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Improving the Strategic Contribution of Purchasing: A local government perspective James Gordon Murray MSc

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Page 1: 031114 PhD thesis final copy

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

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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

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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

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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

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9.5.6 Research Question 1: Could local government Purchasing improve its strategic contribution, and if so, how?.......................................................................................233

10 REFERENCES......................................................................235

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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

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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

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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

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9.1 The contribution to knowledge 213

A7.1 Short-term Value for Money Opportunities 267

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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.

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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.

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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.

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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

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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?’

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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

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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

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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.

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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

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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.

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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

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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

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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,

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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

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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.

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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:

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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,

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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

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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.

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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.

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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:

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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

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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

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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:

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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

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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”.

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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.

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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’.

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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

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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.

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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.

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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

Page 51: 031114 PhD thesis final copy

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’.

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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

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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

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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,

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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:

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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.

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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

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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:

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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:

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• 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

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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:

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• 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

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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

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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.

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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).

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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

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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

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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?

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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?

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

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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:

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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.

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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

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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

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ives

Str

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Exp

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t in

str

ateg

y

Pu

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ives

Str

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Exp

lici

t in

str

ateg

y

Pu

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ives

Str

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Exp

lici

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str

ateg

y

Pu

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ives

Str

ateg

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ibu

tion

Exp

lici

t in

str

ateg

y

Pu

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asin

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ives

Str

ateg

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ontr

ibu

tion

Exp

lici

t in

str

ateg

y

Pu

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asin

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ject

ives

Str

ateg

ic c

ontr

ibu

tion

Exp

lici

t in

str

ateg

y

Pu

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asin

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ject

ives

Str

ateg

ic c

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ibu

tion

Exp

lici

t in

str

ateg

y

Pu

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ives

Str

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Exp

lici

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Pu

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Str

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Exp

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str

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Best Value for Money

No

Str

ateg

y re

ceiv

ed

No

Str

ateg

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ceiv

ed

No

Str

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ceiv

ed

Str

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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

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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

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… 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

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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:

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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

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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

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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

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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:

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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

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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):

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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.

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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.

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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?’

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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

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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

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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:

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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.

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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:

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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:

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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:

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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

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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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