Councils are coming under renewed pressure from the government to accelerate the introduction of electronic procurement. And any suppliers who have not paid much attention to the implementation target date of 2005 could be in for a rude shock.
In a bid to apply pressure, Newham Borough Council has recently written to all of its suppliers saying that from the start of January next year it will only contract and trade with its suppliers using e-procurement methods.
"We want to try and bring forward the potential savings of e-procurement so we can reinvest time and money in our front-line services," explains Martin Scarfe, the financial adviser for Newham Borough Council, who admits the January target could be intimidating for some local businesses. "Many large suppliers are being asked more and more by their customers to trade electronically. For smaller businesses it is a scary message. This is quite a fundamental change for a lot of them. They are used to trading with the phone and fax."
Newham, which is seen in government circles as a pioneer of e-procurement, has clubbed together with the councils of Tower Hamlets, Redbridge, Lewisham and Barnet to create an online London marketplace to buy goods and services from suppliers. But there are currently only about 50 suppliers using the e-procurement system.
Newham is organising e-procurement supplier forums and is providing local businesses with information and support to help them become web-enabled. But it is an uphill struggle.
"E-procurement has potential. But it is too complicated and too much hassle. I'm not convinced at the moment," says Michael Read, managing director of W A Read, a company which manufactures brushes for Newham Council. Read's views are broadly representative of the current thinking of many small London local council suppliers.
However, advocates of e-procurement believe the experience of suppliers who are embracing this new way of working will eventually win over the e-doubters. The online London marketplace is run for Newham and its partner councils by Best Value Procurement, a public sector e-procurement consultancy. Prices for joining start at £250 and scale up depending on the size of a supplier's catalogue. Malcolm Rosier, marketing manager for Best Value Procurement, claims the suppliers who have joined the marketplace are already receiving more accurate orders and prompter payments. "There are some very real benefits for the London marketplace suppliers. The concerns and reservations that suppliers initially had have been quelled."
Other councils are also starting to get tough about e-procurement targets. Essex County Council spends about £500m a year on external goods and services and is now actively marketing its new e-procurement platform, which is hosted by the IDeA, the Improvement and Development Agency. Currently there are only 45 suppliers using the system.
Adrian Gibson, procurement services manager for Essex County Council, argues that e-procurement gives suppliers better visibility because they appear on the computer desktops of all council buyers. "E-procurement will reduce the amount of people going out and buying from sources they shouldn't be. At the moment we have got about 10,000 active suppliers we trade with. By the end of April 2004, we would expect to be able to trade with them via the marketplace."
It costs suppliers about £500 to have a catalogue of their goods and services published on Essex's new electronic marketplace. To facilitate the transition, Essex County Council is putting local businesses in contact with organisations who can set them up with email and websites at affordable prices.
Despite being tough in public about meeting its deadlines, Essex says it will be sensitive to the different needs of its suppliers. Gibson says: "The benefits of e-procurement to providers of social care will be different to those providing stationery and office furniture. We need to understand how to approach different markets. The benefits to each will be different."
One of the risks the government faces as it seeks to speed up the introduction of mandatory e-procurement in local government nationally is that many businesses across the country could lose out economically if they fail to adopt this new way of working. "It is a real tension," admits Caroline Stanger, chair of the government's national local council e-procurement initiative. "If we are not careful e-procurement could really disadvantage smaller businesses. A lot of small businesses are engaging in the e-initiative but a lot aren't."
Stanger believes the take-up of e-procurement by local council suppliers will help modernise local business communities. "E-procurement is about working smarter and using ICT to improve your cost-effectiveness."
The national e-procurement project officially runs until April 2004 and has a budget of £2.5m to promote the take up of e-procurement. The project is currently providing authorities with practical support and assistance on technical issues and, at the same time, is working with them to help get their suppliers on board.
According to the national project team, councils spend an estimated £25bn a year on goods and services, buying up to 38 million items a year from 800,000 suppliers. By removing costly paper-based processes, Stanger hopes that e-procurement will eventually generate public sector savings. But with a deadline of 2005, local councils have a lot of work to do.
www.newham.gov.uk
www.essexcc.gov.uk
www.idea.gov.uk
www.bestvalueprocurement.co.uk
www.uk-plc.net
www.lgolpathfinder.gov.uk/eprocurement
