£26m procurement savings for UK central government department

From strategy to complex programme management, we provide hands-on guidance for organisations that operate in complex and highly regulated sectors, including aerospace and defence, technology products and services, education and central and local government.

The Department for Business, Energy and Industrial Strategy (BEIS) - one of the UK’s most complex government departments - with over 40 separate agencies and arms length bodies - engaged us to help them implement category management.

We worked with BEIS to put into operation new roles, organisation structures, processes and tools which have delivered major efficiency improvements.

Project background

Following a period of restructuring and cost reduction across the department, BEIS’s Director General Finance and Commercial was still very concerned that sufficient improvements had yet to be made across the procurement and commercial functions. The basic concepts behind the use of category management within procurement were understood and it was recognised, based on a range of private and public sector case studies, that category management should be able to drive out significant savings.

However, the department’s management felt they lacked the right skills and experience necessary to implement category management properly. Also, they were very concerned that this new approach had not been tested on an organisation as large, complex, as widely dispersed geographically across the UK, and with such a wide range of different governance structures.

It was therefore clear that BEIS needed very experienced procurement and commercial expertise, ideally backed up by in-depth experience across both private and public sectors, to help them design and implement a practical solutionto these challenges.

We were engaged initially to design a new operating model for category management, and then led a phased implementation to make it work in practice. To conclude our support we handed over the ongoing operation of the new category management regime to an in-house BEIS team.

Key problems and challenges

At the outset the major customer concern was the disjointedness, complexity and inefficiency of procurement across the central BEIS department and its 47 separate agencies and other public sector bodies. The £2 billion total annual spend on products and services was managed by over 20 separate procurement teams, some operating just within one agency, others operating for multiple agencies, and various other hybrid arrangements.

The BEIS organisation also faced a number of cultural and behavioural challenges commonly seen in large federated organisations. These included poor communication and a lack of trust between the centre and the individual agencies. The organisation was also suffering from a level of “change fatigue” having recently been through several waves of re-organisationand austerity-driven cost reductions.

Many of the agencies already had stretched budgets resulting, amongst other things, in it being difficult for them to free up key people to take an active role in designing and implementing the category management solution.

Our Solution

Kick-off

Our first step was to identify and engage a very experienced procurement professional, with 30 years in line management, director roles, consultancy and interim management roles. We selected a consultant who has worked across the globe, in complex private sector organisations and has applied these private sector skills successfully in the public sector.

It was critical to ensure this consultant had excellent communication and stakeholder management skills and, above all, was seen to be credible and trustworthy by the purchasing professionals across the BEIS organisation. We established a small, focused team around this individual and started to design and deliver the solution.

Phase 1 - Design

The key objectives of phase one were to design a new operating model, secure the buy-in of the procurement professionals across the organisation, and build a programme to deliver the change.

The key steps we took to achieve these objectives were to:

• Engage with all the key stakeholders, listen to them carefully and really understand the problems.

• Pull together the latest best practice guidance on relevant disciplines – primarily procurement and specifically category management.

• Define and agree a clear set of outcomes and deliverables at the outset.

• Design a high-level operating model which takes this best practice and moulds it to the particular characteristics of the organisation.

• Focus on defining the key roles to make this happen – the new Category Leaders – then appointing and empowering them to make the change.

• Establish a structured programme, starting with category pilots, and then deliver the remaining categories using a phased approach.

Phase 2 - Delivery

Once the design had been agreed, the core joint team of BEIS and Monro Consulting resources drove the delivery of the Category Management programme, focusing on the Wave 1 categories, including: Contingent Labour, Travel, Energy and Facilities. The work involved developing the Category Plan concept and template, gaining buy-in from the Heads of Procurement (HoPs) from each of the BEIS agencies, identifying and assigning, from within the organisation, the Category Leaders for each category, and working with these leaders to develop their category plans.

Early on during the implementation we faced a significant challenge: the election of a new government and a renewed focus on driving out savings. However, we successfully navigated through this problem by turning it into an advantage: specifically, it gave the programme an additional key change imperative – the need to deliver significant financial savings against the annual spend.

As a direct result of this renewed, government-wide focus on cost savings, BEIS was selected by the Cabinet Office for the Commercial Accelerator Programme (CAP).

Monro Consulting worked closely with the Cabinet Office’s key consultancy – McKinsey & Company – to support them in establishing the CAP programme for BEIS, whilst ensuring it also acted as a catalyst for the existing Category Management work. For example, we provided the BIS intelligence for the CAP team and established the key relationships across the HoP network.

We steered McKinsey in the design and approach of the programme, and helped BEIS to establish an effective governance structure.

Crucially, we helped BIS to develop its own commercial capability in order to take over from the Monro Consulting and McKinsey teams.

The practical transfer of commercial skills and experience was a key part of our work. In particular, the Monro Consulting team leader provided the day-to- day tasking and management for two civil service fast streamers and provided them with broader coaching and mentoring support.

The Monro Consulting work was highly valued by the BEIS Group Chief Commercial Officer – newly appointed during the programme – leading to our scope of work being extended to include the initiation and development of a new commercial strategy. This became the foundation for BEIS’s Commercial Blueprint and included the vision, mission, goals, strategic levers and ambitions for the commercial function within BEIS, along with a new target operating model (TOM).

Phase 3 - Transition

The final, critical stage of our work was to ensure a smooth transition to a steady-state BEIS team to carry forward the momentum and value from the Category Management programme and the Commercial Blueprint. Specifically, Monro Consulting supported BEIS in the induction of new managers and staff, helping them up the steep learning curve and ensuring the implementation of the Wave 2 categories – ICT and Professional Services – was up and running.

The critical success factors

The critical factors that led to our success were:

• Senior commitment - Director General Finance and Commercial personally backing this major change programme, and appointing a Group Commercial Officer to oversee the work.

• Experience - A highly experienced procurement and category management expert in the driving seat.

• Stakeholder Buy-In - Genuinely treating the senior procurement professionals in each of the client organisations as key stakeholders...

• Collaboration - ... and involving them in setting the strategy, designing the solution and making it work.

• Balanced Team - Coordinating a mixed range of consultancy, internal capability and third party support to ensure the whole is greater than the sum of the parts.

Results

As a direct result of the Category Leadership programme and supporting initiatives, BEIS made a saving of £26m in the first year and was on track to make £60m savings in the second year.

In particular, BEIS was seen by Cabinet Office as being an exemplar government department for programme drive and effective governance.

Monro Consulting helped the central team to establish very effective, trusting working relationships across this complex, highly dispersed government organisation. We were also very influential in coaching, guiding and mentoring BEIS colleagues, including the fast streamers, senior management and other staff members.

Client testimonial

“Monro Consulting has had a major positive impact on the BEIS commercial function and helped us to deliver £26m in the first year of the programme.

Monro’s lead consultant has brought to us a huge amount of practical, private sector commercial and procurement expertise, and has applied it very successfully to a complex, highly dispersed public sector organisation. He has also handled the internal cultural and political challenges very effectively.

We are extremely grateful for Monro Consulting’s hard work and commitment to ensure the programme’s success”.

Mitchell Leimon, Head of Major Projects and Commercial Assurance,

Department for Business, Energy & Industrial Strategy (BEIS)