Universities in Australia are taking giant leaps to better collaboration in the procurement of goods and services, a meeting of the Australian Universities Procurement Network was told, which I attended this week in Sydney as a guest of AUPN.
Roughly half of the sector has signed up to an exciting collaborative sourcing programme run jointly with a major consulting firm, while many more are developing a best practice sharing model under the AUPN banner, including a procurement capability assessment programme quite similar to our own in the UK. I’ll write more on the best practice endeavour in a later blog.
Australia’s University Procurement Hub went live on 4 April this year. Seventeen of Australia’s 39 institutions, supported by their partner Accenture, who were selected following a rigorous procurement process, are aiming to save around AUS$300m NPV (£172m) over an ambitious five-year programme (see their striking promo video here).
As Executive Board Chair and director of procurement at the University of Sydney Richard Allen set out the programme, it was obvious that the Australians certainly mean business. They plan to attack an addressable spend of AUS$1.2billion in four waves of collaborative procurement exercises across no fewer than 60 spend categories.
The first wave, Allen believes, will be the easiest to master as they seek to optimise the operating effectiveness of the Hub, ready to tackle the trickier categories later on. These initial categories will sound familiar to LUPC Members: IT, office supplies, furniture, travel and accommodation and laboratory consumables.
The programme has three principal objectives:
- to achieve savings by aggregating the buying power of its members;
- to achieve end-to-end effectiveness through innovation and the use of technology; and
- to uplift organisational procurement capability through process improvement.
Governance is important to the programme. An Executive Board (EB), made up of finance directors and CPOs in equal measure, oversees the project, while a Program Committee (the “engine of the Hub”, according to Allen) consists of representatives of 8 or 9 universities nominated by the EB. This group, in turn, co-ordinates five Category Councils, involving 50 participants drawn from all seventeen participating institutions. Their task is to plan sourcing and contracting milestones, provide legal support and work in tandem with the Accenture team. A single point of contact (SPOC) ensures that each university’s requirements are met throughout the programme.
It doesn’t look easy, though, as they will need to be equal to some hefty challenges if they’re to succeed. Clearly the deal with Accenture is a complex one. The good news is that Accenture’s minimum participation level, its critical mass, has been achieved. This means the project is viable as a commercial proposition. I understand that the project aims to achieve purchase cost savings of between 8 and 12%, with additional commercial incentives available to Accenture if they perform beyond that.
More universities are considering signing up, but there is a sizeable investment to be considered first. Between them the seventeen will part with in excess of AUS$20m (£12m) in fees spread over the five years and front-end loaded (incrementally reduceable if sufficient further institutions join). For that, they will receive all the technology (proper spend analysis, procure-to-pay systems and so on) and the services of a 15 FTE-strong highly skilled and motivated Accenture team. Even with systems included, this still works out at a weighty daily rate for our sector and especially for such a big chunk of work. Of course, it’ll look small if the savings get delivered, but I do hope they’ll be good for it.
And, of course, not every institution is going to be able to enjoy the benefits of every deal that’s done, as presumably some will be locked into existing contracts, for a while at least. For the first wave of (less contentious) categories, there’s just about complete participation from every institution – and that’s good news. But in the later waves, fewer appear quite as interested. Indeed, for the management consultancy category, hardly anyone has shown a strong interest in participating, but perhaps that’s not such a surprise given the nature of the relationships involved.
I also wonder about the wisdom of a model where the partner is incentivised purely by savings at a time when we are seeking to extol the virtues of good procurement as a value-adding discipline. It might be a challenge building in safeguards to ensure that targeted savings aren’t delivered at the expense of quality.
But you can’t fault the collective ambition or the steely Aussie resolve on show here. The project clearly has momentum and the CPOs I spoke to whose institutions have signed up are dedicated to the project and to its success. In my next blog I’ll describe how AUPN plans to complement this activity with a different kind of collaboration, one about raising standards of professionalism and providing support for one another, for the greater good.