adequately specify what is required and also to make a fully rational
decision (Walsh, 1995, p. 34; Choi, 1999, pp. 146-147). ‘Opportunism’ relates to the
potential of one party to exploit situations at the cost of the other (Hobbs, 1996;
Walsh, 1997, p. 34), this is likely when there is an information asymmetry or
imbalance with one party holding information which has a potential economic value.
In turn this leads to an increase in the likelihood of adverse selection and moral hazard
(Milgrom and Roberts, 1992, pp. 166-204; Hobbs, 1996; Walsh, 1997, p. 47).
‘Adverse selection’ relates to the inability of the purchaser to know in advance how
the potential contractor will behave if awarded the contract while ‘moral hazard’
relates to the difficulties a purchaser faces in being sure that the outcomes of a
contract are directly attributable to the performance of the contractor. The potential
problems associated with opportunism are aggravated when the available market is
small creating a ‘small numbers bargaining’ situation (Hobbs, 1996; Walsh, 1997, p.
35). In such circumstances the buyer will have little freedom to decide not to deal
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with a particular supplier. ‘Asset specificity’ arises when, in order to deliver a
contract, the provider has to make specific investments either in equipment,
knowledge or skills which cannot easily be utilised on any other projects. This leads
to a bi-lateral monopoly in that the buyer must use that supplier or else incur further
start-up costs and from the suppliers perspective, a dependency on the buyer, so that
the investment can be recouped (Hobbs, 1996; Walsh, 1997, p. 35; Choi, 1999, p.
173). According to Williamson (1975), dependent on the level of asset specificity
required, the organisation can determine the appropriate procurement option, either
vertical integration (make or hierarchy) or provision through the market (buy). In his
view, insofar as highly specific assets are concerned, the organisation should be
responsible for in-house provision as that restricts the potential for an external
provider to extract ‘rents’ (Milgrom and Roberts, 1992, pp. 248-287; Hobbs, 1996) or
subject the buyer to excessive pressure.
2.4.3 Principal/Agency Theory
While transaction cost economics is concerned with locating the boundaries of the
organisation (Cox and Lamming, 1997; Lockett and Thompson, 2001),
Principal/Agency Theory (Milgrom and Roberts, 1992; Sappington, 1991; Donahue,
1989, pp. 38-39; Walsh, 1997, pp. 36-38) has a different emphasis, that of how the
purchaser (Principal) can ensure that the supplier (Agent) will carry out their contract
in a manner which is in line with the wishes of the Principal with minimum
monitoring costs (Donahue, 1989, p. 38; Walsh, 1997, pp. 36-38). Once again a
major barrier which exists to such a desired relationship is the level of information
asymmetry which exists between the Principal and the Agent. In other words, if one
party holds information which the other does not have, that creates an economic
advantage to the holder of the information. In such circumstances the Principal needs
to put in place mechanisms which incentivise the Agent to deliver the required level
of performance.
Drawing on Principal/Agency Theory, Donahue (1989, p. 45) concludes that
the preference for in-house delivery over external contracting:
Increases (1) the more the task at hand is uncertain at the outset and prone to revision, (2) the harder it is to measure the value of production, (3) the more disruptive it is to switch agents in midstream, and (4) the more the principal knows about the best means to accomplish his task. Conversely, arm’s-length contracts with outside suppliers are more attractive (1) the more precisely requirements can be specified in advance, (2) the more the principal cares about the ends over means, (3) the more difficult it is to monitor fidelity to instructions (or the easier it
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is to measure results), and (4) the more readily incompetent or unfaithful agents can be replaced.
Principal/Agency problems have implications for both sides and the supplier is likely
to determine his willingness to enter into a contract dependent on his attitude to risk,
for example, a risk-averse agent may only be prepared to enter into a contract if there
is a high degree of certainty that payment will be received whatever happens, whereas
a risk neutral supplier will be prepared to enter into a performance-based contract
(Walsh, 1997, p. 37).
2.4.4 Resource-based view and institutional economics; clash or
complementary?
The Resource-Based View, transaction cost economics and Principal/Agency Theory
are not discrete but complementary (Cronner, 1991; Mahoney, 2001; Lockett and
Thompson, 2001). Cronner (1991) holds the view that the primary difference
between the Resource-Based View and institutional economics is that the Resourced-
Based View has as its focus the inputs of the organisation while transaction cost
economics has its focus on opportunism. That view is disputed by Mahoney (2001)
who argues that although both share ‘asset specificity’ and ‘small numbers’, the
Resource-Based View provides a theory of sustainable ‘rents’, that is, how the
organisation can achieve sustainable competitive advantage. Whilst institutional
economics and particularly transaction cost economics provide a theory for the
existence of the firm. An alternative and more embracing view would be that the
Resource-Based View provides guidance as to the activities the organisation should
undertake, transaction cost economics considers the appropriate governance
arrangements and Principal/Agency theory suggests the appropriate transactional
arrangements – it is the ‘fit’ between these three that is important (Lockett and
Thompson, 2001).
2.4.5 Implications of the economics perspective
The Resource-Based View, transaction cost economics and Principal/Agency theory
all have a direct bearing on the strategic procurement ‘make or buy’ decision, indeed
it is frequently impossible to separate one type of analysis from that of the others.
Equally, it would be impossible to establish a protocol for analysis which suggests a
sequential approach to the ‘make or buy’ decision – the decision is more likely to be
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taken in parallel cognisant of all three approaches. The critical link between the
Resource-Based View, transaction cost economics and Principal/Agent Theory is that
the more a skill or knowledge base contributes to profitability, or the more difficult to
‘police’ performance, the more it should be regarded as of high asset specificity.
When the skills or knowledge are not key to the development of profitability, they
may be regarded as of lower asset specificity. Core competencies are always of high
asset specificity because in their absence the firm is unable to retain control of a
sustainable position in a supply and value chain (Cox and Lamming, 1997). This
position is an echo of Porter’s (1990) view that one of the characteristics of the
optimum purchasing strategy will be the minimising of switching costs.
Logically core competencies are highly specific assets and should be
‘contracted’ in-house as they are the foundation of the firm’s long-term survival while
‘residual competencies’ or low specific assets are likely to be available from a number
of alternative sources and could be obtained on the most competitive basis. Cox and
Lamming (1997) argue that in order to survive, firms of the future will embrace a
Resource-Based View and transaction cost analysis perspective, supplying in-house
only what is core or economically advantageous so to do, and externally sourcing the
remainder:
This means that in the future there will be a definite need for professional managers trained in the arts of - and perhaps with a ‘nose’ for – assessing the relative costs and benefits of internal and external contracts for the successful achievement of a sustainable position in specific supply and value chains. The skills which will be required will be those of assessing which contractual relationships – both internal and external – are most appropriate in achieving reductions in costs and improvements in value and quality (Cox and Lamming, 1997).
In a local government context, this debate is directly relevant to the Best Value regime
and the critical decision as to which type of procurement option is most appropriate
for service delivery. Therefore, following Cox and Lamming’s argument, local
government, faced with such a strategic procurement decision, would benefit from the
potential contribution of purchasing managers, not only in that decision but also in
determining the most appropriate type of relationship and its subsequent management.
As alluded to above, Ramsay (2001) generalised that this contribution was not one
currently being made by purchasing managers while White and Hammer (1999),
looking at private sector firms, sought to establish ‘why not?’. White and Hammer
concluded that:
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Overall, the issues that the inhibit the purchaser from contributing to his or her firm’s strategic management include; inadequate status, non-purchasers offering little opportunity for either equitable or timely discussion, and purchasing performance measurements that emphasise quantifiable objectives, irrespective of the impact that the measurement has on encouraging or discouraging the purchaser’s creativity or imitative.
An alternative implication for Purchasing (Ramsay, 2001) is whether or not
Purchasing is a core competency? And, if not, is it a candidate for outsourcing?’
Hines’ (1996) concluded that most purchasers are actually engaged in clerical roles,
which could not be considered core and would therefore be appropriate for
outsourcing. Ramsay’s view is that purchasing is not a core competency but the
strategic decision relating to the identification of core competencies is. It is in that
strategic role as opposed to just the pursuit of certain objectives, which Cox and
Lamming (1997) suggest lies the future, and that role represents a clear opportunity
for Purchasing to improve its strategic contribution.
2.5 MODELS OF PURCHASING’S STRATEGIC EVOLUTION
The progress of Purchasing to a strategic function can be portrayed as an
evolutionary, incremental process (Saunders, 1994, p. 115), and a number of models
have been used to illustrate that journey. Since it is important to understand the core
tenets of strategic evolution the next section provides an introduction to the more
popular models. The models generally move from a ‘clerical’ stage to one of being
‘strategic’, it could be said though that the models are overly generalised and fail to
grapple with some of the issues pertinent to those in a public sector and more
specifically, local government setting.1
2.5.1 Reck and Long
Reck and Long (1988) produced, probably the most widely accepted model of
development (Cousins and Hampson, 2000, pp. 225-269). The model portrays
Purchasing’s journey commencing in a ‘Passive’ mode with little or no strategic focus
and an emphasis on price and availability in the award of contracts and Purchasing
being a reactive function. Progress from that position is to the ‘Independent’ stage
where Purchasing adopts the latest techniques. Although senior managers recognise a
potential strategic contribution, it is largely from the perspective of cost reduction and
1 Lamming’s Lean Supply model (1993) has been dealt with elsewhere: although it does portray stages of development those stages relate more to customer-supplier relationships than strategic evolution.
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adoption of best practice techniques, as such Purchasing’s strategic direction is
independent of the firm’s. From this position, a ‘Supportive’ phase is arrived at which
is much more proactive in seeking strategic alignment and adopts techniques to
strengthen the firms competitive position. Finally, the Purchasing Strategy of the
organisation becomes holistic and integrated with that of the organisation at the
‘Integrative’ stage and cross-functional approaches become the norm. Significantly
Reck and Long (1988) argue that as each stage of development is progressively
reached so too will the appropriate performance measures and expectations of senior
managers.
2.5.2 Cammish and Keough
A further four stage model is presented by Cammish and Keough (1991). As is the
norm in all of the models a clerical, transactional phase acts as the starting position,
this time referred to as ‘Serve the factory’. A switch of emphasis to ‘Lowest Unit
Cost’ represents movement from that position although that is from a decentralised
perspective. ‘Co-ordinate purchasing’ is the next critical step when the organisation
begins to harness its potential leverage and adopt a more corporate philosophy.
Finally ‘Strategic procurement’ is aspired to; cross-functional teams again become
part of the way of delivering procurement, suppliers are seen as an asset to be
certified, managed and developed, Procurement take on a role in challenging
specifications and attention is given to ‘make or buy’ decisions.
2.5.3 Syson
A three stage model is presented by Syson (1992). Equating with Reck and Long’s
(1988) ‘Passive’ stage, this model commences with a transactional focus, ‘Clerical’
stage with efficiency being the watchword. The function then develops through a
‘short-term’ adversarial approach to the market – ‘Commercial’, to a ‘Strategic’ role
reflected by a proactive response to working with the market to achieve competitive
advantage.
2.5.4 Implications for local government
Each of the models starts their strategic development with a clerical focus, typical of
‘order placing’. It could be suggested that in that position, decisions made by
Purchasing would be based on acceptance of the ‘lowest price’. Hines (1996) would
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suggest such positioning dominates Purchasing. If such positioning is common in
local government it could be expected that any progress to a secondary phase of
development would improve Purchasing’s contribution.
The second generalised stage of development, ‘Commercial’, recognises that
lowest price may compromise best value. The emphasis switches to lowest whole life
cost and adoption of best practice techniques, it recognises that being proactive in
working with the supply market could be advantageous; equally, improved internal
collaboration and co-ordination is recognised as making the organisation a more
attractive customer and providing better ‘leverage’ in obtaining a better deal for the
organisation.
The third stage of development, ‘Strategic’, appears to recognise that
Purchasing specialists have ‘intellectual assets’ or perspectives which could improve
the quality of decision making within the organisation. At that third stage, the
Purchasing professional gains ‘a seat at the table’ for wide ranging discussions, most
specifically, the ‘make or buy’ decision.
The implication from the models is that Purchasing’s input is very much from
a cost reduction perspective. The question, which flows from the prior discussion
though would suggest that strategic alignment is fundamental to improving strategic
contribution. That being the case, it may be that current models fall short and that
there is a further stage, as yet not recognised within the models, that sees a
contribution beyond cost reduction and uses procurement as an innovative tool to
satisfy an array of strategic objectives. Within local government such objectives
would be those which the local council have corporately identified as important, and
therefore would flow from that strategic foresight. A separate failing of the models is
that they fail to provide direction on how progress is made from one stage of
evolution to the next. In the absence of such clarity practitioners may adopt a laissez-
faire approach assuming that evolution will ‘just happen’, when there may be a need
for a much more proactive approach.
2.6 CHANGE MANAGEMENT
A basic premise of this investigation is that local government Purchasing could
improve its strategic contribution. Such an assumption implies an acceptance that
change is required; change from the existing traditional contribution to some other
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paradigm. Indeed the previous section highlights the need to establish how change
could most effectively be achieved.
Change is a phenomenon common to all (Spencer and Mountford, 1997); it is
part of the fabric of everyday life and of how society adapts to the external influences
of the environment (Burdett, 1999). Despite its pervasiveness, faced with change in
the workplace, it is natural to find resistance (Spencer and Mountford, 1997) as
individuals become concerned about the possible impact on their future. The basic
question for most people is, ‘How will this change affect me?’ (Bechtel and Squires,
2001). To compound this, resistance is frequently due to the appearance of confusion
of having no clear beginning or end, and a lack of input from those involved. The
result is that those involved sometimes feel vulnerable, overwhelmed or powerless
(Moran and Avergun, 1997; Spencer and Mountford, 1997). Beyond individual
resistance, opposition can also be expected at the level of the organisation itself
(Johnson and Scholes, 1993, pp. 386-421).
In spite of its perceived chaos, ‘change management’, by definition, implies an
organised approach with the objective of bringing about a desired adjustment – it
requires management. Moran and Avergun (1997) define change management as “…
the process of continuously renewing the organisation’s direction, structure and
capabilities to serve the ever-changing needs of the marketplace, the organisation,
and employees”.
A basic approach to the management of change (Bennett, 1991, pp. 336-337)
is to forecast all the relevant environmental changes that might occur and their impact
on the organisation. Then, having done that, evaluate the implications for the
organisation. That approach is flawed though in that it implies change will always be
externally driven, whereas in many situations the organisation may choose to initiate
change of its own volition. Hughes, et al. (1998, p. 140) state that functional experts
may drive change and, in some circumstances, they may have been appointed for that
specific purpose. On other occasions functional experts may just be self-motivated to
implement best practice (Hughes, et al., 1998, p. 141).
2.6.1 Types of change
The seminal piece of work on change management was that of Lewin (1938 and
1951). It was Lewin’s thesis that change has to be seen in the context of two
opposing forces – those ‘driving’ and those ‘resisting’, both those forces need to be
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considered. Lewin argues that effective change management requires a strategy
which ‘unfreezes’ the current state of behaviour so that it can accept change; make the
desired change, and then, ‘refreezing’ or stabilising the system so that a new form of
behaviour becomes embedded as the norm. While Lewin’s principles of ‘freezing’
and ‘unfreezing’ make sense it is perhaps overly pessimistic to rush to the conclusion
that resistance must by its nature be overly obstructive. If Purchasing change is
correctly ‘packaged’ and ‘marketed’, the anticipated resistance within the council,
which has an implication of ‘winners’ and ‘losers’ could be potentially managed to
create a win/win environment. Simplistically, Burdett (1999) shares his own
experience:
… If the future is defined in a compelling way; if the scenarios regarding how the future can unfold are made clear; if people know what is expected of them; if those involved know why and buy into why the change is needed; if new ways of working are orchestrated by those actually doing the work; if those at the receiving end of the suggested change perceive genuine value in it for them and for the wider community; if learning creates room for exploration; and if the right support is available, then change is the stuff of rejuvenation.
Generally change takes place incrementally (Johnson and Scholes (1993, pp.
387-388) although it has been argued that change must happen rapidly (Moran and
Avergun, 1997) – transformational change. Transformational change, the more
radical, is only likely to be appropriate when the organisation faces or anticipates
major external demands and has to either ‘adapt or die’ (Johnson and Scholes, 1993,
pp. 387- 388; Hughes, et al., 1998, p. 144; Kallio, et al., 2002). In the public sector
such a scenario is unlikely, except for perhaps the milder need to change as a result of
new legislation.
It is worth recalling that the Strategic Evolutionary models of Purchasing,
namely those of Reck and Long (1988), Cammish and Keough (1991), and Syson
(1992) are all incremental in their style. Incremental change has a major benefit in
that it provides an opportunity to build on existing skills, routines and beliefs; it is
therefore more likely to win commitment within the organisation. Therefore the
change agent, seeking to bring about incremental change will seek ways of working
within existing systems (Johnson and Scholes, 1993, pp. 387-388).
2.6.2 The change agent
Bennett (1991, pp. 337-338) defines a ‘change agent’ as a person who fosters change
within an organisation. Hamel (2000), much more dynamically, terms change agents
as ‘activists’ and organisational revolutionaries:
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Activists are not anarchists. They are, instead, the ‘legal opposition’. Their legality is not to any particular person or office, but to the continued success of their organisation and to all those who labour on its behalf. They are patriots intent on protecting the enterprise from mediocrity, narrow self-interest, and veneration of the past. They seek reform rather than to destroy. Their goal is to create a movement from within their company and a revolution outside it …
Activists are ‘tempered radicals’. They are committed to their company, but they are also committed to a cause that is at odds with the pervading values or practices in their organisation. They behave as responsible members of their organisation, but they are also a source of alternative ideas and transformation (p. 158)
Generally though, successful change leaders need to see the ‘big picture’ and make
sure change is aligned to organisational objectives. They need to be conscious of the
external environment and its impact on the organisation (Moran and Avergun, 1997;
Spencer and Mountford, 1997). When presenting change they do so in terms of the
organisation’s collective objectives as well as those of the individual (Moran and
Avergun, 1997). They engage others in effecting the change (Spencer and Mountford,
1997). They foster an atmosphere which is able to test change but which encourages
others to take on new behaviour, exemplifying the desired change through their
thought, speech and actions while displaying a constant dedication to making change
a reality (Moran and Avergun, 1997). They help those throughout the organisation
focus on what is necessary to bring about the desired change (Spencer and Mountford,
1997), ‘promoting’ at every available opportunity the change in a manner which is
easily understood by others, helping those affected to understand the implications for
them and yet encouraging challenge (Moran and Avergun, 1997).
2.6.3 Overcoming resistance to change
A number of authors have focused on identifying barriers to change and suggest
prescriptions for overcoming those barriers.
Spencer and Mountford (1997) specifically argue that there are only two
people-related barriers to change, those who lack the capability and those who lack
the willingness. They argue that capability is overcome through appropriate training
and development, while unwillingness needs to be overcome through reinforcement.
Others have cited existing ‘routines’ as a barrier since they are likely to be
embedded in the organisation, and, although providing an element of stability and
comfort, are likely to reinforce the status quo. Purchasing is one function where
routines are liable to have been established for quite some time and, within a public
sector body, may have been developed to demonstrate accountability (Dobler and
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Burt, 1996, p. 747). Although the Best Value regime advocates the need to challenge
existing processes, such a challenge may not be welcomed; one option is therefore to
seek realignment between the routines and the direction the organisation seeks to go
in. Johnson and Scholes (1993, pp. 398-401) suggest that a further remedy to that
barrier is the identification of critical success factors and the incorporation of those
factors within a performance management system. Such a system then acts to
reinforce the desired change. In addition effective performance measurement helps
both the organisation and the individual understand what is involved (Moran and
Avergun, 1997). It is on that basis that it is generally recognised that managers
seeking to effect the change must take personal responsibility for both identifying the
change needed and ensuring that it actually takes place.
The significance of ‘symbols of change’ is frequently emphasised (for
example, Johnson and Scholes, 1993; Burdett, 1999). Symbols endorsing change may
take the form of a change in the reporting structure or increased attention from the
organisation’s hierarchy. Within a council, an increase in purchasing related
discussion at committee level would suggest that elected members see purchasing as
more relevant to their strategic interests. It is also argued (Johnson and Scholes,
1993; Burdett, 1999) that the most powerful form of symbolism is the behaviour of
those charged with leading the change, who through their example act as role models,
either positively or negatively, to the rest of the organisation. Therefore it is of
paramount importance, that if purchasing managers are to lead change, they must
exemplify the desired change in their actions and discussion. Effectively, if they are
to be the change agent, they must ‘market’ the change by their very word and deed.
In addition they need to question, challenge, experiment and confirm that existing
changes are taking place through the activities they have contact with.
Johnson and Scholes (1993, pp. 405-410) highlight that within any
organisation there will be political mechanisms that can act as barriers to change,
specifically, manipulation of organisational resources, and the relationships of
powerful groups or ‘elites’ which may seek to retain the existing regime. To
overcome those barriers the change agent must have excellent political skills which
enable them to identify the obstacles and then, paradoxically, turn them into powerful
change drivers through, for example, building up a powerbase, gaining
encouragement and support to overcome resistance. A powerful political ally or
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champion can also have a major impact on driving forward change. Such a champion
could be, in the local government purchasing context, the Chief Executive, a powerful
elected member, or indeed an influential outsider. Hughes, et al. (1998, p. 141)
stretch that principle considering that a fundamental success factor for change leaders
is their ability to involve a critical mass of staff and build understanding of the need
for change. In so doing Purchasing would create their own political alliance.
2.6.4 The change process
A number of authors have argued that change progresses through a cycle and, as
illustrated in Table 2.7, there are common themes running through the models. Those
themes are summarised by Johnson and Scholes (1993, pp. 411-414) who offer an
overview of the requirements for the effective change agent, namely, clarity of the
direction they wish to move the organisation to, clarity of the context in which they
are working, employing an appropriate style which fits the organisation culture and
making use of the political and symbolic processes of the organisation.
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Kotter (1995) Moran and Avergun, (1997) Bechtel and Squires (2001)1. Establish a sense of
urgency, motivating other to work with you
2. Forming a powerful guiding coalition of perhaps 3-5 people
3. Creating a vision that can be easily communicated
4. Communicating the vision, reiterating and restating the vision at every stage and acting as a symbol of the change
5. Empowering others to act on the vision
6. Planning for and creating short-term wins
7. Consolidating improvements and producing still more change
8. Institutionalising the new approaches.
1. Understanding the current situation
2. Determining the desired state
3. Developing a practical step-by-step change plan
4. Enlisting others and developing a critical mass
5. Tracking and recognising results.
1. Creating a shared vision of the future
2. Developing a current diagnosis of the gaps between the current position and the desired new model
3. Focusing on one or two major change themes
4. Strong leadership that provides high profile advocacy for the change and models of the new culture
5. Creating involvement down the line – especially with middle managers
6. Assuring that the organisational structure is not an impediment
7. Aligning systems to the organisation and individual performance measurement, reward and recognition to ensure consistency with the new model
8. Proactive use of education, training and communication to ensure knowledge, orientation and skills are consistent with the new model
9. Ensuring technologies support the new model
10. Developing a change plan that ensures a common understanding of the way forward.
Table 2.7: Typical change models
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2.6.5 Lessons for achieving effective change
The literature would suggest that those seeking to improve the strategic contribution
of local government Purchasing must recognise a critical element is aligning change
with wider objectives of the organisation. This is a recurring theme within the wider
investigation, not only was it identified within the literature on change (for example,
Bechtel and Squires, 2001), but it was also discussed in section 2.2.B with reference
to purchasing strategy (for example, Porter, 1996; Virolainen, 1998; Cavinato, 1999).
More specifically, Cousins (1999a) asserted that without strategic alignment it will
not be possible to affect change in Purchasing as a strategic function.
A second recurring theme is the need for an ‘over-arching’ plan, which sets
out the direction the change intends to take the organisation in. Such a plan has been
identified as a critical success factor in change (for example, Lewin, 1938 and 1951;
Moran and Avergun, 1997; Bechtel and Squires, 2001) but was also identified in the
context of Purchasing Strategy (Ellram and Carr, 1994; Steele and Court, 1996, p. 13;
Carr and Smeltzer, 1997); the suggestion therefore is that an effective Purchasing
Strategy should embrace issues of change management.
The third pertinent question relates to whether incremental or transformational
change is appropriate? Within both a strategy and Purchasing context the literature
would suggest that an incremental approach to change seems most appropriate,
gradually moving the organisation in a pre-determined direction and building on
traditional strengths.
That therefore begs the question: ‘Who should lead the change?’ While a
senior level champion is a pre-requisite for success, for most local authorities it may
be that the full potential of Purchasing to improve its contribution will not have been
recognised. Therefore it may be the case, as suggested by Hughes, et al. (1998, p.
141) that the change may need to be driven by practitioners themselves. In such a
scenario Cavinato’s (1999) comments are relevant:
When purchasing is behind the rest of the firm, the purchasing management challenge is to educate the group to bring it up to the level of the rest of the firm. …(But W)hat if purchasing is more developed than the rest of the firm? … Others in the firm do not understand what it is saying, nor understand what it can contribute. In such instances the challenge facing purchasing management is to educate the rest of the firm as to what can and is being contributed by it.
While the potential role of change agent places wider demands on practitioners
that must be seen alongside the need for professional skills. Cox (1997a and b; 1998)
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defines competence as an understanding of the full range of available purchasing
techniques coupled with an understanding of when it is appropriate to use them.
Equally Cousins (1998 and 1999a) argued that the appropriate level of individual
skills and competence was the critical factor in repositioning to a strategic function.
Others have argued that traditional purchasing manager training is unlikely to be
sufficient for this higher level of Purchasing, and some feel that a new calibre of
professional educated to MBA standard is the answer (Lamming, 1995; Hines, 1996;
Humphreys, et al., 2000). Although not the focus of this research, when one
considers that in 1996 Murray reported that only 45% of local government purchasing
managers were professionally qualified, the ability of local government purchasing
managers to improve strategic contribution or even to match tomorrow’s needs may
prove to be an enormous challenge.
2.7 STRUCTURE AND ORGANISATION
How the Purchasing structure should be organised has been a perennial question,
vacillating between the poles of centralisation and decentralisation (Baily, et al.,
1994, pp. 42-62). Essentially the decision is dependent on management’s view of the
function (Baily, et al., 1994, p. 43; van Weele, 1994, p. 179) with the more strategic
the perception of the function, the more likely it will be located close to the corporate
core, and the more operationally it is perceived, the more likely it will be located in
decentralised business units (van Weele, 1994, p. 179). Van Weele has provided
examples of drivers which may influence positioning:
Purchasing’s share of end product costs: therefore the higher percentage, the
more strategic
Financial position of the company: therefore the more severe the financial
pressure the greater the accountability demanded
Dependence on the supplier market: therefore more attention from senior
management.
Having said that, the simplistic centralised or decentralised spectrum has a number of
variations, including:
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Centralised
Decentralised
Lead Buyer
Mixed (or hybrid)
Outsourced.
The centralised approach operates on the basis of a specialised unit being in place
through which all purchasing must be channelled. The rationale being that such a
style enables the organisation to maximise its ‘leverage’ and extract the best deals
from the market through the application of power. In parallel Purchasing can
determine the strategy of the function and, within local government, assist in ensuring
compliance with Regulations. Having said that, such a structure sacrifices ‘budget
holder autonomy’, is frequently by-passed and left outside the core procurement
decisions of the organisation. A decentralised structure is effectively the opposite end
of the spectrum with the corresponding pros and cons (Baily, et al., 1994, pp. 48-49;
van Weele, 1994, pp. 183-184).
The ‘lead buyer’ approach (Baily, et al., 1994, p. 49) is traditionally reflected
in the predominant ‘buyer’ of a particular ‘item’ putting in place a contract, managing
it and ensuring that all those within the organisation have access to it. The benefits of
leverage are gained but sometimes the ‘lead buyer’ becomes ‘precious’ of the
contracts and is reluctant to move towards alternative solutions.
Van Weele and Rozemeijer developed the ‘hard core/soft core’ model of the
Purchasing function (1998, pp. 96-112) during their investigation of leading-edge
multi-national companies in Europe and the United States. Primarily the model
represents a shift to a ‘virtual’ Purchasing organisation. The model aims to reap the
benefits of both functional excellence, traditionally associated with a vertical
organisation, at the same time gaining the coordination and economies of scale of a
horizontal organisation. Van Weele and Rozemeijer consider the model to be
particularly appropriate to non-production areas, “where buying is of an ad-hoc
nature, and where specific expertise is needed temporarily” (1998, p. 99). In such
situations it does not make sense to build up specific technical expertise within the
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Purchasing function but instead to create the correct environment to ensure that cross-
functional teams have the mix of expertise, as and when it is required. The ‘hard
core’ comprise of a central, small team of professionals responsible for the purchasing
and supply process, purchasing information systems, purchasing strategy, strategic
relationships, professional development, training and management development
programmes. This hard core moves from project to project, transferring expertise in
the process. The complementary ‘soft core’ resides in specific departments and
comprises those to whom operational purchasing has been devolved. Effectively the
soft core is part of a quasi-Purchasing team while remaining specialists in their own
disciplines; through project specific cross-functional teams, they join with the hard
core to deliver their business specific procurement needs and are agents in effecting
strategic purchasing change.
Building on that model Murray (2002) identified five roles which Purchasing
have taken as ‘process’ experts namely, Researchers, Detectives, Teachers, Doctors
and Architects. Researchers identify and review best practice, then articulate that as
guidance that others can apply. Detectives search for evidence to ensure that best
value for money is obtained. Teachers provide specific, targeted training aimed at
improving understanding and practice. Doctors provide a surgery for those who meet
with specific problems and require customised answers to comparatively unique
problems. Architects design the bespoke process that others subsequently implement
with varying levels of ‘hands on’ support.
The final option open to organisations is that of outsourcing purchasing – this
can be considered at a number of different levels. Firstly, making use of someone
else’s contracts, secondly, asking another purchasing body or consortium to act as
Purchasing Agents. There are obviously an infinite array of variations but most would
consider that while it is fine to potentially outsource the letting and management of
some contracts, the outsourcing of the strategic procurement unit of the organisation
is too close to the ‘core’ to be considered appropriate.
2.8 CRITICAL REVIEW OF THE LITERATURE
Although there exists a considerable body of literature on both local government and
purchasing, between the two is a chasm as opposed to a merging in the area of local
government Purchasing and how it could potentially contribute to the wider objectives
of local government.
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Local government policy literature has not considered the issue of Purchasing
as an instrument for achieving objectives. The little attention which has been given
has been from the perspective of the wider debate on how local government procures
services at a strategic level – the political and business choices between ‘in-house’ or
external service provision (Walsh, 1995; DETR, 1999; Choi, 1999). The potential
contribution of Purchasing, as a function, is rarely considered in this literature,
mirroring the function’s lack of involvement in the strategic ‘make or buy’ decision
(Byatt, 2001).
At the other end of the spectrum purchasing literature has been either
conceptual (Ellram and Carr, 1994; Cox, 1997a), manufacturing focused (Brandes,
1994) or from the perspective of narrowly defined operating strategies (Virolainen,
1998). Even with those significant shortfalls it cannot be assumed that espoused best
practice will necessarily be appropriate for local government since the emphasis that
“… companies exist to appropriate and accumulate value for themselves” (Cox,
1997a, p. 105) does not appear to fit easily within a pubic sector ethos of providing
services for citizens.
When consideration is given to the realm of strategy, Mintzberg (2000, pp. 91-
158), in a scathing critique, highlights that ‘strategic planning’ remains an unproven
concept, although within local government, the principle of developing a plan of
action does seem to be appropriate both as an instrument of gaining a political
mandate (Worral, et al., 1998, Joyce, 2000, Stewart, 2000) and as a change
management tool (Levin, 1938 and 1951; Moran and Avergun, 1997; Bechtel and
Squires, 2001).
Others acknowledge that there is confusion right at the crux of the issue
insofar as what is meant by both strategy (Mintzberg, Ahlstrand and Lampel, 1998, p.
9; Worrall, et al., 1998) and more specifically ‘strategic purchasing’ (Steele and
Court, 1996, p. 13; Lamming, 1997). This confusion is not helped by the absence of
authoritative definitions as to what is meant by ‘strategic Purchasing’. Ellram and
Carr (1994) and Carr and Smeltzer (1997) sought to provide definitions but those fall
short in that they are based on ‘linkage’ with the strategic planning process as
opposed to ‘strategic contribution’; ‘process’ referring to the ‘means’ as opposed to
‘contribution’, the ‘ends’. Equally, Carr and Smeltzer’s three indicators of strategic
purchasing relating to the presence and content of a long-range plan seem to be
flawed; while Purchasing may have ‘a plan’, it does not mean the rest of the
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organisation perceive that plan as strategic. A more meaningful indicator of strategic
Purchasing may be the perceived value given to the contribution or more significantly
the outcome of the plan by those outside the function. A further weakness in those
definitions is that they do not accommodate the argument presented by Cox and
Lamming (1997) and Ramsay (2001) that strategic purchasing is related to the ‘make
or buy’ decision. In answer to that question a working definition of the local
government strategic purchasing process is suggested:
Local government strategic purchasing is the process of determining the corporate purchasing strategy, mapping and overseeing the high-level purchasing portfolio, defining and challenging the desired purchasing outcome, determining and managing specific purchasing plans, identifying, evaluating and challenging purchasing service delivery options, contract award, post-contract management and review (See Figure 2.10). For the purpose of this research Ellram and Carr (1994) and Carr and Smeltzer’s
(1997) view of a strategic function will be paraphrased insofar as Purchasing acts as a
strategic function when it “directs all activities of the purchasing process toward
opportunities consistent with the organisation’s capabilities to achieve its long-term
goals”. A Purchasing Strategy will be accepted as a document which sets out “the
specific actions the Purchasing function may take to achieve its objectives”.
The focus of this investigation though is ‘Can local government Purchasing
improve its strategic contribution, and if so, how?’ It therefore does not focus on the
area of definitions of strategic Purchasing and the strategic purchasing process but
instead addresses the specific area of how the Purchasing function can improve its
strategic contribution.
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Figure 2.10: The local government strategic purchasing process
The categorisation of Purchasing objectives into four schools provides
indicators of potential stages in improving contribution; though rather than providing
answers, the schools highlight the pitfalls of the ‘tyranny of experience’ (Cox, 1997a,
p. 29) and the need to be cautious in assuming that what is good for one organisation
will be appropriate for local government.
The four schools set alongside the models of Purchasing’s strategic evolution
(Reck and Long, 1988; Cammish and Keogh, 1991; Syson, 1992) emphasise the
shortcomings of the models’ implied emphasis on cost reduction. While the models
once again provide useful indicators of improved contribution, they do not actually
provide sufficient guidance as to ‘how’ such contribution can be improved.
Accepting those criticisms, it might have been assumed that U.K. central
government would provide suggestions as to how local government Purchasing may
improve its strategic contribution. However the review of policy documents
suggested a predominately cost reduction focus linked with legal compliance.
The primary critique of the existing literature is that it has not given sufficient
attention to local government Purchasing. Some effort has been made to close that
gap (Murray, 1996; Erridge and Murray, 1998a and 1998b) but this literature focused
on whether perceived private sector best practice, specifically ‘lean supply’, could be
applied in a local government environment. While that may provide a useful
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foundation for further investigation, it failed to answer the much more significant
questions, ‘Could local government Purchasing improve its strategic contribution, and
if so, how?’
2.9 THEORETICAL MODEL FOR IMPROVING THE STRATEGIC
CONTRIBUTION OF LOCAL GOVERNMENT PURCHASING
This investigation seeks to add to the body of knowledge through examining how
local government Purchasing could improve its strategic contribution and determining
the appropriateness of existing models. In the absence of a specific body of
knowledge there are few pointers available on how its contribution can be improved.
The existing literature on local government and purchasing may, however, provide
theoretical direction or a descriptive model as to how that may be accomplished.
One of the central tenets of the literature on strategy is the need for alignment
of Purchasing objectives with the strategic objectives of the organisation (for
example, Fitzpatrick, 1995; Carter and Narasimhan, 1996; Porter, 1996; Virolainen,
1998; Cavinato, 1999). Indeed Cousins (1999a) asserted that without strategic
alignment it will not be possible to affect change in Purchasing as a strategic function.
Within local government, the Best Value regime seeks alignment (DETR, 1997;
Filkin, 1997; DETR, 1998, p. 72; Local Government Act 1999; Byatt, 2001; Audit
Commission, 2002). Firstly, alignment should be reflected through the priorities of
the local population setting the strategic agenda for the council – ‘outside in’.
Thereafter, all functional strategies should be aligned – ‘top down’. While at the
highest level within the council this suggests a fundamental difference between
traditional strategic management, which seeks to influence the external environment
for its own advantage (Ansoff, 1985; Cox, 1997), within the council the importance of
strategic alignment and internal consistency is no less important. Furthermore, the
literature would suggest that if Purchasing has as its focus achievement of the wrong
objectives, instead of making a strategic contribution it could have an adverse and
detrimental effect on the organisation’s performance (Spekman, et al., 1994;
Leenders, 1998). It therefore follows that theoretically the first step towards
improving the strategic contribution of Purchasing is to minimise its potential
negative impact and ensure strategic alignment of objectives with those of the council.
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The literature on local government (Section 2.2) has provided suggestions as
to what the strategic objectives of a typical council might be, namely:
1. Customer focus in service delivery
2. Improving the quality of life of its citizens
3. Public accountability
4. Public stewardship
5. Local economic development
6. Environment
7. Quality improvement
8. Community leadership/political advocacy.
The literature has also highlighted a need to be cautious of over generalising as, by
their very nature, local councils reflect diversity through differing local priorities
(Stewart, 2000; DTLR, 2001, para. 2.10). That need not be a limitation on the
research since there may well be common issues by varying levels of local priority, in
turn those common issues may be supplemented with other more unique local
demands. It can therefore be assumed that the local government purchasing manager
needs to be particularly wary of the ‘Tyranny of Experience’ (Cox, 1997a, p. 29), the
danger of transferring instinctively from either another sector or another council the
others priorities.
The Best Value regime, following on from the former Compulsory
Competitive Tendering, has highlighted that ‘the strategic procurement decision’
facing councils is that of whether to provide services internally or source from the
market (Donahue, 1989; Walsh, 1995; Choi, 1999; Local Government Act 1999;
Babcoe, 2001). Participation of Purchasing practitioners in the strategic ‘make or
buy’ decision regarding the delivery of council services would constitute a truly
strategic contribution (Ramsay, 2001) indeed Cox and Lamming (1997) see such a
role as representing the long-term future of the profession. Having said that, research
in the private sector has concluded that such a role frequently excludes Purchasing
practitioners (White and Hammer-Llyod, 1999; Ramsay, 2001) generally due to the
low status accorded within the organisation (White and Hammer-Llyod, 1999).
If it is assumed that at the present time Purchasing is excluded from strategic
procurement decisions due to the function’s low status, the first stage of development
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may be that Purchasing will have to take the lead in repositioning itself as a strategic
function (Hughes, et al., 1998, p. 141, Cavinato, 1999).
A number of models (Reck and Long, 1988; Cammish and Keough, 1991;
Syson, 1992) have been developed which portray an evolutionary or incremental
journey in the development of Purchasing from a clerical function to one which is
recognised as making a strategic contribution. Each of the models commences the
strategic development from a ‘clerical focus’, typical of ‘order placing’ and ‘lowest
price wins’. Hines (1996) argues such positioning dominates Purchasing. If Hines’
conclusion is equally applicable in local government, then it can be assumed that any
progress to a secondary phase of development would constitute an improvement in
contribution.
The second stage of development recognises that lowest price may
compromise best value. The emphasis switches to lowest whole life cost and
adoption of best practice techniques, it recognises that being proactive in working
with the supply market could be advantageous; equally, improved internal
collaboration and co-ordination is recognised as making the organisation a more
attractive customer and providing better ‘leverage’ in obtaining a better deal for the
organisation.
At the third stage of development Purchasing specialists are recognised as
having ‘intellectual assets’ or perspectives which could improve the quality of
decision making within the organisation. At that third stage, the Purchasing
professional gains ‘a seat at the table’ for wide ranging discussions, most specifically,
as suggested through the economics perspective, the ‘make or buy’ decision (Cox and
Lamming, 1997; Babcoe, 2001; Ramsay, 2001).
The review of literature identified four schools of Purchasing objectives,
namely, the Classical, Cost Reduction, CQID (Cost Reduction, Quality Improvement,
Innovation Transfer, and Delivery), and Contingency schools. Although it is not
explicit in the literature, and allowing for the peculiar needs for a focus on security of
supply in the early 70s (Taylor, 1975), while incorporating the strategic ‘make or buy’
decision (Cox and Lamming, 1979), it is argued that the popularity of a particular
‘theoretical school’ could be plotted on a time-line. The time-line can be perceived as
a historical development model (Figure 2.11) reflecting the existing development
models discussed above.
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Figure 2.11: Time-line of Purchasing’s strategic objectives.
That said, it is argued that taking the time-line as an illustration, and accepting Hines
(1996) view that few organisations are pursuing objectives beyond those of the
Classic school, then, it could be inferred that for the majority of local authorities, the
pursuit of a ‘higher level’ of objectives would in itself improve contribution given the
caveat that such objectives are consistent with the over-aching strategic objectives of
the council.
Accepting the implication that change is intrinsic to improving the strategic
contribution of local government Purchasing, a review of the literature on change
management was carried out. The change management literature suggests that a
council seeking to improve the strategic contribution of Purchasing must recognise
that a critical element is aligning change with wider objectives of the organisation.
This is a recurring theme within the wider investigation, not only has it been
identified within the literature on change (for example, Bechtel and Squires, 2001),
but it was also discussed in section 2.3.2 with reference to purchasing strategy (for
example, Porter, 1996; Virolainen, 1998; Cavinato, 1999), and more specifically,
Cousins (1999a).
The need for a political mandate suggested that a Purchasing Strategy is
important (Worral, et al., 1998). The change management literature highlighted the
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Strategic contribution
of Purchasing
1970s 1980s 1990s 2000s
Classic
Security of supply
Cost Reduction
CQID
Contingency
Make/Buy
need for an ‘over-arching’ plan, which sets out the direction the change intends to
take the organisation in. While such a plan has been identified as a critical success
factor in change (for example, Lewin, 1938 and 1951; Moran and Avergun, 1997;
Bechtel and Squires, 2001) it was also identified in the context of Purchasing Strategy
(Steele and Court, 1996, p. 13); the suggestion therefore is that an effective
Purchasing Strategy is required, written by practitioners, that should embrace issues
of change management.
Johnson and Scholes (1993, pp. 398-401) suggest that a further effective
change managment tool is the identification of critical success factors and the
incorporation of those factors within a performance management system. Such a
system then acts to reinforce the desired change. In addition effective performance
measurement helps both the organisation and the individual understand what is
involved (Moran and Avergun, 1997). The issue of effective, ‘measuring the correct
things’, Purchasing performance measurements was also alluded to within the
purchasing literature (Spekman, et al., 1994; Leenders, 1998; White and Hammer-
Llyod, 1999). The implication would therefore be that if Purchasing wants to
improve its strategic contribution there should be performance management systems
in place which reflect effectiveness and issues of concern to senior managers.
The Purchasing strategic development models reflect an evolutionary,
incremental process (Saunders, 1994, p. 115) while the change management literature
recognises two contrasting strategies, incremental or transformational change. Given
that local government would rarely be faced with a crisis justifying ‘transformational
change’, that incremental change has a major benefit in that it provides an opportunity
to build on existing skills, routines and beliefs and is therefore more likely to win
commitment within the organisation, it can be inferred that when seeking to improve
the contribution local government Purchasing an incremental change management
approach to should be adopted.
It was recognised that a change agent will be required, ideally the change
should have a senior level champion (Gershon, 1998) but for most local authorities it
may be that the full potential of Purchasing to improve its contribution will not have
been recognised. Therefore it may well be the case, as suggested to by Hughes, et al.,
(1998, p. 141), that the change may need to be driven by Purchasing practitioners
themselves primarily through educating the rest of the council as to Purchasing’s
actual and potential contribution (Cavinato, 1999).
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In summary it is therefore possible to present a theoretical prescriptive model
(Figure 2.12) of a number of constituent parts which are required to improve the
strategic contribution of local government Purchasing:
1. Ensure strategic alignment within the objectives of the council
2. Practitioners should lead the repositioning of Purchasing as a strategic
function and educate those within the council as to Purchasing’s potential
contribution
3. Adopt staged incremental approach to change in objectives
i. Clerical/Passive
ii. Independent
iii. Supportive
iv. Integrative
4. Develop a strategically aligned Purchasing Strategy, authored by practitioners,
which sets out Purchasing’s programme for contributing to the councils
objectives, embraces change management and has Member ownership.
5. Utilise strategically aligned Purchasing performance measures.
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Figure 2.12: Theoretical model for improving the strategic contribution of local government Purchasing
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3 RESEARCH METHODOLOGY
3.1 INTRODUCTION
The literature review set the foundation for the investigation, highlighting an absence
of research on local government Purchasing and specifically how its strategic
contribution could be improved. On that basis the investigation sought to answer one
primary question:
Research Question 1: ‘Could local government Purchasing improve its strategic
contribution, and if so, how?’
Arising from the literature are a number of secondary research questions:
Research Question 2: Are Purchasing objectives aligned with the objectives of the
council?
Research Question 3: Are strategically aligned Purchasing Strategies in place?
Research Question 4: Are the existing models of evolutionary development
applicable to local government?
Research Question 5: Are strategically aligned Purchasing performance measures
utilised?
Research Question 6: Within councils, who leads the repositioning of Purchasing?
This chapter provides an explanation of how the answers to those questions were
sought and the justification for the approach taken.
The chapter first classifies the purpose of the research. Philosophical
paradigms are discussed and the ontological assumption set out. The chapter then sets
out the investigative techniques used and the rationale for their selection.
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3.2 RESEARCH AGENDA
3.2.1 Purpose
Four different purposes for research may be identified (Hussey and Hussey, 1997, pp.
10-11), each probing progressively deeper, namely, exploratory, descriptive,
analytical or explanatory, and predictive. Identifying the purpose assists in
determining which specific research methodology best fits the investigation.
Exploratory research
Exploratory research is useful when there is an absence of prior research. The
research does not start with ‘a blank sheet of paper’ but instead considers the
appropriateness of existing theories and their applicability to the problem under
investigation. In the context of this investigation the literature review served as an
appropriate means of identifying existing theories. Exploratory research is rarely
conclusive; through considering patterns, ideas or hypotheses rather than testing or
confirming a hypothesis it provides insights suitable for subsequent more rigorous
investigation (Phillips and Pugh, 1994, p. 51; Babbie, 1995, pp. 84-85; Hussey and
Hussey, 1997, p. 10).
In the absence of existing key variables inductive logic is considered more
appropriate than deductive reasoning. An inductive logic (Geisler and Feinberg,
1987, pp. 44-45; Geisler and Brooks, 1990, pp. 149-179) has as its foundation an
analysis of empirical research upon which a theory is built (Geisler and Feinberg,
1987, pp. 43-44; Geisler and Brooks, 1990, pp. 133-148; Strauss and Corbin, 1990, p.
30).
Deductive logic starts with the cause and reasons to the effect, while inductive logic starts with the effects and attempts to find the cause. That is why deductive reasoning is called a priori (prior to looking at the facts) and inductive reasoning is called a posteriori (after seeing the evidence) (Geisler and Brooks, 1990, p. 23).
A mix of qualitative and quantitative techniques may be used, although those
typically utilised are case studies, observation and historical analysis (Babbie, 1995,
pp. 84-85; Hussey and Hussey, 1997, p. 10).
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Descriptive research
Descriptive research is used to describe situations and to identify information on the
characteristics of a problem (Babbie, 1995, p. 85; Hussey and Hussey, 1997, p. 10). It
differs from exploratory research not only in depth but also insofar as it sets out to
specifically ascertain and describe pertinent issues (Hussey and Hussey, 1997, p. 11).
Quantitative and statistical techniques are generally used.
Analytical or explanatory research
Analytical or explanatory research is aimed at analysing and explaining ‘why’ and
‘how’ issues. It is concerned with discovering and measuring causal relations,
sometimes through controlling variables, to identify causal linkages. It seeks to
deliver a causal explanation for what is happening (Hussey and Hussey, 1997, p. 11)
and is likely to utilise quantitative data.
Predictive research
Predictive research takes a further step beyond explanatory research and predicts the
likelihood of a similar situation occurring elsewhere. Those predictions are based on
hypothesised general relationships, not only of ‘how’ and ‘why’ but also ‘where’.
The approach is beneficial when trying to generate ‘what if’ questions (Hussey and
Hussey, 1997, p. 11).
Review of research purpose
The literature review highlighted the absence of a body of knowledge on local
government purchasing. While the investigation as a whole is concerned with
exploring how local government Purchasing could improve its strategic contribution,
in parallel it accesses the appropriateness of existing models. This investigation is
therefore exploratory in nature; it is concerned with tackling a ‘new’ issue. It was not
therefore considered appropriate to provide a hypothesis for testing or confirmation.
The exploratory nature of the research had an impact on the research methods
adopted, as it also coloured the choice of methodology and techniques, tending more
towards a phenomenological paradigm, using inductive logic and an iterative style of
development, gaining insights as opposed to providing definitive answers. An
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iterative approach enables each phase of the research to build upon the knowledge
developed from the preceding stage (Drongelen, 2001).
3.2.2 Analytical framework
This investigation seeks to identify how the strategic contribution of local government
Purchasing could be improved (Research Question 1). The literature review provided
suggestions as to what the typical objectives of a local council might be although it
also highlighted a need to be cautious of generalising as, by their very nature, local
councils reflect diversity through differing local priorities (Stewart, 2000; DTLR,
2001, para. 2.10). Furthermore the literature review made it possible to develop a
prescriptive theoretical model of constituent stages which are required to improve the
strategic contribution of local government Purchasing, namely:
1. Ensure strategic alignment with the objectives of the council
2. Practitioners should lead the repositioning of Purchasing as a strategic function
and educate those within the council as to Purchasing’s potential contribution
3. Adopt a staged incremental approach to change in objectives
i. Clerical/Passive
ii. Independent
iii. Supportive
iv. Strategic.
4. Develop a strategically aligned Purchasing Strategy, authored by practitioners,
which sets out Purchasing’s programme for contributing to the councils
objectives, embraces change management and has Member ownership.
5. Utilise strategically aligned Purchasing performance measures.
The analytical framework provides a structure for the investigation and for
establishing whether or not the theoretical model is applicable in local government
leading to the further development of a strategic purchasing alignment model as a
result of the empirical investigation.
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Theoretically the starting point for the investigation is an assumption that local
government Purchasing is positioned as a clerical function, Hines (1996) argued that
this is typical of 80% of the profession. A critical step forward from that position is
alignment with the strategic objectives of the council (Research Question 2). The first
phase of the investigation was therefore to generalise on the strategic objectives of
U.K. local councils and identify the potential for a contribution from Purchasing –
which set the foundation for the subsequent research. Investigative techniques
utilised initially to identify the strategic objectives of councils were documentary
analysis, both of N.I. council corporate strategies and Belfast City Council, and a
subsequent tri-partite postal survey. The later in-depth single case study of Belfast
City Council and mini-case studies assist in verifying those findings.
The literature suggests that in order to improve Purchasing’s strategic
contribution there should be a documented aligned Purchasing Strategy. The presence
and significance of documented and aligned Purchasing Strategies (Research 3) is
therefore considered through the tripartite survey, the in-depth single case study and
the mini-case studies.
A common theme from the literature is that an incremental and evolutionary
approach is likely to be necessary in repositioning Purchasing (Reck and Long, 1998;
Cammish and Keough, 1991; Syson, 1999). The stages of progress are typified as
progressing from a clerical stage, through a commercial stage delivering cost
reductions and being involved in cross-functional teams, to a third strategic stage
when Purchasing professionals are recognised as making a valuable contribution to
wider discussions including the ‘make or buy’ decision. The evolutionary journey is
central to the investigation and was investigated through both the in-depth single case
study of Belfast City Council and mini-case studies (Research Question 4).
Change management tools implied from the literature review in improving
Purchasing’s strategic contribution include alignment of Purchasing Strategy and
performance measures. The case studies and surveys sought to establish whether
aligned Purchasing Strategies and performance indicators were present and their
criticality to improving contribution (Research Question 5).
The theoretical model suggests that evolutionary change may need to be led by
purchasing managers. The investigation sought to identify who are the change agents.
Investigative techniques deployed were both an in-depth single case study of Belfast
City Council and mini-case studies (Research Question 6).
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3.3 RESEARCH METHODOLOGY
3.3.1 Epistemological arguments and ontological approach
Epistemology is the branch of philosophy concerned with the nature and origin of
knowledge. It is concerned with how it is possible for people to know things and
more significantly how it is possible to know that a claim is justified (Geisler and
Feinberg, 1980, p. 19 and p. 33; Babbie, 1995, p. 18; Hussey and Hussey, 1997, p.
49). The epistemological assumption refers to a researcher’s assumption about the
relationship between the researcher and the subject matter being researched, and the
related impact on the validity of knowledge (Hussey and Hussey, 1997, p. 76).
There are two basic paradigms or philosophical methodologies, namely,
‘positivism’ and ‘phenomenological’, although they are sometimes referred to simply
as ‘quantitative’ and ‘qualitative’ methodologies respectively (Hussey and Hussey,
1997, p. 47; Silverman, 2000, pp. 88-101). The paradigms should not be viewed as
two separate approaches but instead as two ends of a spectrum (illustrated in Tables
3.1 and 3.2) with considerable blurring in between the poles (Hussey and Hussey,
1997, p. 47):
Positivistic paradigm Phenomenological paradigm Tends to produce quantitative data Uses large samples Concerned with hypothesis testing Data is highly specific and precise The location is artificial Reliability is high Validity is low Generalises from sample to population
Tends to produce qualitative data Uses small samples Concerned with generating theories Data is rich and subjective The location is natural Reliability is low Validity is high Generalises from one setting to
anotherTable 3.1: Features of the two main paradigms (Source: Hussey and Hussey, 1997, p. 54)
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Quantitative research Qualitative research Its purpose is to explain social life Is nomothetic – interested in
establishing law-like statements, causes, consequences, etc.
Aims at theory testing Employs an objective approach Is etiological – interested in why things
happen Is ahistorical – interested in
explanations over space and time Is a closed approach - is strictly
planned Research process is determined prior
to contact with respondents Researcher is distant from respondent Uses a static and rigid approach Is particularistic – studies variables Places priority on studying differences
Employs high levels of measurement Employs a deductive approach
Its purpose is to understand social life Is idiographic – describes reality as it
is
Aims at theory building Employs a subjective approach Is interpretative – interested in how
things behave Is historical – interested in real cases
Is open and flexible in all aspects
Research process may be influenced by the respondent
Researcher is close to the respondent Uses a dynamic approach Studies whole units Places priority on studying both
similarities and differences Employs low levels of measurement Employs an inductive approach
Table 3.2: Comparing features of Qualitative and Quantitative research methodologies (Sarantakos, 1998, p. 55)
Positivistic paradigm
Positivism or quantitative research has its origin in the natural sciences and is based
on the assumption that the scientist can carry out an investigation in a detached
manner without influencing either the observation or the outcome; on that basis
society can be studied scientifically or objectively (Babbie, 1995, pp. 41-42; Hussey
and Hussey, 1997, pp. 51-52). Positivists hold that only what can be observed and
measured represents valid knowledge (Hussey and Hussey, 1997, p. 49). As an
epistemology, positivism is clear-cut; causal relationships can be revealed and
understood via event regularities (Ramsay, 1998, p. 430; Sayer, 2000, p. 13). A
positivist paradigm can therefore simplistically be characterised as that of ‘cause and
effect’. Bhasker (1975) and Sayer (2000, p. 15) contend that event regularities are
unique to ‘closed systems’; closed systems are self-contained, unaffected by external
influences - such systems rarely exist within the realm of social sciences. The social
sciences are therefore not the same as the natural sciences; they do not lend
themselves to the experimental conditions of the laboratory. Indeed, given the
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diversity of causes in the social world, an absence of regular associations should be
expected (Sayer, 2000, pp. 15-16). The paradigm also implies that those participating
in the research will have complete recall, completely understand the issues being
researched and be free from bias. Such rational behaviour is unlikely within social
sciences.
Ramsay (1998, p. 429) supports this view in suggesting that as far as
purchasing is concerned, the phenomena under investigation are made up of a number
of different components, including, physical structure, data storage and transmission
mechanisms, human beings and human interpretations; furthermore he holds the view
that very little empirical investigation into purchasing will be able to exclude the
human component entirely. Ramsay’s view therefore makes it difficult to see how a
positivist approach would be appropriate for this investigation.
That said, were a positivist paradigm adopted, it would commence with a
review of the literature, from which a theory or model is conceived and a hypothesis
constructed. The hypothesis is then tested through quantitative statistical analysis
(Hussey and Hussey, 1997, p. 55; Ramsay, 1998, p. 429).
Phenomenological paradigm
The alternative position to positivism, the phenomenological paradigm or qualitative
methodology, grew out of the criticisms of the positivist paradigm (Hussey and
Hussey, 1997, p. 52). The phenomenological paradigm holds the view, echoing that
of Sayer (2000), that social science research takes place within an ‘open system’ in
which it is impossible to separate the interrelationship of the investigator from what is
being investigated (Smith, 1983, p. 7). The phenomenological paradigm understands
reality from the perspective of the participant (Hussey and Hussey, 1997, p. 52).
In the ‘open systems’ of the social world, the same causal power can produce different outcomes, according to how conditions for closure are broken: for example, economic competition can prompt firms to restructure and innovate or to close. Sometimes, different causal mechanisms can produce the same result, for instance, you can lose your job for a variety of reasons (Sayer, 2000, p.15).
A phenomenological paradigm therefore focuses on the meaning rather than the
measurement of social phenomena and fully accepts that the research process will
have an influence on the subject of the research (Hussey and Hussey, 1997, p. 52).
Research using a phenomenological paradigm need not have an existing
theory or model; the investigation may be carried out to generate such a theory and/or
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hypothesis, or describe emerging patterns using qualitative data (Hussey and Hussey,
1997, p. 55; Ramsay, 1998, p. 429).
Chadwick, et al. (1984, pp. 214-215) have highlighted the strengths and
weaknesses of the methodology. In its favour the paradigm:
Seeks to achieve a deeper understanding of the researcher’s world
Is highly flexible
Presents a more realistic view of the world
Seeks to research people in their natural settings and as people (not as numbers or
figures)
Aims to study from the inside rather than the from the outside
Seeks to report back findings in a descriptive, verbal way, using the language of
the researched.
The main weakness is the danger of generating meaningless or misleading
information. There are issues, particularly when considering the use of in-depth case
studies and interviews, including the time-consuming and costly nature of the
methodology together with the associated ethical issues of trust – to gain insights it is
sometimes necessary to get side-by-side with the participant if not to become a
participant. By no means least, the methodology suffers from problems of reliability,
representativeness and generalisability. While Sayer (2000, p. 12) has highlighted
that “powers may exist unexercised, and hence that what has happened or been
known to have happened does not exhaust what could happen or have happened”.
Since this investigation is exploratory, no claims are made as to its
representativeness or indeed generalisability – it merely sets out to identify patterns of
how the strategic contribution of local government Purchasing has and could be
improved. In addition it assesses existing models (Reck and Long, 1988; Cammish
and Keough, 1991; Syson, 1992) and their applicability to the sector.
Ontological approach
Given that the positivist and phenomenological paradigms provide a platform for
establishing how knowledge is gained, they colour how research is carried out.
This investigation is exploratory; trying to establish what happens in the real
world and starts from an acknowledged position that little is known about local
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government purchasing. It is therefore necessary to piece together a picture of what is
perceived to be reality as opposed to starting with an accepted picture. A positivist
paradigm would not fit easily with such a position.
A positivist paradigm assumes that social phenomena ought to be quantifiable.
The open systems of the social world (Sayer, 2000) contradict the assumption that
two-dimensional quantifiable research can be achieved as the multiple variables could
not be isolated sufficiently. The phenomenological approach accepts such a position
and was therefore deemed appropriate for this investigation.
Furthermore the positivist paradigm assumes that research can be carried out
in a value free manner. By contrast in this investigation, the various actors can be
expected to have different motivations for both behaviour and responses. For
example, one council could been driven by a ‘can do’ and experimental culture, with
an opportunistic purchasing manager, while another council may be ‘risk averse’ or
indeed not even have considered the potential strategic contribution of Purchasing.
By its nature, in building up a picture of the potential contribution of local
government Purchasing there will be a high reliance on subjective opinions; equally it
is acknowledged that the interpretation of findings cannot be entirely free from the
researchers own perceptions.
In summary a phenomenological paradigm has been adopted for this
investigation as it:
1. Is an accepted approach for exploratory areas of enquiry
2. Offers the opportunity to ‘really understand’ the dynamics of what
happens in local government Purchasing
3. Is informed by theory but not constrained by it
4. Encourages reporting of findings using the language of the researched
5. Offers flexibility in research designs and methods.
Of particular relevance qualitative methodologies require that the researcher enters the
field without any preconceptions, hypothesis or knowledge of the research object and
that the researcher studies a single case in the first instance and the findings from that
case inform the expanded study for comparison and integration (Sarantakos, 1998, p.
12).
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3.4 INVESTIGATIVE APPROACH
3.4.1 Literature review
The investigation first considered, through literature, the strategic objectives of local
government, its raison d’être (Cox, 1997a, p. 55). This provided the context for later
work.
Having achieved this, it is then possible to specify the full range of operational tools and techniques which are potentially available to assist the company in developing its own unique migration path to where it needs to be in the future (Cox 1997a, p. 57).
Literature reviews have the advantage of not only being resource efficient but
also providing a speedy route to establishing the salient issues on a research matter
(Hakim, 1987, p. 17). Unfortunately literature reviews suffer from bounded
rationality (Jankowicz, 1995, p. 137) insofar as the investigation will only be able to
consider a limited selected sample of published work (Bell, 1993, pp. 38-38). A
further weakness of literature reviews is that the researcher may either consciously or
subconsciously selectively reject literature in trying to create what Cox (1997a, p. 57;
1997b, p. 324 and 1998, p. 142) has referred to as a ‘lawyers brief’, and Hakim (1987,
pp. 141-142) alludes to as focused sampling, that is, only reporting on the facts which
support the chosen posture of the researcher.
While no intentional restriction was placed on the literature reviewed and no
effort was taken to selectively report, that potential is acknowledged as a limitation on
the research. The wider empirical investigation should provide the necessary
safeguards to protect against that weakness.
3.4.2 Methods of data collection and triangulation
A range of qualitative research techniques were used in two discrete phases. The
range included documentary analysis, postal surveys, an in-depth single case-study,
and nine mini-case studies including semi-structured interviews. Each of the
techniques has its own strengths and weaknesses, but collectively they provide
‘methodological triangulation’ (Denzin, 1970; Smith, 1975, p. 290; Hakim, 1987, p.
144; Bell, 1993, p. 64; Kitchener, 1994; Babbie, 1995, p. 106; Jankowicz, 1995, p.
175). Triangulation involves the use of a variety of research methods in order to
provide mutual verification of findings or different perspectives.
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Ramsay (1999) argued, “the only guaranteed method of improving the
reliability of conclusions based on empirical research is to employ triangulation”.
The social world is so messy and the nature of social phenomena so multifaceted, that no approach can hope to capture the whole picture. Multiple methods and sources of data are required both because they allow for multiple checks upon their reliability and validity, and because they reveal differing aspects of social reality (Osborne, 1996, p. 14).
Blaikie (1988) highlighted the benefits of triangulation as:
It enables the researcher to obtain a variety of information on the same issue
The researcher can use the strengths of one method to overcome the limitations of
the other
The researcher has the potential to achieve a higher degree of reliability and
validity
The researcher can overcome the deficiencies of single-minded studies.
The investigation’s triangulation and investigative approach are illustrated
diagrammatically in Figure 3.1:
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Figure 3.1: Triangulation and the investigative approach
3.4.3 Documentary analysis
Documentary analysis is a resource efficient technique which utilises existing
documentation. The documents analysed have not been specifically developed for the
research and as such are secondary data (Hussey and Hussey, 1997, pp. 149-150).
Documentary analysis is a low cost technique and can be carried out comparatively
quickly.
On the negative side the researcher can be selective in the documents analysed
and therefore present a biased picture (Hakim, 1987, pp. 141-142). Equally, since
some of the documents may be prepared in the knowledge that they will be read by
those outside the organisation, there is a danger that the documents may not be
reliable, but instead put a ‘gloss’ on some of the less attractive perspectives. The final
limitation on the use of documentary analysis is that different authors may use the
same words but ascribe to them different meanings, this is particularly likely in a
developing field. For example, a Purchasing strategy could refer to a strategically
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aligned corporate document for improving purchasing activity across the organisation
or to an approach for carrying out a specific purchase.
Within a phenomenological investigation Sarantakos (1998, p. 275) suggests
documentary analysis can serve a number of purposes:
Ascertaining the main aspects of an issue
Questioning main ideas and thoughts on a subject
Helping to clarify the central components of the research problem
Investigating what has been said on a subject
Substantiating a line of thinking
Challenging or questioning thinking.
Within this investigation, as can be seen from the following overview, documentary
analysis was used for all of the above purposes.
Documents analysed at various stages of the investigation comprised:
Corporate Strategies of N.I. councils
Administrative documents of Belfast City Council
Belfast City Council Purchasing Strategy
Belfast City Council Minutes
Purchasing Strategies of the mini-case study councils
Analysis of N.I. Council Strategies
In the early stages of the investigation a telephone census request was made to the
twenty-six Northern Ireland local councils for copies of their published Corporate
Strategies. The telephone request provided the added benefit of being able to discuss
agreed themes of strategies, which although not yet published, were in the process of
development. This approach provided insights into the stated corporate objectives of
fourteen of the twenty-six N.I. councils and in a few cases the intended contribution
of Purchasing. As a result it was possible to validate some of the opinions formed
from the literature review.
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Search of Belfast City Council administrative documents
Following the analysis of N.I. Corporate Strategies, an examination of the published
administrative documents (Hakim, 1987, p. 44) relating to Belfast City Council was
carried out. That examination aimed to drill below surface level promotional
documents to the core working documents. In so doing it provided further validation
of the local government objectives identified during the literature review and the
analysis of Corporate Strategies. The analysis also provided a further opportunity to
probe the explicit perceived contribution of Purchasing in achieving the council’s
objectives.
Analysis of Belfast City Council Purchasing Strategy
The second phase of the investigation included a single in-depth case study of Belfast
City Council. Within that case study the objectives and performance measures set out
within the Purchasing Strategy were considered as they provided indications of the
planned contribution of the Council’s Purchasing function and purchasing process.
Analysis of Belfast City Council Minutes
While Belfast City Council Purchasing Strategy set out the aspired contribution of
Purchasing, a review of the Council Minutes during the period 1990 until 2000
facilitated a longitudinal study (Hussey and Hussey, 1997, pp. 62-63) as to whether
Purchasing was increasing its profile with elected members, the assumption being that
greater profile was perceived as a positive indicator. A contrary view could be taken
though that an increasing interest of elected members in a function could just as easily
indicate concern. One of the benefits of triangulation and the related verification of
the case study findings by the Chief Executive was that it was fair to draw a positive
conclusion.
Analysis of mini-case study councils’ Purchasing Strategies
The later stage of the investigation comprised mini-case studies of nine councils. Part
of that investigation included an analysis of the councils’ Purchasing Strategies.
Although all nine were invited to provide a copy of their Strategy only five were
actually received. Since the Purchasing Strategies were not fundamental to the
investigation, and owing to the parallel sensitivities of trying to maintain a
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constructive interview environment, it was not considered appropriate to place
additional demands on the interviewees for a copy of their Strategies. It was also felt
that if too much emphasis was placed on obtaining the document, interviewees may
have felt that they were being subjected to a form of test. The subsequent analysis
and pattern matching provided an opportunity to validate the parallel purchasing
manager interviews with regard to the aspired strategic contribution of Purchasing and
the performance measures used.
3.4.4 Postal surveys
A further research instrument used was postal surveys. Although surveys are
generally associated with a positivist paradigm (Hussey and Hussey, 1997, p. 62) they
are now recognised as one of the most popular methods of data collection in social
research (Hakim, 1987, p. 47).
Survey research is probably the best method available to the social scientist interested in collecting original data for describing a population too large to observe directly (Babbie 1995, p. 257).
Surveys can be used for exploratory, descriptive and explanatory purposes (Babbie,
1995, p. 257). Combined with the use of sampling techniques, postal surveys provide
an opportunity to draw conclusions from a sample of the population which should be
applicable to the population as a whole (Hakim, 1987, p. 47; Babbie, 1995, p. 257;
Hussey and Hussey, 1997, p. 64). Paradoxically one of the main advantages of survey
research is that it provides both a high level of transparency and confidentiality;
transparency in that it should be possible for others to review the approach and
findings and draw similar conclusions (Hakim, 1987, p. 48); confidentiality in that
respondents need not reveal their identity yet can still express their opinions (Babbie
1995, p. 277). A major justification for postal surveys though is the economy of time
and cost, a respondent’s opinion can be gained without the researcher having to be
physically present (Babbie 1995, p. 277).
On the negative side, postal surveys suffer from a number of weaknesses. By
its nature a questionnaire needs to be suitable for completion by respondents. This
creates a risk of standardising on the lowest common denominator and may lead to
missing an important issue which is relevant to the respondents (Babbie, 1995, p.
274). To protect against this it is useful to pilot the questionnaire and also provide
opportunities for the respondent to make additional options and enter free text. A
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second major weakness is that respondents may not have given thought previously to
the issue being investigated or may lack sufficient understanding of the issue to
respond effectively (Babbie, 1997, p. 274). As a result they may simply opt not to
return the questionnaire or alternatively answer in an unreliable way. A third
weakness, alluded to above, is that of gaining an adequate response rate to generate
reliable findings; to combat this it is necessary to make use of reminders and
incentives. Finally, there is a need to protect against the researcher creating leading
questions which in turn lead to biased responses. Steps taken to reduce the impact of
each of these weaknesses are considered below.
Postal surveys were utilised at each stage of the investigation and comprised
the following:
Tri-partite survey of U.K. council Leaders, Chief Executives and purchasing
managers
Belfast City Council Chief Officer (email) survey
Mini-case study Chief Executive survey.
Each of the different surveys had a specific purpose and was carried out at different
times, the details of which are outlined below.
Tripartite survey of U.K. councils The first survey took place at an early stage of the investigation and specifically set
out to:
Verify the objectives of local government identified in the previous research
(Research Questions 1 and 2)
Identify Purchasing’s perceived current and potential strategic contribution
and strategic alignment (Research Questions 1 and 2)
Establish the current strategic objectives of Purchasing (Research Question 1
and 2)
Identify the presence of Purchasing Strategies (Research Question 3)
Identify the current perceived ‘positioning’ of Purchasing (Research Question
1 and 4)
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Consider the appropriateness of the current performance indicators (Research
Question 5).
Establish who currently sets the strategic agenda for Purchasing (Research
Question 6)
This particular survey was truly exploratory and as such was used to tease out some of
the issues meriting further attention. As a result the questionnaire addressed a wide
range of issues, many of which subsequently proved irrelevant to the investigation;
such a risk is inherent in both exploratory research and a phenomenological paradigm.
A postal survey was selected primarily due to the anticipated low cost and the lack of
time required to gain a representative view from councils throughout the U.K. It was
considered critical early in the investigation to gain a representative view of councils
across the range of council types and also from the three key actors, namely, the
Leader from a political perspective, the Chief Executive as the head of paid service
and the purchasing manager as the professional representative.
A self-administered, postal questionnaire, with predominantly ‘closed-ended
questions’ (Appendix 1), was sent to a stratified, systematic random sample of local
council actors. The sample aimed, once again, to gain the benefits of triangulation
(Babbie, 1995, p. 106; Bell, 1993, p. 64; Hakim, 1987, p. 144, Jankowicz, 1995, p.
175), and a ‘multiple respondent approach’ (Stuart, 1996) to protect against
‘Purchasing practitioner bias’ through surveying the views, not only of purchasing
managers, but also other actors, in this instance, U.K. local council Leaders and Chief
Executives. The findings should therefore be particularly interesting since they go
some way towards Ellram and Carr’s (1994) suggestion that research would be of
benefit that compares Purchasing’s view of itself with that of top management. A
similar approach was later adopted by SOPO in 1999 in a census of English and
Welsh authorities; therefore some additional simple verification was possible. Other
simple verification was made possible with the findings of the DTLR/LGA
commissioned research carried out on English local authorities in 2000 (Birch, 2001).
‘Kemps Local Authority & Public Service Yearbook 1998’ was used as a
sampling frame. The ‘Yearbook’ is published annually and circulated, free of charge,
to local authorities. The ‘Yearbook’ lists and categorises each of the 470 individual
councils, namely, County Councils (35), English Unitary Authorities (63), London
Boroughs (33), Non-Metropolitan District Councils (259), Scottish Unitary Councils
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(29), Islands Councils (Scotland)(3), Welsh Unitary Authorities (22) and Northern
Ireland District Councils (26). The classification system on which the ‘Yearbook’ is
structured, is implicitly stratified and facilitated a systematic, random sample (Babbie,
1995, p. 212). Therefore it can be assumed to have made allowance for not only the
various political persuasions of councils throughout the land but also the full spectrum
of council types.
The survey was sent to each of the three actors in forty-seven councils,
(Population: 470; Sampling Interval: 10; Sampling Ratio 1:10). The Chief Executive
and purchasing manager received ‘personalised’ letters as they were named within the
‘Yearbook’.
While the covering letter specifically requested respondents to complete the
questionnaire independently, it was not possible to eliminate intra-council
collaboration. It is therefore acknowledged that a potential existed for councils to
present a view of consensus, when that may not in reality be the case.
A small number of additional questions (Numbers 18-23), regarding currently
utilised purchasing strategies, were addressed only to purchasing managers.
The questionnaire was designed to aid ease of completion through the use of
multiple choice questions, which also provided the opportunity for free text. This
‘ease of completion’ brought with it the risk of ‘leading’ respondents to potential
answers at the expense of those not listed, as a result some reliability may have been
sacrificed. To protect against this and provide validation, a placebo question (Babbie,
1995, p. 210) was included in those additional questions sent to purchasing managers.
The survey was constructed against the background of the preliminary
literature review and the documentary analysis of Northern Ireland council corporate
strategies. The questionnaire aimed to ease completion and thereby increase the
response level. On that basis it was decided to, insofar as was possible, provide
multiple-choice suggested answers as opposed to open questions. This approach also
lent itself to easier data entry and analysis.
Section 1 of the questionnaire aimed to establish the strategic context. A
number of goals, which were deducted from the literature review and analysis of
corporate strategies to be likely priorities, were listed. Conscious that other goals,
apart from those identified during the prior research, may be pursued by councils, the
questionnaire provided an opportunity for respondents to introduce additional goals to
the investigation – a number of respondents did subsequently identify additional
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goals. The survey did not seek to identify the priority allocated to the goals; it was
therefore decided not to use a scale but merely a ‘tick’ for responses and treat each
goal identified as having equal value. Section 1 did not seek to draw out the
connection between corporate goals and Purchasing’s objectives but was relevant to
answering Research Question 2.
Having set the strategic context in Section 1, and to assist in answering
Research Questions 1 and 2, Section 2 of the questionnaire, built upon the potential
contribution of Purchasing identified through the analysis of Northern Ireland council
strategies. It sought to identify not only a linkage between the corporate goals and
Purchasing’s contribution but also, more specifically, how it was intended that
contribution would be made.
Section 3 of the questionnaire sought to establish the level of parity
Purchasing had gained with other functions of the council in participating on cross-
functional teams in carrying out the requirements of the Best Value legislation. The
literature review had identified that participation on such teams could be a way in to
make a contribution to the strategic decision-making of the council. It was therefore
expected this section may have assisted in answering Research Question 1. A list of
functional experts was provided, based on anecdotal evidence, so that respondents
would be prompted to recall actual actors. An option was also provided for
respondents to add other actors.
Section 4 of the questionnaire sought to identify Purchasing’s perceived
strategic contribution (Research Question 1). The literature review suggested the
need for a Purchasing Strategy and on that basis respondents were asked whether such
a Strategy was in place (Research Question 3). Prompts were then provided so that
respondents could identify which actors (Research Question 6) set the objectives of
Purchasing – the purpose being to establish whether Purchasing set its own agenda or
whether others had a role. Building upon that, in the context of Research Question 2,
respondents were then asked to identify the primary objectives of Purchasing – no
prompts were provided. Questions 11 and 12 proved critical in answering Research
Questions 1 and 2. Both these questions employed the same list of prompts used
Section 1 to identify council’s goals but in these questions respondents were asked to
identify which of those goals Purchasing ‘could’ and ‘do’ contribute to respectively.
There was therefore a clear linkage between Section 1 and questions 11 and 12 of
Section 4. Building upon the perceived and potential strategic contribution of
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Purchasing identified in questions 11 and 12, and in answer to Research Question 5,
questions 22 and 23 sought to establish the related linkage with Purchasing
performance management. An open question was used for question 22 which merely
sought to identify the performance measures used. Question 23 aimed to pick up on
the measures identified in question 22 and extract the specific quantifiable targets
pertaining over the incoming five-year period.
Further questions (Questions 13-21) probed detail of specific Purchasing
tactics, for example, green purchasing, local sourcing, basis of contract awards, use of
portfolio analysis. It had been intended that the detail gained from those answers
would have provided pointers for improving Purchasing’s contribution (Research
Questions 2 and 3).
The findings from Sections 2, 3, and 4 (Questions 9, 10, and 13-21) of the
survey, although analysed, were not subsequently deemed relevant to the wider
investigation and were considered a distraction from the wider investigation’s
findings. Those findings are therefore not reported within the thesis.
The questionnaire was piloted on a sample of three Northern Ireland councils,
to ensure ‘fitness for purpose’ and suitability in extracting the required information.
The councils chosen for the pilot were selected on the basis that they were the only
three N.I. councils, apart from Belfast, known to have dedicated purchasing
professionals, that each of the purchasing managers were known personally to the
researcher and each of the purchasing managers had previously been engaged in post-
graduate research. It was therefore hoped the pilot councils would be sympathetic to
the research and at the same time the purchasing managers would be able to provide,
through subsequent follow-up telephone conversations, constructive feedback.
Of the three councils piloted none of the Leaders responded. From one of the
remaining councils neither the Chief Executive nor the purchasing manager
responded. In total therefore a response was received from both the Chief Executive
and the purchasing manager of two councils. The analysis of the pilot surveys
suggested that the questions had been properly understood, that it was easy to
complete the questionnaire, that responses were taken seriously in that it was possible
to detect that ‘ticking the boxes’ had not prevailed, the Chief Executives and
purchasing managers had not collaborated in the completion of the questionnaires and
that the responses were ‘fit for purpose’. A follow-up telephone conversation with the
two purchasing managers who had responded confirmed those conclusions. It was
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therefore not deemed necessary to alter the questionnaire format although a decision
was taken to colour-code the questionnaires to aid subsequent administration.
Recognising that the response rate to questionnaires is generally low (Babbie,
1995, pp. 255-264), the following incentives were introduced for the subsequent
survey:
A covering letter explaining the purpose and its potential use within the
requirements of the ‘Best Value regime’ (see Appendices 2-4)
A reply paid envelope
An option to ‘fax back’
An offer of the ‘Executive Summary’
An offer of acknowledgement in the final report.
Since the questionnaire was posted during the summer months, a five-week response
time was provided. In line with the recommendations of Babbie (1995, pp. 260-261),
two follow-up mailings were sent, the first immediately after the closing date
(Appendix 5) and the second two weeks later (Appendix 6). Each of the follow-up
mailings included a reminder letter, reply paid envelope and a copy of the
questionnaire. The first reminder provided an opportunity to discuss the rationale
and/or receive a paper referring to its rationale. Three respondents availed of this
option prior to completing the questionnaire.
A test for ‘non-respondent bias’ was carried out using the principles
established by Armstrong and Overton (1997). That test accepts that the last wave of
responses are much more characteristic of non-respondents than the first wave of
responses. Therefore, if there is a similarity between the first and last wave of
responses, it can be assumed that no ‘non-respondent bias’ exists.
Two further tests were carried out to establish the representativeness of the
Chief Executives’ responses, this being a critical group. The first test considered the
types of council the respondent Chief Executives represented. The second test
considered the political makeup of the councils from which Chief Executives
responded.
Detailed statistical analysis was not carried out, firstly, due to the qualitative
nature of the research; secondly, it would have suggested a higher level of reliability
than was considered possible from the responses; thirdly, the respondents ranked
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many options as opposed to just one which therefore led to non-standard distributions.
Equally, while the findings suggest that three different actors were responding, the
analysis does not necessarily reflect the fact that respondents were from the same
councils.
Belfast City Council Chief Officer (email) survey
A major constituent part of the investigation was an in-depth case study of Belfast
City Council. A component of that research was an email survey to the twenty-eight
Chief Officers of the Council. The purpose of the survey was to test empirically, in a
quick, low cost and confidential manner, whether Purchasing had made a recognised
contribution to specified objectives and whether the pursuit of those objectives had
made a ‘value added contribution’. The survey did not make use of either reminders
or follow-up emails as to do so may have compromised the anonymity considered
necessary to gain an unbiased view. A response rate of 32% was achieved, nine
responses out of a population of twenty-eight.
Mini-case study Chief Executive survey
Within the mini-case studies a questionnaire was sent to the Chief Executive of each
of the nine councils, after the practitioner interview. A personalised covering letter
(Appendix 12) was sent with the questionnaire (Appendix 13). The researcher at that
time was employed by a professional body that provided support to local councils, the
covering letter made use of their ‘brand’ and ‘integrity’ to encourage a response and
also explain the context of the research. A self-addressed envelope was provided and
a guarantee of anonymity promised. Reference was also made to parts of the research
previously published to demonstrate credibility. The use of a postal questionnaire
was significantly more cost effective than personal interviews.
The semi-structured nature of the questionnaire protected against leading
questions. Questionnaires were sent to each of the nine Chief Executives of whom six
replied - a response rate of 67%. A date was specified in each letter by which the
response was requested and a conscious decision was made not to send reminder
letters so as to avoid being perceived as a nuisance. Having said that, the covering
letter made specific reference to the small sample being invited to participate and the
dependence on support of the individual – it was hoped that the good will of the Chief
Executives would be sufficient to prompt reply.
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Within the questionnaires an option was provided to request copies of the
previously published parts of the research. In so doing it was hoped that Chief
Executives would perceive a benefit from participation and in parallel, that as a result
of dissemination, the research findings would be transferable to practice. Four of the
respondents (67%) availed of that option.
As with the tripartite questionnaires used earlier in the investigation the
findings should also be particularly interesting since they go some way towards
Ellram and Carr’s (1994) suggestion that research would be of benefit that compares
Purchasing’s view of itself with those of top management.
Pattern matching against the conceptual model and content analysis were used
to evaluate the replies together with simple cross comparison with the practitioners’
interview responses.
3.4.5 Single in-depth case study
A core research instrument used was a descriptive chronological case study (Yin,
1994, p. 16), focused on Belfast City Council, to establish how one council had
improved the strategic contribution of Purchasing. The case study was used as an
instrument to answer all six of the research questions.
Case studies are considered “the preferred strategy when ‘how’ and ‘why’
questions are to be asked… and when the focus is on a contemporary phenomena
within some real-life context” (Yin, 1994, p. 1 and p. 13) though, as a research
approach they are not without criticism.
The first criticism is that the researcher has allowed a bias to influence the
direction of the study (Yin, 1994, p. 9). This criticism was particularly relevant to the
investigation since the active participant-observer (Yin, 1994, pp. 87-89) approach
was utilised. The researcher was at that time employed as purchasing manager in
Belfast City Council. To protect against that risk, critique was sought from a number
of those familiar with the case, namely, the Chief Executive, Environment Strategy
Manager, a Policy Analyst, the former Head of Economic Development, and each
member of the Procurement Unit staff: all of whom concurred with the narrative.
Further, publicly available records were used to verify the evidence and associates
were invited to present rival theories on the outcomes achieved. Further independent
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verification was gained through the use of an email questionnaire to Chief Officers
and an analysis of Council Minutes (discussed above).
A second criticism is that case studies provide little basis for scientific
generalisation (Yin, 1994, p. 10). Therefore case studies, like experiments, are
generalisable only to the theoretical proposition and not to populations or universes
(Yin, 1994, p. 10). That said, the case study was explorative (Babbie, 1995, pp. 84-
86) and the themes identified were to be tested against both those of the literature
review and at a later stage against the research findings from subsequent mini-case
studies.
The third criticism relates to the generalisation that case studies take too long
and result in a mass of unreadable documents (Yin, 1994, p. 10). The constraints of
available time, data and access meant that the case study only considered actions from
1994 (when Belfast City Council first set out to develop a Purchasing Strategy), until
December 2000. With regard to readability, reference is only made to the key actions
and their outputs within the main report, supporting data being obtained in
Appendices 7 to 10.
Yin (1994, p. 20) holds the view that case studies have five components:
1. A studies operation
2. Its propositions, if any,
3. Its unit(s) of analysis
4. The logic linking the data to the propositions, and
5. The criteria for interpreting the findings.
It is the opinion of Yin (1994, p. 7) that one of the most important steps to be taken in
a research study is that of defining the research questions. Setting out on an
investigation without such clarity is likely to lead to sub-optimal results. The
overarching research question asked throughout the case study was: ‘Had Purchasing
improved its strategic contribution, and if so, how?’ The Analytical Framework set
out previously (Figure 2.12) was once again used.
The unit of analysis was primarily a single embedded case study (Yin, 1994,
pp. 41-44) of Belfast City Council. Belfast City Council was chosen as the case study
organisation for a variety of reasons:
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1. As Purchasing/Procurement Manager during the period of the investigation and
having been involved with the Council’s Purchasing for a considerable number of
years unique access to information was available
2. The earlier analysis of administrative documents (discussed above) indicated an
alignment with the emerging new objectives of local government
1. The Council had adopted a Purchasing Strategy in 1996 which had sought strategic
alignment and therefore had a history of seeking to align Purchasing with corporate
objectives.
2. The Council’s Purchasing had been identified as best practice in a number of the
areas of interest and therefore represents a ‘critical case’ (Yin, 1994, p. 38).
Time and cost considerations prohibited the potential of multiple case studies (Yin,
1994, p. 51).
Four tests can be used to establish the quality of any empirical research (Yin,
1994, pp. 32-33):
Construct validity
Internal validity
External validity
Reliability.
Construct validity (Yin, 1994, pp. 33-35) seeks to establish that the correct
operational measures are being used. To demonstrate construct validity specific
objectives to be achieved were identified through both the research questions and the
analytical model and clear evidence of the results presented.
Internal validity (Yin, 1994, p. 35) concerns itself as to whether or not there
could be alternative (rival) explanations for the outcomes achieved. As discussed
above, the fundamental aim of the case study was to establish how strategic
contribution could be improved. To guard against the potential bias of an active
participant-observer, critical peer review was sought and achieved of the explanation
reported through presentation of the findings at the 10th Annual International
Purchasing and Supply and Education and Research Association (IPSERA)
Conference, and subsequent publication of the case study in the International Journal
of Public Sector Management (Murray, 2002).
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The question of whether the study’s findings can be generalisable beyond the
host organisation, is the focus of external validity (Yin, 1994, pp. 35-36). In itself,
the conclusions developed through the case study are only valid for Belfast City
Council. However, later interviews with those responsible for Purchasing in other
councils sought to establish the validity of the findings for external generalisation.
The concept of reliability (Yin, 1994, pp. 36-38) has been discussed above in
relation to the previous research phases. In a case study context, it relates to the
ability of other researchers to repeat the same case study investigation and come to the
same findings and conclusions. To facilitate such a test clear documentary evidence
and sources are presented.
3.4.6 Mini case studies including semi-structured interviews
As alluded to above, the in-depth case study of Belfast City Council was unique to
that setting. To satisfy the ability for the findings to be externally generalisable,
focused mini-case study interviews (Yin, 1994, pp. 84-86) were used. The mini-case
studies sought to supplement the findings from the in-depth case study of Belfast City
Council through gaining the views of other councils on improving Purchasing’s
strategic contribution. Three investigative strategies were pursued. The first, in-depth
semi-structured interviews with purchasing managers, the second, was an analysis of
the Purchasing Strategy (discussed above) provided by a number of the interviewees;
and the third stage, was a postal survey of the respective Chief Executives utilising a
semi-structured questionnaire (discussed above).
The mini case studies as a whole were analysed utilising ‘pattern matching’
(Yin, 1994, p. 106). Pattern matching compared the conclusions from the Belfast City
Council case study with the empirical findings. A match between the two suggests
internal validity (Yin, 1994, p. 106). Content analysis, while traditionally used in the
analysis of documents, can also be utilised with interview transcripts. By its nature
the process is highly subjective, particularly in how categories are allocated, and
could lead to criticism of bias. However, to protect against that criticism the report
includes verbatim examples of the categorisation. While peer review of that data may
have provided more rigour, the review of more than twenty hours of taped interviews
for comparison was just not considered feasible.
The selection of cases was based on a purposive sample of local councils:
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Purposive sampling is a type of non-probability sampling method in which the researcher uses his or her own judgement in the selection of sample members. It is sometimes called a judgemental sample (Babbie, 1995, p. 227).
Purposive sampling involves choosing people whose views are relevant to an issue because you make a judgement, and/or your collaborators persuade you that their views are particularly worth obtaining and typify important varieties of viewpoint (Jankowicz, 1995, p. 157).
The sample comprised a number of councils who had either:
Been cited elsewhere as exemplifying good purchasing practice
Previously contacted the researcher to obtain information on specific aspects
of local government Purchasing, or
Were known to be actively involved in the wider development of local
government Purchasing.
Interviews were arranged with nine purchasing managers over a seven month period.
Triangulation was sought through the use of an open-ended questionnaire sent to the
Chief Executive of each of the councils and a parallel analysis of those Purchasing
Strategies made available. It is fully acknowledged that the sample is not
representative of local government in general, their purpose within the investigation
was to supplement the findings of the in-depth case study and add a wider
perspective.
Open-ended, semi-structured interviews (Yin, 1994, p. 84) sought to establish
steps taken to improve the strategic contribution of Purchasing
Eighteen councils were invited to participate. Four did not reply to the
invitation to participate; five were sympathetic but had insufficient time to assist.
Nine councils therefore participated. When requesting an interview a copy of the
proposed semi-structured interview questions was provided (Appendix 11). This
enabled the interviewees not only to reassure themselves as to the content but also as
one interviewee stated: made him think about some issues not previously considered.
Acknowledging that tape-recorded interviews provide the most accurate
rendition (Yin, 1994, p. 86), prior to commencement of the interview permission was
gained for it to be taped. An assurance was given that no confidential information
was being sought, that interviewees should feel free to ignore any questions they felt
uncomfortable with, that they would be provided with notes of the interview content
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for verification of the interview and that their responses would remain anonymous. It
was considered essential to provide such assurances in order to gain the trust of the
interviewees and encourage them to be more open (Healey and Rawlinson, 1994, p.
137). Further, in order to encourage a relaxed atmosphere and acknowledge the
contribution, the interviews were held at a variety of settings ranging from the
interviewees’ offices to over lunch in public restaurants. Further, with the tape
recorder running an informal chat was embarked upon prior to the more focused
interview questions with a view to ‘easing the atmosphere’ – it was obvious that a
number of the interviewees initially found it difficult to relax. The semi-structured
nature of the interviews proved invaluable for providing the richness of information
facilitated through probing.
Along with the interview notes a short ‘thank you’ was sent acknowledging
the contribution.
It is acknowledged that the mini case studies can suffer from the following
weaknesses (Yin, 1994, p. 80):
Bias due to poorly constructed questions
Response bias
Inaccuracies due to poor recall
Reflexivity - interviewee gives what interviewer wants to hear.
Caution was therefore exercised in accepting at face value what was said and
corroborative evidence sought, for example, detail on the Purchasing Strategy (when
obtained). Further testing took place through the semi-structured postal
questionnaires which were subsequently sent to the Chief Executives of each of the
respective councils.
The semi-structured interviews proved to be resource intensive, significantly
time consuming and costly. For example, excluding time travelling to the interviews
it generally took three to four times as long to transcribe the interview than to carry it
out.
A major risk, which required significant discipline to protect against, was the
temptation of putting words into interviewees’ mouths – this required considerable
‘tongue biting’ with those who tended to stray off the point, missed the key emphasis
of the question, or were slow in making their point.
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3.5 SUMMARY OF LIMITATIONS
This section comments on the research methodology and its limitations.
3.5.1 The phenomenological methodology
The phenomenological methodology adopted acknowledges that the investigation is
carried out within an ‘open system’ in which neither the researcher nor the researched
are free from external influence. Equally the subjective nature of the investigation
acts as a major limitation. Firstly, the literature and documentation considered cannot
be accepted as comprehensive as other relevant literature may have escaped the
attention of the researcher, nor can the conclusions drawn from the literature and
documentation be considered free from sub-conscious researcher bias. Secondly,
survey and case study respondents may not have full or objective recall of the
circumstances on which they were probed nor indeed can it be assumed that they fully
understood the terminology or issues being investigated.
3.5.2 Unreliability of documents
The investigation made extensive use of publicly available documentation. It is
acknowledged that those documents may have been unreliable. Equally so, it is
possible that a number of the publicly available documents may not have presented a
true picture of the councils’ Purchasing but in many circumstances reflected
‘intended’ strategy as opposed to ‘realised’ strategy.
3.5.3 Size of the sample
The investigation comprised a number of surveys that used restricted sized samples.
The initial pilot postal survey of U.K. council leaders, Chief Executives and
purchasing managers utilised a sampling ratio of 1:10 on a sampling frame of 470
councils. While the sampling frame was stratified and this led to a systematic random
sample being drawn, the number of councils contacted only amounted to 47, even
though in each of those councils three key players received the questionnaire. Given
no constraints on time and cost it may have been beneficial to have used a ratio of 1:5,
which would have doubled those contacted but not necessarily the responses or
reliability. As it was the percentage of responses from each of the actors was 34% of
Leaders of Council, 53% of Chief Executives and 36% of purchasing managers.
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Tests for non-respondent bias and representativeness were carried out. On that basis
the sample was of sufficient size for the subsequent analysis.
The number of mini-cases carried out was restricted to nine although eighteen
were invited to participate. The logistics and time involved, for a part-time
researcher, in carrying out the nine interviews proved to be enormous. Indeed, taking
into consideration the purpose of the interviews, it may well have been sufficient to
have restricted the investigation to five mini-case studies paralleled with a postal
survey to a wider range of councils. However, the quality of interview material
obtained was sufficient to justify the nine interviews. Time and cost restrictions
meant that it just was not feasible to carry out an additional postal survey.
3.5.4 Collusion within councils in responding to surveys
The tripartite postal survey and the survey of Chief Executives carried out during the
mini-case studies both sought to obtain an independent view of Purchasing’s
contribution. While the evidence appeared to suggest that no collusion took place
within the councils, it is possible that the various actors conspired to present a unified
picture of the council and therefore distort the findings.
3.5.5 The mini-case studies are atypical
It was acknowledged from the outset that the purposive sample of mini-case studies
would be focussed on ‘leading edge councils’. To have targeted a random sample
would have added little to the investigation, particularly when the objective of the
interviews was to establish their experience of improving Purchasing’s contribution .
3.5.6 Use of prompts in both the pilot survey and the interviews
The key criticism of the research methodology may be the use of multiple-choice
questions in the pilot survey and prompts in the semi-structured interviews. In both
those circumstances it could be that they acted as leading questions, directing the
respondents to the answers the researcher sought.
In the tripartite postal survey that criticism seems unmerited insofar as none of
the respondent purchasing managers incorrectly answered the placebo question. This
would indicate that the responses from purchasing managers were approached in a
conscientious manner. Equally, since few of the respondents ‘ticked’ all answers
within a range of options, that was accepted as an indication that the responses are
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reliable. Perhaps the most telling argument in defence of the questions used was that
the respondents were mostly critical of themselves – not something one would expect
from leading questions. The practicalities for analysis of using open-ended questions
also weighted against their use.
With regard to the prompts used in the semi-structured interviews, since these
were used at the latter end of the interviews, they were triangulated against
documented Purchasing Strategy content and if prone to exaggeration, would have
contradicted the preceding answers.
3.5.7 The validity of the in-depth case study
As the researcher was an active participant-observer in the Belfast City Council case
study there was a high risk of researcher bias. To provide the necessary ‘internal
validity’, the Chief Executive, the former Head of Economic Development,
Environment Strategy Manager, a Policy Analyst, and each of the Procurement Unit
staff were provided with a draft of the chapter and asked to suggest alternative (rival)
explanations. Since the draft was provided after the researchers’ resignation from the
Council, there was little to be gained by those asked to critique the draft from not
being frank. Equally, since all of the commentators knew the paper was to be
published, that in itself went some way to protect the validity of the research.
3.5.8 Confusion of definitions
The literature review identified the potential confusion regarding what precisely is
meant by a Purchasing Strategy. It cannot therefore be assumed during this research
that when local government practitioners or indeed Chief Executives, refer to their
Purchasing Strategy they are talking about the same thing.
3.5.9 The passage of time
It was inevitable that over a six-year investigation changes would occur in phenomena
under observation. Little could be done to compress the research and given the
resources it would have been beneficial to have carried out parallel longitudinal case-
studies in a number of councils. Such an attractive proposition is for others to pursue
and hopefully this investigation will prove to be of their benefit.
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3.6 CONCLUSION
This chapter has categorised the investigation as exploratory. An analytical
framework has been set out which will guide the investigation. Research paradigms
have been discussed and justification provided for accepting a phenomenological
paradigm. The rationale for adopting the phenomenological paradigm is that it is an
accepted approach for exploratory areas of enquiry, offers the opportunity to ‘really
understand’ the dynamics of what happens in local government Purchasing, is
informed by theory but not constrained by it, encourages reporting of findings using
the language of the researched and offers flexibility in research designs and methods.
The chapter continued by providing an overview of the investigative
techniques used, including documentary analysis, postal surveys, an in-depth case
study and mini-case studies.
The following chapters explain the use of the framework and methodology to
explore how the strategic contribution of local government Purchasing could be
improved.
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4 ANALYSIS OF NORTHERN IRELAND COUNCIL CORPORATE STRATEGIES
4.1 INTRODUCTION
The theoretical model suggested that if Purchasing is to improve its strategic
contribution it should ensure strategic alignment and develop a Purchasing Strategy
which sets out how Purchasing will contribute to the objectives of the council. With
that foundation in mind, the first empirical investigation aimed to set the context of
local government Purchasing through a preliminary identification of the published
Northern Ireland district council strategic objectives and, in a few cases, the proposed
contribution of Purchasing in achieving those objectives.
4.2 METHODOLOGY
A documentary analysis was carried out on the published Corporate Strategies of
Northern Ireland councils. In the event of Strategies being in the process of
development, a telephone interview was carried out with the ‘tasked officer’ to
identify currently agreed themes, if any.
Of the twenty-six local councils in Northern Ireland, twelve had published
Strategies or similar documents outlining their raison d’être by January 1998. Nine
councils were in the process of developing Strategies of which only two were willing
to participate in an interview focusing on the identified objectives. The publication
dates of the Strategies spanned a period from 1992 until 1997. It can be assumed,
during that period, that councils would have been exposed to new external
environmental pressures. However the analysis was still considered a reliable
indicator of the objectives of local government in Northern Ireland. Common themes
were taken as those pursued by more than 50% of those councils who provided
information on their Strategies. As a result the analysis focused on the areas of
consensus within councils as opposed to the level of diversity.
Although there is a danger of reading too much into what could be described
as ‘glossy marketing publications’, that risk was considered worth taking since the
Strategies provided a statement to the electorate, against which the Council could
subsequently be judged.
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A second weakness recognised in the research is, since no standard format has
been adopted and no code exists which sets out the level of detail required, there is a
danger of assuming that, for example, Purchasing’s contribution is not recognised,
when in reality it may have been recognised, but was not stated at the level published.
These weaknesses need not overly affect the validity of the research findings
since the concern was with the stated objectives.
The analysis therefore assists answer the following research question:
Research Question 1: ‘Could local government Purchasing improve its strategic
contribution, and if so, how?’
4.3 ANALYSIS
Table 4.1 provides an overview of the analysis.
Goal/Council A B C D E F G H I J K L M NLocal economic development Tourism Environment Customer focus in service delivery Political advocacy Quality Staff development Profile promotion Local Agenda 21 Quality of life Innovation Recreation & leisure CCT ‘in house’ retention of contracts Community development Culture Financial management ‘open government’ Management systems Civic pride Reducing ‘Rate dependency’ through funding sourcing/exploitation
Roads infrastructure Internal communication
Table 4.1: The strategic objectives of the Northern Ireland local councils.
The analysis suggests, in descending order of frequency, that the following are
objectives of local government in Northern Ireland:
Local economic development
Tourism
Environment
Customer focus in service delivery
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Political advocacy
Quality
Staff development
Profile promotion.
Obviously other objectives identified are peculiar to the needs of specific councils,
but this was not considered a major concern since it reflects the expected diversity.
4.3.1 Explicit references to Purchasing’s strategic contribution
In four cases explicit reference was made to how Purchasing would contribute to the
corporate objectives of the councils, those are considered below.
Local economic development
Belfast City Council identified that Purchasing could contribute to the achievement of
local economic development objectives. Strabane District Council (1997) intended to
“Maximise the extent of Local Sourcing by Strabane district companies” but did not
state whether it was its own intention to source locally.
Environment
Three councils recognised Purchasing had a potential contribution to make towards
the achievement of environmental objectives. Belfast City Council were developing
an Environmental Purchasing Strategy, Banbridge District Council was developing a
“local sensitivity purchasing initiative”, and Newtownabbey Borough Council
intended to “Purchase goods and materials with environmental considerations in
mind”.
Quality
Although the literature review recognised that Purchasing has a contribution to make
in ensuring quality, none of the Strategies examined recognised the dependence on
suppliers if quality is to be delivered.
4.4 CONCLUSION
While the analysis of N.I. council Corporate Strategies was concerned with ‘scene
setting’, it revealed two important points. Firstly, there is a high level of consensus
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among the councils on strategic objectives although the objectives identified did not
replicate those objectives suggested as typical at the conclusion of the literature
review. Secondly, Purchasing was rarely identified within the Strategies as having a
potential contribution. Only four of the fourteen councils explicitly stated a potential
contribution from Purchasing and on those occasions it was in the achievement of
local economic development and environmental objectives.
It is also noteworthy that while the literature review identified quality as being
a traditional Purchasing objective, not one of the nine councils who stated quality was
one of their objectives, identified Purchasing as having a potential contribution to
make in the achievement of that objective.
In answer to the research question therefore the analysis suggests that local
government Purchasing could improve its strategic contribution if it pursued
objectives of local economic development, environment and quality.
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5 ANALYSIS OF BELFAST CITY COUNCIL DOCUMENTS
5.1 INTRODUCTION
The second empirical investigation built upon the documentary analysis of N.I.
council Corporate Strategies, it aimed to provide further verification of council
objectives and identify the explicitly stated expected contribution of Purchasing in the
achievement of those objectives. The analysis also provided a backdrop for the
subsequent case study of Belfast City Council Purchasing.
5.2 METHODOLOGY
A documentary analysis was carried out on publicly available administrative
documents relating to Belfast City Council. This broader scope provided an
opportunity to get ‘below the surface’ and helped establish the objectives of the major
N.I. council. The analysis therefore assists in answering the following research
questions:
Research Question 1: Could local government Purchasing improve its strategic
contribution, and if so, how?
Research Question 2: Are Purchasing objectives aligned with the objectives of the
council?
Research Question 3: Are strategically aligned Purchasing Strategies in place?
5.3 ORGANISATION
Belfast City Council is the largest of the 26 single-tier district councils in Northern
Ireland and has 51 elected members. The Council serves a population of 284,400,
manages an annual net expenditure of some £68m, operates from 102 locations and
employs some 2,336 people (Belfast City Council Corporate Plan: Year 3 update).
Belfast City Council was one of those councils whose Corporate Strategies
were reviewed and considered in Chapter 4.
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5.4 VISION AND STRATEGY
Belfast City Council first developed its approach to corporate management following
a major change management programme carried out during 1992 and 1993. One of
the outcomes of the change management programme was the need for a Corporate
Plan. As a result in 1993 the Council adopted its first Corporate Plan which identified
the following as ‘Key Issues’:
• Meeting the Competitive Challenge
• External relations
• Profile
• Environment and Health
• Customer Orientation
• Corporate Development
• Human Resources
• Organisational Development
• Information Systems.
That Corporate Plan was reviewed and in 1997 the Council adopted the following
Vision:
Belfast City Council’s aim is to provide effective civic leadership for the people of Belfast by providing beneficial services to local communities and by representing their best interests in consultation with other providers of public services. The City Council will work to ensure that Belfast, the major city of Northern Ireland, becomes safe, attractive, healthy, environmentally sustainable and economically viable and that the Council itself earns a reputation for fairness and efficiency (Belfast City Council, 1997).
That Vision was subsequently revised in April 1998 with the adoption of a new
Vision:
VISION STATEMENT
The City Council is committed to working for and encouraging the continuous improvement of the City so that all citizens can see Belfast becoming better.
VISION FOR THE CITY
The Council will, in the interests of the whole City, work to make Belfast a place:
Where there is effective civic leadership
Where customer focused Council services are provided for all
Where the views and concerns of all communities are sought and represented by the Council in its dealings with other bodies
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Which is attractive with a high standard of health, cleanliness and consumer safety
Where there is a vibrant economy with all development carried out on a sustainable basis.
CORPORATE VALUES
Belfast City Councillors and employees will endeavour to:
Act in a fair and equitable manner
Deliver customer focused, high quality services consistently, quickly and courteously. In 1995 Belfast City Council agreed an Economic Development Strategy to support its commitment to economic regeneration. A constituent part of that Strategy was that Belfast City Council would act as a role model and:...endeavour to play a pro-active role in promoting employment opportunities and good practice. This will be reflected its purchasing strategy... (Belfast City Council Economic Development Strategy 1995-2000, p13). In 1996 Belfast City Council developed an Environment Strategy, a central part of which was a green purchasing strand. The green purchasing strand aimed to complement the Economic Development Strategy through improving the competitiveness of local businesses by enhancing their environmental performance, and in turn reducing the adverse environmental impact of the Council’s supplies. The Council’s approach to green purchasing has been the focus of a number of studies and has been held up as best practice (Morton and Paul, 1998). During January 1996 the Department of the Environment published a discussion paper “The Belfast City Region, Towards and Beyond the Millennium”. In its response to that document Belfast City Council clarified some of it’s own opinions. Those views reflect the opinions of the two major decision- making groups within Belfast City Council, the elected members and senior officers. Articulating the views of the main political party groupings, i.e. SDLP, Ulster Unionists, DUP, Sinn Fein and Alliance: -VIEWS ON LONG TERM VISION FOR THE CITY... The vision must be holistic and not focus solely on land use - quality of life and environmental issues are very important (para. 4.8).NECESSARY PROCESS TO ACHIEVE A COMPETITIVE, SOCIALLY INCLUSIVE AND SUSTAINABLE CITY... The City Council is increasingly aware of sustainability issues both at policy and practical level (para. 4.8)... There is a need to balance economic growth and environmental quality (para. 4.9).Environment Policy
BELFAST CITY COUNCIL WILL STRIVE TO BECOME LEADERS IN ENVIRONMENTAL MANAGEMENT BY MINIMISING THE ADVERSE ENVIRONMENTAL IMPACT OF THE
SERVICES IT PROVIDES. THE CITY COUNCIL IS ALSO COMMITTED TO ENSURING THE SUSTAINABLE FUTURE OF THE CITY AND WILL PLAY A LEADING ROLE IN
FACILITATING THE DEVELOPMENT OF A LOCAL AGENDA 21 FOR THE CITY.
The Council will secure the effectiveness of its policy by:
Making adequate arrangements for the implementation of its corporate strategy on the environment and for ensuring that its strategic action plans are continually reviewed and developed.
Endeavouring to motivate or influence others to achieve an attractive and sustainable environment within the city.
Demonstrating environmentally responsible behaviour and stewardship in the use of resources associated with the running of its business.
Working in partnership with other statutory agencies, business, the community and voluntary groups.
Belfast City Council Environment Policy adopted 3rd November 1997.
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5.5 CORPORATE GOALS
In 1998 the Council released its ‘Year 1 1998-2002 Corporate Plan’. That Corporate
Plan is significant in the context of this research. Firstly, the Council consolidated its
Corporate Strategic Objectives (p. 5) as:
Civic Leadership
Best Value
Sustainable Development.
Secondly, under one of five ‘process(es)’ which merited special consideration (p. 7) is
found: “ensure that external suppliers are effectively procured, managed and
developed”. Further probing indicates that:
The corporate Purchasing Strategy was approved in October 1996 and the Purchasing Unit will continue with its implementation. The Unit will also assist in the implementation of those parts of the Environment Strategy and Economic Development Strategy which relate to Purchasing (p59).
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5.6 CONCLUSION
In answer to the research questions the analysis of Belfast City Council
documentation provides some replication of the suggested objectives from the
literature review and the analysis of N.I. council Strategies, namely:
Local economic development
Environment
Customer focus in service delivery
Political advocacy
Quality.
While the verification of objectives is of interest, of particular significance is the
explicitly stated potential contribution of Purchasing to achievement of the Council
objectives of local economic development and environment; that purchasing is one of
five processes meriting explicit reference, specifically with regard to supplier
procurement, management and development; a documented Purchasing Strategy and
its implementation is referred to.
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6 TRIPARTITE SURVEY OF U.K COUNCILS
6.1 INTRODUCTION
The third empirical investigation made use of tripartite, postal questionnaire based,
survey research and provided suggestions on the current and potential contribution of
Purchasing, the alignment of Purchasing objectives with corporate objectives, the
presence of documented Purchasing Strategies and Purchasing performance measures.
6.2 METHODOLOGY
One of the risks of a qualitative research approach is that it has the potential to
generate a high percentage of irrelevant research. This criticism was realised in the
third empirical investigation, a tripartite, postal questionnaire based, survey targeted
at the perceived key decision makers, namely, Leaders, Chief Executives and
purchasing managers of U.K. councils. Owing to the early exploratory nature of the
investigation at this stage, the questionnaire asked a high percentage of questions
which, while at that time were thought to have been of relevance, subsequently
proved irrelevant to the core investigation. Nevertheless the information provided
relevant information for answering the following research questions:
Research Question 1: ‘Could local government Purchasing improve its strategic
contribution, and if so, how?’
Research Question 2: Are Purchasing objectives aligned with the objectives of the
council?
Research Question 3: Are strategically aligned Purchasing Strategies in place?
Research Question 5: Are strategically aligned Purchasing performance measures
utilised?
Separate research carried out by the Society of Purchasing Officers in local
government (SOPO), in collaboration with the Chartered Institute of Purchasing and
Supply (CIPS), during 1999 provided a comparison and additional verification; as
does that jointly commissioned by the Department of Transport, Local Government
and Regions, and the Local Government Association (Birch, 2001). The SOPO
research unfortunately only focused on English and Welsh councils while Birch’s
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focus was on English authorities. Unfortunately, both SOPO and Birch’s research are
considered flawed in that they used predominately ‘closed and leading’ questions.
6.2.1 Survey response
One hundred and forty-one questionnaires were sent out. 16% were returned in
response to the initial request, a further 13% in response to the first reminder and 12%
in response to a second and final reminder; as a result a response rate of 41% was
achieved. The percentage of responses from each of the actors was 34% of Leaders,
53% of Chief Executives and 36% of purchasing managers. A further 12% responded
but were unable to help. (SOPO 1999 census of English and Welsh authorities gained
response rates of 10% from Leaders, 20% Chief Executives and 27% purchasing
managers).
Babbie (1995, pp. 261-262) suggests that “… a response rate of at least 50%
is adequate for analysis and reporting. A response of at least 60% is good … and a
response of 70% is very good” but acknowledged that there is no statistical basis for
that belief and that a lack of response bias is much more important.
6.2.2 Test for non-respondent bias
A test for ‘non-respondent bias’ was carried out and satisfied using the principles
established by Armstrong and Overton (1997). That test accepts that the last wave of
responses is much more characteristic of non-respondents than the first wave of
responses, therefore, if there is a similarity between the first and last wave of
responses, it can be assumed that ‘non-respondent bias’ is absent.
6.2.3 Tests for representativeness
Recognising that the highest response rate was received from Chief Executives (i.e.
53%) and that Babbie (1995, pp. 261-262) considers a response rate of 50% adequate
for analysis, two further tests were carried out to establish the representativeness of
the Chief Executives’ responses, this being a critical group. The first test considered
the types of council the respondent Chief Executives represented. The findings of that
test (Figure 6.1) indicate that with the exception of the London Borough Councils, the
Chief Executives hail from a representative mix of U.K. council types.
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Figure 6.1: Representativeness of Chief Executives by council type
The second test considered the political makeup of the councils from which Chief
Executives responded. That test (Figure 6.2) indicated that each of the main political
parties was well represented.
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Figure 6.2: Political persuasions of councils from which Chief Executives responded.
6.2.4 Tests for significance and reliability
Detailed statistical analysis was not carried out, firstly, due to the qualitative nature of
the research; secondly, it would have suggested a higher level of reliability than was
considered possible from the responses; thirdly, the respondents ranked many options
as opposed to just one which therefore led to non-standard distributions. It is also
important to note that while the perceptions of three different actors were gained, the
responses were not necessarily received from all three actors within the same council.
The findings are therefore highly qualitative as opposed to quantitative. It should be
borne in mind though that the key issue derived from this stage of the investigation is
whether or not there exists a potential gap in Purchasing’s strategic contribution.
None of the respondent purchasing managers incorrectly answered the placebo
question. This would suggest that the responses from purchasing managers were
approached in a conscientious manner.
Equally, since few of the respondents appeared to ‘tick’ all answers within a
range of options, this would suggest that the responses are reliable.
It was therefore considered that the responses are sufficiently reliable to
answer the research questions but not sufficiently reliable to confirm that other
researchers would find the same results.
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6.2.5 Comments
The tripartite approach experienced some opposition, for example, one council (in this
case all three respondents), who chose not to participate, considered it “…not well
received and perhaps a wrong tactic” - ironically that council had previously gained
recognition for the strategic alignment of their Purchasing Strategy. Conversely
others replied that they were stimulated by the questionnaire and “found it raised
useful questions which had not previously been considered”.
6.3 FINDINGS
6.3.1 The objectives of local government
The first objective of the investigation was to gain respondents’ perception of their
council’s strategic objectives. While the responses would provide verification of the
preceding research it was considered more important to create a background against
which respondents could subsequently map Purchasing’s perceived current and
potential contribution.
Responses from Chief Executives, having the largest response rate (53%) and
expected to be closer to the strategic process, were assumed to be the most reliable
respondents, were first analysed. Once again, common objectives were taken to be
those currently pursued by more than 50% of the respondent local councils. Chief
Executives were asked to identify council corporate objectives from a selection of
multiple-choice prompted options or alternatively avail of the option to add other
objectives through the use of ‘free text’. When ‘free text’ was used by the respondent
the researcher coded the response to enable aggregation and subsequent analysis.
Table 6.1 indicates the comparative findings of the survey with those of the
previous analysis of N.I. Corporate Strategies:
160
Objectives previously identified from analysis of N.I. Council Strategies
(in descending order of commonality)
Objectives identified from survey of U.K. Councils (incl. N.I.)(Percentages indicate level of consensus)
1. Local economic development2. Tourism 3. Environment4. Customer focus in service
delivery5. Political advocacy6. Quality7. Staff development8. Profile promotion.
1. Local economic development (96%)
2. Environment (92%)3. Customer focus in service
delivery (88%)4. Quality of life (88%)5. Quality (84%)6. Community development
(76%)7. Local Agenda 21/Sustainble
development (76%)8. Staff development (76%)9. Open government (64%)10. Tourism (64%)11. Cost reduction (52%)12. Recreation and leisure
(52%)Table 6.1: The perceived objectives of local government: A comparison of two investigations.
The analysis indicates that the conclusions drawn from the preceding desk research
(documentary analysis of N.I. Corporate Strategies and analysis of Belfast City
Council documentation), underestimated the full scope of local government objectives
although largely validated the core findings.
Assuming that respondents were completing the questionnaire on the basis of
spontaneous recall, it can also be assumed that the responses reflect those objectives
that have been successfully inculcated. The spontaneous recall responses therefore
were considered a better reflection of the actual objectives being pursued than those
identified during the previous desk research.
While the previous research indicated that more than 50% of the N.I. councils
had objectives relating to ‘Political Advocacy’ and ‘Profile Promotion’, those goals
appear of comparatively little significance to U.K. councils in general (20% and 16%
respectively). It is assumed that this variation was an anomaly of the political
environment prevalent in N.I. during the period when the strategies were published,
that is, local councils represented the only democratic voice at that time.
The research suggests new goals that the previous desk-based documentary
analysis had not considered common, specifically:
161
• Quality of life
• Community development
• Open government
• Recreation and leisure
• Sustainable development (a.k.a. Local Agenda 21)
• Cost reduction.
It could also be argued that this extended list is indicative of local government being
confused with the jargon of strategy. For example, ‘tourism’ is unlikely to be a goal
per se, instead both it and ‘community development’ are likely to be two of a variety
of strategies adopted in pursuit of ‘local economic development’. ‘Community
development’ may also be a strategy towards ‘quality of life’, as would be ‘recreation
and leisure’. Equally, it is possible to argue that ‘environment’ and ‘quality of life’
are strategies relating to ‘sustainable development’ although anecdotal evidence
would, at the present time, indicate this objective is still in its embryonic stage of
definition.
While no statistical significance can be given to the analysis, Figure 6.3
suggests an acceptably high level of consensus between the three actors on the
perceived corporate objectives of local government.
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Figure 6.3: The perception of actors on the objectives of local government.
6.3.2 Presence of documented Purchasing Strategies
Having probed the strategic objectives of local councils, Chief Executives responses
were analysed to establish the presence of a documented Purchasing Strategy.
The responses indicate that only 33.3% of the respondent councils have a
documented Purchasing Strategy in place. That findings gained some verification
through the SOPO (1999) investigation which concluded from research based on
English and Welsh authorities that 40% of councils have such a Strategy in place, and
those of Birch (2001) who concluded that only 27% of English authorities had a
Strategy in place.
6.3.3 The perceived current and potential strategic contribution of Purchasing
The survey then considered the responses received from Chief Executives relating to
the current and potential strategic contribution of Purchasing (Figure 6.4).
While the specific objectives identified through the survey are of interest,
those objectives could be expected to change through the passage of time. It is much
163
more significant, in the context of this investigation, that the analysis indicates a gap
between the perceived current and potential strategic contribution of Purchasing. In
turn this suggests a major strategic opportunity for local government Purchasing to
improve its strategic contribution.
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Figure 6.4: Strategic gap analysis: Chief Executive’s perception of Purchasing’s contribution to the achievement of local government objectives.
6.3.4 The ‘fit’ between the current objectives of local government and
Purchasing objectives
Having identified Chief Executives’ view of the current and potential perceived
strategic contribution of Purchasing, the investigation looked for the ‘fit’ between the
perceived corporate objectives and those of purchasing managers. Purchasing
managers were therefore asked to state the primary objectives of Purchasing through
an ‘open question’. The researcher, to enable analysis, then coded the stated
Purchasing objectives.
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The purchasing manager responses were compared against those common
corporate objectives, as perceived by Chief Executives (Table 6.2). The percentage of
respondent purchasing managers who identified separate Purchasing objectives which
matched those of the Chief Executives were then tabled.
While there is a danger of trying to draw statistically significant conclusions
from the analysis, it can be inferred that:
1. There is a lack of strategic ‘fit’ between Purchasing objectives and those of local
government corporate objectives
2. Most of the respondent purchasing managers are pursuing objectives not
recognised by Chief Executives as corporate objectives
3. 36% of purchasing managers were either not able to or not prepared to state
Purchasing objectives, which suggests an absence of clearly ‘owned’ Purchasing
objectives
4. Purchasing objectives, associated with cost reduction, quality improvement,
innovation transfer and delivery improvement are not among those identified by
local government purchasing managers
5. The Purchasing objectives stated are largely representative of a ‘clerical’ position.
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Chief Executives’ views of corporate objectives
Purchasing managers’ view of Purchasing
objectivesLocal economic development
92% 7%
Environment 92% 7%Customer focus in service delivery
88% Not referred to
Quality of life 88% Not referred toQuality 84% Not referred toQuality at lowest price 21%Sustainable development 76% Not referred toCommunity development 76% Not referred toStaff development 76% Not referred toOpen government 64% Not referred toTourism 64% Not referred toCost reduction 52% Not referred toRecreation and leisure 52% Not referred toValue for Money Not referred to 64%Ethics Not referred to 7%Best value Not referred to 21%Support rest of council in meeting objectives
Not referred to 7%
Professional services Not referred to 21%Probity Not referred to 7%Support service delivery Not referred to 7%Legal compliance Not referred to 7%Choice Not referred to 7%Table 6.2: Fit between corporate objectives and Purchasing objectives
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6.3.5 Purchasing Performance Measures
Accepting the lack of ‘strategic fit’ between Purchasing’s objectives and corporate
objectives, the survey invited purchasing managers, using an ‘open question’, to list
Purchasing performance measures currently used and to state the relevant quantifiable
targets for each of those indicators over each of the following four years.
Only two of the 14 respondent purchasing managers had quantifiable,
timescaled targets in place. Five (36%) did not answer the question while four (28%)
stated they did not have any measures in place. The remaining managers cited a range
of ad hoc indicators which were generally not used by their peers but collectively
typical of a ‘clerical’ positioning:
Customer satisfaction
Number of purchase requisitions
processed
Budgetary control
Compliance with internal service
standards
Cost
Availability
Ease of purchase
Quality
Quality control
Stock turn
Invoice value
Best price to product specification
Product/service delivery quality
Order lead time quoted with Tender
TQM systems of suppliers
% Rejects in goods received
Timeliness of delivery
Market testing
Savings achieved
Contract leakage/savings forgone
Nature of spend:
proprietary/competitive
On cost percentage
The analysis suggests that there is no logical link between corporate objectives,
Purchasing objectives and Purchasing performance measures.
6.4 CONCLUSIONS
The survey findings suggest that Chief Executives have identified a potential strategic
contribution from Purchasing which is not yet being realised. It could therefore be
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inferred that Chief Executives have identified scope for improving Purchasing’s
contribution and particularly through greater alignment with corporate objectives
(Research Question 1).
The findings suggest that Purchasing objectives are not aligned with the
council corporate objectives (Research Question 2).
Only one in three councils appear to have a documented Purchasing Strategy
in place. Although a conclusive answer cannot be given as to whether those
Strategies which are in place are strategically aligned, it can be inferred from the
findings regarding existing Purchasing objectives that it is unlikely that strategies are
not aligned (Research Question 3).
The reality that 64% of the respondent purchasing managers were either
unable or unprepared to identify Purchasing objectives, while the remaining managers
only identified ‘clerical’ focused objectives, supports the conclusion that strategically
aligned Purchasing performance management systems are not in place and supports
the assumption made from the literature review that local government Purchasing is
likely to be positioned as a ‘clerical’ function (Research Questions 2 and 5).
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7 IN-DEPTH SINGLE CASE STUDY
7.1 INTRODUCTION
This chapter builds upon the previous empirical investigations, particularly the
tripartite survey which suggested the presence of a perceived gap between the current
and potential strategic contribution of local government Purchasing. The chapter
considers, through a single in-depth, chronological case study, how a council’s
Purchasing function improved its contribution from one of being ‘clerical’ positioned
to one which was acknowledged as making a strategic contribution.
The case study demonstrates that local government Purchasing can be
perceived as having improved its strategic contribution and provides suggestions as to
how that was done. It demonstrates an alignment of Purchasing objectives with the
objectives of the Council but questions how critical they are to improving
contribution. While the case study also demonstrated the presence of an aligned
documented Purchasing Strategy, it raises questions regarding the significance
attached to such documents. The analysis challenges the applicability of existing
models of evolutionary development. It demonstrates the use of strategically aligned
Purchasing performance measures but once again questions how critical they are to
improving contribution. The case study also suggests that within Belfast City
Council, the repositioning of Purchasing was led by Purchasing practitioners.
Further detail, not deemed significant to the investigation, is included within
the Appendices (7-10). A summary of the analysis is tabled together with other
potentially relevant factors.
In conclusion the implications arising from the case study are discussed and
considered in the context of the analytical model.
7.2 METHODOLOGY
An in-depth, descriptive, chronological case study (Yin, 1994, p. 16) of Belfast City
Council is used to consider the improvement of Purchasing’s strategic contribution.
The case study aims to provide indicative answers to the following research questions:
Research Question 1: Could local government Purchasing improve its strategic
contribution, and if so, how?
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Research Question 2: Are Purchasing objectives aligned with the objectives of the
council?
Research Question 3: Are strategically aligned Purchasing Strategies in place?
Research Question 4: Are the existing models of evolutionary development
applicable to local government?
Research Question 5: Are strategically aligned Purchasing performance measures
utilised?
Research Question 6: Within councils, who leads the repositioning of Purchasing?
The case study is reported from the position of an active participant-observer (Yin,
1994, pp. 87-89; Babbie, 1995, pp. 283-284). That privileged position provided a
unique opportunity to access information. Having said that, there existed a risk of
researcher bias (Yin, 1994, p. 9). To provide the necessary ‘internal validity’ (Yin,
1994, p. 35), the Chief Executive, the former Head of Economic Development,
Environment Strategy Manager, a Policy Analyst, and each of the Purchasing Unit
staff were provided with an early draft of the chapter for critique. The focus of the
research is not to present Belfast City Council either as a ‘role model’ or
representative but as an illustrative test of the theoretical model developed from the
literature review.
7.3 CASE STUDY FINDINGS
7.3.1 Moving from a ‘Clerical position’
During the period 1973 to 1991 Purchasing within Belfast City Council was
decentralised and typical of a clerical function (characteristic of Reck and Long’s
(1988) ‘Passive’ position). Each part of the Council had responsibility for its own
purchasing with only a limited amount of coordinated buying taking place.
Consequently departments had acquired varying levels of expertise, particularly with
regard to those purchases unique to themselves. During that time one department’s
Purchasing Office became accepted as the Council’s ‘lead buyer’ with responsibility
for a centralised stores operation and letting a number of co-ordinated supplies
contracts on behalf of the other departments, for example, uniform clothing.
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7.3.2 Participation in high-level cross-functional teams
1991 and 1992 were viewed as two significant years for the development of
Purchasing within the Council, primarily driven by legislative changes. The first, and
considered most catalytic change, was the introduction of the Public Works Contracts
Regulations (1991) and the Public Supplies Contracts Regulations (1991). Those
Regulations implemented European public procurement legislation into U.K. law.
Some in the Council were intimidated by the requirements of the Regulations.
Purchasing (the existing ‘lead buyer’) viewed this as an opportunity to take ownership
of the Regulations and act as the Council’s expert interpreter. It is the view of
Purchasing that the Regulations helped its repositioning since the Regulations
emphasised the need for better planning of the purchasing process, better articulation
of the ‘specification’ and how both suppliers and bids were to be evaluated, and
greater transparency. It is also thought that same position enabled Purchasing to gain
advisory involvement in the letting of major contracts, which in turn provided an
opportunity to influence specifications, the procurement approach, and gain ‘invited’
access to major purchasing decision-making processes.
The second piece of legislation which provided an opportunity for Purchasing
was the Local Government (Miscellaneous Provisions) (NI) Order 1992. That
legislation required the Council to subject a number of ‘defined’ services to
Compulsory Competitive Tendering (CCT). The Council’s response was to set up
Tender Evaluation Groups for each service to be tendered. Thought to be as a result
of advising on the public procurement legislation and adopting a ‘can do philosophy’,
each of those groups included the Council’s senior, and at that time only,
professionally qualified Purchasing specialist. Membership of those high-level cross-
functional teams (characteristic of Cammish and Keogh’s (1991) ‘Strategic
Procurement’ position) provided a further opportunity to demonstrate Purchasing’s
contribution, not only through working ‘within’ the legislation to achieve the
Council’s objectives of retaining ‘in-house’ service delivery, but also to demonstrate a
more structured and professional approach (characteristic of Reck and Long’s (1988)
‘Independent’ position, Cammish and Keough’s (1991) ‘Lowest Unit Cost’ position,
and Syson’s (1992) ‘Commercial’ position) to supplier selection and tender
evaluation, while contributing towards cost reduction and quality (‘Fitness for
Purpose’ as opposed to ‘improvement’). Participation in those teams acted as a
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marketing opportunity for Purchasing; those high-level decision-makers who had
contact with Purchasing through the teams began to change their perception of
Purchasing. It is the perception of those in Purchasing that within a matter of months
an expectancy developed amongst senior decision-makers that they should involve
Purchasing as opposed to a strategic diktat that ‘they must’.
7.3.3 Involvement beyond purchasing
Late in 1992 the Council embarked upon a major change management programme.
The Council’s senior purchasing practitioner was seconded to one of the three Project
Teams responsible for delivering the Programme, specifically the team charged with
developing the Council’s first Information Systems Strategy. Opportunistically, in
that position, he was able to suggest to the project team developing the new structures,
how a new ‘hard core/soft core’ (van Weele and Rozemeijer, 1998, pp. 96-112) mixed
delivery of Purchasing should be structured. Subsequently, in 1993 a specialist
Purchasing Unit was set up using that structure. The new Purchasing Unit had the
following purpose statement “To provide an excellent internal purchasing
consultancy service, which facilitates and enables ‘best practice purchasing’
throughout the Council”. That Unit was to have authority to set the strategic
direction, set-up coordinated contracts, and provide advice and guidance, effectively
working as an internal consultancy service (characteristic of Cammish and Keough’s
(1991) ‘Coordinated Purchasing’ position). The Unit would charge for its services
through the use of service level agreements.
7.3.4 Marketing
In spite of the acknowledgement of successful participation on high-level cross-
functional teams, the newly formed Purchasing Unit was still not immediately
welcomed by all its potential internal customers, a number of whom appeared to
resent the intrusion into what they perceived as their domain. Anecdotal evidence
suggested that a considerable amount of the customer opposition was based
subconsciously on the perceived need to defend previous practices. In 1994 a
proactive Marketing Plan was therefore developed and implemented with the purpose
of reassuring, re-positioning the Unit, clarifying roles and ‘selling’ the benefits of
professional Purchasing.
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A key marketing strategy in gaining the ownership of those reluctant to accept
a repositioning of Purchasing was the targeting of those managers who had only
recently joined the Council. They were targeted, within the first two months of
employment, for an introduction to the Purchasing Unit. The key message presented
was ‘What are your immediate procurement needs?’ and ‘Here’s how Purchasing can
help?’ It was established that these new managers were typical ‘innovators’, open to
offers of support and open to experimentation with, what appeared to the rest of the
Council to be more high risk innovative approaches (reported in Erridge and Murray,
1998a). This in turn provided Purchasing with an opportunity to demonstrate
deliverable results on cost reduction, quality improvement, innovation transfer and
delivery.
That demonstrable evidence and the new managers subsequently
subconsciously acting as informal Purchasing Ambassadors, in turn enabled
Purchasing to gradually win over many of the remaining ‘laggards’ within the
organisation, those most reluctant to accept that Purchasing could provide more than
act as a ‘clerical’ function. It appeared that even though Purchasing continued to
participate on major interdepartmental Working Groups, for example, the CCT
Tender Evaluation Groups, those who resisted change most were senior managers
who had been accustomed to Purchasing providing a traditional ‘clerical’ role. Those
senior staff were only prepared to provide opportunities for a wider contribution from
Purchasing after their own, lower-level staff had successfully experimented with or
tested the ‘new’ Purchasing and received what they described as a ‘professional value
added service’; in some ways that ‘added-value’ merely amounted to helping ‘get
them out of a hole’ rather than adopting a ‘hard sell’ approach.
7.3.5 Professionalising Purchasing
Prior to 1992, there were no professionally qualified Purchasing staff in the Council.
At the end of the case study research, in 2000, the Unit had four full-time staff. The
Purchasing Manager held MCIPS (Corporate Member of the Chartered Institute of
Purchasing and Supply), and MSc in Purchasing and Supply Management; the
Purchasing Officer, MCIPS and BA(Hons) in Public Policy with Purchasing
specialisms; one of the Purchasing Assistants, MCIPS and MSc in Purchasing and
Supply Management; and the other the foundation qualifications of the CIPS, and a
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BA(Hons) in Business Studies. The drive to obtain professional qualifications came
from within the Unit and in some cases was without any form of support.
7.3.6 Development of an aligned Purchasing Strategy
Between 1993 and 1995 the Council had no explicitly stated Purchasing Strategy;
Purchasing focused on ensuring legal compliance and transferring best practice from
the private sector. Little was consciously done towards achieving the wider
objectives of the Council.
In 1994 the Purchasing Manager set about developing the Council’s first
Purchasing Strategy. The catalyst for the decision to develop a Purchasing Strategy
was seen as a critical mass of factors all pointing towards the need for a documented
Strategy, namely:
1. The Purchasing Unit were newly created and the Strategy was perceived as a
‘good thing to do’
2. The Purchasing Manager was undertaking an MSc in Purchasing and Supply
Management and one of his assignment options included the development of a
Purchasing Strategy
3. The Council had introduced a new corporate approach to performance
management which included a programme of Policy and Performance
Reviews. The Purchasing Manager volunteered the Purchasing Unit as one of
the first Review pilots and, while the Purchasing Unit had developed its own
Business Plan, it became obvious that an anticipated recommendation from the
Review would be the development of a documented Corporate Purchasing
Strategy.
The Strategy was developed using traditional strategic planning methods in
which the ‘central specialist’, in this case the Purchasing Manager, carried out an
environmental analysis, developed objectives and subsequent five-year action plans.
At that time a conscious decision was taken by the Purchasing Manager to align the
Strategy with the objectives of the Council (characteristic of Reck and Long’s (1988)
‘Supportive’ position). It is noteworthy that others could not, at that time, see the
potential strategic contribution of Purchasing. For example, Purchasing was not
initially considered relevant to the environmental objectives of the Council and it was
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only after lobbying by the Purchasing Manager that Purchasing’s input was
subsequently welcomed.
While the Purchasing Strategy was still in the early stages of being developed
the Head of Economic Development invited suggestions for inclusion in the Council’s
first Economic Development Action Plan. In response the Purchasing Manager
suggested that the Plan should include ‘ease of access to public procurement’
initiatives. That suggestion was adopted and led to an internal political mandate and
ownership of the evolving ‘open procurement’ initiatives. It is noteworthy that the
Council’s Purchasing Strategy, although at that time still being drafted, was referred
to in the Economic Development Action Plan, and aspirationally positioned as a ‘Role
Model’. The Purchasing Manager, in marketing the Purchasing Strategy, subsequently
used this high-level endorsement from elected Members to win the support of others.
A consultation process followed the drafting of the Purchasing Strategy
through the medium of an inter-departmental Working Group. The role of the
Working Group was to debate the draft Strategy thoroughly and ensure that the views
of the various departments were considered. In parallel the Council were developing
a Corporate Plan and suite of fourteen Corporate Strategies.
The Purchasing Strategy was somewhat unusual in that it really spanned two
Strategies, the Environment Strategy and the Purchasing Strategy. The reason for this
was that although it had already been recognised through the Economic Development
Plan that a Purchasing Strategy was required, no agreement had been reached on the
need for an Environment Strategy. The Purchasing Strategy therefore made reference
to the interdependency with the Environment Strategy (incorporating its green
purchasing strand) which was going through a parallel consultation process. It is also
noteworthy that although the Purchasing Working Group decided that green
purchasing lay within the remit of the Environment Strategy, there was considerable
debate as to whether green purchasing should be developed at all as it was anticipated
that it would add to Council costs and potentially place the Direct Service
Organisation (DSO) at a competitive disadvantage. That argument was countered
through the realisation that if the DSO improved its overall environmental
performance, it could on the contrary, ultimately gain a competitive advantage.
Having achieved ‘sign-off’ by the Purchasing Working Group, both the
Purchasing and the Environment Strategies were presented to and endorsed by Chief
Officers and elected Members in October 1996. The Purchasing Manager became
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responsible for the implementation. The linkages between the ‘Corporate Plan Key
Issues’ (Belfast City Council Corporate Plan 1995/1996, pp. 5-6) were explicitly
stated within the Purchasing Strategy (Table 7.1) (characteristic of Reck and Long’s
(1988) ‘Integrative’ position, and Cammish and Keough’s (1991) ‘Strategic’
position).
It should be noted that these Purchasing objectives, relate to the purchasing
processes of the Council, and although included within the Purchasing Strategy and
with responsibility for implementation resting with the Purchasing Manager, the
objectives go beyond the sole scope of the Purchasing function.
Corporate Plan Key Issue Purchasing ObjectivesMeeting the Competitive Challenge
Assist Belfast City Council in reducing the total acquisition costs of bought-in supplies and services.
Assist in the identification and selection of suitable quality service providers.
Assist in commercial aspects of negotiation and monitoring with ‘outsourced contracts’.
External Relations Ensure Belfast City Council purchasing is carried out in line with European and U.K. purchasing legislation.Assist in the development of SMEs.Provide quality suppliers with ‘ease of access’ to Belfast City Council purchasing systems.
ProfileRaising the profile of the Council as a quality organisation
Identify and introduce to Belfast City Council external suppliers and service providers who match our quality needs.Introduce ‘Supplier development/engineering’ programmes.Ensure that Belfast City Council carries out its purchasing to the highest ethical standards.Promote Belfast City Council as a ‘preferred customer’.Introduce and implement a ‘Supplier Charter’
Environment and Health Ensure Belfast City Council purchasing is carried out in an environmentally responsible manner in line with the ‘Environment Policy’.
Customer Orientation Develop ‘Best Practice’ purchasing to match the needs of the Council’s customers.
Corporate Development Develop a uniform corporate purchasing culture embracing performance management, total quality and competition.
Human Resources Improve the effectiveness of Council ‘purchasing’ staff.Organisational Development Ensure that Belfast City Council purchasing is co-ordinated and
achieves Value for Money.Information Systems Provide effective purchasing information systems in line with the
Information Systems Strategy.Reduce ‘non value added’ transactional purchasing systems.
Table 7.1: Linkage between Corporate Plan key issues and Purchasing objectives
The Purchasing Strategy was effectively split into two sections. The first section
clarified some foundations, namely, responsibilities, operational roles and
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relationships. The second, more relevant to this investigation, detailed the specific
Purchasing objectives and how they were to be achieved. The detailed content and
implementation of the Strategy have been reported elsewhere (Murray, 2000 and
2001a) and add little to the present discussion, however the section headings and their
objectives are Tabled (Table 7.2) and more detail provided in Appendices 7-10.
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Strategy ObjectiveLegal Compliance To ensure compliance with all the internal and external purchasing rules
and regulations.Value for Money To achieve ‘Value for Money in all Belfast City Council purchasing.Supplier Utilisation To achieve maximum benefit from the utilisation of suppliers as an
external resource.Development of SMEs and ‘Ease of Access’
To assist in achieving the greater objectives of the ‘Economic Development Strategy’
Environmental Purchasing To ensure that Belfast City Council purchasing is carried out in an environmentally responsible manner in line with the ‘Environment Policy’
Purchasing Skills Development To improve the effectiveness of all staff involved in purchasing activities.
Information Systems Development To ensure that appropriate Information Systems are in place to increase the economy, efficiency and effectiveness of Belfast City Council.
Purchasing Ethics To achieve the greater objective of raising the profile of Belfast City Council as a quality organisation through carrying out purchasing activities to the highest ethical standards.
Table 7.2: Purchasing objectives.
The Environment Strategy set the following objectives:
Ensure purchasing is carried out in a cost-effective environmentally responsible
manner
Ensure purchasing contributes to environmental sustainability
Contribute to the corporate objectives of increasing the profile of the Council.
Like those of the Purchasing Strategy these objectives were supported by a detailed
action plan.
7.3.7 Accommodating external impacts on the documented strategy
Having started the development of an aligned Purchasing Strategy in 1994, there were
a number of changes which took place both internally and externally which led to a
shift in corporate objectives.
Firstly, the Council recognised that its long-term financial plan was going to
be placed under increased pressure and on that basis in 1995 (Belfast City Council,
1995b) the Council embarked upon a cost reduction strategy with each department
being asked to generate savings. Secondly, in 1997 the U.K. government made clear
its intention to shift from CCT to the Best Value regime. Thirdly, a new Chief
Executive was appointed and in 1998 it was decided that the strategic objectives of
the Council should be consolidated into three, namely, Civic Leadership, Best Value
and Sustainable Development.
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Potentially each of these factors had an impact on the explicit objectives
detailed in the Purchasing Strategy. To assess the impact of those changes, and
ensure continued alignment, the Purchasing Strategy was reviewed and tested for the
impact of each of those changes. The view was taken that no modification was
required to the Strategy and that the changes could be accommodated within the
existing framework of the Strategy. However the emphasis switched to the implied
objectives of Best Value, local economic development, environment, quality of life,
cost reduction, quality improvement and customer service delivery. In itself these
developments are significant as it reflects the need for a Strategy to be sufficiently
flexible to accommodate and respond to change.
7.3.8 Purchasing Performance Measures
Prior to 1993 there were no Purchasing performance measures used or reported upon
although internally significant attention was given to legal compliance and stores
operational efficiency indicators such as stock turnover.
When the Purchasing Unit was set up in 1993 it was given a number of
performance measures developed by the consultants who led the corporate change
management process, specifically:
1. Number of contracts let
2. Compliance with EU procurement legislation
3. Savings achieved.
These were considered by the Purchasing Manager to be inappropriate and he argued
successfully the case for their replacement with new measures (Murray, 2001b),
namely:
1. ‘Customer satisfaction’, measured through a questionnaire to establish
whether those who used Purchasing considered it to have matched their needs
2. ‘Delivery to schedule’, measured against pre-agreed project plans
3. ‘Market penetration’, which reflected whether the consultancy service was
gaining greater ownership within the organisation.
That said, included within Belfast City Council’s Purchasing Strategy were detailed
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plans setting out how the Purchasing objectives were to be achieved. Each plan set
out what was to be done, when it was to be done and who held the responsibility for
ensuring it was done. Also set out within each plan were quantitative and qualitative
performance measures. For the purpose of the investigation the performance
measures have been brought together and are tabled below (Table 7.3).
The Unit staff felt that the clear linkage between Corporate Objectives,
Purchasing objectives and Purchasing performance measures made the Strategy both
meaningful and tangible to the upper echelons of the Council, both elected members
and Chief Officers.
While the performance measures shown in Table 7.3 demonstrate the presence
of strategically aligned performance measures, by the time the first years performance
was due to be reported, it was decided corporately that the Council’s performance
management system was overly cumbersome and that there should be a reduction in
the total number of measures used. Accordingly Purchasing performance indicators
were broken into two categories, those relating to the Corporate Purchasing Strategy
indicators and those relating to the Purchasing function. The revised indicators are
tabled below (Table 7.4):
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Purchasing objective Quantitative performance indicators Qualitative performance measuresTo achieve ‘Value for Money in all Belfast City Council purchasing.
1. Percentage of contracts which take account of TACs
2. Year on year comparable reductions in real costs
3. Number of action plan activities carried out to schedule
4. Number and value of cost reduction initiatives effectively introduced
1. Survey (not less than every three years) of customers perceptions of purchasing effectiveness, efficiency and economy in matching their needs
To achieve maximum benefit from the utilisation of suppliers as an external resource.
1. Number of supplier failures to deliver to contract
2. Number of supplier complaints 3. Delivery of Action Plan to
schedule4. Year on year comparable reduction
in real costs 5. Survey of suppliers (not less than
every three years)6. Number of upheld complaints
received
1. Survey (not less than every three years) of customers’ perception of purchasing effectiveness, efficiency and economy in matching their needs.
To improve the effectiveness of all staff involved in purchasing activities.
1. Year on year comparable reduction in real costs to the Council
2. Delivery of Action Plan to schedule
1. Survey (not less than every three years) of customers’ perceptions of purchasing effectiveness, efficiency and economy in matching their needs.
2. Benchmarking against Purchasing NVQ indicators (not less than every three years)
To assist in achieving the greater objectives of the ‘Economic Development Strategy’
1. Level of interest generated in invitations to tender from SMEs
2. Delivery of Action Plan to schedule
3. Percentage of business placed with Belfast based SMEs
1. Survey the views of the Economic Development Manager2. Survey (not less than every three years) of customers’ perception of
purchasing effectiveness, efficiency and economy in matching their needs
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To ensure compliance with all the internal and external purchasing rules and regulations.
1. 100% compliance with Purchasing rules and regulations
2. Delivery of Action Plan to schedule
1. Internal Audit reports2. Local Government Audit reports3. Survey the views of the Director of Legal Services.
To ensure that Belfast City Council purchasing is carried out in an environmentally responsible manner in line with the ‘Environment Policy’
1. Delivery of Action Plan to schedule 1. Survey of the views of the Chairman of the Environmental Project Team
To ensure that appropriate Information Systems are in place to increase the economy, efficiency and effectiveness of Belfast City Council.
1. Delivery of Action Plan to schedule
To achieve the greater objective of raising the profile of Belfast City Council as a quality organisation through carrying out purchasing activities to the highest ethical standards.
1. Delivery of Action Plan to schedule2. Number of complaints upheld
1. Survey (not less than every three years) of suppliers views
Table 7.3: Belfast City Council Purchasing objectives and Performance measures
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Corporate Purchasing Indicators Purchasing Unit Indicators • Percentage of business awarded to
local SMEs• Percentage of local businesses
‘greening’• Supplier satisfaction (measured
through a survey which also provided a method for suppliers to suggest improvements)
• Performance against action plan.
• Internal customer satisfaction • Percentage of projects delivered to
schedule• Market penetration.
Table 7.4: Belfast City Council Purchasing performance measures (post 1996)
7.3.9 Improved strategic contribution through alignment
The investigation finally sought to establish whether the deliberate alignment of
Purchasing Strategy with the strategic objectives of the Council led to a perceived
repositioning of Purchasing.
By way of introduction, in 1998 the Council released its Year 1 Corporate
Plan (1998-2002). Stated under one of five ‘processes’ meriting special consideration
is found: “ensure that external suppliers are effectively procured, managed and
developed”. One can conclude from that statement that Purchasing was gaining in
strategic significance, suggesting that Purchasing had been repositioned within the
Council.
Having said that, Purchasing did not have Chief Officer status although the
Purchasing Manager reported directly and advised Committee, when appropriate.
To test empirically for a repositioning of the Purchasing function a simple
questionnaire was emailed to each of Council Chief Officers. Although the response
was only 32% (nine responses out of twenty-eight) it is not considered disappointing
as at the time the target group were said to be suffering from ‘questionnaire fatigue’.
The responses of Chief Officers as to whether Purchasing had contributed to the
objectives of Best Value, sustainable development (namely, local economic
development, environment and quality of life), cost reduction, quality improvement
and customer focus in service delivery are tabled (Table 7.5). The responses suggest
that the perception of the respondent Chief Officers was that Purchasing had
contributed to all of the objectives detailed, although there exists a high level of ‘don’t
know’ in respect of contribution to cost reduction, quality improvement and quality of
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life. Of particular significance are the answers to the question ‘Do you feel that
Purchasing pursuing the above objectives has made a value added strategic
contribution?’ In response to that question 71% of respondents answered ‘yes’ and
29% ‘don’t know’.
Objective Yes No Don’t knowBest Value 89% Nil 11%Local economic development- 78% Nil 22%Environnent 89% Nil 11%Quality of life 44% Nil 56%Cost reduction 56% Nil 44%Quality improvement 62.5% Nil 37.5%Customer focus in service delivery 89% 11% nilTable 7.5: Chief Officers’ perception of the strategic contribution of Purchasing
Further evidence was sought through a simple search of the Council Minutes
during the period 1990-2000 for references to ‘purchasing/procurement’. It should be
noted that the Purchasing Manager had no control over input to the actual content of
the Minutes. Figure 7.1 summarises the findings of that review. Allowing for the
likelihood that the period during 1994 to 1996 was abnormal, since it included the
introduction of the Purchasing Unit and development of the Strategy, the trend
appears to reflect a repositioning of Purchasing since 1994. When one considers that
on average during the years 1994 to 2000 Purchasing was mentioned at nine
Committee meetings per month there are sufficient grounds to accept there had been a
repositioning of Purchasing.
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Figure 7.1: References in Council Minutes to purchasing/procurement.
7.4 ANALYSIS OF CASE STUDY
7.4.1 Can contribution be improved? (Research Question 1)
The in-depth case study provided evidence to answer all six of the research questions,
the answers of which are summarised together with evidence and comment in Table
7.6. The case study suggests Purchasing can improve its strategic contribution. This
was particularly demonstrated through the survey of Chief Officers of whom 71% of
respondents agreed that pursuing aligned objectives had improved contribution. With
regard to ‘How’ Purchasing improved its contribution, the case study, as will be
discussed in 7.4.6, provides a useful contrast to theoretical model developed at the
conclusion of the literature review.
7.4.2 The importance of aligned Purchasing objectives (Research Question 2)
The case study demonstrates that Purchasing objectives can be strategically aligned
with the objectives of the council but there is no evidence to suggest that alignment of
objectives was critical in initially improving contribution. For example, it is clear that
progress had been made in initially improving contribution through assisting in
interpreting legislation and delivering what could be considered ‘professional
Purchasing’; the alignment of objectives only appeared to be considered in the later
stages of development. An alternative perspective, though the case study does not
provide an answer, which could be inferred from the literature is that perhaps it is
0
20
40
60
80
100
120
140
160
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
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Research question Answer Evidence Comment/observations1. Could local government
Purchasing improve its strategic contribution, and, if so, how?
Yes 1973-1991: 1992:
1993:
1994 –1996: 1996 – 2000:
‘Passive’(Reck and Long, 1988)‘Strategic procurement’ (Cammish and
Keough, 1991)‘Independent’ (Reck and Long, 1988)‘Lowest Unit Cost’ (Cammish and Keough,
1991)
‘Commercial’ (Syson, 1992)
‘Coordinated Purchasing’(Cammish and Keough, 1991)
‘Supportive’ (Reck and Long, 1998)‘Integrative’(Reck and Long, 1988) ‘Strategic’ (Cammish and Keough, 1991)
‘Soft issues’ evidenced: opportunistic Purchasing, ‘can do’/‘facilitator’ philosophy’, proactive marketing targeting new senior managers, Purchasing staff self-motivated to management their own professional development.
Tables: 7.1 and 7.2Figure: 7.1, 7.2 and 7.3
2. Are Purchasing objectives aligned with the objectives of the Council?
Yes Table: 7.1 and 7.2 May have been important in improving positioning but not critical in improving contribution. Perhaps more likely that contribution would have been negatively affected if dysfunctional objectives pursued.
3. Are strategically aligned Purchasing Strategies in place?
Yes Tables: 7.1 and 7.2 Not critical to improving contribution since improvement in contribution had taken place prior to the development of Strategy. Perhaps an ‘enabler’ for wider strategic contribution.
4. Are the existing models of evolutionary development applicable to local government?
No Existing models do not appear to reflect the chronological development stages
Figure: 7.2 and 7.3
Stages of development better reflected in the incremental development of emerging Purchasing objectives pursued, each of which build upon previous demonstrable evidence.
5. Are strategically aligned Purchasing performance measures utilised?
Yes Tables: 7.4 and 7.5 Not critical to improving contribution since improvement in contribution had taken place prior to the development of Strategy.
6. Within councils, who leads the repositioning of Purchasing?
Purchasing Case study demonstrates that Purchasing were proactive and opportunistic in leading its own repositioning
Opportunistic, self-motivated staff and professional staff may have been critical features in improving contribution.
Table 7.6: Summary of in-depth case study analysis
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much more important to ensure that Purchasing objectives are not out of alignment
with corporate objectives, as that would lead to Purchasing being dysfunctional.
Equally the case study suggests the need to keep Purchasing objectives under review
and access the impact of environmental changes to ensure continued alignment.
7.4.3 The importance of an aligned Purchasing Strategy (Research Question 3)
The case study demonstrates that a strategically aligned Purchasing Strategy was in
place. Once again though the case study suggests the need for the Strategy to remain
flexible to accommodate strategic change at the level of the council. The case would
however challenge the necessity for a documented Strategy in improving contribution
since there were indications that Purchasing had been repositioned from a ‘clerical’
role prior to the development of the Strategy. The case study throws up an interesting
question, in that since a wider strategic role had been identified for Purchasing in both
the Economic Development Plan and the Environment Strategy, ‘What was the
additional benefit gained from developing a Purchasing Strategy?’ That said, the
Strategy may have helped in providing a mandate for the subsequent more strategic
roles.
7.4.4 The importance of aligned Purchasing performance measures (Research
Question 5)
Evidence is also provided, through the case study, of strategically aligned Purchasing
performance measures. Once again evidence of an improved contribution could be
observed prior to the development of the Purchasing performance measures; it can
therefore be concluded that while aligned Purchasing performance measures may be
helpful in improving contribution they are not critical.
7.4.5 The lead in repositioning Purchasing (Research Question 6)
The evidence from the Belfast City Council case suggests that, in that particular case,
Purchasing were proactive and took the lead in seeking to improve contribution and
positioning, for example:
187
• Purchasing turned the changes in public procurement legislation into an
opportunity to apply and demonstrate good practice, this in turn was
thought to have ‘opened the door’ to invited participation on strategic
cross-functional teams
• The decision to gain professional qualifications was self-driven by
Purchasing staff
• Purchasing took the lead in suggesting a new organisational structure
which subsequently appears to have resulted in the setting up of a
specialist function
• Purchasing developed a marketing plan aimed at gaining wider
ownership but first focussed on those staff new to the council
• Purchasing took the lead in developing the Purchasing Strategy and
advocating that a wider contribution was possible, specifically in relation
to the objectives of local economic development and environment.
7.4.6 The appropriateness of existing evolutionary models (Research Question
4)
The major challenge posed through the case study is that of the lack of fit with the
existing models of strategic evolution. The traditional models (Reck and Long, 1988;
Cammish and Keough, 1991; Syson, 1992) parallel an incremental journey from a
‘clerical’ role through ‘commercial’ to ‘strategic’. Yet when the chronological case
study evidence is considered, that incremental progression does not seem to be
replicated, indeed the actual characteristics portrayed within the various stages of the
models seem to be contradicted by the evidence portrayed in Figure 7.2. As such the
existing models do not appear to represent the evolution of Purchasing within Belfast
City Council. An alternative perspective can be taken though which focuses on the
emerging changes in Purchasing objectives as illustrated in Figure 7.3.
The Belfast case study suggests the change in Purchasing objectives may have
been contingent upon the foundation laid during the preceding phases and that those
preceding objectives did not cease to be important but were embedded further. The
case also suggests that incremental development is required and that any ‘leap-
frogging’ from one stage of development to another may not be possible. For
188
example, considering the incremental development from a clerical function,
characterised by a switch of objectives from the ‘5 Rights’, to the objectives of legal
compliance, cost reduction and quality (‘Fitness for Purpose’); it was only having
delivered on the ‘clerical’ objectives that opportunities were provided, by those whose
contracts Purchasing work with, to pursue the additional objectives. The next stage of
development, that to what could be considered from the literature review to be typical
of private sector objectives, namely, cost reduction, quality improvement, innovation
transfer and delivery improvement, was once again predicated upon demonstrable
evidence of earlier accomplishment.
The final stage of development, that which could be referred to as strategic
alignment, in Belfast was not so much dependent on the pursuit of the specifically
detailed objectives but on the ‘fit’ with the wider corporate objectives.
Figure 7.2: Timeline of strategic evolutionary model characteristics in Belfast City Council development
189
Figure 7.3: Evolution of Belfast City Councils Purchasing objectives
Drawing together the various key themes arising from the in-depth case study a model
of local government Purchasing’s evolutionary journey was developed (Figure 7.4).
The model was subsequently utilised during the future mini-case study interviews and
further refined.
190
Figure 7.4: Draft model of local government Purchasing’s evolutionary development
7.4.7 Explanation of model
The model differs from the theoretical model developed at the conclusion of the
literature review (Figure 2.12) insofar as the incremental progression of Belfast City
Council did not reflect that depicted in the traditional evolutionary models, namely,
Passive, Independent, Supportive and Strategic (Reck and Long, 1988). The in-depth
case study did not neatly progress through those expected stages but on the contrary
appeared to progress chronologically as follows:
1. ‘Passive’ (Reck and Long, 1988)
2. ‘Strategic Procurement’ (Cammish and Keough, 1991)
3. ‘Independent’ (Reck and Long, 1988)/ ‘Lowest Unit Cost’ (Cammish and
Keough, 1991)/ ‘Commercial’ (Syson, 1992)
4. ‘Coordinated Purchasing’ (Cammish and Keough, 1991),
5. ‘Supportive’ (Reck and Long, 1988)
6. ‘Integrative’ (Reck and Long, 1988)/ ‘Strategic’ (Cammish and Keough,
1991).
191
That said, an incremental journey was discernable when the progressive changes in
Purchasing objectives was mapped (Figure 7.4). It was considered that those changes
in objectives represented an increasingly improved strategic contribution from
Purchasing and that progression is reflected in the model.
The model portrays a three stage development, firstly the position which was
moved from, namely the pre-1992 ‘Clerical’ stage with objectives typical of ‘Classic’
school. The next stage of development is referred to as the ‘Private Sector Imitator’
stage. That title is used as it adequately captures the pursuit of objectives generalised
through the literature review as the ‘Cost Reduction’, and ‘CQID (Cost reduction,
Quality improvement, Innovation transfer, delivery improvement) schools, yet those
objectives are adapted to suit the local government context.
The critical component in progressing from the Clerical stage to the Private
Sector Imitator stage is a change in Purchasing’s behaviour through professionalising.
The in-depth case study suggests that professionalising Purchasing led to a two-
phased development. The first was demonstrating a contribution to legal compliance,
cost reduction and quality was necessary in gaining peer ownership. It was only after
that ownership was gained that further internal collaborative opportunities were
provided to Purchasing which enabled the successful pursuit of objectives of the
CQID school.
The existing evolutionary models (Reck and Long, 1988; Cammish and
Keough, 1991; Syson, 1992) imply that pursuit of these CQID objectives represents a
significant contribution from Purchasing yet the in-depth case study suggests that a
further stage of development is possible, in the model, the ‘Strategic Breakthrough’
stage. The model depicts that gaining access to the higher-level of strategic objectives
is predicated upon Chief Officer and Elected Member ownership, this too is illustrated
by the model.
A further difference between the model (Figure 7.4) and the theoretical model
(Figure 2.12) is that the later emphasised the need for a Purchasing Strategy document
and performance indicators. While the in-depth case study did demonstrate the
presence of both a Purchasing Strategy document and aligned purchasing performance
indicators they were only developed after there had already been a demonstrable
improvement in Purchasing’s strategic contribution; a Purchasing Strategy and
192
performance indicators can therefore not be considered essential to improving
contribution although they may be helpful.
The draft model (Figure 7.4) is further developed and tested through the mini-
case studies to determine its suitability as a prescriptive model for improving the
strategic contribution of local government Purchasing.
7.5 CONCLUSIONS
The in-depth case study demonstrated that it is possible to align Purchasing Strategy,
objectives and performance measures with the higher-level objectives of the council.
The case demonstrates that it is possible to improve Purchasing’s strategic
contribution and be recognised as doing so through adopting a more professional
approach and imitating private sector good practice, then seeking wider alignment
with the council’s objectives.
The case study led to the development of an outline model which is
subsequently developed through the next stages of the research.
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8 MINI CASE STUDIES
8.1 INTRODUCTION
The literature review provided the basis for a theoretical model which suggested how
Purchasing’s strategic contribution could be improved. The later tripartite survey of
U.K. councils highlighted a perceived gap, in the minds of Chief Executives, between
Purchasing’s current and potential contribution; it was suggested closing that gap
could represent an improvement in Purchasing’s strategic contribution. Separately the
in-depth case study challenged some of the basic assumptions which arose from the
theoretical model, specifically the criticality of aligned Purchasing objectives,
Strategies and performance measures. The case study also challenged the
applicability of the existing models of Purchasing’s strategic evolution and arising
from that case an alternative development model was set out. Furthermore the case
study demonstrated that within that particular case, the repositioning of Purchasing
and the associated repositioning process was led by Purchasing.
This chapter builds further upon those foundations, considering the experience
of a purposive sample of nine U.K. councils.
The mini-case studies suggest that the adoption of a Strategic Purchasing
approach (Carr and Smeltzer, 1997), professionalising, development of an aligned and
documented Purchasing Strategy would improve Purchasing’s strategic contribution.
The mini-case studies also suggest that although aligned Purchasing Strategies are
evident, on a day-to-day basis Purchasing objectives are not aligned and aligned
Purchasing performance measures are not to be expected. The mini-case studies
suggest that in repositioning Purchasing, the existing evolutionary models fall short of
reflecting local government experience, and that incremental development is
predicated on providing demonstrable evidence of achievement. Furthermore the
mini-case studies provide verification that the model developed at the conclusion of
the previous chapter reflects local government Purchasing’s anticipated development.
In closing the key conclusions drawn from the mini-case studies are tabled.
8.2 METHODOLOGY
Three investigative strategies were pursued, namely, in-depth semi-structured
interviews with purchasing managers, analysis of the Purchasing Strategies which
were provided by a number of the interviewees and a postal survey of Chief
194
Executives utilising a semi-structured questionnaire.
The sample comprised a number of councils who had either:
Been cited elsewhere as exemplifying good purchasing practice,
Previously contacted the author to obtain information on specific aspects of local
government Purchasing, or
Were known to be actively involved in the wider development of local government
Purchasing.
Interviews were arranged with the purchasing managers over a nine-month period.
Triangulation was sought through a parallel analysis of those Purchasing Strategies
made available and the use of an open-ended questionnaire sent to the Chief
Executive of each of the councils. Once again the investigative strategy reflects
Ellram and Carr’s (1994) suggestion that research should be of benefit that compares
Purchasing’s view of itself with those of top management. Eight of the interviews
were tape-recorded; a technical fault meant the ninth was dependent on notes only. A
transcript of the key comments was sent to the interviewee within seven days of the
interview for verification.
It is fully acknowledged that the sample is not representative of local
government in general; the sample does however act as a useful test of the theoretical
model (Figure 2.12) and the potentially contradictory findings from the in-depth
Belfast City Council case study (Figure 7.4).
The first stage of the mini-case studies was a semi-structured interview with
purchasing managers. Eighteen councils were invited to participate, four did not reply
to the invitation; five were sympathetic but had insufficient time to assist. Nine
councils therefore participated. When requesting an interview a copy of the proposed
semi-structured interview questions was provided (Appendix 11). This enabled the
interviewees to not only reassure themselves as to the content but also as one
interviewee stated: made him think about some issues not previously considered.
The investigation aims to answer the research questions and compare those
answers with the preceding research:
Research Question 1: Could local government Purchasing improve its strategic contribution, and if so, how?
195
Research Question 2: Are Purchasing objectives aligned with the objectives of the council?
Research Question 3: Are strategically aligned Purchasing Strategies in place?
Research Question 4: Are the existing models of evolutionary development
applicable to local government?
Research Question 5: Are strategically aligned Purchasing performance measures
utilised?
Research Question 6: Within councils, who leads the repositioning of Purchasing?
Content analysis of the interviews was used to extract the key themes arising from the
answers and representative quotations are included within the report.
It had been hoped to carry out a document analysis of the mini-case study
Purchasing Strategies. Prior to the interviews, each interviewee had been sent an
outline of the semi-structured interview which contained a request for a copy of the
Strategy. During the interview an opportunity was made available for volunteering
the Strategy, and following the interview, when the transcript was provided for
verification, it was also made clear that a copy of the Strategy would be welcomed.
Having heard from managers during the interviews that all but one of the nine had a
current Purchasing Strategy document, each of the interviewees were encouraged on a
number of occasions to provide a copy of their Purchasing Strategy. Owing to the
sensitivities of trying to maintain a constructive interview environment it was not
considered appropriate to place additional pressure on the interviewees for a copy of
their Strategy. It was also felt that if too much emphasis was placed on obtaining the
document interviewees may have implied that they were being subjected to a form of
test. Therefore in order to maintain a long-term cooperative and constructive
atmosphere for future researchers it was decided not to harass interviewees for a copy
of the Strategy. As a result only five documented Purchasing Strategies were
obtained. It was therefore not possible to have a thorough analysis of all the
Strategies but only of the five received (Appendix 13).
Following the interviews each of the Chief Executives was sent a semi-
structured postal questionnaire (Appendix 12). Six of the nine Chief Executives (or
their nominees) replied yielding a response rate of 67%.
Content analysis was once again used to identify common themes and answer
the research questions.
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8.3 IMPROVING PURCHASING’S STRATEGIC CONTRIBUTION
In seeking to establish ‘if’ and ‘how’ local government Purchasing could improve its
strategic contribution, Chief Executives were first asked, through the postal survey, to
identify Purchasing’s current contribution. Chief Executives were then probed to
establish their view of the significance of strategic alignment and a documented
Purchasing Strategy in repositioning Purchasing. Chief Executives’ opinions on the
importance of a Purchasing Strategy were then compared with those expressed
through the purchasing manager interviews. Finally, Chief Executives’ opinions on
the stages of improving contribution were sought.
8.3.1 Current strategic contribution
Chief Executives’ views of how Purchasing make a strategic contribution lacked
sufficient consensus to draw meaningful conclusions. Although Chief Executives had
differing views on the key stages of improving Purchasing’s strategic contribution, a
common implied theme in the responses was that the adoption of a strategic
management approach would improve Purchasing’s contribution. That role would
include professionalising, the development of an aligned and documented Strategy
that embraces a wider perspective, and effectively communicating and disseminating
that strategy.
To compare Chief Executives perception of Purchasing’s current contribution
each of the Chief Executives was asked, ‘Does Procurement/Purchasing make a
strategic contribution to the Council?’
The respondent Chief Executives were unanimous that currently a strategic
contribution is made but there was a lack of consensus as to how that contribution was
manifested; a range of responses, characteristic of the complete spectrum of strategic
evolution from a ‘Clerical’ to a ‘Strategic’ function, were cited (see Table 8.1):
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Strategic contribution made by Purchasing No of respondents
Ensuring partners have shared values 1Maximising value for money 1Considering aims/objectives in procurement decisions 1Delivering e-Government 1Contributes to Best Value Steering Group 1Participates fully in Best Value Review Process, providing advice on options for service delivery
1
Will participate on Community Planning Group which is being set up 1Procurement Strategy linked in with Corporate Strategy 2Achieved objectives of service improvement and cost effectiveness 1Cost reduction 1Best Value 1Sustainability 1Mainstreaming (equality) in procurement contracts 1Adding value to the demand chain process 1Probity, accountability and integrity 1At the centre of technical & cultural change in move from traditional departmental operations to one of being a strategic commissioner of services through a range & variety of inter-agency partnerships and increasing use of private sector partners
1
Table 8.1: Chief Executive examples of strategic contribution made.
Chief Executives were then asked ‘Does alignment with the strategic goals of
the Council have an effect on Purchasing’s strategic positioning?’ One of the
respondent Chief Executives did not understand the question, while there was
consensus among the others that alignment does make a difference (Table 8.2):
Chief Executives responseYes No Not
answeredDoes alignment with the strategic goals of the Council have an effect on Purchasing’s strategic positioning?
5(83%)
0 1(17%)
Table 8.2: Chief Executives view on importance of aligned Purchasing objectives
198
Examples of the responses received are set out below:
Yes insofar as the corporate procurement unit’s historical strategic direction is supported and enhanced by means of its increased participation in the broader aspects of ‘Procurement Matters’ such as Community Planning, striving for continuous improvement, promotion of partnership working, economic development and environmental considerations (Chief Executive D).
In order to align with the strategic goals of the Council the central procurement service has to have sufficient importance and status to ensure compliance by its customers with its own and the Council’s SMARTic objectives. A mix of regulation and promotion ensures that the service is protected from maverick purchasing whilst ensuring a vehicle for the purchasing economies of scale and empowerment necessary for central purchasing to be a key player in the Council’s demand chain management strategy (Chief Executive G’s nominee).
The more procurement contributes to strategic goals such as improved service quality, generating employment, helping regeneration and changing the existing culture, the closer to the corporate core it becomes. [Council] procurement is placed in this context in our performance and management directorate (Chief Executive H).
8.3.2 The importance of a Purchasing Strategy
Chief Executives were then asked ‘Do you think a Purchasing Strategy document is
important to repositioning from a ‘clerical function’?’ One of the six did not
understand the question, the remaining five agreed that a Strategy document is
important for repositioning. The opinion of Chief Executives, while supporting the
theoretical model, was at variance with the purchasing managers to the slightly
different but corresponding question, ‘Is a Purchasing Strategy critical in
repositioning Purchasing?’ In answer to that question, only two of the purchasing
managers considered a Strategy was critical to success (Table 8.3):
Chief Executives Purchasing managersYes No Not
answeredYes No Not
answeredDo you think a Purchasing Strategy document is important to repositioning from a ‘clerical function’?
5(83%)
0 1(17%)
Is a Purchasing Strategy critical in repositioning Purchasing?
2(22%)
7(78%)
0
Table 8.3: The perceived importance of a Purchasing Strategy
The contrasting opinions of why Chief Executives felt a Strategy was important and
those of purchasing managers are illustrated below through extracts from both the
questionnaires and interviews:
199
Chief Executives:
• It sets out measurable procurement objectives
• Provides a corporate position statement and ensures a consistent approach to Best Value, procurement and purchasing
• Facilitates best practice and consistent contracting processes
• Clarifies training requirements
• Facilitates the examination of relevant issues (e.g. eProcurement)
• (Chief Executive D)
Procurement at [the] Council is most certainly not a clerical function – it clearly operates at a strategic as well as at an operational level. A Strategy document can place the procurement service in the context of overall service delivery, can incorporate those best practice linkages that underpin successful centralised procurement and can incorporate those aspects of regulatory and statutory provision that are necessary for buyers in large councils. It can also contextualise internal partnering arrangements such as those that exist between Corporate Procurement and Creditors’ payments, both working in juxtaposition to deliver statement billing, purchasing card and eventually eProcurement. In this way, the strategic value of procurement in organisations spending in excess of £100 million per year can be stressed and maverick purchasing can be reduced (Chief Executive G’s nominee).
Purchasing managers:
No (Acting Manager B).
My job is to reach the organisations strategic objectives – I don’t need a Purchasing Strategy document on how I’m going to meet those objectives. – Why should I? (Manager C).
… good for promoting the service (Manager D).
I think the Procurement Strategy is only important insofar as when you win people over you have something to put on the table (Manager E).
A Purchasing Strategy is critical as it provides a political mandate (Manager A).
Absolutely … if you want to achieve anything or if there are any obstacles thrown in your way, you can say “hang on – we’ve got to meet the corporate aims and objectives of the Council – these are your objectives, not mine and we’re working at helping you to achieving those goals” (Manager I).
8.3.3 Key steps in improving contribution
Finally Chief Executives were asked to make comments on the key stages of
improving Purchasing’s contribution. Although the responses lacked consistency, an
underlying theme can be detected, namely, the need to adopt a more strategic and
corporate approach.
200
The various Chief Executive responses are set out below:
Good information Training Understanding its importance and the contribution it can makeActing in the corporate interest (Chief Executive A’s nominee).
Early involvement in strategic planning.Full involvement in Best Value Review Process, as well as any subsequent service delivery option evaluationCommunication of procurement strategy, policy and proceduresDevelopment of a procurement training plan (Corporate)Greater use of benchmarking and performance measurement techniques(Chief Executive D).
Knowing current extentDeveloping strategyImplementing and adjusting over time(Chief Executive F’s nominee).
Appoint the best professionals and reward accordinglyImplement a top-down service planning approachImplement staff appraisal and development systems for procurement staffDevelop eProcurement and purchasing card systemsArrange suitable and contemporaneous training for procurement staffInstil a customer-centric approach to providing a procurement serviceImprove buyer understanding of suppliers and supply marketsMeasure year-on-year performance by means of realistic and meaningful key performance indicators.(Chief Executive G’s nominee).
Reengineering purchasing processes for efficiency gainsMaximising buying power and rationalising supplier baseReassessing competition policiesProviding core guidance on implementing policiesProviding accountability in new governance structures(Chief Executive H).
8.4 THE STRATEGIC ALIGNMENT OF PURCHASING OBJECTIVES
The mini-case studies sought to establish the degree of alignment between
Purchasing’s objectives and those of the council.
A triangulated approach was used with the intention of providing self-
verifiable, robust answers. Firstly, during the interviews, purchasing managers,
without the use of prompts, were asked to identify their Purchasing objectives. Later
they were asked ‘How does Purchasing make a strategic contribution?’ – it was
assumed that the answer to both of the unprompted questions would provide an
insight into the actual objectives of Purchasing. Separately an analysis was made of
the five Purchasing Strategies provided (Appendix 14) to identify those objectives
201
explicitly stated within the Purchasing Strategy. It was hoped that collectively the
three answers would have had a high degree of correlation. Table 8.4 summarises the
findings.
The analysis does not demonstrate a correlation between Purchasing
objectives, perceived strategic contribution and those detailed in the Purchasing
Strategies received. The analysis would, on the contrary suggest that, on a day-to-day
basis, Purchasing objectives are not generally aligned with those of the council.
The analysis of the Purchasing objectives explicitly stated within the
documented Strategies received though does suggest a trend towards greater
alignment with the those objectives previously identified in the tripartite survey by
Chief Executives as having the potential to improve Purchasing’s strategic
contribution.
On the basis of the purchasing managers stated current contribution and the
Purchasing objectives explicitly stated in the documented Purchasing Strategies, it
could be generalised that local government Purchasing, in the sample considered, is
typically positioned somewhere between ‘Independent’, focusing on cost reduction
and adopting best practice, and ‘Supportive’, seeking strategic alignment (Reck and
Long, 1988).
Cited below are relevant extracts from the purchasing manager interviews:
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Purchasing Objective CouncilA B C D E F G H I
Pu
rch
asin
g ob
ject
ives
Str
ateg
ic c
ontr
ibu
tion
Exp
lici
t in
str
ateg
y
Pu
rch
asin
g ob
ject
ives
Str
ateg
ic c
ontr
ibu
tion
Exp
lici
t in
str
ateg
y
Pu
rch
asin
g ob
ject
ives
Str
ateg
ic c
ontr
ibu
tion
Exp
lici
t in
str
ateg
y
Pu
rch
asin
g ob
ject
ives
Str
ateg
ic c
ontr
ibu
tion
Exp
lici
t in
str
ateg
y
Pu
rch
asin
g ob
ject
ives
Str
ateg
ic c
ontr
ibu
tion
Exp
lici
t in
str
ateg
y
Pu
rch
asin
g ob
ject
ives
Str
ateg
ic c
ontr
ibu
tion
Exp
lici
t in
str
ateg
y
Pu
rch
asin
g ob
ject
ives
Str
ateg
ic c
ontr
ibu
tion
Exp
lici
t in
str
ateg
y
Pu
rch
asin
g ob
ject
ives
Str
ateg
ic c
ontr
ibu
tion
Exp
lici
t in
str
ateg
y
Pu
rch
asin
g ob
ject
ives
Str
ateg
ic c
ontr
ibu
tion
Exp
lici
t in
str
ateg
y
Best Value for Money
No
Str
ateg
y re
ceiv
ed
No
Str
ateg
y re
ceiv
ed
No
Str
ateg
y re
ceiv
ed
Str
ateg
y in
pro
cess
of
deve
lopm
ent
Sustainable Development (Local Agenda 21) viz. Local economic
development Environment Quality of life
(incl. diversity, equal opps. etc)
Cost reduction Quality/ Quality improvement
Customer focus in service delivery
Open government
Skills development
Legal & procedural compliance
“Adds value & harnesses spend”/Purchasing efficiency
Co-ordinated purchasing
Rationalisation/Standardisation
Performance management
Risk management
Organisational structure
203
Savings
eProcurement/eGovernment
Mixed economy of service delivery
Profile promotion
Local strategic partnerships
Table 8.4: Comparison of purchasing managers objectives, perceived strategic contribution and explicit Purchasing objectives
204
… it adds value and harnesses spend (Manager A).
Currently cost reduction, more coordinated contracting and addressing transaction costs. Legal compliance & protecting the council
… what we decided to do was concentrate on Supply Chain Management because the one thing we’re really good at is saving money … under the heading Supply Chain Management are a series of recommendations, fewer suppliers, more bulk buying, rationalising lead purchasing – having fewer of those but eventually implementing eProcurement … minimising process costs…(Manager H)
At the moment we provide information, an efficiency mechanism, but not necessarily an effective one, for buying lots of relatively small, frequent types of things. Providing advice to other sections of the authority on contractual issues, to provide something of an early warning mechanism if things are starting to go wrong… I think, in my case I have to say, my starting point is that the Procurement Service is not the finished product. That finished product will be at the end of our Best Value Review report in April (2002)… a more centralised approach, … not procurement itself but some of the rules regulating the process, making sure that certain criteria are met, holding contract lists, sharing best practice, etc. All those things you can bring together for the benefit of departments into a central area …which I think is more efficient (Manager E).
It’s a truly corporate service that reaches everybody, so therefore, to that extent it’s bound to make a strategic contribution. Its potential for cost saving is obvious. Its potential for professionalism is obvious, and its potential for integrity, accountability and open government is obvious. There’s also the economies of scale argument, the specialism, the rationalisation of products and services, the aggregation and the potential to reach an internal market of users rather than the alternative which is not to have Procurement and allowing people to do what the devil they like – so you’ve no controls. So I think that makes a strategic contribution. Plus of course, without us there could be no environmental purchasing, equal opportunities mainstreaming and any of those other fine political initiatives.
The overarching strategic objectives are, … to cut costs, to improve your accountability and to carry out the other few things that I mentioned earlier on the political side (viz. Environment and Equal Opportunities) and you’ve also got to do that against the background of your resources … I like to think we’re trying to do everything on a proactive rather than reactive basis….
… The fundamental, underlying principles are still the same; you’re there to reduce costs, to standardise procurement where possible, to act as an advisory service to people who’ve got some devolved purchasing. (Manager G).
To make sure that we get customer satisfaction for the service that’s delivered. Customers being the citizens of [the area]. It’s moving away from the old style ‘you’ll get whatever we, the Council, want to give you’. It’s much more about 'we will procure the services that the people of [the area] want, and it’s about delivering them smarter, it’s about delivering them on time, it’s about the customers’ involvement in saying ‘well actually we don’t want that service – we want this one and this is how we want it, and this is how we want to access it’. Strategic procurement will ensure that that happens through commissioning frameworks, through how they do things – but it’s got to come from the top – that is the biggest problem (Manager I).
The fact that Procurement will sit on the Board that will look at the community planning and political motives of the organisation and everything and anything that that brings. The intention is that Officers will come to that Group with outlines of the ambitions that they have for departments and Procurement sits on it to give a Procurement perspective at the very early stage – it doesn’t exist as yet. The second would be Procurement’s direct involvement with the Policy Officers Forum which addresses any policy issue across the Authority – that’s ‘the think tank’ if you like for the corporate strategy… I think we have now got to the stage where we have sorted out the basics, all the building blocks are there… there are some elements that we could do better, like the access policy, the green procurement stuff, but they are happening, they are developing, but slower than I would have wished. We have high profile, high-level involvement in Best Value right across the Authority. We are now at the next stage, we are talking about what is the future, for example, Community Planning, broader procurement is a strategic choice type issue, at the highest level (Manager D).
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8.5 THE PRESENCE OF STRATEGICALLY ALIGNED PURCHASING
STRATEGIES
In seeking to establish the presence of strategically aligned Purchasing Strategies the
findings from both the purchasing manager interviews and the Chief Executive postal
survey were used together with a documentary analysis of the Strategies received.
Purchasing managers were asked during the interviews ‘Was alignment with the
council’s corporate objectives sought when developing the Purchasing Strategy?’ Six
of the interviewees said alignment had been sought and two said it had not. The
remaining manager, who was in the process of developing the Strategy, said that it
was a condition of approval that the Strategy would be aligned. The interview
findings were verified through the subsequent Chief Executive postal survey; five of
the six claimed the Strategy was aligned while the remaining Chief Executive said
that it would be. The final stage of the analysis, which considered the content of the
Purchasing Strategies (Appendix 14), suggested that all five of the Strategies received
had been aligned. The findings suggest that, within the mini-case study councils,
strategically aligned Purchasing Strategies had been developed. This would suggest a
conclusion that, at best, the councils are at a ‘Supportive’ stage, seeking strategic
alignment.
The findings are summarised in Table 8.5:
Is your Purchasing Strategy aligned with the strategic objectives of the council?
Yes No It will be
Purchasing manager responses 6 (67%)
2 (22%)
1 (11%)
Chief Executive responses 5 (83%)
0 1 (17%)
Table 8.5: Presence of aligned Purchasing Strategies
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Despite seeking to obtain a copy of the Strategies, only five of the nine purchasing
managers provided a copy. None of the Strategies were older than six months; it was
therefore too early to establish how the intended and realised strategies compared.
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One Manager (H) said that strategic alignment just was not considered
practical:
… I didn’t attempt to look at the eighteen cross cutting themes of the authority because it’s extremely hard to relate procurement strategy, which is generic across all services, to eighteen themes which might be a better life for old people and that kind of thing – how do you relate procurement to that?
One Manager (B) said that the Strategy was not aligned to the best of his
knowledge (however the interviewee was not the person who developed the Strategy
and examination of the document specifically stated that alignment had been sought).
Of those purchasing managers who claimed to have an aligned Strategy one
set out with the express intention of developing an aligned Purchasing Strategy and
found a benefit through the existence of a Corporate Strategy:
The questions we asked ourselves were ‘what is the Authority setting out to do – what is the Vision, and how can Procurement deliver that Vision? … Where can we have influence that will enable these things to happen?’ We were fortunate in that the Authority had a Corporate Strategy that was developed about two years ago, and that had identified twelve key events that the Authority wanted brought about in the community - twelve key issues that they wanted addressed. When we wrote the Procurement Strategy we sat down and looked at that, eight of those twelve we felt Procurement could have a significant impact on, less so in others. … What we did really was we identified eight of those that we felt Procurement could make a positive contribution towards and we set about drafting the Procurement Strategy to address in reasonably specific terms those eight issues. The eight issues don’t appear as such in the Procurement Strategy, but the Strategy was drafted very much with that in mind (Manager D).
One Manager was driven by the council decision to align all strategies. Subsequently
‘the light went on’ that the various cascading strategies should be linked:
We had the Corporate Plan with all its targets. The Council said, ‘right, we want each department to write a departmental plan, and then at a lower level than that, we want each service to write its own service plan. And again, it comes back to the old thing of all of a sudden the light went on for me and I realised what the linkage was in all of these things – that the service plan actually linked into the departmental plan which then links into the corporate plan which had the corporate goals and objectives and so forth. So that’s how the whole thing sort of linked together… So we’ve actually tried to say ‘I believe things actually link into the corporate plan’ – but to be fair that’s the first time we’ve done that. These are the different goals we set ourselves [illustrated using the Procurement Strategy document]. The different issues are the things that were flagged up to us out of the Best Value Review [in 1999] as being important by internal clients and external clients from the investigations we carried out (Manager F).
A third manager acknowledged that while strategic alignment was not uppermost in
their minds when they first developed the Strategy, he was encouraged to do so by his
Chief Officer:
I said ‘… here’s my organisational objectives …’. Then I was talking to my Deputy Chief Executive and he said ‘tell me how that fits with the objectives of the organisation?’ The Deputy Chief Executive motivated me to align the Procurement function with the corporate goals of the organisation. I took out the core objectives of the organisation and said ‘how does Procurement fit in with each of these? – Where does Procurement make an impact on each of these?’ …
…I felt Procurement could do X, I went back to the core objectives of the organisation to ensure the Procurement objectives fitted the core objectives of the organisation and where I could
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identify any other issues that Procurement could impact upon, I brought those in. So the driver was meeting the objectives of the organisation through the Procurement function and I’m a strong believer that can be done (Manager C).
Two pragmatically acknowledged that alignment is constrained by how clearly
articulated the objectives of the Council are:
… part of the problem with putting any more detail in [the Strategy] is that the Council objectives themselves are vague. So consequently the Strategy can only be vague in those areas (Manager E).
… there is a need to ensure that it is linked to the corporate objectives of the Council. The first problem that arises is there are no agreed corporate objectives for [the Council] at this moment in time (Manager I).
Two of the managers expressed concern as to the long-term practicalities of aligning
Purchasing Strategies with the higher-level strategies of the council:
I would say that perhaps in local government it’s becoming more difficult aligning procurement strategy with corporate strategy because corporate strategy is becoming more like community planning. Community planning - because it’s all to do with consultation, a good deal of it becomes aspirational – not something that the Council can actually deliver on. ... Procurement is so wide ranging and encompasses the delivery of virtually everything, that it’s in conflict in many ways with community planning aspirations, because the community is not remotely interested in the finances of the Council (Manager E).
You’ve got a City Vision, which is the objectives of the Council, and you have to try and relate Procurement to that – but there’s so little synergy. The City Vision is about clean streets and learning for all, and you can’t really focus on Procurement being able to assist them…There’s a City Vision – it’s political in the main, but it does examine the resources that will be needed to achieve that, but in terms of Procurement, it certainly doesn’t get down to the Procurement level. Procurement touches everybody in the Council – but there’s a difficulty trying to translate my objectives into the City Vision objectives (Manager G).
Of particular interest to the investigation, two of the managers who referred to their
Strategies as being aligned, doubted if there would be any significant difference if the
Strategies had not been aligned:
… if you took us out of the Council, and said ‘right under the Local Government Goods and Services Act, you are now free to trade’, I don’t think our locus would be much different if we were completely on the outside. So in a sense we’re not really affected by what the Council are doing and thinking (Manager G).
I don’t think the Procurement Strategy would change one iota whether the corporate objectives are there or not (Manager I).
The postal survey of Chief Executives was then used to seek to verify the
findings from the purchasing manager interviews.
Four of the five respondent Chief Executives stated that they had a Purchasing
Strategy and that it was aligned with the objectives of the Council. One said that the
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Strategy was in the process of development and that it would be aligned with the
strategic objectives of the Council.
Included as examples of alignment were the following:
Strategy was linked to key aims and values of the Council’s Corporate Strategy in areas such as sustainability issues, market management, promotion of partnership working in appropriate circumstances, eCommerce, openness and transparency, accessible documentation and, of course the Modernising Local Government and Best Value principles (Chief Executive D).
1. Environmental procurement accords with the Council’s Charter for the Environment, jointly produced by the Sustainable Development Unit … and the … Corporate Procurement Unit.
2. Cost-saving objective transposed into Key Performance Indicator via Service Planning process, via measurement of contract-on-contract saving matched against relevant market price performances.
3. Accountability objective – automatic de-briefing of Tenderers by Corporate Procurement Unit of all unsuccessful Tenderers and all papers relating to tenders and contracts placed in the public domain prior to contract award.
4. Mainstreaming equal opportunities in the supply chain and contractual processes. (Chief Executive G’s nominee)
The Council has a performance management framework which links the strategic goals of the authority through strategic themes and business plans to individual objectives and appraisals. The Procurement Strategy reflects this framework (Chief Executive H).
8.6 EVOLUTIONARY DEVELOPMENT
To establish the appropriateness of the existing models of Purchasing’s strategic
evolution and compare the observations of the in-depth case study it had been
intended to probe the experience of the mini-case study purchasing managers. It
became obvious though, based on the answers reported above regarding objectives
and Strategies, that significant progress on the strategic evolutionary journey had not
yet been made and that the purposive sample, who were expected to be exemplars,
were at best, generally at the ‘Independent’ stage.
Purchasing managers were therefore asked during their interviews ‘Have
Purchasing objectives changed over the years?’, ‘What would you recommend to
others in seeking to improve Purchasing’s strategic contribution?’ and ‘In your
experience, is there an incremental approach to improving strategic contribution?’
Retrospective reflection by the purchasing managers made it clear where Purchasing
had come from, namely, a focus on regulatory compliance, price and savings. From
that position there had been a shift to ‘professionalising’, coordinating purchasing and
the pursuit of cost reduction objectives. Managers then spoke of their aspirations for
the future, which generally typified a ‘Supportive’ position.
Even though managers generally spoke of ‘coordinating purchasing’, the
managers implied that was part of professionalising or transferring best practice and
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not a subsequent stage, as argued by Cammish and Keough (1991).
Significantly a recurring theme from the purchasing manager interviews was
that demonstrable evidence of professional purchasing was necessary before
‘operational peers’ started to act as ‘Purchasing Ambassadors’ selling Purchasing to
their own line managers. It was then only after ownership was gained that Chief
Officers and Members provided the opportunity to contribute to the strategic
objectives of the council.
While many of the purchasing managers acknowledged that they still saw
room for improving their strategic contribution, if the existing models were compared,
having gained recognition through transferring best practice purchasing, including
reducing costs, participating on cross-functional teams and coordinating purchasing,
they still fell short of optimal strategic contribution.
The phenomenological research approach provided an advantage in that, as a
result of considering the answers given during the earlier interviews, it was possible to
utilise the evolutionary model developed during the in-depth case study (Figure 7.3
above) and test for verification. That model was therefore tabled during some of the
later interviews for comment. The model while still in a developmental stage was, in
a number of cases, immediately related to by the managers and accepted as
articulating their perceptions of strategic development.
The conclusion from the interviews therefore was that existing models of
Purchasing’s strategic evolution fall short of reflecting local government experience
and that the local government model developed during the in-depth case study is
perceived as a truer reflection.
Extracts from the interviews are included below in support of the conclusions
formed:
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In the past Purchasing’s only objective was achieving savings. You need to look at what you’re doing – by analysing spend. Then harness spend. …We proved that a contribution could be made through taking the initiative and letting a major contract for mobile phones. The evidence from that helped us gain ownership. … demonstrate that you can add value [through cost reduction] and then having won ownership at that level you can move forward. (Manager A).
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Originally it was virtual anarchy – there was no co-ordination at all, each section were doing their own thing. [The Procurement Manager] came along, moved towards strategy before he wrote the Strategy, then once the Strategy was out that was our target…The inherited purchasing approach was decentralised with a level of anarchy. In parallel Purchasing was viewed as a clerical support function with very little training. The first implied objectives of Procurement were legal compliance, cost reduction and ‘to professionalise’. These objectives were seen as a means to the end of providing the platform for an improved strategic contribution and explicit Purchasing Strategy (Acting Manager B).
From a matter of commissioning widgets to a matter of commissioning outcomes … Cost reduction, legal compliance, ensuring delivery and quality, strategic alignment [at that time supporting in-house service delivery of contracts under CCT], we’re still gaining Chief Officer and Member ownership but aspire to wider strategic alignment (Manager C).
The 5 Rights are the basics, you have to get that right, if you don’t get that right you are failing in the basics. Beyond that, there are ways of adding value, you can take the five rights and add other benefits that cannot be added by any other part of the organisation. … we looked at what was happening in the broad professional sense, … then we said there are all these ‘high-faluting’ things out there, ‘can we use any of those ideas to improve what we’re doing. Some of it we could use without any real problem – things that you could just directly take off and apply to your own situation. [I then asked, “At that stage did you find that inside people could trust you?”]
Yes, much more so, because we were then coming with suggestions that had never been made before, small but very tangible differences, very straight forward common sense, small changes to the way things were done, that resulted in clear, well defined, measurable improvements.
[“At that stage, I think it is fair to say, you weren’t dealing with the Directors of the organisation?”]
Oh no … if you don’t come up with the goods, none of that matters, you have to tell them (operational peers) what you are going to do, and how you can help, and then you have to show them that it works, and then they come to trust you (Manager D).
Put in controls, transfer best practice throughout the organisation… green purchasing has definitely come to the fore but in practice it is not at the front end of procurement objectives. Equality is definitely rising - a much higher profile. Whereas three years ago equality was considered formally only in very large contracts, it moved further up the scale with the feeling that it must be considered … it’s really moved to the top of the Agenda. … you’ve got eProcurement – whereas three years ago that wouldn’t even have been on the Agenda and now we’re looking at eProcurement as part of the move towards eGovernment.… Three years ago it was definitely driven by the history of CCT – it was price… (Manager E).
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[Referring to Figure 7.4] I think the only area where I part company with [the model] is to say, for us it wasn’t a sequential thing. Ever since I’ve been here I’ve had Member and [my own] Chief Officer support. What I have had to work on has been other Chief Officers.
I would almost say this box [, the Private Sector Imitator stage,] was all jumbled up really, I think I was doing all these things more or less all at the same time – I can understand why you would want to put it like this, because it does make it easier for people to look into and understand. And to a large extent, what I have told you actually endorses that, certainly getting the staff on side, the deliverables. I can see that it’s more easy for people to understand when it’s set down like that.I would absolutely agree with you on this column [, the Strategic Breakthrough stage], these are the refinements really, these are the sort of things you go on to look at once you’ve got your act together …probably fair to say that five years ago, the Unit had a little bit of a negative reputation because we were perceived by the departments as the people who said ‘no you can’t do that’- we sort of policed the rules type of thing – which probably, to be fair to the Unit, reflected the ethos of the Council (Manager F).
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As the politicians move then you must move with them. The fundamental, underlying principles are still the same; you’re there to reduce costs, to standardise procurement where possible, to act as an advisory service to people who’ve got some devolved purchasing. I mean that much has never changed but in a regulatory framework that has existed since I came – so to that extent it hasn’t changed that much but the focus has changed – the modern communications, the political objectives – they’re more to the fore than they were…
[Referring to Figure 7.4] These things don’t change [: the private sector imitator stage]. People want things straight away, they want it as cheaply as possible, they want the quality of goods to be as good as possible and you want to examine the whole life costs. Once you’ve put that into place they will last forever – that’s the philosophy. These other bits [, the breakthrough stage,] that are tacked on, you wouldn’t even do it unless you were politically obliged to… (Manager G).
Two years ago…procurement was carried out at directorate level by people who knew nothing, absolutely nothing about purchasing and absolutely nothing about European legislation and didn’t realise that affected them whatsoever - they didn’t know how much they spent, who they spent it with, what they spent it on. There were no corporate contracts whatsoever, no aggregated spend. So Members were saying … They wanted to make sure that we were complying with EU legislation… everyone was buying the same thing from different people, paying different prices, totally uncoordinated…. you’ve got to get the basics in place … there is no use trying to bring in all these fancy strategies and anything you like, if you haven’t got the fundamental basics of procurement in place. … the next stage was to get them trained up a bit further so they can actually say to themselves they can make an impact in their own areas of procurement … getting the basics in place, getting the fundamentals in place, the bottom building block if you like ‘cause then you can just move up through the stages… then it’s about making sure you have the skills and capacity in place to move forward to the next stage – which is where we’re at the moment. The next stage is to look at the big stuff that nobody wants to touch – to look at the services, to look at the works, to look at how we’re doing the approved lists – so that’s a chunk that you’re going to have to bite off – you’re looking at best value reviews – that’s another big chunk … get all that under control and that leaves scope to be more innovative.
[“Does environment & local economic development happen after you’ve got the nuts & bolts in place?”]
No – we’re doing that at the same time – that’s part of the nuts and bolts. That to me is a building block which enables you to move forward, for example, you’ve got health and safety, your environment bit, your regeneration, your equality opportunities, all that has got to be in place – that’s all going on at the same time.
[“Is that only because you started with a blank sheet of paper?”]
Yes, absolutely … you see I came into virgin territory, there was nothing, absolutely nothing – so when I went to the Chief Officers I said ‘ this is a vital part of procurement’ and they believed me…. If I wasn’t starting with a blank sheet of paper it would be different (Manager I).
8.7 STRATEGIC ALIGNMENT OF PURCHASING PERFORMANCE
MEASURES
To establish the presence of strategic aligned Purchasing performance measures an
analysis of the five Purchasing Strategy documents received was carried out.
Of the five Strategies received only two included any performance measures;
Table 8.6 summarises the Purchasing performance measures of those two councils.
The measures included within the Strategy of Council A were considered
typical of a ‘clerically’ position function, neither time-scaled nor quantified, and only
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one of those indicators could be loosely linked to a strategic objective, that of local
economic development. The measures included within the Strategy of Council F,
were considered typical of a ‘Supportive’ positioned function, and were either time-
scaled or quantifiable; it would therefore be easy to compare how performance
matched expectations. The measures of Council F were also set out within the
Strategy in a manner which clearly illustrated the linkage with the strategic objectives
of the council. For many of the objectives beyond cost reduction, the measures were
based upon an action plan and the expected time for completion.
It can therefore be concluded that, within the mini-case study councils,
Purchasing performance measures are not generally aligned to the strategic objectives
of the council. It can however be concluded, based on the evidence of Council F, that
it is possible to strategically align Purchasing performance measures in a time-scaled
and quantifiable manner.
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Council Purchasing performance measuresCouncil A Council F
Cost of procurement activities Benchmarking suppliers costs with
other local authorities Spend on in-house provision,
suppliers, contractors and partners Procurement spend by post-code Invoice and payment method trends Proportion of manual, electronic and
purchase card transactions
Save £35m over 5 years, year 1 £5m Reduce invoices processed by 50,000
by end of year 1 Take out procurement costs by £5.5m Leverage advantage gained £11.5m Improved purchasing and procedures
£4.5m Calculate client satisfaction score and
increase by 10% over 5 years Increase proportion of expenditure
with approved contractors from 30% to 40% over next five years
Reduce average number of approved firms per £1m spend from 19.51 to 15 over 5 years
Increase expenditure on purchase cards from nil to £250,000 year-on-year over next 5 years.
Table 8.6: Purchasing performance measures
8.8 THE LEAD IN REPOSITIONING PURCHASING
The final research question which the mini-case studies sought to suggest an answer
to was ‘Within councils, who leads the repositioning of Purchasing? To gain an
answer to that question, purchasing managers were asked to outline ‘How were the
Purchasing objectives developed?’
Of the nine purchasing managers interviewed two suggested that the change
had been driven by elected members, two considered it to have been driven by Chief
Officers and the remaining five said that they had been the primary change agent
(Table 8.7).
Elected members
Chief Officers
Purchasing managers
Who led the development of Purchasing objectives?
2 (22%)
2 (22%)
5(56%)
Table 8.7: Purchasing change leaders
Cited below are relevant extracts from the interview transcripts:
Members driven:
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The purchasing objectives were arrived at following a review of Council purchasing activities. The review was carried out approximately 18 months ago but did not follow a traditional BV review methodology. The review was driven by an elected Member of the Council who believed there was a need to examine Purchasing. That Member sits on the Council Cabinet with a portfolio of ‘Resources and Procurement’. The Member was proactive and actively engaged in the review (Manager A).
An informal BV review was carried out of the Procurement function in May 2001...The review started out with Members saying ‘well we’ve got a corporate function – it used to do CCT and now it does all the corporate type purchases, stationery, photocopiers, all the things that support the Council, the energy contract - what is it we want from the corporate function?’ You’ve got District Auditors saying you’ve got to optimise the use of the corporate team in Best Value Reviews and some of the Members saying ‘are they actually into bigger scale procurement or just the basic procurement buying tasks?’ The purchasing strategy came from the BV style review picking out best practice in supply chain management. It has been planned and implemented through the Council's Chief Officer management team with cabinet approval. All procurement functions have an individual plan within the overall Strategy (Manager H).
Chief Officer driven:
The former Assistant Director of Corporate Services had been studying for an MBA and became aware that Purchasing’s potential was not being realised. Subsequently the Assistant Director found support from the Lead Member for Corporate Services. It was then agreed that a professional purchasing manager be recruited to act as a change agent in professionalising the Council’s procurement (Acting Manager B).
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The Head of Financial Services had always thought that he needed someone in Procurement but couldn’t persuade anyone else at that time – he wrote a paper, presented to Members saying ‘if you get someone in Procurement these are the savings that we could make’ and that was the basis of the paper. So Members were saying ‘alright then'...(Now it's) me – I have to drive everything, apart from savings – that’s Member led…The way the objectives are set – they are set by me. I write the paper, and I tell the executive – this is what we’re going to do and this is our long-term strategy for the next three years and they nod in agreement (Manager I).
Purchasing manager driven:
… some of it was simply theoretical work, looking at, for instance, the government’s aspirations about best value, and I think it’s important to put that there, so that they match the aspirations of the government and the Audit Commission, etc; some of them were just about good practice - entirely officer driven from my own experience about what represented best practice; some of it was consultation but it tended to be with other officers (Manager E).
I started [the Council] five years ago, now to be fair, we had a lot of the building blocks in place already… So when I got here, we got our heads together and said ‘let’s sit down with a blank sheet of paper and decide, where we want to go and where we want to be in five years time?’ – that was when the whole thing spread out really. … and we literally did it on one side of A4 - we found it the other day and it still stood up.
… after I’d been here about 18 months, somebody left and we sat and thought about what we were going to do. We decided we were going to create, within the Procurement function, a policy and strategy team.... Basically what we said to them was that, ‘you’re not going to do any actual procurement; what we want you to do is to think about where we’re going and how we’re going to get there?’ – and it was the best thing we ever did, it really was. So they actually sat down and worked out what the strategy was and eventually produced [the 2001/2002 Strategy] for us. We’ve always had a Procurement Strategy but it’s been all over the place – bits over here, bits in my head, … (Manager F).
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At the end of the former County, as things were winding down, I drew up a list of priorities for Procurement, and at the top of that list was a Procurement Strategy because I felt that during my years in local government we had always been stumbling in the dark. You never really knew what it was you were trying to do. I felt it was really important to have a clear written, overall objective, that you could use as a measure of success, I thought it was something that should have taken on board what the local business community and the broader business community were saying to you, coming up with a way of delivering it in Procurement – I thought that’s what we need a Procurement Strategy for.
On the post-graduate Diploma in Purchasing and Supply Management course I did in 1989/90, there were people from all sorts of diverse backgrounds, a lot of the Japanese manufacturing companies – the buyers who came from that background…. They saw Procurement in a completely different light to how Procurement was seen in local government. They saw Procurement at a very high strategic level, influencing how the company does things. It took me quite sometime to think how does that apply in a local authority - Purchasing in a local authority was about buying things you were told to buy. They felt that the Procurement Strategy was the basic plan of action they needed to take, and I felt that was a really valuable tool for a local authority. I have argued from that day that we needed a Procurement Strategy. In a local authority where there is no performance management strategy, how on earth do you know what you are trying to do? So I looked to other authorities and every opportunity I had I argued that was the first thing needed to take procurement forward. It back fired in that the corporate consultancy did a consultation with 23 authorities, none of whom had a Procurement Strategy, and they came back and said that there were 23 authorities all over the country, none of whom have got a Procurement Strategy – what have you got to say to that!
[In 1996] a new Chief Executive joined the authority who had previously had involvement with procurement. He came down to us, saw the sign on the door, knocked on the door, walked in and said ‘Hi, my name is [withheld], I’m the new Chief Executive, this is Procurement, what is it that you do, what is it you should do, and what is it needs to happen before you can do what you should be doing? Write me a report and come and see me in a week’s time’. It’s all changed from then really. I guess the biggest change came with the move from operational contracting to a much more strategic role in the authority. That sort of came to a conclusion back in June 2000 when the authority created the post of Corporate Procurement Officer (Best Value)… which was exclusively involved in the procurement issues that arose from Best Value Reviews – the ‘make of buy’ decision (Manager D).
8.9 CONCLUSIONS
The findings from the mini-case studies are summarised in Table 8.8. The suggestion
is that the adoption of a strategic approach, professionalising, development of an
aligned and documented Purchasing Strategy would improve Purchasing’s strategic
contribution. The mini-case studies also suggest that although aligned Purchasing
Strategies are evident, on a day-to-day basis Purchasing objectives are not aligned and
aligned Purchasing performance measures are not to be expected. Furthermore the
mini-case studies suggest that in repositioning Purchasing, the existing evolutionary
models fall short of reflecting local government experience, but that the model
developed during the in-depth case study is relevant and that incremental development
is predicated on providing demonstrable evidence of achievement.
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Research question Answer Evidence Comment/observations1. Could local government
Purchasing improve its strategic contribution, and, if so, how?
Yes Strategic alignment with the objectives of the council (Table 8.2)Adopt a Strategic Purchasing approach ProfessionaliseDevelop an aligned and documented Purchasing Strategy (Table 8.3)Disseminate the strategy
Chief Executives see a Purchasing Strategy as important.Current contribution could be improved by moving through higher level private sector imitator objectives and then better alignment with council objectives
2. Are Purchasing objectives aligned with the objectives of the Council?
No Not on a day-to-day basis (Table 8.4) In principle purchasing managers say they have aligned objectives but what they said ‘they do’ does not reflect day-to-day alignment.
3. Are strategically aligned Purchasing Strategies in place?
Yes Tables 8.4 and 8.5Appendix 13
Yes but only recently
4. Are the existing models of evolutionary development applicable to local government?
No Existing models do not seem to reflect the chronological development Verification of outline model developed during in-depth case study.Need to demonstrate evidence of achievement but essential to get ‘the basics’ right and build trust.
5. Are strategically aligned Purchasing performance measures utilised?
Not in general
Only one of the mini-case study council had strategically aligned measures
Not critical to improving contribution since improvement in contribution had taken place prior to the development of Strategy.
6. Within councils, who leads the repositioning of Purchasing?
Various actors
Table 8.7 .
Table 8.8: Summary analysis of mini-case studies
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9 CONCLUSIONS, CONTRIBUTION TO KNOWLEDGE AND IMPLICATIONS
9.1 INTRODUCTION
This investigation contributes to the body of knowledge through exploratory research
by answering the question: ‘Could local government Purchasing improve its strategic
contribution, and if so, how?’ This chapter draws together the findings from the
investigation and sets out an answer to that question. In so doing the limitations of the
existing literature, which were discussed in Chapter 2, are revisited, the theoretical
model derived from the literature review is challenged and recommendations are
made for improving the strategic contribution of local government Purchasing. In
closing, suggestions are made on how future researchers may wish to further build
upon the investigation.
The investigation adds to the body of knowledge through:
1. Confirming that the strategic contribution of local government Purchasing
can be improved and outlining how that improvement can be brought
about;
2. Providing new insights to the previously under researched area of local
government Purchasing including, the wider view of Chief Executives
with regard to potential strategic contribution, the lack of effective use of
performance measures;
3. Challenging the need for a Purchasing Strategy and timeliness of its
alignment;
4. Challenging the appropriateness of existing models of Purchasing’s
strategic development; and
5. The development of a model for improving local government
Purchasing’s strategic contribution. The model, developed as an outcome
of the investigation, goes beyond the extant models mapping Purchasing’s
strategic evolution (Reck and Long, 1988; Cammish and Keough, 1991;
Syson, 1992) which it is argued fall short of the needs of local government.
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9.2 THE KNOWLEDGE GAP
The literature review (Chapter 2) confirmed that although significant academic
attention has been given to both the local government policy area (for example,
Rhodes, 1988; Byrne, 1994; Caulcott, 1996; Corrigan and Joyce, 1997; Hill, 1997;
Joyce, 2000; Rao, 2000; Stewart, 1999 and 2000) and Purchasing (for example,
Lamming, 1993; Monczka, et al, 1993; Ellram and Carr, 1994; Gadde and Hakansson,
1994; Saunders, 1994; Carter and Narasimham, 1996; Carr and Smeltzer, 1997;
Cavinato, 1999) there is an absence of literature on local government Purchasing and
specifically how its contribution could be improved. Indeed only a few authors have
sought to focus on the practice of local government purchasing (de Boer and Telgen,
1998; Erridge and Murray, 1998a and 1998b) and those investigations have given
little more than cursory reference to the strategic potential of the Purchasing function.
Accepting those significant shortfalls, Cox (1997a, p29; 1999) has warned
against assuming espoused best practice from one sector should be transferred to
another. That being the case and since local government, unlike the private sector,
does not exist to make a profit, there may be dangers in even trying to transfer the
lessons learnt from the private sector to local government.
Therefore a knowledge gap exists with regard to local government Purchasing
in general but specifically relating to: ‘Could local government Purchasing improve
its strategic contribution, and if so, how?’
Given the knowledge gap, at the conclusion of the literature review (Chapter
2) a theoretical prescriptive model (Figure 9.1) was developed which suggested, based
on extant theory, how local government Purchasing could improve its strategic
contribution, namely:
1. Ensure strategic alignment within the objectives of the council
2. Practitioners should lead the repositioning of Purchasing as a strategic
function and educate those within the council as to Purchasing’s potential
contribution
3. Adopt a staged incremental approach to change in objectives
i. Clerical/Passive
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ii. Independent
iii. Supportive
iv. Integrative
4. Develop a strategically aligned Purchasing Strategy, authored by
practitioners, which sets out Purchasing’s programme for contributing to
the council’s objectives, embraces change management and has Member
ownership.
5. Utilise strategically aligned Purchasing performance measures.
Figure 9.1 (also 2.13): Theoretical model for improving the strategic contribution of local government Purchasing
224
The investigation accepted those suggestions as a starting position and sought to
compare the applicability to the theoretical propositions on how to improve local
government Purchasing. As part of the exploratory approach the theoretical
propositions were then articulated as research questions, namely:
1. Could local government Purchasing improve its strategic contribution, and
if so, how?
2. Are Purchasing objectives aligned with the objectives of the council?
3. Are strategically aligned Purchasing Strategies in place?
4. Are the existing models of evolutionary development applicable to local
government?
5. Are strategically aligned Purchasing performance measures utilised?
6. Within councils, who leads the repositioning of Purchasing?
The answers to the research questions, set alongside the extant literature review,
provide the basis for the investigations conclusions.
9.3 CONCLUSIONS AND RESEARCH ISSUES
This section places theory alongside the investigation’s findings so that conclusions
can be drawn on how the strategic contribution of local government Purchasing could
be improved.
The key lessons derived from the investigation are tabled below (Table 9.1)
alongside the degree to which theory had previously addressed the issue. Table 9.1
therefore highlights the contribution to knowledge:
225
Key lessons learnt from the investigation Degree to which the literature has addressed the issue
1. The strategic contribution of local government Purchasing can be improved.
Not addressed
2. To improve strategic contribution Purchasing should align itself with the wider strategic objectives of the council.
To some extent (Porter, 1996; Hines and Rich,
1997;Virolainen, 1998; Cavinato, 1999; Cousins, 1999a; Cousins
and Hampson, 2000, p. 238)
3. Chief Executives have identified a potential for improving strategic contribution which local government Purchasing is not, as yet, making.
Not addressed
4. While strategically aligned and documented Purchasing Strategies having in some councils been recently put in place, they are not critical to the improving the current strategic contribution but could be important in further development of a more strategic role, the ‘Strategic Breakthrough’ stage.
Not addressed
5. Although evidence was found of Purchasing objectives have been aligned with the corporate objectives of local government, purchasing managers do not focus on the delivery of those objectives on a day-to-day basis
Not addressed
6. Local government Purchasing could improve its strategic contribution through professionalising, adapting and adopting private sector good practice, progressively and incrementally pursuing objectives of ‘legal compliance, cost reduction and quality’, ‘cost reduction/quality improvement/ innovation transfer/delivery improvement’.
Not addressed
7. Purchasing objectives can be classified into four schools, namely, ‘classic’, ‘cost reduction’, ‘cost reduction/quality improvement/ innovation transfer/delivery improvement’, and ‘contingency’.
Not addressed
8. Strategically aligned Purchasing performance measures are not commonplace in local government yet their adoption could help improve Purchasing’s strategic contribution and particularly if they ‘pull’ performance toward the next stage of development.
To some extent(Butler, 1995; Davies, 1995, pp. 309-337; Osborne and Gaebler,
1992, pp. 138-165; Syson, 1992. p. 232; Spekman, et al, 1994; van
Weeele, 1994, pp. 200-206)9. The repositioning of Purchasing is driven by an array of
actors, not just Purchasing practitioners.To some extent
(Hughes, et al, 1998; Cavinato, 1999
10. Existing models of Purchasing’s strategic incremental evolution are only partially applicable to local government but fall short of reflecting that journey.
Not addressed
Table 9.1: The contribution to knowledge
9.3.1 Need for strategic alignment
The Best Value regime has emphasised the need for councils to review how they
provide services to citizens and ensure that all functions of the council, including
Purchasing, are strategically aligned with the ultimate needs of citizens.
Beyond local government the importance of strategic alignment or ‘fit’ has
been emphasised by a number of authors (for example, Fitzpatrick, 1995; Carter and
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Narasimhan, 1996; Porter, 1996; Virolainen, 1998; Cavinato, 1999). Porter (1996)
argued the need for three-dimensional ‘fit’ between corporate and functional
objectives, across functions in reinforcing each others strategies and collaboratively
through coordination, creating synergies and eliminating waste. In a Purchasing
context Virolainen (1998) and Cavinato (1999), reiterating the need for strategic
alignment, have highlighted that Purchasing must sit within the wider context of the
organisation as opposed to being a ‘stand alone’ functional unit. In parallel Cousins
(1998a and with Hampson, 2000, p. 238) has argued that without strategic alignment
it will not be possible to reposition Purchasing as a strategic function. The literature
on change management has also highlighted the need for strategic alignment (Bechtel
and Squires, 2001). The literature therefore suggests a need for strategic alignment
and implies that increased alignment should improve contribution.
In the absence of any existing literature the investigation therefore set out to
establish the degree of Purchasing’s alignment with local government corporate
objectives and whether that provided opportunities to improve Purchasing’s
contribution. As a first step in doing so it was necessary to first establish a position
on the strategic objectives of local government.
The literature review highlighted an array of local government objectives and
yet acknowledged that at a local level different priorities should be expected (Stewart,
2000). The review findings were subsequently tested empirically through an analysis
of N.I. council Corporate Strategies (Chapter 4), an analysis of Belfast City Council
documents (Chapter 5), and a tripartite postal survey of U.K. council leaders, Chief
Executives and purchasing managers (Chapter 6). The analysis suggested that, in
spite of the expected local variations, there is a high level of consensus and the
strategic objectives of local government can be generalised as fairness, equality,
public accountability, sustainability (namely, local economic development,
environment and quality of life), customer focus in provision of local services,
quality, open government and cost reduction.
Chief Executives were then asked to compare Purchasing’s current and
potential strategic contribution. Of particular significance and not identified through
previous research, Chief Executives highlighted a perceived gap between
Purchasing’s current and potential contribution (Chapter 6). While the specific
objectives identified through the survey are of interest, it is accepted that those
objectives will change over the passage of time. Yet it could be assumed that the
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principle will remain the same, namely, that Chief Executives may have a wider view
of Purchasing’s potential strategic contribution than that of purchasing managers.
Therefore central to improving contribution is fully stretching the potential areas for
strategic alignment with the wider objectives of the council.
Having said that, the analysis of N.I. Corporate Strategies (Chapter 4) and the
in-depth case study (Chapter 7), identified that Purchasing could contribute to the
achievement of some of the objectives identified by the Chief Executives (Chapter 6)
and that the pursuit of a broader range of objectives, namely, best value, sustainability
(namely, local economic development, environment and quality of life), cost
reduction, quality improvement and customer focus in service delivery; was
recognised by the in-depth case study Chief Officers as an improved strategic
contribution. Of particular concern though, while the respondent Chief Executives
(Chapter 6) identified the traditional Purchasing objective of cost reduction as a
potential contribution, not one of the respondent purchasing managers identified cost
reduction as a Purchasing objective. It could therefore be concluded that as a starting
position, Purchasing could improve its strategic contribution through pursuing the
objective of cost reduction.
The investigation then, through the mini-case studies (Chapter 8), explored
whether alignment with the strategic objectives of the council had an effect on
Purchasing’s strategic position. The clear majority of respondent Chief Executives
felt that it did have an effect. Given that position, it is noteworthy that the views of
the mini-case study purchasing managers, who when asked to outline how they made
a strategic contribution, did not suggest that on a day-to-day basis they were pursuing
strategically aligned Purchasing objectives even though their documented Strategies
were aligned.
It can therefore be concluded from the investigation that to maximise
improved strategic contribution Purchasing should align its objectives with the
achievement of the wider strategic objectives of the council.
9.3.2 Need to develop an aligned Purchasing Strategy
Mintzberg (2000, pp. 91-158) questioned the benefit of documented Strategies in
general, particularly when set within a strategic planning context. He did recognise
though the potential value of ‘strategic programming’ in circumstances typified by
local government, namely, organisations operating in a generally stable environment,
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with comparatively simple operations, in an elaborate structure. From a local
government perspective, some argue that documented Strategies have merit as a
method of consensus building and gaining a political mandate (Worral, et al., 1998;
Joyce, 2000; Stewart, 2000). Others see Strategies as a change management tool
(Levin, 1938 and 1951; Moran and Avergun, 1997; Bechtal and Squires, 2001). That
said, within the Purchasing Strategy literature, Purchasing Strategies are regarded by
some as essential (Steele and Court, 1996, p. 13; Carr and Smeltzer, 1997). It would
therefore have been assumed that, when seeking to improve local government
Purchasing’s strategic contribution, a Purchasing Strategy would have been an
important tool.
The tripartite survey of U.K. councils (Chapter 6) indicated that only 33% of
councils had a documented Purchasing Strategy in place. While the mini-case studies
(Chapter 8) suggested that all those exemplar councils claimed to have either a
Strategy in place or were in the process of doing so.
The in-depth case study (Chapter 7) suggested that, in that particular case,
Purchasing, while having a Purchasing Strategy document in place, had improved
strategic contribution prior to development of the Strategy. Purchasing had improved
its strategic contribution through pursuing objectives of legal compliance, cost
reduction and quality in addition to participating in high-level cross-functional teams;
then building on that foundation, pursuing objectives of cost reduction, quality
improvement, innovation transfer and delivery improvement.
The mini-case studies also sought to establish the importance of a documented
Purchasing Strategy (Chapter 8). The respondent Chief Executives generally thought
that a Strategy was important in repositioning Purchasing, while the purchasing
managers felt such a document was useful but not critical.
Carr and Smeltzer (1997) emphasised the need for an explicitly aligned
Purchasing Strategy and that view was echoed through the suggestions put forward
for improving contribution in the survey of mini-case study Chief Executives (Chapter
8). Cousins (1995) found that of the 42% of firms he surveyed who had a Strategy in
place, only 24% of those Strategies were directly linked to the Corporate Strategy
(therefore 10.8%). In a separate investigation Tamas (2000) found that only 13% of
those surveyed had a strategically aligned Strategy. Given that the tripartite postal
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survey (Chapter 6) indicated that only 33% of councils had a Purchasing Strategy in
place it could be extrapolated that perhaps as few as 4% of council Purchasing
Strategies may be aligned.
The in-depth case study demonstrated that particular Purchasing Strategy was
aligned while the mini-case studies indicated that all of those Purchasing Strategies
either had been or would be aligned.
The conclusion drawn is that in order to improve the strategic contribution of
local government Purchasing, a Strategy document may be helpful but not necessarily
critical. Indeed, it may be, as can be inferred from the later discussion, that until such
times as Purchasing has improved positioning beyond that of a ‘clerical’ function, the
internal environment may not be receptive to a corporate Purchasing Strategy.
9.3.3 Classification of Purchasing objectives
Prior to this investigation there was no evidence from the literature reviewed of an
attempt to classify the varying objectives pursued by Purchasing into specific
categories. During the literature review it was evident that such a classification would
benefit the investigation. Pattern matching was therefore carried out (Section 2.3.6)
which identified four discrete and progressively stretching schools of Purchasing
objectives, namely, ‘Classic’, ‘Cost reduction’, ‘Cost reduction/Quality
Improvement/Innovation transfer/Delivery improvement’, and ‘Contingency’ schools.
The ‘Classic’ school (for example, Baily, 1987; Scheuing, 1989; Dobler and
Burt, 1996) has elevated the tactical objectives associated with clerical positioned
(Syson, 1992, pp. 234-235) or mass production style Purchasing (Hines, 1996), to the
realm of Purchasing objectives. That school considers Purchasing’s raison d’être to
be delivering the optimum mix of the ‘5 Rights’ namely, right price, time/place,
quantity, quality and supplier; in a public sector body that may also include legal
compliance.
The ‘Cost Reduction’ school views Purchasing’s primary strategic role as
being to reduce costs. Cost reduction has almost invariably been cited in literature as
an objective of Purchasing (for example, Taylor, 1975; Kraljic, 1983; Baily, 1987;
Leenders, et al., 1989; Syson, 1992; Lamming, 1993; Gadde and Hakanson, 1994;
Speckman, et al., 1994; van Weele, 1994; Dobler and Burt, 1996; Hines, 1996) and
some commentators (for example, Fitzpatrick, 1996) have stated that cost reduction is
the primary objective of Purchasing. The parallel review of central government
230
literature on Purchasing, would position central government within the cost reduction
school.
The ‘Cost Reduction’ school is implicitly challenged by the bulk of literature,
which appears to emanate from the ‘Cost/Quality/Innovation/Delivery school’
(CQID) (for example, Lamming, 1993; Monczka, et al., 1993; Speckman, et al., 1994;
van Weele, 1994; van Weele and Rozemijer, 1996). That school focuses on
objectives, not only of cost reduction, but also quality improvement, innovation
transfer, security of supply and reduced delivery time.
The ‘Contingency’ school (for example, Rajagopal and Bernard, 1993; Watts,
et al, 1995; Carter and Narasimhan, 1996; Carr and Smeltzer, 1997) holds a
Contingency view that Purchasing’s role should directly flow from the wider
objectives of the firm and not be limited or restricted by former traditions.
Purchasing’s strategic contribution, according to the Contingency school, lies in
integration with the explicit goals of other functions (Carter and Narasimhan, 1996)
and developing appropriate synergistic Purchasing strategies.
The classification of Purchasing objectives into the four schools subsequently
provided a foundation for mapping the progress of local government Purchasing. It is
therefore claimed that the classification of Purchasing objectives is a contribution to
knowledge.
9.3.4 Need for aligned Purchasing Performance Measures
In seeking to effect change, it has been advocated (Johnston and Scholes 1993, pp.
398-401; Moran and Avergun, 1997) that there is a need for strategically aligned
performance measures to reinforce and reward the ‘aspired to’ change in behaviour.
It could therefore be inferred that Purchasing performance measures, with the purpose
of improving Purchasing’s strategic contribution, should be aligned with the
objectives of the council. On the other hand there is a danger of efficiency focussed
measures encouraging Purchasing to focus on the wrong things and ultimately being
detrimental to the performance of the organisation (Spekman, et al. 1994). Equally,
Reck and Long (1988) have argued that as Purchasing progresses along incremental
stages of development there will be a need for performance measures, in parallel, to
reflect and develop in line with the aspired changes. There was no evidence in the
literature review of the status of Purchasing performance measures in local
231
government. The investigation therefore makes a contribution to knowledge in
respect of Purchasing performance measurement.
The tripartite postal survey (Chapter 6) indicated that the use of Purchasing
performance measures was at a rudimentary level with measures generally being
efficiency focussed, and unquantifiable. The findings from the in-depth case study
(Chapter 7) indicated that strategically aligned performance measures could be
developed and that finding was further supported through one of the mini-case study
councils (Chapter 8). In general though, it is can be inferred from the evidence of the
tripartite survey and the mini-case studies that councils are not effectively utilising
Purchasing performance measures.
Given the evidence, it can therefore concluded that, to improve Purchasing’s
strategic contribution, strategically aligned Purchasing performance measures,
changing in line with the next aspired to stage of development, should be developed.
9.3.5 Need for Purchasing change agents
The change management literature advocates that there is a need for change to be
championed by a change agent (Bennett, 1991, pp. 337-338; Moran and Avergun,
1997; Spencer and Mountford, 1997; Hamel, 2000). Hughes, et al., (1998, pp. 140-
141) have argued that in improving Purchasing’s positioning it may be necessary for
Purchasing practitioners themselves to act as change agents. Cavinato (1999) has
echoed that view expressing the opinion that Purchasing may well have to take
responsibility for educating the organisation as to Purchasing’s potential contribution.
The view that the rest of the council may need to be educated with regard to
Purchasing’s potential contribution does not seem to be justified in the general context
of local government since, contrary to expectations, the findings from the tripartite
postal survey (Chapter 6) suggested that Chief Executives had a wider view of
Purchasing’s potential contribution than purchasing managers themselves. This
finding is an echo of the conclusion drawn by Debryne, et al, (1998) which found that
in Belgian and Dutch firms it was senior managers who generally drove change in
Purchasing’s objectives as opposed to Purchasing.
The in-depth case study (Chapter 7) suggested that, in that particular case,
Purchasing had acted as the change agent. Yet the mini-case studies (Chapter 8)
demonstrated that an array of change agents had taken on that role. It is therefore not
possible from the investigation’s findings to form a conclusive opinion that any
232
specified actor should be the catalyst for change, but in the absence of any other actor
taking on the role of change agent, Purchasing should be prepared to take a proactive
lead in repositioning Purchasing (Hughes, et al., 1998, pp. 140-141; Cavinato, 1999).
9.3.6 Need for incremental change
Accepting that this investigation had a focus on improving Purchasing’s contribution
implies an underlying assumption of a need for change. Change management
literature recognises that on some occasions transformational change may be needed
(Moran and Avergun, 1997). A preference for incremental change has been advocated
in the literature though (Johnson and Scholes, 1993, pp. 387-388) and appears
particularly appropriate within the comparatively stable environment of local
government since it provides the benefit of building on existing skills, routines and
beliefs.
The literature review identified three incremental models of Purchasing’s
strategic evolutionary development (Reck and Long, 1988; Cammish and Keough,
1991; Syson 1992). Those models generally map Purchasing’s evolution through four
discrete stages each building progressively on the foundation laid through the
preceding stage of development.
The existing models of Purchasing’s evolutionary journey imply that the
ultimate stage of development, and by implication improved contribution, is reflected
in the successful pursuit of cost reduction objectives, or at best, objectives of cost
reduction, quality improvement, innovation transfer and delivery improvement.
Those objectives, while relevant to profit orientated organisations, appear to fall short
of the local government corporate objectives identified above and the potential
strategic contribution identified by Chief Executives (Chapter 6).
Furthermore, the in-depth case study (Chapter 7) did not seem to replicate the
evolutionary stages of development nor did the mini-case study interviews with
purchasing managers (Chapter 8). On the contrary, it appears from the case studies
(Chapters 7 and 8) that Purchasing’s incremental improvement in contribution is
reflected in progressive incremental changes in Purchasing objectives.
The investigation suggests that at present the incremental development stages
for local government Purchasing are typified by four phases of changes in objectives,
namely:
233
1. ‘5 Rights’ (Clerical stage)
2. Legal compliance, cost reduction and quality
3. Cost reduction, quality improvement, innovation transfer and delivery
improvement
4. Best Value, local economic development, environment, quality of life and
customer focus in service delivery.
The change from the Clerical stage appears to reflect the traditional models and is
characterised through professionalising Purchasing in transferring perceived private
sector best practice and a switch from ‘lowest price wins’ to ‘lowest unit cost’. This
professionalising characteristic was also referred to in the mini-case studies (Chapter
8) by the respondent Chief Executives. Both the in-depth case study and the mini-
case studies (Chapters 7 and 8) suggest one of the ingredients of professionalising, as
co-ordinating purchasing and participating on cross-functional teams, yet the existing
models, particularly Cammish and Keough (1991), present those aspects as
characteristic of a higher level of development.
Within local government it appears from the case studies it is only after
Purchasing is seen by its operational peers to have demonstrated its ability to reduce
cost without compromising quality or legal compliance, that internal ownership is
gained from operational and tactical peers. That ownership appears critical to moving
forward to the next stage of local government development which is the pursuit of
objectives of cost reduction, quality improvement, innovation transfer and delivery
improvement. One of the reasons for the dependency on gaining operational and
tactical ownership appears to be that there is a dependency on those peers to provide
access to further opportunities to increase contribution and in turn those peers act as
Purchasing Ambassadors in influencing their senior managers. While this stage has
parallels with the existing models of development, and is referred to as the ‘Private
Sector Imitator’ stage, those models still fall short of the potential strategic
contribution identified by Chief Executives during the tripartite survey of U.K.
councils (Chapter 6), namely, in contributing to the local government objectives of
best value, local economic development, environment and customer service in service
delivery. That stage has been named the ‘Strategic Breakthrough Stage’.
It can be inferred from the case study research, particularly the in-depth case
study, that the opportunity to gain access to the ‘Strategic Breakthrough Stage’ is
234
dependent once again on recognition of successful achievement of the preceding stage
objectives and that while the objectives can currently be articulated, it is anticipated,
that as objectives change, so Purchasing will be assumed to have a potential
contribution to make to those as yet unspecified objectives. It can also be inferred
from the case studies that it is only as a prelude to this stage that a Corporate
Purchasing Strategy appears to be developed, possibly as a result of the need to gain a
political and Chief Officer mandate. At that stage Purchasing can be referred to as
‘Integrated’ but it appears the strategic journey is somewhat different than that
depicted by Reck and Long (1988).
9.3.7 Professionalising Purchasing
Although not the focus of this investigation, previous research identified that within
local government only 45% of purchasing managers were professionally qualified
(Murray, 1996). Yet others have argued the need for high-level qualifications to
MBA standard if Purchasing is to be repositioned as a strategic function (Lamming
1995; Hines, 1996; Cousins, 1998 and 1999a; Humphreys, et al., 2000).
The in-depth case study (Chapter 7) identified that two members of staff were
qualified to Masters level and a recurring theme from the mini-case studies was the
need to professionalise Purchasing in order to make an improved contribution. This
investigation did not sufficiently research the dependency on qualifications to enable
reasonable conclusions to be drawn as to the level of qualification required, if any, to
progress through the various incremental stages of development, although it can be
inferred from the previous research (Murray, 1996) that if as few as 45% of local
government purchasing managers are professionally qualified, then within local
government Purchasing, there may well be a skills deficit.
9.4 IMPLICATIONS FOR IMPROVING THE STRATEGIC CONTRIBUTION
OF LOCAL GOVERNEMNT PURCHASING
Taking into consideration the discussion above on the key stages of development and
the interdependencies, a prescriptive model has been outlined below which sets out
the steps Purchasing should take to improve its strategic contribution (Figure 9.2):
235
Figure 9.2: Local government Purchasing development model.
The model has three discrete stages, namely, the ‘Clerical’, ‘Private Sector Imitator’
and ‘Strategic Breakthrough’ stages. In order to make use of the model it is first
necessary to position the council’s existing Purchasing within one of the stages of
development, this can be done by considering the objectives Purchasing is currently
acknowledged as contributing to within the council. It is then possible to identify the
suitable incremental phases of development and the necessary components to further
improve Purchasing’s strategic contribution. As with Reck and Long’s (1988) model
it is not considered possible to ‘leap-frog’ a stage of development.
The ‘Clerical’ stage is considered, based on Hines (1996) research, to typify
80% of councils. The clerical stage equates with Reck and Long’s (1988) ‘passive’
stage and is the type of Purchasing which Cox and Lamming (1997) argued has little
or no future. It is likely that, when Purchasing is positioned in the Clerical stage,
operational efficiency will be considered to represent success, for example, timely and
accurate processing of Requisitions into Purchase Orders. Performance measures, if
any, will reflect the efficiency focus, for example, quantity of orders placed and cycle
time for processing Requisitions into Purchase Orders. If Purchasing actively
participate in the award of contracts, as opposed to merely processing the related
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administrative data, it is likely that the basis of those awards will be ‘lowest price to
specification’. The stage does not as such reflect a stage of development but instead
represents a starting position. The interest of Elected Members and Chief Officers in
Purchasing will be negligible and from a concern with reassurance that internal
operational procedures concerned with probity have been complied with. It is likely
that there will be little, if any, recognition that Purchasing makes a strategic
contribution.
To improve Purchasing’s strategic contribution from the Clerical stage,
Purchasing should first ‘professionalise’, this is reflected in the model as a change in
behaviour and becomes a precondition for further evolutionary development. The
Clerical stage may not have had any need for professionally qualified staff and it can
therefore be expected that there will have been little investment in ‘Purchasing
specific’ training and development. Purchasing staff may therefore have to take the
initiative, as was evident in the in-depth case study, to develop their own skills. If the
council, as opposed to Purchasing, champions progress from the clerical stage, an
appropriate Purchasing performance measure may be the percentage of professionally
qualified staff, for example, at CIPS Foundation Stage and subsequently CIPS
Professional Stage; such measures reinforce the desired change in behaviour.
As a result of professionalising, Purchasing will be better able to make a
constructive strategic contribution. Typical signs of a change from a Clerical stage to
a Private Sector Imitator stage would be the consideration of wider criteria in the
award of contracts, likely to be reflected in a switch from ‘lowest price’ contract
awards to ‘lowest cost at no compromise of quality’. In the model, unlike Cammish
and Keough’s (1991), Purchasing can be expected to look for low-risk opportunities
for cost reduction through coordinating purchasing. Low-risk opportunities are
advocated as the rest of the council may not, during the transition phase to a Private
Sector Imitator, have built up sufficient confidence in Purchasing. Typical low-risk
opportunities for consideration would include categories such as Stationery Supplies.
As a category Stationery Supplies cut across the council, tend to include transaction
processes viewed by Purchasing’s customers as bureaucratic, frequently using more
than one supplier and generally the potential market comprise a range of willing
potential providers enthusiastic and with the capability of providing for a larger
‘corporate contract’ at a competitive price.
237
Having demonstrated evidence of a more professional approach, the model
reflects that it is then possible for Purchasing to act within the ‘Private Sector
Imitator’ stage. Purchasing objectives should be more clearly articulated and, as an
interim phase of development, will focus on legal compliance, cost reduction and
quality. The contribution to cost reduction was specifically indicated, through the
investigation, as one aspect where Purchasing could improve its strategic contribution
through the transfer of existing good practice.
The scope for co-ordinated purchasing is likely to increase and may move
beyond supplies to include services, such as the provision of Agency Staff, as greater
operational peer ownership is gained. Involvement in the setting up of co-ordinated
purchasing arrangements for services provides scope for cost reduction but brings
with it much greater dependency on Purchasing from its internal customers. Internal
customers will be much more vulnerable should the service provider fail to deliver the
required level of service and there will be a need for robust post-contract management
by Purchasing. It is therefore likely that Purchasing will only be permitted the
opportunity by operational peers to lead these purchasing exercises as a result of
gaining the confidence of those internal customers through the successful
management of previous low-risk contracts during the transition phase from a Clerical
position.
Also as a result of professionalising, Purchasing can be expected to have
improved their understanding of the council’s internal and external purchasing
regulations, Purchasing may then take on a role of interpreting those regulations for
internal customers and assisting those customers achieve their purchasing needs in a
legally compliant manner. Suitable Purchasing performance measures, at this phase,
should be related to the Purchasing objectives, for example, internal customer
satisfaction, increase in the range of coordinated contracts let and cost reduction.
Previous performance measures from the Clerical stage may well be disregarded as no
longer relevant. Internal operational and tactical ownership is built up through the
demonstrable evidence of a more professional approach in a manner which matches
the needs of internal customers; this is reflected in the model through a change in
behaviour.
There may, as yet, not be any need for a Purchasing Strategy but if one were
developed it would reflect the Purchasing objectives of legal compliance, cost
reduction and quality and include details of how those objectives are to be achieved.
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The Strategy may be of little interest to Elected Members and could only be expected
to have the attention of Chief Officers if it had a potential to adversely impact on their
management. The Strategy would be of specific interest to operational peers within
the council as it would be expected to have an impact on their working practices and,
to be successful, would require their ownership. It is therefore important that, if a
Strategy is to be developed, it is done in collaboration with those peers and that they
own the Strategy as ‘the council’s’ as opposed to merely ‘Purchasing’s’.
Demonstrable and tangible evidence of success to operational peers provides
the platform for Purchasing to expand the scope of Purchasing objectives to cost
reduction, quality improvement, innovation transfer and delivery improvement. There
will be a high level of mutual dependency between Purchasing and its internal
customers to improve Purchasing performance. At this phase of the Private Sector
Imitator stage Purchasing is critiquing private sector best practice conscious that it
may need to be adapted to match the local government environment; the local
government lean supply model (Erridge and Murray, 1998a and 1998b) may serve as
an approach. Previous internal customers of Purchasing will, by preference, act as
‘Purchasing Ambassadors’, subconsciously marketing the benefits of working in
liaison with Purchasing. Among those influenced by Purchasing Ambassadors will
be Chief Officers, who in turn will provide opportunities for Purchasing to work with
them in improving contribution. The subconscious marketing by Purchasing
Ambassadors should be supported with proactive marketing by Purchasing.
A significant difference between the ‘legal compliance, cost reduction and
quality’ phase and the ‘cost reduction, quality improvement, innovation transfer and
delivery improvement’ phase, is that in the later phase Purchasing will start to view
the supply market as a resource capable of improving the council’s performance.
Resource Management (Lamming, 1993) and Supply Management (Cox and
Lamming, 1997) will become approaches. Purchasing will therefore act as a conduit
between the external market and the internal customers.
Suitable performance measures will continue to include internal customer
satisfaction but more significantly will include measures relating to Purchasing’s
increasing sphere of influence, for example, Market Penetration (Murray, 2001b) and
increased scope of coordinated contracts. Measures relating to the percentage of
qualified staff may become unnecessary, as Purchasing’s professionalism will be
judged through its performance outcomes as opposed to its inputs. Efficiency
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measures may also be disregarded, as it should be assumed Purchasing have in place
the appropriate systems.
Purchasing skills may need to be further developed to maximise contribution
at this stage (Lamming, 1995; Hines, 1996; Humphreys, et al., 2000). Cognisant of
the needs of the next stage of development, Masters qualifications, if pursued, should
by preference, have an emphasis on public sector policy and purchasing strategy.
It is at this stage that the existing development models (Reck and Long, 1988,
Cammish and Keough, 1991; Syson, 1992) appear to end. One of the arguments of
this thesis is not that those existing models fail but that they are insufficient.
Specifically their insufficiency is in two respects, the inability to reflect the local
government Purchasing stages of development identified through the empirical
evidence and more importantly in that they fail to provide the scope to reflect the
potential contribution identified by Chief Executives through this investigation.
The later stage of development, the ‘Strategic Breakthrough’ stage is reached
when Purchasing is seen as a proactive contributor in the achievement of the wider
local government objectives, for example, best value, local economic development,
environment, quality of life and customer focus in service delivery. The contribution
to best value will include participation in the strategic ‘make or buy’ decision. While
these objectives were specifically identified through the investigation, they should not
be considered exhaustive. On the contrary Purchasing should be open to the changing
priorities of the council and seek to identify wider opportunities for contribution.
Access to these opportunities will be dependent on successfully having gained the
ownership of Chief Officers and then Elected Members. Such ownership is likely to
be gained through the development of an aligned council Purchasing Strategy,
providing a mandate for future actions.
Proactive supplier development will become much more important to the
council. Purchasing would be expected to participate in cross-functional teams with a
view to improving both the opportunities for suppliers to gain council business and
change suppliers behaviour to that which is aligned with the councils objectives, for
example, sustainability (namely, local economic development, environment and
quality of life).
Performance measures at the Strategic Breakthrough stage of development
should be of specific interest to the upper echelons of the council and be integrated
into the councils performance management system. Suitable measures are likely to
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continue to include market penetration and customer satisfaction, but will be extended
to consider external supplier satisfaction, percentage of business by value and quantity
awarded to Small and Medium Enterprises, percentage of suppliers improving their
environment performance.
1.1 SUMMARY OF ANSWERS TO THE RESEARCH QUESTIONS AND
IMPLICATIONS FOR FURTHER RESEARCH
This investigation set out to establish ‘Could local government Purchasing improve its
strategic contribution and, if so, how?’ Arising from the literature review a theoretical
model was developed suggesting how local government Purchasing could improve its
contribution, and, on that basis a number of secondary research questions were posed:
‘Are Purchasing objectives aligned with the objectives of the council?’
‘Are strategically aligned Purchasing Strategies in place?’
‘Are the existing models of evolutionary development applicable to local
government?’
Are strategically aligned Purchasing performance measures utilised?
‘Within councils, who leads the repositioning of Purchasing?’
This section draws together the investigation’s answers to those questions and
comments on the implications.
9.4.1 Research Question 2: ‘Are Purchasing objectives aligned with the
objectives of the council?’
Although evidence was found in the mini-case studies of Purchasing objectives
having been aligned with the corporate objectives of local government, those
objectives have not, in general, been embedded within the culture of purchasing
managers to the extent that they impact upon their day-to-day decisions. The findings
from the tripartite survey suggest that Chief Executives have identified a wider
potential contribution to strategic objectives than is currently achieved by Purchasing.
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Furthermore Chief Executives see it as important, that for Purchasing to improve
strategic contribution, it should seek greater alignment.
At a theoretical level, it has therefore been demonstrated that it is possible for
Purchasing to align itself with strategic objectives and, as demonstrated through the
in-depth case study, it is possible for purchasing managers to embed the pursuit of
those objectives within their practice. Having said that, for purchasing managers in
general, alignment needs to go beyond a theoretical concept to affect change. If
purchasing managers are to be the primary agent for bringing about change, they must
be exemplars and role models to the rest of the council (Moran and Avergun, 1997;
Spencer and Mountford, 1997) otherwise the probability of successful intended
change is compromised. Indeed it may well be argued that the lack of demonstrable
ownership by purchasing managers could in the long-term be counter-productive ; that
begs the questions: ‘Is it to the long-term detriment of an organisation to have an
intended Strategy of good intentions without implementation?’ or ‘Is it better to only
adopt a Strategy when the change agent and the organisation are at a suitable stage of
development to drive forward implementation?’
Insofar as Chief Executives perceive a gap between current and potential
contribution, that gap provides a strategic opportunity for Purchasing to improve its
contribution. Logically, on the assumption that the current local government
objectives remain unchanged, it is therefore suggested that, if Purchasing aim to
contribute to the corporate objectives of sustainability (namely, local economic
development, environment, and quality of life), quality, customer focus in service
delivery and cost reduction, it is unlikely that Chief Executives will act as an obstacle
in the acceptance of Purchasing’s strategic contribution and may be an ally. Two of
those objectives, specifically, quality and cost reduction, have a direct correlation with
traditional Purchasing objectives and therefore the strategies used in the wider
Purchasing community may be appropriate for transfer. Further research would
therefore be merited which questions: ‘How appropriate is it to transfer traditional
Purchasing objectives and strategies for the pursuit of quality and cost reduction, from
the wider Purchasing community to local government, and, to what extent does the
local government sector context, constrain the direct transfer of those strategies?’
Given the absence of a fit between Purchasing’s current and potential
contribution, it would be beneficial to carry out a parallel investigation, in say three
years time, to establish if any shift has taken place.
242
As alluded to in the literature review, the U.K. government has embarked upon
a local government modernisation agenda. In some respects that agenda seems
removed from Purchasing practitioners. The potential and actual impacts of the
modernisation agenda on Purchasing merit further research, as does the related impact
of the Best Value regime.
9.4.2 Research Question 3: ‘Are strategically aligned Purchasing Strategies in
place?’
The investigation found recent examples of strategically aligned and documented
Purchasing Strategies in place but the research suggests that, at most, 33.3% - 40% of
councils may have any Purchasing Strategy in place; and may, perhaps, be as low as
6% - 10%.
Although Strategies may not yet be common, the research findings
demonstrated that an improved contribution can be made prior to the adoption of a
Strategy. Furthermore, the research suggests that unless Purchasing is recognised as
having moved from a ‘Clerical’ focus to one of delivering, what could be described as
‘private sector objectives’ of cost reduction, quality improvement, innovation transfer
and delivery improvement, it may be too early to seek ownership for a corporate
Purchasing Strategy.
The timing of when to produce a Purchasing Strategy may therefore be just as
critical as its alignment – further research to probe this dependency would be merited.
It is concluded that unless Purchasing has improved its professionalism – adapting,
adopting and delivering private sector good practice – others may well remain
sceptical that a wider strategic contribution could be made. It is contended that
without confidence in Purchasing’s ability having been gained, optimal strategic
contribution may always be compromised. It is therefore argued that Purchasing
should have the building blocks of demonstrable achievement of objectives of legal
compliance, cost reduction and quality, before pursuing wider, more ambitious,
objectives.
Given the case study evidence of improved strategic contribution without an
aligned Purchasing Strategy, the question could be asked ‘What purpose does a
Strategy have, and, how dependent is the council on the presence of a Strategy to
maximise contribution?’
243
The investigation cast doubt over the presence of aligned Strategies within
councils yet saw such Strategies as being important to successfully improving
contribution. It would be of benefit to establish and review the presence of aligned
and documented Purchasing Strategies – such a documentary analysis may be suitable
for desk-based research.
9.4.3 Research Question 4: ‘Are the existing models of evolutionary
development applicable to local government?’
The research findings indicate that the existing models of Purchasing’s strategic
incremental evolution (Reck and Long, 1988; Cammish and Keough, 1991; Syson,
1992) were not typical of those found in the councils studied. Those models appear to
fall short of the investigation’s findings in two respects. Firstly, the traditional models
position the higher-level of strategic development as being cost reduction, quality
improvement, innovation transfer and delivery improvement, while in local
government that appears to be an intermediate stage of development, the Private
Sector Imitator stage, with a higher-level of strategic contribution available beyond
that stage. It is therefore contended that existing models fall short of local
government and a new model for strategic development is presented. Secondly, the
characteristics of the incremental journey, observed in both the in-depth case study
and the mini-case studies, was not a replication of those depicted in the models.
Given the foregoing, further research would be merited which establishes, ‘Within the
wider Purchasing community, how true a reflection of reality are the existing models
of Purchasing’s strategic development?’
One of the weaknesses of the existing models is that they fail to explain how
progress, from one stage of development to the next, can be accomplished – it is
contended that the model developed, as an outcome of this investigation, overcomes
that weakness. Further research would however be merited to establish, ‘To what
extent is there a correlation between the components of Purchasing’s strategic
development, as portrayed in the model, and do other dependencies exist?’
The velocity of evolutionary change may be worthy of further investigation,
namely, ‘How long it does it take to progress from the ‘Clerical’ stage to the ‘Strategic
Breakthrough’ stage?’. Change was too recent in the mini case-study councils to
provide any useful analysis. It may be useful to have that timeframe so realistic targets
244
for change can be established. Given that information, it would then be possible to
identify what ‘accelerators’ exist.
The investigation has also implied that ‘leapfrogging’ a stage of development
is unlikely to result in success; further research would be merited in establishing if
that is the case.
There is of course a danger of implying from the thesis that all local
government Purchasing should progress to the Strategic Breakthrough stage – that is
not the intention. Councils may choose to position their Purchasing at any stage of
the spectrum. Equally, so a council may choose not to progress through to the higher-
level of contribution, but may opt out at any stage along the journey. The decision as
to where Purchasing should aspire to be positioned is one of political decision-making
for individual councils. The decision of where Purchasing should be positioned
though should not be the prerogative of Purchasing, but instead should be made by
politicians and chief officers. While the upper echelons of the council may make the
decision, there is a responsibility to consider why such positioning is chosen. If it’s as
lack of awareness of potential contribution, a market strategy should be embarked
upon. If however, it is a question of the competence of Purchasing to make a higher-
level contribution, then the council may need to consider looking elsewhere to
accelerate Purchasing change; that could include an entirely new team, interim
management or possibly external coaching and mentoring. It should however be a
professional responsibility to aim to maximise contribution.
9.4.4 Research question 5: Are strategically aligned Purchasing performance
measures utilised?
The use of strategically aligned Purchasing performance measures was not found to
be typical in local government. Performance measures, if used at all, were generally
found to have an operational focus although a few examples were found which
demonstrated that strategically aligned Purchasing performance measures could be
utilised.
Like the findings relating to the need for an aligned Purchasing Strategy,
evidence was found that strategic contribution could be improved even in the absence
of strategically aligned performance measures. The conclusion is reached though that,
while not essential, Purchasing performance measures can be used as a successful
change management tool to incrementally ‘pull’ performance through the incremental
245
stages of development. It is therefore contended that, performance measures should
not be strategically aligned too early, as measures which are too remote from those
which can be reasonably aspired to, may be counter-productive. Equally, measures
which are out of strategic alignment may well pull Purchasing in the wrong direction,
be counter-productive and reinforce dysfunctionalism. Further research would
therefore be merited which produces a library of Purchasing performance indicators
for local government which would be suitable for use at various stages of
Purchasing’s strategic development.
9.4.5 Research Question 6: ‘Within councils, who leads the repositioning of
Purchasing?’
The investigation found that various actors took on the role of catalysts for the
repositioning of Purchasing’s contribution, for example, purchasing managers, elected
members and chief officers – there was no typical change agent. It is unlikely though
that change will ‘just happen’ – it needs to be driven. It be beneficial to catalogue the
array of catalysts and to establish the most effective change agent. Furthermore, it
would be of interest to consider ‘What drives the drivers?’. That knowledge may not
only help equip those catalysts but also be transferable to other functional specialisms.
Given that purchasing managers generally demonstrated a low recognition of
Purchasing’s potential strategic contribution and the perceived skills deficit, it may
well be therefore that purchasing practitioners are not best placed to lead change until
such times as they have demonstrable evidence of having ‘changed themselves and
their tactical contribution’.
Equally, it would also be informative to establish how ‘personality dependent’
change is. For example, during the investigation it became apparent that one of the
mini-case study councils had lost the author of its Strategy, since their departure six
months had passed and during that time the change appeared to have stalled.
9.4.6 Research Question 1: Could local government Purchasing improve its
strategic contribution, and if so, how?
In summary the investigation has identified that it is possible to improve the strategic
contribution of local government Purchasing and to do so it is recommended that
councils should:
246
1. Align Purchasing with the strategic objectives of the council
2. Adopt an incremental approach to improving contribution
a. Professionalise
b. Demonstrate contribution to legal compliance, cost reduction and
quality
c. Supplement that contribution through demonstrating a contribution to
quality improvement, innovation transfer and delivery improvement
d. Supplement that contribution through contributing to the wider
strategic objectives of the council, for example, best value,
sustainability (namely, local economic development, environment and
quality of life)
3. Market Purchasing’s potential contribution.
4. Develop an aligned Purchasing Strategy in collaboration with operational
peers and reviewed regularly to reflect incremental changes in the objectives
of the council
5. Utilise Purchasing performance measures which ‘pull’ towards the needs of
the next desired phase of development
6. In the absence of any other change agent, Purchasing should lead
repositioning.
The focus of this investigation has been local government Purchasing. Although
reference was made to central government Purchasing strategy, the public sector is
diverse and the key questions of this investigation could just as interestingly be
applied to the wider public sector, for example, Police, Fire, Universities, and the
Health Service.
Finally and perhaps most significant, this investigation was exploratory
adopting a phenomenological approach. It would beneficial if others used a positivist
approach to further test the investigations conclusions.
247
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APPENDIX 1: QUESTIONNAIRE
LOCAL GOVERNMENT GOALS AND THE CONTRIBUTION OF PURCHASING
Please enter the name of the Council you represent, or attach business card:
Section 1: The Goals of Local Government
This sections seeks to identify the common goals of local government
1. Please identify with a ‘’ the stated goals of your Council:
Local economic developmentTourismEnvironmentCustomer focus in service deliveryPolitical advocacy QualityStaff developmentProfile promotion Local Agenda 21Quality of lifeInnovationRecreation and leisure‘In house’ delivery of servicesCommunity developmentCulture‘Open government’Civic prideReducing ‘rate’ dependencyCost reductionLocal sourcingDevelopment of SMEsother goals:
265
Section 2: Corporate Strategy and Purchasing’s Contribution, if any.
In this section please feel free to send copies of the relevant documents referred to as an alternative to answering the specific questions.
2. Does your Council have a Corporate Strategy? Yes/noIf ‘yes’, please briefly outline the role of ‘Purchasing’ within that Strategy, if any:
3. Does your Council have a Local Agenda 21 Strategy? Yes/noIf ‘yes’, please briefly outline the role of ‘Purchasing’ within that Strategy, if any:
4. Does your Council have an Environment Strategy? Yes/noIf ‘yes’, please briefly outline the role of ‘Purchasing’ within that Strategy, if any:
5. Does your Council have a Local Economic Development Strategy? Yes/noIf ‘yes’, please briefly outline the role of ‘Purchasing’ within that Strategy, if any:
Section 3: Best Value
6. Has your Council been selected as a ‘Best Value pilot’? Yes/no
7. Please indicate with a ‘’ the functions represented on your ‘Best Value’ project team:
266
MarketingFinanceOperationsPurchasingHealth and Safety Environmentother functions:
Section 4: Purchasing Strategy
8. Does your Council have a Purchasing Strategy? Yes/no
9. Who sets the corporate objectives for Purchasing? (Please ‘’)
Elected MembersChief ExecutiveChief Officers’ Management TeamPurchasing professionalsothers:
10. What do you believe are primary objectives of the Purchasing function?
11. Please identify with a ‘’ which of the Council’s goals you believe Purchasing could contribute to the achievement of:
Local economic developmentTourismEnvironmentCustomer focus in service deliveryPolitical advocacy QualityStaff developmentProfile promotion Local Agenda 21Quality of lifeInnovationRecreation and leisure
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‘In house’ delivery of servicesCommunity developmentCulture‘Open government’Civic prideReducing ‘rate’ dependencyCost reductionLocal sourcingDevelopment of SMEsother goals:
268
12. Please identify with a ‘’ which of the Council’s goals you believe Purchasing do contribute to the achievement of:
Local economic developmentTourismEnvironmentCustomer focus in service deliveryPolitical advocacy QualityStaff developmentProfile promotion Local Agenda 21Quality of lifeInnovationRecreation and leisure‘In house’ delivery of servicesCommunity developmentCulture‘Open government’Civic prideReducing ‘rate’ dependencyCost reductionLocal sourcingDevelopment of SMEsother goals:
13. Does your Council practice ‘Green Purchasing’? Yes/no
14. Does your Council practice ‘local sourcing’? Yes/no
15. Please prioritise the factors which best represent the basis of purchasing decisions in your Council:
Lowest priceDelivery timeQualityLowest whole life costsLocal sourcingEnvironmental impactothers:
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16. Which description, do you think best fits your Purchasing function?
ClericalAdministrativeSupportiveStrategic
17. Please feel free to comment on how the role of Purchasing local government could be more effective:
18. Please indicate which of the following purchasing approaches you currently employ:
Yes No Don’t know I intend to introduce in future
Medium term contracts (i.e. 2-3 years) Long term contracts (>3 yrs.)Co-ordinated purchasingGreen PurchasingCross functional teamsJ.I.T.E.D.I.G.J.C.Purchase CardsPurchasing Portfolio analysis Pareto analysisSupplier
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developmentDebriefingLocal sourcingUse of Purchasing Information Systems
19. Please briefly one other purchasing approaches you utilise:
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20. Please briefly define Purchasing’s customers:
21. Please briefly outline how you consult with your customers regarding their ‘quality perceptions and needs’:
22. Please list Purchasing performance measures currently used:
a) ______________________________________________b) ______________________________________________c) ______________________________________________d) ______________________________________________
23. Please indicate, in respect of the above performance indictors, current standards and future targets, please include timescale:
Indicator (as
previous question)
current standard
Target year end
1998/1999
Target year end
1999/2000
Target year end
2000/2001
Target year end
2001/2002
abcdefgh
If would you would like to receive an ‘Executive Summary’ of the findings, please ensure that your name and address were indicated at the start of the questionnaire, and indicate below:
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I would /would not like to receive an Executive Summary
I am happy/not happy to have my assistance acknowledged within the research report.
Please return in the envelope provided or alternatively FAX BACK to (44) 01232 315252 Thank for your assistance, you are assured that your response will be treated in confidence.
Gordon Murray MSc DipM.MCIM MCIPSPurchasing Manager, Belfast City CouncilMPhil research student at University of Ulster.
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APPENDIX 2: COVERING LETTER TO LEADERS OF COUNCIL
6 July 1998
Dear«Title»«LastName»
‘Best Value’ and Local Government Purchasing
I am the Purchasing Manager of Belfast City Council and an MPhil. research student at the University of Ulster.
As you are probably aware the new ‘Best Value’ regime has a requirement for benchmarking between councils. It therefore appears appropriate to myself, that I focus the early part of my research on establishing benchmarks relating to the role and contribution of local government Purchasing, particularly from a political perspective.
To assist in creating baseline information, I would therefore ask you to complete the enclosed questionnaire, and return it to myself, either in the envelop provided or alternatively, by fax to 01232 315252.
A separate questionnaire has been sent to the Council’s Purchasing Manager, who may well have a different view of their contribution. To improve the validity of the research I would therefore request that you complete the questionnaire yourself. I have set myself a closing date for the return of questionnaires as 20 July 1998, and would appreciate your assistance. As you would expect, I can assure you that all responses will be treated as confidential.
If you would like to receive an Executive Summary of this stage of the research, I will be happy to forward this at a latter stage (the questionnaire provides an opportunity for that option).
Thank you in anticipation for your support.
Yours sincerely,
Gordon Murray MSc DipM.MCIM MCIPSPurchasing ManagerMPhil research student, University of Ulster.
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APPENDIX 3: COVERING LETTER TO CHIEF EXECUTIVES
6 July 1998
Dear«Title»«LastName»
‘Best Value’ and Local Government Purchasing
I am the Purchasing Manager of Belfast City Council and an MPhil. research student at the University of Ulster.
As you are probably aware the new ‘Best Value’ regime has a requirement for benchmarking between councils. It therefore appears appropriate to myself, that I focus the early part of my research on establishing benchmarks relating to the role and contribution of local government Purchasing.
To assist in creating baseline information, I would therefore ask you to complete the enclosed questionnaire, and return it to myself, either in the envelop provided or alternatively, by fax to 01232 315252.
A separate questionnaire has been sent to the Council’s Purchasing Manager, who may well have a different view of their contribution. To improve the validity of the research I would therefore request that you complete the questionnaire yourself. I have set myself a closing date for the return of questionnaires as 20 July 1998, and would appreciate your assistance. As you would expect, I can assure you that all responses will be treated as confidential.
If you would like to receive an Executive Summary of this stage of the research, I will be happy to forward this at a latter stage (the questionnaire provides an opportunity for that option).
Thank you in anticipation for your support.
Yours sincerely,
Gordon Murray MSc DipM.MCIM MCIPSPurchasing ManagerMPhil research student, University of Ulster.
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APPENDIX 4: COVERING LETTER TO PURCHASING MANAGERS
6 July 1998
Dear«Title»«LastName»
‘Best Value’ and Local Government Purchasing
I am the Purchasing Manager of Belfast City Council and an MPhil. research student at the University of Ulster.
As you are probably aware the new ‘Best Value’ regime has a requirement for benchmarking between councils. It therefore appears appropriate to myself, that I focus the early part of my research on establishing benchmarks relating to the role and contribution of local government Purchasing.
To assist in creating baseline information, I would therefore ask you to complete the enclosed questionnaire, and return it to myself, either in the envelop provided or alternatively, by fax to 01232 315252.
I have set myself a closing date for the return of questionnaires as 20 July 1998, and would appreciate your assistance. As you would expect, I can assure you that all responses will be treated as confidential.
If you would like to receive an Executive Summary of this stage of the research, I will be happy to forward this at a latter stage (the questionnaire provides an opportunity for that option).
Thank you in anticipation for your support.
Yours sincerely,
Gordon Murray MSc DipM.MCIM MCIPSPurchasing ManagerMPhil research student, University of Ulster.
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APPENDIX 5: 1ST REMINDER LETTER
2 September 1998
Dear «Title» «LastName»,
Local Government Purchasing
I recently wrote asking for your assistance with research I am carrying out. The research forms part of an MPhil. that I am currently progressing. In parallel the outputs have the potential to provide ‘Best Value’ benchmarking information of the Purchasing function.
At this stage the research primarily aims to establish Purchasing’s current and potential contribution to the achievement of local government goals. Ultimately I hope to develop a ‘toolkit’, from which local government Purchasing practitioners may ‘pick and mix’, as is appropriate, to their own organisations. You are unlikely to be surprised that early indicators suggest that that ‘toolkit’ will be different from traditional, private sector purchasing approaches!
All information provided will be treated in a strictly confidential manner and it will not be possible to trace comments back to particular respondents.
This is original research which builds upon my work, about to be published, in ‘Public Policy’ and the ‘European Journal of Purchasing and Supply Management’. I would be delighted to provide you with a copy of an article which outlines the rationale behind the research if it would be of interest.
As I am sure you can imagine, I am highly dependent on the co-operation and assistance of a small sample of colleagues in local government, if my research is to have any meaningful significance. Unfortunately, at present, my records indicate that a response has not yet been received from yourself. I would therefore once more ask for your assistance in completing a copy questionnaire and returning it in the enclosed reply paid envelope during the next week..
I apologise if I have caused you any additional inconvenience and thank you in anticipation for your support.
Yours sincerely,
Gordon Murray
MPhil. student at University of Ulster
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APPENDIX 6: 2ND REMINDER LETTER
22 September 1998
Dear «Title» «LastName»,Local Government Purchasing
I have written on two previous occasions asking for your assistance with research I am carrying out. The research forms part of an MPhil. that I am currently progressing. In parallel the outputs have the potential to provide ‘Best Value’ benchmarking information of the Purchasing function.
The last possible date on which I make use of your contribution is now approaching. Taking that into account I am sending this final request for your co-operation. Once again a reply paid envelope has been enclosed, as is a copy of the original questionnaire.
I would reassure you that your reply will be treated with the utmost of confidentiality.
I apologise if I have caused you any additional inconvenience and thank you in anticipation for your support.
Yours sincerely,
Gordon MurrayPurchasing ManagerMPhil. student at University of Ulster
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Appendix 7
Extract from Belfast City Council Purchasing Strategy 1996-2001
‘Value for Money Strategy’Objective:
To achieve 'Value for Money' in all Belfast City Council purchasing.
'Value for Money' can be defined as achieving the right quality of supplies and servi‘es at the lowest possi’le‘cos’.
Cost is defined as the 'Total Acquisition Cost' ('TAC').
It will be the responsibility of 'spending departments' to ensure that 'TAC's' are defined and taken into consideration in all purchasing. Spending departments are expected to liaise with the Procurement manager to establish TAC’s for areas of major expenditure.
The obtaining of 'VFM' through purchasing activities is essential to
· ensure the competitiveness of the Council's Direct Service Organisation· reduce costs to the Ratepayers of Belfast.
'VFM' opportunities identified by the Purchasing Unit will be presented to the Purchasing Liaison Group for evaluation.
Two strategies will be employed to achieve 'VFM'.
Pay less Reduce costs
An interdepartmental Purchasing Liaison Group will be set up which will initially focus its attention on short-term opportunities for improvement identified in Table [A7.1] on page [267].
In the longer-term the Purchasing Liaison Group will be responsible for the continuous improvement of purchasing.
A Guidance Note on the Selection and Appointment of Consultants is included in Appendix ‘z’. This procedure will be binding on all Departments.
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Table A7.1: Short-term Value for Money OpportunitiesPay less Reduce costs
· Greater emphasis on 'Functional and Performance' specifications
Increase’ standardisation and decrease in use of 'Proprietary Items'
Improved negotiation power and skills
Increased harnessing of purchasing ‘muscle’
· Increased use of 'Investment Appraisal' techniques.
Purchasing process re-engineering Improved Purchasing Staff
effectivenessTraining and empowering all 'purchasers' Automation of 'Order Processing' including 'EDI'
Increased use of coordinated purchasing Introduction ‘of 'Blanket Orders'Use 'Corporate Purchasing Cards' for small value orders
Improved ‘Stock Control’ · Greater emphasis on 'Total
Acquisition Costs' Collaborative team approach to
purchasing 'Supplier Management' 'Supplier Development/Engineering' Long term supplier arrangements 'Reverse Marketing' Improved use of Purchasing
Information Systems Integration of suppliers into
purchasing processMaximising 'Supplier De-briefing' opportunities.
` Table A7.1: Short-term Value for Money Opportunities
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Appendix 8Extract from Belfast City Council Purchasing Strategy
1996-2001
Development of SMEs and 'Ease of Access' Strategy
Objective:
To assist in achieving the greater objectives of the 'Economic Development Strategy'.
Belfast City Council recognises that, as a major purchaser within the city, it can use its purchasing muscle and example to contribute to the economic development of the city. However this power must be exercised in a way which is within the constraints of public purchasing legislation and compatible with reducing costs to the rate-burden to the Citizens of Belfast.
Two strands are available in contributing to the economicdevelopment of Belfast:
Creating 'Ease of Access' to the Council purchasing systems Contributing to the growth of SMEs
The Council must be aware that the Purchasing Strategy and the Economic Development Strategy have two separate roles, which on many occasions may overlap. In either area decisions will be taken in the light of current Belfast City Council Policy. Ease of Access
It is alleged that those in the private sector have misconceptions regarding how public sector purchasing is carried out and the basis on which contract awards are made. It is also recognised that Belfast City Council is a large, dispersed organisation, with many potential buyers. This makes it difficult for vendors to easily identify 'points of contact'.
The 'ease of access for quality suppliers' in the short term will therefore:
Publish and distribute a 'Supplier Charter'
Publish a 'Selling to Belfast City Council' directory with the aim of assisting potential vendors' understanding of Belfast City Council purchasing
Host a 'Meet the Buyer Open Day' which will launch the 'Supplier Charter' and the 'Selling to Belfast City Council' guide
Detail on all quotations and tenders named points of contact for both technical and administrative information
Clearly identify on all tenders the criteria to be used for the award
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Make freely available debriefing, via the Purchasing Unit, for all unsuccessful participants in quotation and tender submissions.
Assisting the growth of SMEs
The 'Ease of Access Strategy' should itself assist in the growth ofSMEs however additional, more proactive options are alsoavailable. The 'assisting the growth of SMEs' strategy aims to parallel the Economic Development Strategy by directly increasing the level of business which the Council will direct to Belfast Suppliers:
In the short term
Ensure that Belfast City Council pays its suppliers within any agreed terms.
In the medium term
The Purchasing Manager will identify purchases which are sourced outside the Belfast area.
The Purchasing Manager will research the 'Reverse Marketing' experiences of other public sector organisations
The Purchasing Manager will prepare a 'Reverse Marketing Strategy' with the objective of assisting local SMEs to compete successfully for Belfast City Council business.
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Appendix 9 Mini-cases
Best Value for Money
The illustrative examples of this case reflect a spectrum of five roles which Purchasing have evolved as process experts to assist in the achievement of best value for money, namely,
Teachers Researchers Detectives Architects Doctors
Teachers provide specific, targeted training aimed at improving understanding and practice. Researchers identify and review best practice prior to articulating that as Guidance Notes which others can apply. Detectives search for evidence to ensure that best value for money is obtained. Architects design the bespoke process which others subsequently implement with varying levels of ‘hands on’ support. Doctors provide a surgery for those who meet with specific problems and require ‘customised’ answers to comparatively unique problems. Once again the cases are presented in rough chronological order.
TeachersIt is the view of the Council that it is not necessary for all purchasing to be channelled through the Procurement Unit. Instead it is felt that Procurement should take on the role of a ‘school’, training others how to deal with particular situations so that they can, through their own buying activities seek out best value for money opportunities.
Since 1997 the Purchasing Unit (now Procurement Unit) has been delivering twice yearly ‘Purchase Process Training’. The training covers the following areas:
Internal policy, strategy and regulations public procurement legislation requisitioning proprietary items the quotation process negotiation legal aspects of contracting.
On occasions this training course has been specifically tailored to suit the needs of individual departments. Other specialist training has been provided on an ad hoc basis to address specific needs, namely, implementing the environmental purchasing policy, Purchase cards and Low value orders, and Purchasing Strategy.
During the 1999 Best Value Review of the Procurement Unit focus group research indicated that ‘… it was felt that the quality of training was good, and that it was valued by services. Reference was made to individualised training which had been carried out for services which was felt to be ‘excellent’.’
Researchers
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Researchers seek out best practice, adapt it to the needs of the organisation and then disseminate that information in the form of Guidance Notes and procedures for others to follow.
As a consequence of an adverse report from the Ombudsman, in 1998 it was agreed the Council needed to improve its processes for the appointment of ‘works’ contractors and consultants, an area traditionally beyond the remit of Purchasing. A Working Group was set up by the Chief Officers Management Team, on which the Purchasing Manager had equal status. The Purchasing Manager conducted research and subsequently modified the Construction Industry Boards guidance notes for the appointment of Consultants (a Senior Quantity Surveyor in parallel reviewed the guidance notes for Contractors).
The Capital Works Procurement Guidance Notes were subsequently adopted by the Chief Officers Management Team, binding for all Council ‘works’ procurement. Training was then developed and delivered by the Purchasing Manager.
The production of guidance notes requires investment from only a limited number of staff and is therefore considered to be very cost effective. Other guidance notes have been produced by the Procurement Unit which include ‘How to apply the environmental purchasing policy,’ and ‘The appointment of management consultants’. DetectivesMuch of the accepted wisdom of public sector purchasing has been built upon the false notion that the buying organisation need only present its needs to the market and a response will be received from a ‘ready and waiting’ group of suppliers. The assumption being that each of those suppliers will aggressively compete to provide the service/product, and the competitiveness of the market will then deliver an optimum bid. As a result the public sector buyer can go some way to demonstrate best value for money, but what happens when only one supplier seeks to provide the service/product? Does that represent a market failure and how do the Council satisfy itself that it has received best value for money? In such a situation the Purchasing professional takes on the role of a detective, seeking out evidence.
In 1999 the Council set about re-letting its contract for Taxi Services, estimated to be worth £30,000 over it's three year period, less revenue from franchising fees. To ensure a good quality service was provided, applications for inclusion on a Select List were publicly advertised. Only one application was received and that from the major provider in Belfast.
Despite there being only one application, it was evaluated against and satisfied the pre-agreed quality criteria. In line with Council Standing Orders, as with all Select Lists, the specific application had to be presented to the Committee for acceptance, before a priced tender could be requested. The dilemma facing Purchasing was that Committee minutes, once presented to the Council, are in the public domain. Therefore should the sole applicant become aware that his was the only offer being invited, the potential for obtaining a best value for money offer would be significantly reduced.
Purchasing therefore carefully managed the flow of information. First, Members were asked to treat the matter as confidential. Furthermore, before ratification of the Committee Minutes, the tender documents were released, with a return date before that of the Council meeting. During the intervening period the bidder was put under very tight account management to remove any complacency.
The single bid was duly received and evaluated, without comparative bids on the following:
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the rates of previous contracts comparative rates for similar journeys from providers who had not
tendered justification for increase on previous rates.
From that information it was established that the bid represented a competitive rate and was therefore recommended for acceptance.
Post acceptance, further research was carried out to establish why there had been such a poor response, that response will be used to encourage others to bid in future award processes. In addition the account is tightly managed to ensure that the contractor delivers a satisfactory service.
ArchitectsThe purchasing process architect designs and leads procurement processes, generally through a cross functional team.
Traditionally grants were awarded by the Council without the input from Purchasing. However, in 1999 a decision was made at Committee that four grants of £300,000 each (one for each electoral area of Belfast) should be awarded in an open and transparent process. To that end the Committee decided that the Procurement Manager should design and guide a suitable process, and sit on the evaluation panel as an equal member with the Committee Chair and Deputy Chair, the Head of Economic Initiatives and the Economic Development Manager. The recommended process was subsequently put in place.
In the fullness of time applications were received and evaluated. It was the decision of the Panel that applications relating to two areas failed to satisfy the evaluation criteria and therefore it was deemed inappropriate to make awards for those areas.
In 2000 it was decided to apply the same process and re-invite applications for the two areas that had received no grants. Short-lists were subsequently drawn up and interviews held. Although it was not practicable for the Procurement Manager to participate on the interview panel, his nominee, one of the Procurement Assistants did. In due course interviews were held, an array of process queries addressed by the Procurement Assistant, and suitable organisations selected for the award of the grants.
Subsequently requests were received for debriefing. Debriefing provided an opportunity to explain the procurement process. Moreover it provided an opportunity to contribute to a customer focus by providing a conduit for those unsuccessful to present suggestions how their needs could be better matched. At one debriefing, carried out by the Procurement Manager and an Economic Development Officer a community group explained that they had not seen the original call for applications, not only did this reduce their time to respond but it also became evident that they had become aware of the ‘call’ by chance. Further probing identified that their needs could have been met had the Council used a mailshot to local community groups - that suggestion was welcomed and will be used in the future. It was also suggested that groups would value a visit by the evaluation panel so that their proposals could be outlined on the ground - that suggestion was also accepted on the proviso that only those which satisfied the core ‘entry criteria’ would be visited.
Doctors
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A significant amount of purchasing is devolved to departments. While ‘Purchase Process Training’ and internal regulations provide some guidance for buyers on ‘what to do’, inevitably on occasions, there is a need for non-routine advice. On those occasions Purchasing responds somewhat like a Doctor, diagnosing symptoms and prescribing remedies.
In May 2000, the Parks and Amenities Section invited quotations for the draining of four football pitches. The estimated contract value being £25,000.
Four quotations were invited. Three days before the latest time for receipt of offers, a fifth supplier contacted the Council and requested that he too be allowed to quote. On the advice of the Procurement Manager, the request was acceded to.
Five quotations were duly received and the Bills of Quantities compared by the Engineer. It became evident that the quotation received from the firm who requested documents just before the closing date had submitted an abnormally low offer (£11,500 compared with the next lowest of £23,300). Further the analysis suggested that it would be unlikely that the materials could be obtained at the rates submitted. This placed the Engineer in a dilemma, ‘how could the risk be taken with such a low and apparently uneconomic bid?’ The Engineer therefore sought the advice of the Procurement Manager.
On the recommendation of the Procurement Manager, the critical cost drivers were subsequently identified by the Engineer and the supplier invited to a meeting to discuss his costings. In parallel references were sought by the Engineer, which proved impossible to obtain.
The Engineer, Procurement Manager and contractor met. The situation was discussed and the contractor invited to demonstrate how he could provide the service at the rates within the Bill of Quantities. The discussion revealed that the contractor, unlike his competitors, had visited the site, taken ‘bore hole samples’ and based his rates on the assumption that he could reuse some of the existing materials, in addition he proposed using alternative solutions to some of the technical problems. The contractor was informed that all the indications from independent investigations suggested that the materials may well prove unsuitable for reuse. It was agreed that the contractor would revisit the site and carry out further sampling. On the basis of that sampling he would confirm his intention not to withdraw and should his assumptions prove unjustified during the work he would carry the risk. The contractor further undertook to provide a guarantee on the performance of his alternative technical solution, that should it fail within five years (a reasonable period) he would, at his expense repeat the work in the traditional manner. (It should be noted that internal research confirmed that the alternative technical solution was efective).
The Engineer was reassured, the various assurances received and the contractor awarded the contract at a saving to the Council of some 50%. As a result it was agreed that further work would be carried out on the same rates thereby increasing the Council’s benefit.
The work was subsequently carried out to the satisfaction of the Engineer.
Cost Reduction.Cost Reduction was addressed in the Purchasing Strategy under the objective of Value for Money. Two generic Value for Money Strategies were outlined, one of ‘pay less’, the other ‘reduce costs’. The actual content of the Strategy is included as Appendix ? Cost reduction is considered to be part of the raison d’être of the Purchasing function,
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as a result, finding and making opportunities for cost reduction is part of the ‘everyday business’ of the Unit.
The Council undertakes a significant amount of arboricultural activities in its own right along with acting as an agent for the Department of the Environment Roads’ Service in the development and management of street trees. In total it is estimated that the contract value is £400,000 per year. In 1997 it was identified that the incorporation of both types of work into a three year, rise and fall based contract, would be cost effective. The anticipated contract value of £1.2M meant that the contract was classified as a Residual Services contract under the Public Services Contracts Regulations.
The tender was subsequently presented to the market using a technique developed and known in the Council as a ‘double envelope’ process. This requires potential contractors to submit their tenders in two separate envelopes, contained within a covering envelope. One of the envelopes contains all the information necessary, to evaluate the Tenderers ‘quality’, while the second envelope contains the Schedule of Rates. Only those Tenderers who satisfy the quality evaluation have their second envelope opened. As a result low priced bids, which have not matched the Council’s quality threshold, are not seen. Effectively this is an amalgamation of the Restricted and Open procedures, but with major savings in terms of processing time.
Tenders were subsequently received and evaluated based on the estimated aggregated contract cost as opposed to lowest prices. That evaluation identified the supplier to whom the contract would be awarded. However, that analysis (using a standard spreadsheet package) also revealed that there were some rates within the Schedule that appeared excessive. This was highlighted to the Tenderer who was asked to bring forward proposals for cost reductions. The proposals duly received led to cost reductions estimated to be approximately 20%. It is the Council’s view that this type of Post Tender Negotiations (PTN) more akin to value analysis, does not contravene the prohibition of price based PTNs since before the discussions, it had already been identified and documented to whom the contract was to be awarded.
A similar tender exercise and PTN took place on the following three year contract, it is estimated that those PTNs led to cost reductions of 27%.
Other transaction cost savings, resulting from the amalgamation of the contract, the letting of three year contracts and the awards based on a ‘systems buying’ approach to a sole first tier supplier, although considered to have been delivered, have not been quantified.
Quality improvementAs with cost reduction, quality improvement is now considered a common Purchasing objective. It therefore has become part of the raison d’être of the Procurement Unit approach.
Traditionally the responsibility for preparing specifications rested with technical staff. Those technical staff would generally scan the market and identify a technical solution. This would subsequently be articulated through a technical specification presented to the market. The establishment of the Purchasing Unit did not seek to change that role but merely sought to complement it with a ‘purchasing perspective’ and a cross-functional team based approach.
The 1996 Purchasing Strategy stated a wish to switch to functional and performance based specifications. It was anticipated the use of functional and performance specifications would deliver long-term cost reductions and improve the quality of the ‘solution’ bought as a result of providing more opportunities to
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harnessing supply market expertise. From a buyer perspective this meant stating the problem to be solved as opposed to stating the solution.
In 1997 the manager responsible for specifying grounds maintenance equipment agreed to try a functional and performance based specification in sourcing new equipment. Table ? illustrates some of the differences between the previous ‘technical’ style and the functional and performance approach
1994 Technical specification 2000 Functional and performance specification Road Going Self-propelled Triple Mower
24hp water cooled diesel engine with low emissions. Transport speed up to 25kph, cutting speed up to 12kph. 2.13m cutting width. Hydraulic drive to wheels and cutting reels. Differential lock. Variable cutting reel speed control. Large front and rear wheels for reduced ground marking. Cutting performance of 1.8 hectares/hr at 12kph. Cutting units - 8 knife floating units. Single foot pedal hydrostatic control. Power steering to rear wheels. Foot operated disc brakes. Rear mudguards with toolboxes.
Ride-on Three Gang Cylinder Mower
To cut grass in parks, playing fields, open spaces and banks where the larger machines can not operate, to drive on the road between sites.
The Ride-on Three Gang must satisfy the following requirements:
1. Be of a design and build capable of providing five year’s reliable service in a Compulsory Competitive Tendering / Best Value Grounds Maintenance contracting environment.
2. It must leave a good quality cylinder finish.3. The minimum width of cut must be 2 metres.4. Be capable of operating in four wheel drive.5. Be fitted with Trelleborg or equivalent tyres
which will not damage the turf, will allow the machine to cut grass on soft ground, provide grip on grass banks and will not be easily punctured.
6. Be capable of cutting the banks at Annadale Embankment.
7. Be capable of lifting its cylinder units individually hydraulically to allow it to cut around obstacles.
8. Have a facility to backlap the cylinders.9. Be powered by a diesel engine capable of
providing enough power to carry out all tasks with out being under undue pressure.
10. Hold enough fuel for an eight hour working day.
11. Height of cut to cover the range of 15mm to 70mm.
12. Be fitted with a parking brake.13. Come complete with road lighting kit.14. Come complete with road tax and number
plates.15. Be fitted with an amber flashing beacon.
Table ?: Illustrative comparison of lawn mower specifications.
The main concern in using a functional/performance specification related to how unknown products offered, would be assessed as to their ‘fitness for purpose’. This problem was comparatively easily overcome through stating the particular operational environment, expected operational life of the equipment and then testing offered machines ‘on the ground’ performing the actual tasks.
The 1997 procurement exceeded all expectations. The technical analysis of the machines offered was considered by the manager to be significantly easier and
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more ‘operationally’ focused than was previously the case but much more germane, the equipment offered was considered to deliver improved quality at a perceived long-term cost saving. The approach has since been repeated each year and in August 2000 the manager confirmed his preference was now for this style of specifying. In addition he provided anecdotal evidence that previously Tenderers would have received a specification, identified the machine on which the specification had been based and merely price on that machine. This position had now changed and as Tenderers, they now had an increased range of technical solutions, which provided better quality at reduced cost to the Council.
Customer focus in service deliveryIn the autumn of 1996 a supplier contacted the Council and complained that they were prohibited from competing for business as a result of one of the questions asked on the Council’s application form for inclusion on a Select List for Employment Agency Services. A meeting was subsequently held with the Director of Corporate Services, Purchasing Manager and a representative of the firm. During the discussions it became evident that one specific question regarding the address of those members who claimed to hold membership of a relevant professional body caused offence. The purpose of the question was to obtain sufficient information to check individual membership. As a result of the discussions it was agreed to drop the question and include on the covering sheet of the Application Form a statement that would hopefully minimise any other questions causing a barrier to entry:
The information requested within this document is required so that Belfast City Council can identify potential contractors best fitted to match the quality needs for the project. If, for any reason, you feel uncomfortable about providing any of the details requested please discuss the matter with the Council’s Purchasing Manager, Mr. Gordon Murray….
The above represents just one example of how Purchasing respond to customers needs, other typical examples relate to suppliers reluctance to provide copies of their financial accounts. In such circumstances Procurement Unit staff have met with the prospective supplier and evaluated the accounts in his presence.
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Appendix 10Comparative Analysis of Belfast City Council ‘Intended’ and ‘Realised’ Purchasing Strategy
Value for Money StrategyObjective: To achieve ‘Value for Money’ in all Belfast City Council purchasing.
Activity Completed Completed in accordance with anticipated time-
scale
Intended in Strategy Targets realised Unintended outcomes realised
Purchasing Liaison Group set up to investigate short
term opportunities for improvement
No - Group was set up but felt happy to leave
initiatives to Purchasing
No Yes Yes - Purchasing Unit were able to pursue many of the opportunities as situations arose and a number of the
proposed changes have now been integrated into Council purchasing,
e.g. Functional & Performance specifications, increased harnessing
of purchasing muscle, training & empowering all purchasers. Longer
term contracts, supplier management, fuel cards.
Purchasing Liaison Group responsible for continuous
improvement
No - Group happy to leave initiatives to Purchasing
and in the absence of specific ‘project focus’
ceased to function.
No The Purchasing Manager acting as
Lead Officer was able to drive continuous improvement in the absence of Group
through ‘gate-keeper’ role in Tendering
process. Guidance Note on Selection
& Appointment of Consultants issued.
Yes Yes Yes Yes
Purchasing became involved in award of Grants
No
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Supplier Utilisation StrategyObjective: To achieve maximum benefit from the utilisation of suppliers as an external resource
Activity Completed Completed in accordance with anticipated time-
scale
Intended in Strategy Targets realised Unintended outcomes realised
Introduce longer term contracts
Yes Yes Yes Yes
Earlier supplier involvement in
specification process
Yes Yes Yes Yes
Greater use of Functional and Performance based
specifications
? There has not been as large a shift to F&P specifications as was
anticipated
? Yes ?
Increased use of Supplier Appraisal
Yes Yes Yes Yes
Supplier selection on major expenditure issues to be
carried out in collaboration with Purchasing Unit
Yes Yes Yes Yes
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Activity Completed Completed in accordance with anticipated time-
scale
Intended in Strategy Targets realised Unintended outcomes realised
Supplier Development to be introduced
Yes Yes Yes Yes Council became a Model of best practice
Supplier Management training to be provided and
a central facility made available
?: Training on supplier management only addressed through Purchasing Process
Training course - more detailed/specific training
envisaged
? Yes No Supplier Development became key tool in assisting SMEs and
greening supply chain
Council identified by Suppliers as best
practice
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Purchasing Skills Development StrategyObjective: To improve the effectiveness of all staff involved in purchasing activities
Activity Completed Completed in accordance with anticipated time-
scale
Intended in Strategy Targets realised Unintended outcomes realised
Annual corporate Purchasing Training Plan to be developed and delivered
Yes Yes Yes Yes
Staff Development and Training Plan to be
prepared each year for Purchasing Unit Staff
Yes Yes Yes Yes
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Development of SMEs and ‘Ease of Access’ StrategyObjective: To assist in achieving the greater objectives of the ‘Economic Development Strategy’
Activity Completed Completed in accordance with anticipated time-
scale
Intended in Strategy Targets realised Unintended outcomes realised
Publish ‘Supplier Charter’ Yes No - the process of obtaining corporate and political approval took
longer than was anticipated
Yes Yes Council became a Model of best practice
Publish ‘Selling to Belfast’ Yes Yes Yes Yes Council became a Model of best practice
Host ‘Meet the Buyer’ Day Yes Yes Yes YesDetail on all quotations and
tenders named ‘points of contact’
Yes Yes Yes Yes
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Activity Completed Completed in accordance with anticipated time-
scale
Intended in Strategy Targets realised Unintended outcomes realised
Identify on all tenders the criteria for award
Yes Yes Yes Yes It is now common practice to include
evaluation criteria also on requests for
quotationsMake freely available
debriefingYes Yes Yes Yes Council became a
Model of best practice for ‘constructive
debriefing’Ensure suppliers paid
within termsCommitment made Yes Yes Commitment made but systems not
in place to confirm adherence Purchasing Manager to identify purchases not
sourced locally
No No Yes No
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Activity Completed Completed in accordance with anticipated time-
scale
Intended in Strategy Targets realised Unintended outcomes realised
Purchasing Manager to research Reverse Marketing experiences of other public
sector organisations
No- anecdotal evidence suggested no other public sector body engaged in
Reverse Marketing
No Yes No
Purchasing Manager to prepare Reverse Marketing
strategy
No No Yes No Reverse Marketing now practiced on an ad
hoc basis Purchasing Unit became
active in Purchasing ‘outreach activities’
Yes No Frequently asked to deliver ‘Meet the
Buyer’ seminars off site
Purchasing Unit now considered to be a best practice example and have raised the profile
of the Council as a quality organisation through international invitations to speak
and winning an array of awards
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Legal Compliance StrategyObjective: To ensure compliance with all internal and external purchasing rules and regulations
Activity Completed Completed in accordance with anticipated time-
scale
Intended in Strategy Targets realised Unintended outcomes realised
Purchasing Unit to develop EC compliance systems
Yes Yes Yes Yes Purchasing Manager identified as the
Council’s primary point of reference on Public Procurement
LegislationTraining programme to be
deliveredYes: incorporated within
Purchasing Process Training
Yes Yes Yes
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Environmental Purchasing StrategyObjective: To ensure that Belfast City Council purchasing is carried out in an environmentally responsible manner in line with the ‘Environment Policy’NB The action plan was contained within the separate Environment Strategy document which had the following stated objectives: To ensure that Belfast City Council purchasing is carried out in a cost-effective environmentally responsible manner To ensure that purchasing contributes to environmental sustainability To contribute to the corporate objectives of increasing the profile of Belfast City Council.
Activity Completed Completed in accordance with anticipated time-
scale
Intended in Strategy Targets realised Unintended outcomes realised
Review of Policy on use of recycled paper
Yes Yes Yes Yes New Policy adopted by Council
Ease of access to Green Office Supplies
Yes Yes Yes Yes Supplier proactive in marketing and
reporting on use of green products.
Introduce Environmental Purchasing Policy
Yes Yes Yes Yes Purchasing Unit now considered to be a best practice example and have raised the profile
of the Council as a quality organisation through international invitations to speak
and winning an array of awards
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Activity Completed Completed in accordance with anticipated time-
scale
Intended in Strategy Targets realised Unintended outcomes realised
Guidance Notes on Policy implementation to be
introduced
Yes Yes Yes Yes ditto
Supplier Guide to Environmental Purchasing
Policy published
No
Public launch of Policy Yes Yes Yes Yes dittoRecommendations on
potential areas for future attention
Ongoing Yes Yes Yes Council subsequently adopted a Green
Vehicles StrategySuggestion scheme initiated
to solicit ideas for future action
Yes: Addressed at higher level by Environment
Strategy Manager
Yes Yes Yes
Research current Green purchasing best practice to
develop proposals on policy implementation
Ongoing Yes Yes Yes
In the absence of suitable guidance Purchasing Unit staff developed their own Environmental Purchasing
Models
No Purchasing Unit now considered to be a best practice example and
raised the profile of the Council as a quality
organisation
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Activity Completed Completed in accordance with anticipated time-
scale
Intended in Strategy Targets realised Unintended outcomes realised
Participate on UMIST research study
‘Environmental Impact of Purchasing in Organisations’
Yes Yes Yes Yes Purchasing Unit now considered to be a best practice example and have raised the profile
of the Council as a quality organisation
through various publications related to
the research. Training for Category A Environment Suppliers
Yes Yes Yes Yes Council approach to Green Supplier
Development now referred to as best
practiceIntroduction of
environmental criteria into all contracts
Yes Yes Yes Yes
Monitor the effect of Environment Strategy on
purchasing
Yes Yes Yes Yes Expectations relating to uptake by market
exceeded
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Activity Completed Completed in accordance with anticipated time-
scale
Intended in Strategy Targets realised Unintended outcomes realised
Pilot scheme for suppliers on assessment of
environmental effects of products supplied
Yes Completed one year earlier than anticipated and has been rolled out through
various initiatives
Yes Yes
Preparation of Reverse Marketing Strategy for
category A environmental purchases to create a market for ISO14001
suppliers
Yes Completed earlier than anticipated and high uptake
from current suppliers
Introduce Green Supplier of the Year Awards
Yes Completed two years earlier than anticipated
Yes Yes Awards now published as local best practice and Council approach
to Green Supplier Development now referred to as best
practicePiloted Green Supplier
ClubYes No
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Activity Completed Completed in accordance with anticipated time-
scale
Intended in Strategy Targets realised Unintended outcomes realised
Provided Environmental seminar for suppliers and
published papers as Towards a Greener
Business
No Assisted with development of SMEs
and promoting the Council as a quality
organisationPiloted ACORN project No Assisted with
development of SMEs and promoting the
Council as a quality organisation
Fair Trade Policy adopted Yes No Purchasing Unit now considered to be a best practice example and have raised the profile
of the Council as a quality organisation
Experiments with Social Justice purchasing
No Assisting in raising the profile of the Council
as a quality organisation
Council committed to research Ethical/Social
Justice purchasing
No
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Information Systems Development StrategyObjective: To ensure that appropriate Information Systems are in place to increase the economy, efficiency and effectiveness of Belfast City Council purchasing
Activity Completed Completed in accordance with anticipated time-
scale
Intended in Strategy Targets realised Unintended outcomes realised
Purchasing Liaison Group to identify requirements of
Purchasing Information system
Yes Yes Yes No: The implied implementation of a Purchasing Information System has
not progressed as it is part of a wider Core Financials System
Investigate fuller automation of the
purchasing process including the use of EDI
Yes Yes Yes No: The implied implementation of a Purchasing Information System has
not progressed as it is part of a wider Core Financials System. It is
anticipated that the next strategy will address eProcurement
eProcurement piloted for stationery supplies
Yes No
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Purchasing Ethics StrategyObjective: To achieve the greater objective of raising the profile of Belfast City Council as a quality organisation through carrying out purchasing activities to the highest ethical standards
Activity Completed Completed in accordance with anticipated time-
scale
Intended in Strategy Targets realised Unintended outcomes realised
CIPS Ethical Code adopted Yes Yes Yes Yes
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Appendix 11Council purchasing managers: Semi-structured Interview Questions
A: Purchasing Strategy
1. What are the strategic objectives within the Council?ExplicitImplied(Look for validation of Model)
2. How were Purchasing’s objectives arrived at ?What were the drivers?
3. Have Purchasing’s objectives changed over the years?
4. Is it your view that Purchasing Strategy is ‘planned’ or ‘emergent’?
5. Do you have a documented Purchasing Strategy?(Obtain copy if not already in possession)
6. When was the Purchasing Strategy agreed/adopted?By whom - Members/Chief Officers?
7. What was the background to the Purchasing Strategy being developed?Who took the initiative?
8. How do the ‘intended’ and ‘realised’ strategies compare?(Look for evidence)
9. How did the ‘realised’ Purchasing Strategy develop?
B: Purchasing’s Strategic Contribution
1. In what ways does Purchasing make a strategic contribution?Why? (Look for evidence)
2. Do you think a Corporate Strategy is important for improving Purchasing?
Why? How?
3. Was alignment with the Strategic goals of the Council sought?Have you any examples of alignment?
4. Does alignment have an effect on Purchasing’s position?How?Why?(Look for evidence)
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5. What would you recommend to others in seeking to improve Purchasing’s strategic contribution?
Goals?Tactics?Gaining Ownership?Positioning?Marketing?Why?
C: Achieving Change
1. How is Purchasing Strategy implementation led?
2. What obstacles have been encountered?How have they been overcome?
3. In your experience is there an incremental approach to improving strategic contribution?(Compare Model - look for dependencies)
4. What would you say is important in transforming Purchasing to a strategic function?
5. Could you identify any catalysts to improving Purchasing’s internal profile/contribution?
(legislation?(compare Model)
6. In your experience how long does it take to move Purchasing from a clerical to a strategic function?
What are the critical steps?(Compare Model)
7. Is a Purchasing Strategy critical in repositioning Purchasing’s strategic contribution?
Why?
D: Political Procurement
1. Do you think Purchasing has a Political role?Expand?
2. What are Members aspirations of Purchasing?
3. How do Members involve themselves in Purchasing Strategy?
E: Purchasing Staff
1. What characteristics are required of Purchasing staff?
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(Compare Model)
2. What experience and training do you think local government purchasing managers require?
Is it different from those in the private sector?
3. Do you see any difference on the role of local government purchasing managers and their Private Sector peers?
F: Round up
1. I have a list of local government objectives, do you agree with that list?Omissions?(Validate Model)
2. Which of those objectives do Purchasing seek to contribute to?Is that explicit?Is that recognised?(Evidence)
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Appendix 12Covering letter to Chief Executives (2)
06 September 2001Chief ExecutiveX Council
Dear Chief Executive,
PhD Research
I am the CIPFA/IPF Procurement Adviser and have been carrying out PhD research on ‘Improving the strategic contribution of local government purchasing’. The research is now reaching its conclusion.
The Council’s <….> was good enough to contribute to the research through participation in an interview. As part of the research validation process I would be grateful if you could complete the attached questionnaire and return it in the enclosed envelop by 28th September 2001.
I would stress that you are one of only nine Chief Executive’s being asked to participate in the research – so your assistance is vitally important. In order to improve the validity of the research, I would ask that you provide your own opinions and do not seek the assistance of the <…..>. If you would prefer, the Chief Officer most familiar with the procurement function may complete the questionnaire.
For you information, the research up to this stage has been published as four academic papers in international journals. If you wish, I am happy to provide you with copies of those papers.
I can assure you that your response will be treated as confidential.
Should you wish to discuss the questionnaire or the research please fell free to ring me on 028 90 247137.
Thank you,
Gordon Murray MSc DipM MCIM MCIPS MInstAM(AdvDip)IPF Procurement AdviserEnclosure (Questionnaire)
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Appendix 13:Chief Executive Questionnaire (2)
Improving the Strategic Contribution of Local Government Purchasing
<?> Council Chief Executive Response (change as appropriate)
Strategic Contribution1. Does Purchasing/Procurement make a strategic contribution in the
Council? Yes/No/Not sure
If ‘Yes’, please briefly state how? (For example, goals/objectives contributed to):………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
2. Does your organisation have a Purchasing/Procurement Strategy? Yes/No/Don’t know
If ‘Yes’, was alignment with the strategic goals of the Council sought? Yes/No/Don’t know
If ‘Yes’, please provide brief examples:………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
3. Do you think a Purchasing/Procurement Strategy document is important to repositioning from a ‘clerical function’? Yes/No/Don’t know
If ‘Yes’, why?:………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
4. Does alignment with the strategic goals of the Council have an effect on Purchasing’s /Procurement’s strategic positioning? Yes/No/Don’t know
If ‘Yes’, why?:………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
Achieving Change
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5. In your experience, what are the key stages of improving Purchasing’s/Procurement’s contribution?
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
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Political procurement
6. What do you think are Members aspirations of the Purchasing/Procurement function?
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
Quid pro quoDo you want to receive copies of previously published papers relating to this research? Yes/No
If ‘Yes’, please state your name and address: ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
Thank you for taking the time to participate in this research. I can assure you that all responses will be treated as confidential.
Gordon Murray
Appendix 14Mini case study analysis of Purchasing Strategies
Purchasing Strategy of Council A
The Purchasing Strategy of Council A is high-level and does not contain a lot of detail. Four themes are identified as key to the Council’s Procurement Strategy, namely, the Council’s Vision and Values, Financial Strategy, Best Value and eBusiness.The first theme, ‘Council’s vision and values’, explicitly states:
All strategic procurement decisions offer the opportunity to advance the Council’s Vision and Values. Although Strategic Procurement affects all of these objectives, a number are of particular relevance, including:
Effective partnership Comprehensive and integrated front-line services Community participation Care and respect for the environment.
The three other themes imply but do not state explicitly Purchasing objectives as being, cost reduction (savings and transaction costs), best value for money, and eProcurement.
Six aims are explicitly stated for procurement:
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1. Reducing the supplier base and by acting in consortia or partnership, increasing the Council’s overall purchasing power.
2. Seeking to influence the companies, bodies and groups with whom the Council deals, by means of specifications or conditions, to adopt appropriate environmental and ethical standards.
3. Communicating the Council’s community aims and core values to its suppliers and partners to enable a better understanding of the Council’s requirements.
4. Embracing electronic commerce and developing plans to meet or exceed government targets.
5. Developing effective systems and arrangements, which minimise the cost of procurement transactions.
6. Achieving value for money savings through better procurement in order to release resources to support the key objectives of the Council.
The remainder of the document addresses how a best value options appraisal (make/buy decision) is to be carried out.
Purchasing Strategy of Council B
The aims of Council B are clearly stated as meeting community needs, leading the community, promoting local democracy, providing good quality services, promoting equal opportunities and improving the environment. The alignment of Purchasing with the Council’s goals is reflected in the stated objectives of the Procurement Strategy2, namely to:
Establish more effective ways of working Improve probity through transparent and standardised processes Reduce cost and increase income Improve quality of procurement practice Promote the principles of equal opportunity and sustainability in the
procurement process Raise the profile of procurement and bring greater awareness of what is
possible, through improved training and communication.
The Strategy states that “Best value for money is at the heart of procurement – selecting suppliers who will deliver quality at best price”. Purchasing clearly have an objective of local economic development “(W)e are committed to doing all we can to place orders for the supply of goods and services with local businesses”. Ease of access is deemed to be one way of achieving that objective within the constraints of public procurement legislation, as a result a ‘Selling to (B)’ guide has been published. Further extensive strategies in pursuit of local economic development goals are detailed within the Purchasing Strategy, these include proposals relating to:
Increasing staff awareness of the benefits of dealing with local businesses through training
Tactical choice of suppliers invited to quote below the threshold for public advertisement
2
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Simplifying access to approved lists Encouraging PFI/PPP to sub-contract locally Use of Purchase Cards to reduce transaction costs and improve promptness
of payment Use of the council’s web page for publishing tender specification.
With respect to quality of life, there are explicit proposals to improve the quality of information obtained from suppliers regarding their equal opportunities policies, and improving the manner in which that information is evaluated. There is also a recommendation to consider ethical issues, such as animal testing and fair trade.
Significant attention has been given to how Purchasing could contribute to environmental objectives. The approach is holistic in that it recognises the full sphere of influence including specification development, pre-tender qualification, tender evaluation and supplier development. In that respect
The Procurement Manual will be updated to include a new section on green
procurement A ‘Green’ procurement guide for suppliers will be developed Training aimed at increasing suppliers’ awareness of green issues will be
provided, and Consideration will be given to the development of a Green Supplier of the
Year Award.
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Purchasing Strategy of Council C
Council C have produced a ‘strategic map’ – this was provided on the explicit basis that it was ‘not for publication’. The strategic map is a very clear cascade from the Council’s key priorities to strategic procurement input and skills input required. It can be implied from the map that the purchasing objectives are, best value for money (including plurality of service delivery), local economic development, environment, open government, customer focus in service delivery (including internal/external quality improvement), skills development, realignment as a strategic commissioning unit.
Purchasing Strategy of Council D Council D have a number of Procurement strategic aims that reflect alignment with the objectives of the Council, two of which are worthy of specific mention:
1. Procurement activities will be conducted in an open, transparent and non-discriminatory way giving all would be suppliers fair opportunity to secure our business. In particular we will ensure that our procedures do not place unnecessary obstacles in the way of small companies, new companies and companies owned or managed by members of minority or disadvantaged groups. The Council recognises the impact that it has on the local business community and will work in partnership with other Agencies to establish appropriate links to ensure that local business is best prepared to compete for all available Council work and trade.
2. Sustainable development is being put at the heart of Council decision making and this fact will be fundamental in the development of procurement policy and practice, this will be reflected in the issuing of a ‘Green Purchasing’ policy.
The Council have also stated Corporate Procurement Objectives:
To take a strategic approach - avoid short-termism, look at whole life costs To review related services and activities together (joined up thinking) - to
maximise the scope for improvements and minimise the costs of achieving them
To explore the scope of cross agency working To define the outcomes desired then research the market, examine all views
including the public, staff and the private sector providers By appraising the options reach a considered, rational and defensible
decision as to how best the service can be provided To focus on quality, continuous performance improvement and cost of the
service through the application of innovative procurement solutions To uphold the Council’s aims in relation to sustainable development.
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Purchasing Strategy of Council F
The Foreword to Council F’s Strategy, written by an Executive Member is insightful:
It was entirely appropriate that purchasing and procurement was prioritised to be reviewed in the first year of Best Value reviews. The function is fundamental to fulfilling the requirements of Best Value in other service areas, and to the Council’s other long term plans.
As these future plans are essentially strategic, so the ‘procurement’ function becomes strategic to their delivery. Every Council service procures goods and services externally, and every Best Value review must examine the alternative options for service delivery – the ‘make or buy’ decision. It is important, therefore, that the procurement function facilitates that delivery in a timely and cost effective way.
… never before has the Council had a strategic approach to procurement and one of the key things to come out of the review was the publication of this integrated Purchasing and Procurement Strategy.
The strategy is explicit in its rationale:
This strategy will co-ordinate interdepartmental plans to deliver procurement reform as a corporate priority. It is important that any strategy makes clear reference to the Council’s overall vision and values, and that the aims of the strategy have clear links to organizational and service priorities. To achieve this, each key procurement objective has been clearly linked to the Corporate Plan objectives and to the Core Values of the Council.
The purpose and aims of the Strategy are stated as:
To ensure that procurement planning reflects the Council’s core values and corporate aims and objectives.
To secure commitment to effective procurement from Members and officers at all levels throughout the organisation.
To provide a corporate focus to procurement, thereby assisting coordination of procurement activity and helping to achieve optimum resource allocation whilst avoiding duplication of effort.
To map out the way forward on reforming and continuously improving the Council’s procurement function.
To facilitate programming and assignment of budgets, tasks and targets to meet the key procurement objectives identified.
To draw together, in one document, all the existing elements of a procurement strategy developed in response to the Government’s ‘Best Value’ agenda.
To encourage long-term thinking and commitment to strategic procurement issues.
To identify and promote the benefits of strategic procurement.
Within the Strategy there are clearly stated objectives, each supported with a position statement, key issues and targets:
To ensure that risk is appropriately managed and that all procurement remains
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legal, ethical and transparent whilst embodying the Council’s core values.
To ensure a structured approach to education, training and development for all officers across the Council with procurement responsibilities.
To develop the Government’s ‘Rethinking Construction’ agenda and apply the appropriate principles to the Council’s construction related procurement activity.
To use ICT to reduce cost, and improve the efficiency and effectiveness of all aspects of the procurement process for the Council, its suppliers and contractors.
To improve the accuracy, availability, appropriateness and accessibility of procurement related management information.
To reduce the cost of the procurement process, and obtain value for money on all procured goods and services.
To ensure that procurement resources are deployed effectively and that systems are in place to deliver the procurement priorities identified in this strategy.
To promote the development and use of performance measures.
To promote procurement practices and policies which contribute to the
Council’s priorities on equality, sustainability, and regeneration.
To manage the Council’s supply chains, develop better relationships, and
promote co-operative procurement arrangements, on behalf of the Council
with public, private and voluntary sector organisations.
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