National Procurement Strategy for Local Government in England 2022

Decorative
Supporting local government procurement – from good to great

Foreword

This refresh of the National Procurement Strategy for Local Government in England is launched at a time of many opportunities and pressures on council procurement. We are tasked with delivering both economic and social value to our communities and for levelling up within and between our places. The role of procurement in local government remains pivotal in maximising these opportunities through our supply chains and managing the challenges faced by our sector and our communities.  

Third-party spend is increasing, as is the reliance on procured goods and services, with local government remaining a significant commissioner and purchaser at both a place and aggregate level across all key spend categories. The current operating context sees increased pressures on councils facing further restrictions on revenue and capital finances. In addition, increased volume and complexity of demand and market pressures on services, particularly social care, creates further challenges. Increased costs due to high inflation, exponentially higher energy costs, the climate change emergency, disruptions in the supply chains and suppliers unable to meet contractual requirements, and the war in Ukraine are all material to the way in which councils approach procurement.  

There is an imperative for the sector to share new approaches and to learn rapidly and openly with key partners including commercial partners. We must understand data and insights in order to develop innovative solutions to issues including price increases and potential market failure. The sector must work even more collaboratively and commercially. We must continuously improve our end-to-end contract management to fully realise the benefits from the contracts we have let.

We need to continue the improvement journey supported by clear strategy. This strategy is sector-led and endorsed by councils across England. It is a strategy relevant to councils across all types, sizes and geographies. We need to ensure that the importance of the procurement function in local government is recognised and harnessed, that opportunities are taken and pressures managed. 

We urge you to make use of this strategy and the supporting toolkit so that we can move from good to great.

Councillor Peter Fleming
Chairman, LGA Improvement and Innovation Board (2018 to 2022)

Professor Martin Reeves
Chief Executive, Coventry City Council and National Procurement Champion

Introduction

The vision of this strategy is to support local government procurement in developing from good to great.

This strategy is supported by a ‘recipe for success’ and a detailed self-assessment toolkit for improvement which identifies maturity levels against themes and enablers.

‘Recipe for success’ for local government procurement

The National Procurement Strategy (NPS) for Local Government in England has been developed, owned and lived by officers and councillors. It sets out the ambition of the sector and includes guidance and a roadmap to improvement and innovation.

This strategy promotes:

  • adding value
  • fulfilling our social value priorities through procurement:
    • creating new businesses, new jobs and new skills
    • improving supplier diversity, innovation and resilience
    • tackling climate change and reducing waste
  • building even greater connections and partnerships locally, across the public sector, with suppliers and the voluntary sector
  • attracting, developing and retaining talent
  • exploiting data and technology
  • effective contract, supplier relationship and supply chain management
  • embracing public procurement transformation and innovation including making procurement easier for bidders.

This strategy is released at a time of challenges and opportunities. Local government faces challenges including inflation, supply chain shortages, war, and climate change – and opportunities including new procurement legislation and the National Procurement Policy Statement. Spend by local government is increasing – in 2021, local government spend stood at more than £70 billion. The new procurement rules are expected to move the winning bidder test from ‘most economically advantageous tender’ (MEAT) to ‘most advantageous tender' (MAT), and this change will help councils to focus on value in its broader sense beyond economic value. This, along with the ability to implement competitive flexible procurements, will help councils to increase innovation and social responsibility in procurement. This strategy provides the emphasis and tools that help local government continue on the procurement improvement journey.

Self-assessment toolkit

The National Procurement Strategy (NPS) toolkit supports this strategy's vision and ‘recipe for success’. It is a self-assessment toolkit which councils can use to

  • understand the maturity of the procurement function
  • set goals
  • assess progress.

The toolkit is for guidance only as it is recognised that ‘one size doesn’t fit all’. The expectations are that each council chooses the level of maturity it will aim for in each of the key areas. These choices will reflect local priorities and the resources available to the council. It is recognised that district councils may have different objectives to larger councils and each council can determine what maturity level is right in their own local context.

Decorative

Figure 1 illustrates the themes and enablers that sit behind this strategy

It is acknowledged that councils' engagement with the NPS toolkit diagnostic has been high and is increasing over time. The NPS toolkit approach is a ‘journey’ for councils and regions in assessment and improvement. Recently reported indicators against the diagnostic toolkit indicate that there is still room for further improvement within the current themes and enablers, and that they remain relevant. The 2022 strategy, therefore, builds on the 2018 strategy to provide confidence in a continuous improvement journey. All councils are encouraged to make use of the toolkit to understand both their individual and regional perspectives for improvement and collaboration, and district councils are particularly encouraged to make use of the toolkit given the limited resources available to them. Overall, the benefits of sharing good practice identified through the toolkit diagnostic results, to help with improvement, is key.

Additional indicators in the toolkit are ‘flagged’ and will be identifiable so that councils can continue to score themselves against previous outcomes from the assessment process. The strategy and toolkit benefit from an additional focus on adding value and creating social value.

From 2022 onwards, a ‘peer review’ approach is planned to provide additional validity to assessments. This may be through a ‘buddying’ scheme, where councils review each other, or through expansion of a central resource offer to provide ‘fitness checks’. The Government Commercial Continuous Improvement Assessment Framework (CCIAF) is also available to councils to assess their procurement maturity against central government standards. Some councils are also undertaking the Head of Procurement assessment process to support their score against the CCIAF. This may be in addition to, or instead of, the NPS toolkit assessment.

This strategy has been developed by and for councils in England – it is endorsed by the Local Government Association's Procurement National Advisory Group (NAG) and has been informed by a survey of all council procurement leads in May 2022. It is hoped that it will also be relevant for the wider public sector (including councils in other parts of the UK, and fire and rescue services) as well as professional buying organisations.

Making it happen

This strategy looks to councils and groups of councils to provide local and regional leadership and to assess their own progress.

Leadership for this strategy is provided by the Local Government Association and its Procurement National Advisory Group (NAG) – a group of senior local government procurement professionals from England and Wales.

LGA and NAG will provide national leadership by:

  • engaging regionally and nationally with councils in order to understand areas of good practice as well as areas of concern
  • providing a single voice for local government on procurement and supplier management issues
  • engaging with the sector’s strategic suppliers and trade bodies including those representing SMEs and VCSEs
  • facilitating and supporting further collaborative and partnership working between councils and the wider public sector
  • publishing case studies, good practice guidance and toolkits
  • leading periodic diagnostic reviews, evaluating progress against toolkit maturity levels and sharing high level results
  • connecting exemplar councils to other councils who identify a wish to improve in particular areas of focus, either individually or collectively, by sharing experiences at conferences and workshops
  • engaging with chief executives through organisations such as Solace
  • reporting progress through the LGA Improvement and Innovation Board and communications to councils will be delivered through:

Themes

The National Procurement Strategy for Local Government in England 2022 focuses on three themes which councils have identified as the sector’s priorities:

  • showing leadership
  • behaving commercially
  • achieving community benefits.

Each of the themes is broken down into key areas whose content is set out in more detail below. Our toolkit, which accompanies this strategy, provides additional guidance to councils on how to frame objectives and assess maturity in each of the key areas.

Showing leadership

Decorative

Engaging councillors

Engaging councillors refers to the engagement of councillors in the leadership and governance of council procurement and commercial activity. This includes both the cabinet or portfolio holders and overview and scrutiny members. To perform their roles effectively councillors benefit from good procurement and commercial advice and skills.

What it is

Councillors set the council vision and strategic priorities and must be satisfied that the procurement and commercial arrangements for their delivery are robust. Councillors make key decisions, particularly in major projects, and maintain oversight of the performance of key contracts, agreeing corrective action where necessary. Councillor engagement needs to be supported through training, good procurement and commercial advice and reporting arrangements.

Why it is important

When councillors are fully engaged with procurement and commercial matters, the quality of decision-making
is better and oversight and accountability are improved. Councillor engagement leads to better project delivery and better outcomes for the local community.

High level principles and specific behaviours

Minimum Developing Mature Leader Innovator
Councillors regard procurement and commercial issues as purely operational matters. The council is exploring the best approach to councillor engagement in procurement and commercial matters. Councillor engagement is delivering better results on some projects. Councillor engagement is delivering better results across all procurement and commercial activity. Councillor engagement is contributing to the success of a combined authority or group of councils project or another innovative project.

Engaging senior managers

Engaging senior managers refers to the corporate management team valuing and benefiting from procurement and commercial input at all stages of decision-making, including early advice on major projects.

What it is

Key decision-makers value and benefit from procurement and commercial advice including at the early stages of major projects. This is a two-way process requiring action by senior managers on the one hand and by procurement and commercial advisors on the other.

Why it is important

Good procurement and commercial advice (wherever possible, provided in-house or shared between councils) can have a decisive impact on the outcome of a project, particularly one involving innovation. It is important that senior managers engage with procurement and commercial issues from the earliest stages of the project.

High level principles and specific behaviours

Minimum Developing Mature Leader Innovator
Senior management regard procurement and commercial issues as purely operational matters. The council is exploring the best approach to obtaining procurement and commercial input into decision-making. Senior managers are engaged with procurement and commercial issues, routinely taking advice at key decision points. The council is demonstrating better results from early procurement and commercial advice on projects. Council procurement and commercial advice is valued by leaders of combined authority or group of councils projects or in connection with an innovative project.

Working with partners

Working with partners refers to a ‘one team’ approach to the design and implementation of solutions for public services which spans council departments and organisations.

What it is

The council works as a single team to design and implement solutions for public services and commissioners or budget holders, and commercial and procurement advisors work together as part of that team.

Why it is important

A team approach is the best use of limited resources and can lead to innovative solutions and better results. The team approach should characterise how council departments work together and how the council works with other councils, health, fire, police, housing, voluntary, community and social enterprise (VCSE) and other partners.

High level principles and specific behaviours

Minimum Developing Mature Leader Innovator
There are teams but they work in isolation from commercial and procurement advisers. The council acknowledges the business case for a cross-council approach to design and implementation of solutions and is seeking to encourage this. Designing and implementing solutions as a single team in high value or high-risk projects. Designing and implementing solutions is the council’s normal way of working (policy). Designing and implementing solutions as a combined authority or as a group of councils or with health, fire, police, housing, voluntary, community and social enterprises (VCSEs) and other partners.

Engaging strategic suppliers

Engaging strategic suppliers refers to the process of identifying strategic suppliers and engaging with them to improve performance, reduce cost, mitigate risk and harness innovation.

What it is

The council takes a strategic approach to the management of relationships with the most important suppliers (otherwise known as strategic supplier relationship management). This activity should be carried out cross-department and is most effective when done cross-organisation.

Why it is important

Effective management of strategic supplier relationships can deliver a range of benefits including improved outcomes for the public, added social value, reduced cost, reduced risk and innovation.

High level principles and specific behaviours

Minimum Developing Mature Leader Innovator
Firefighting. Ad hoc engagement with important suppliers, usually when there is a problem to be resolved. Acknowledges the business case for improved strategic supplier management and is piloting engagement. Delivering the programme of engagement with strategic suppliers at council level. Playing a leading role in programme of engagement with strategic suppliers at combined authority or group of councils level. Playing a leading role in a programme of engagement with strategic suppliers at regional or national level.

Behaving commercially

Decorative

Creating commercial opportunities (including income generation)

Creating commercial opportunities refers to how an organisation promotes revenue generation and value creation through the way it plans its major third-party acquisitions (works, services and goods), reviews its business options (make or buy), engages with, and influences, markets and potential suppliers, seeks to support and encourage innovation, and promotes the development of new ideas and solutions to service delivery.

Commercialisation is a broad subject, and this key area is confined to how procurement teams should contribute to its successful delivery.

What it is

There are many ways in which commercial opportunities can be created through the strategic management of the commercial cycle and the services and assets delivered through the contracts it creates. Commercialisation is a broad and important subject to the sector. This key area is confined to how procurement teams should contribute to helping identify and create commercial opportunities.

Why it is important

As grants from central government are reduced, organisations are required to look at other means of reducing funding deficits. Commercial opportunities can be created in many ways, from conventional means such as increasing returns on assets to the way the council engages with its development partners and third-party contractors.

High level principles and specific behaviours

Minimum Developing Mature Leader Innovator
Focused on business as usual and compliance. Some high value or high profile acquisitions examined for creating commercial opportunities. Clear understanding of the ways in which new revenue generation opportunities can be created across the commercial cycle.
End-to-end policies and processes promoting this approach are in place across the organisation.

Revenue generation and potential wealth creation is a standard part of all contract review meetings.

Procurement staff are encouraged to enhance commercial skills and demonstrate commercial behaviours.

Organisations work collectively to identify and exploit new commercial opportunities through market shaping and shared working with development partners.

Organisations address commercial opportunity through the development of staff knowledge.

Managing contracts and relationships

Contracts and relationship management refers to the effective management and control of all contracts from their planned inception until their completion by the appointed contractor(s). It covers the supporting policies, procedures and systems needed to undertake it, together with broader issues from the identification and minimisation of risk, successful and timely delivery of outcomes and performance, effective control of cost and variations and the maintenance of clear communications and operational relationships with contractors.

What it is

Contract and relationship management is the process by which all contracts and variations are managed effectively to control costs, secure the quality and timeliness of agreed outcomes and performance levels and minimise the occurrence of risks.

Why it is important

Poor contractor performance or commercial failure can seriously damage a council’s reputation and its ability to deliver effective services and support to local communities.

High level principles and specific behaviours

Minimum Developing Mature Leader Innovator
Compliance-driven. Reactive approach to contract and relationship management.

Identified the need to change and improve.

Basic policies, procedures and systems in place.

All basic policies, procedures and systems in place to support contract and relationship management across the organisation and used in all departments.

Well-developed policies, procedures and systems in place to support contract and relationship management.

Used to drive forward planning, cost control and contractor performance.

Contract and relationship management recognised by the leadership team as being essential to driving ongoing improvement and better service outcomes.

Systems, procedures and staff delivering consistently high results.

Managing strategic risk

Managing strategic risk refers to the impact by an external event, passing of a statute or illegal activity upon business as usual, reputation or financial health of the organisation.

What it is

A series of actions and policies designed to reduce or even eliminate the probability of a perceived risk occurring and minimising the detrimental effects that may occur should it materialise.

Why it is important

The occurrence of any risk, particularly when it could be foreseen, can have a devastating impact on the organisation’s reputation and the lives of the people it serves, the quality of the services that it provides, and even its financial viability.

High level principles and specific behaviours

Minimum Developing Mature Leader Innovator
Compliance driven. Doing enough to meet statutory requirements. Good awareness of issues involved and potential threats with basic systems in place to manage them should they occur. Taking a proactive approach to strategic risk management with all vulnerable areas identified and mitigating policies and plans in place. All vulnerable areas are assessed and risk strategies include shared ownership, transparency and reporting with appropriate suppliers. Effective policies and plans in place in all areas, shared with contractors with contingency plans in place and active management of all strategic risks.

Achieving community benefits

Decorative

Creating social value (SV)

Social value refers to wider financial and non-financial impacts of programmes, organisations and interventions, including the wellbeing of individuals and communities, social capital and the environment. From a business perspective, it may be summarised as the net social and environmental benefits (and value) generated by an organisation to society through its corporate and community activities reported either as financial or non-financial (or both) performance. Councils are encouraged to consider using the national themes, outputs and measures (TOMs) in their procurement activity, as the basis of measuring social value.

What it is

Social value is about improving economic, social and environmental wellbeing from public sector contracts over and above the delivery of the services directly required and at no extra cost.

Why it is important

Experience from procurements let by councils that have fully integrated social value requirements has shown that a minimum of +5 per cent to +20 per cent social value (according to sector) can be obtained on contract value by way of direct community benefits.

High level principles and specific behaviours

Minimum Developing Mature Leader Innovator
At the start of the journey. Wants to
do more.
Takes a proactive approach to integrating social value into procurement and commissioning.

Social value is consistently embedded into corporate strategy and there is a consistent framework for management and delivery.

Demonstrates behaviours for collaboration and partnership-building with communities and potential suppliers.

Social value is a core operational metric, integrated into all departments and activities with regular reporting against targets and decision-making. Takes a proactive place-based approach to social value and leading the sector within the area or region.

Engaging local small medium enterprises (SMEs) and micro-businesses

The Government definition of SMEs is any business with up to 250 employees and a turnover of up to 50m Euros. Micro businesses are those with 1 to 9 employees. There were around 6 million SMEs in the UK in 2021, which equates to 99.9 per cent of the business population. For the purposes of this document the term ‘SME’ shall refer to both SME and micro-businesses.

What it is

SMEs are non-subsidiary, independent firms.

Why it is important

SMEs play a major role in creating jobs and generating income for those on low incomes, they help foster economic growth, social stability, are a source of innovation and contribute to the development of a dynamic private sector.

High level principles and specific behaviours

Minimum Developing Mature Leader Innovator
Council does not see any benefits to be gained from SME engagement. SME organisations are engaged in a few key contracts only. There is a proactive approach to integrating SME organisations into procurement and commissioning. SME engagement is embedded into corporate strategy. SME engagement is a core operational way of doing business, integrated into all directorates and departments and activities with regular reporting against targets.

Enabling voluntary, community and social enterprise (VCSE) engagement

VCSE refers to organisations that include small local community and voluntary groups, registered charities both large and small, foundations, trusts and social enterprises and cooperatives. These are often also referred to as third sector organisations or civil society organisations.

What it is

The VCSE sector is diverse in size, scope, staffing and funding of organisations. It provides a broad range of services to many different client groups. However, VCSE sector organisations share common characteristics in the social, environmental, or cultural objectives they pursue, their independence from government and the reinvestment of surpluses for those objectives.

Why it is important

VCSE organisations can play a critical and integral role in health and social care including as providers of services, advocates and representing the voice of service users, patients and carers.

High level principles and specific behaviours

Minimum Developing Mature Leader Innovator
Organisation does not see any benefits to be gained from VCSE engagement.

There is no ongoing communication with the market regarding local need, long- term strategies and desired outcomes.

Small VCSEs are unaware of their role in responding to such needs.

Services are commissioned to address current needs and have little or no focus on prevention and long-term needs of the community.
VCSEs are not invited to inform service provision.

Commissioners and procurers have started to communicate to the market what the local need is, and the desired market outcomes.

However, small VCSEs remain unaware of their place in the market.

Short-term needs are a priority but there is some effort to bring in small VCSEs and to consider long-term and preventative needs.

Commissioners and procurers have informed the market what the local need is and the desired market outcomes.

Small VCSEs can make efforts to collaborate with organisations to respond to local need.

There is a good balance between addressing short-term needs and working with small VCSEs to establish the long-term priorities and needs of the community.

Commissioners and procurers have clearly set out how the market should deliver, and to what standards.

Small VCSEs can collaborate with other organisations to effectively respond to local needs and meet desired outcomes.

Services incorporate VCSE expertise on prevention and long-term needs while also providing relevant crisis services.

Enablers

Decorative

Councils have identified a number of cross-cutting issues that will also need to be addressed if they are to realise their ambitions in the key areas.

These are referred to as ‘enablers’ of the strategy.

The five enablers are:

  • adding value
  • developing talent
  • exploiting digital technology
  • enabling innovation
  • embedding change.

Adding value

Procurement has a key role in adding value in council spend.

We need to work proactively to understand emerging issues and learn how to manage them, we need to understand and mitigate against risks. We need to demonstrate the value we add to our colleagues and partners, sharing data and good practice to move from good to great.

This goes beyond making monetary savings, implementing category management, contract management, adding social value and ensuring value for money. As well as ensuring that these building blocks are in place, the sector needs to work openly, closely and rapidly with partners including the wider public sector, central government and key suppliers to seek out and realise all opportunities for adding value through the procurement process.

Minimum Developing Mature Leader Innovator
The organisation implements value for money considerations through competitive procurement procedures and implementation. The organisation is developing value considerations through category management, savings and demand management, risk and fraud management, performance and transparency, partnering and collaboration. The organisation has clear policies in place to increase value through the procurement process. The organisation works across councils on adding value initiatives including good practice on emerging issues, risk management, rapid data sharing including price data, talent development in commercial skills and managing contracts to gain benefits.

The organisation embraces developments and initiatives across councils, across the wider public sector, including central government, and with strategic suppliers.

These initiatives include good practice on emerging issues, risk management, rapid data sharing including price data, talent development in commercial skills and managing contracts to gain benefits.

Developing talent

Talent management, recruitment and retention which are key building blocks to an excellent procurement function.

Developing talent includes professionalisation of council procurement talent, addressing recruitment and retention of procurement talent and developing agile procurement talent that can address commercial challenges and innovation in the procurement role.

Developing talent underpins councils’ ability to address issues and particularly issues of value.

Minimum Developing Mature Leader Innovator
Identifies some procurement roles and responsibilities in job descriptions. Recruits staff with appropriate experience or professional qualifications and responds to ad hoc requests for training and development. Service plan includes support for staff to obtain professional qualifications and for apprenticeships.

Planned approach to talent development in relation to future procurement and contract management workload including:

  • contracts pipeline
  • resourcing plan
  • competency framework
  • remuneration strategy
  • comprehensive training and development plan, including provision for development of staff not currently in procurement or contract management roles
  • secondments to and from the private sector and VCSE sector.

The planned approach to talent development is in place at combined authority, or group of councils, level.

Talent development includes commercial skills development.

Exploiting digital technology

Rapid use of data is critical for understanding how to manage procurements and contracts. Increasing data and transparency date is available, along with artificial intelligence, and making good use of this will be key to managing the pressures on councils.

Minimum Developing Mature Leader Innovator

Basic purchase ordering functionality for some products or services using finance or operational systems.

Limited procurement and contract management information available via static sources.

Use of an integrated Procure to Pay (P2P) system in conjunction with online ordering for all services or products.
May include some human intervention and paper trails.

Some procurement and contract management Information available online to all stakeholders with appropriate search and filtering.

Use of electronic tendering and quotations system for some tenders or quotes (either as a dedicated system or tender box rental).

Use of an integrated Procure to Pay (P2P) system in conjunction with online ordering for all services or products fully automated and paperless, with human intervention being restricted to exceptions only.

Comprehensive procurement and contract management information available online to all stakeholders with appropriate search and filtering.

Use of electronic tendering and quotations system for all tenders or quotes (either as a dedicated system or tender box rental).

Access and interaction to all the above possible from any electronic mobile device.

Access to a Procure to Pay (P2P) system via secure mobile application, promoting a self-service approach for suppliers (access should include online viewing of payment records or status and the ability to auto convert orders to invoices).

Technology used to forward plan all strategic acquisitions and to underpin sourcing and procurement decision-making.
Performance monitoring and communications underpinned by dashboards and diagnostics.

Mobile applications designed for supplier and contractor interactions including future opportunity alerts, contract management, contractor performance ratings and procurement satisfaction levels.

Shared systems and information with delivery partners (including voluntary sector or local businesses) and other councils and citizens.
Knowledge management, accessing paper and electronic sources to build comprehensive intelligence about contracts, markets and trends.

Sharing data rapidly across councils, wider public sector and with key suppliers to implement commercial approaches.

Enabling innovation

The procurement rules reform will provide more opportunity to innovate in procurement and flexible procedures. Making use of these opportunities is key.

Minimum Developing Mature Leader Innovator
Ability to capture and harness procurement innovation in organisation is non-existent. Innovation only considered in a few contracts where technology is involved.

Outcomes based on procurement and market making are the ‘standard’ way of doing things.

Innovative procurement approaches are not just applied to technology but to established services.

Innovation in procurement and contract management
is mainstreamed.

Procurement techniques such as innovation partnerships and pre-commercial procurements are used regularly.

All contracts reviewed to identify new service delivery and income generation models.

Procurement challenges and innovative potential solutions shared across councils and regions.
Procurement rules reform opportunities are embraced.

Embedding change

Procurement has a key role within councils and across the wider public sector and needs to sit at the top table to ensure commercial considerations run through the council decision-making.

Minimum Developing Mature Leader Innovator
Success depends on individuals, not organisational engagement. New approaches and ideas are applied in isolated procurement processes. Procurement change is comprehensively applied across multiple projects and departments. Senior leaders recognise the importance of procurement and contract management and promote it as a way of leading and managing organisational change.

Procurement and contract management are key drivers of organisational change and are embedded at all levels in the organisation.

Lessons learned are shared with other organisations at regional and national levels.