Getting extra value out of your budget
As schools hunker down for future public spending cuts, finance expert, Malcolm Trobe offers some timely advice on how to get extra value for money from your budget.
There are some pearls of wisdom that are passed down from generation to generation, and I can still remember a conversation between my parents when they were standing in a car showroom looking to replace their well travelled Morris Minor. “Cheapest is not necessarily the best value for money,” said my dad. “Aye, and being expensive does not guarantee quality,” responded my mother. Of course, they were both right – and their comments are just as valid today. Deciding how to spend your hard-earned cash is never easy and neither is determining how to make the most of your school budget.
In earlier articles I considered an understanding of the term ‘Best Value’, indicating that it goes beyond the value for money (VFM) principles. These VFM principles are, however, very important and need to be considered in relation to procurement, suppliers, risk management and option appraisal. This is all part of the process of a school making best use of its budget to raising its educational standards as far as possible.
VFM has three main elements: economy, efficiency and effectiveness. It is helpful to have a common understanding of these terms in discussions within a school leadership team, the governing body and with all those involved in the procurement of goods and services in a school.
- Economy means minimising the cost of resources while ensuring the right quality.
- Efficiency means the relationship between the resources used and the output in terms of services or goods.
- Effectiveness is the extent to which the actual outcomes match the intended outcomes.
Listening to a school business manager talking about the procurement process recently was very informative. She indicated that her school had a checklist of factors they considered when making decisions. She made it clear that cost was a key element, but some form of guarantee of quality was essential. They looked at the reputation of the supplier and their capacity to provide them with what they wanted when they wanted it. The reliability of the supplier was very important and the after-sales service was also a critical factor.
This point was emphasised by an independent school bursar who said: “It is no use to us if, when something does go wrong, they are unable to get us up and running again very quickly. For that reason we have response and replacement times built into a number of our agreements. In terms of the services we outsource, we always have a very tight service level agreement with penalty clauses to ensure there is pressure on the supplier to keep us fully operational.” A colleague commented on the fact that they, in the recent past, had also taken more note of the ethical issues involved and made certain that the supplier was in line with the school’s ethos and culture.
Rigorous evaluation of the procurement process is important. At this same meeting another business manager commented on the excellent relationships they had built up over time with a number of their suppliers but added: “We keep them on their toes.” He indicated that these suppliers know they will not automatically be awarded the next contract just because they have provided the services before, and he concluded: “We always go through our thorough procedures to ensure we are getting best value for our money. That certainly doesn’t mean just going for the cheapest, nor does paying top price ensure quality.”
No slack habits there, I thought. So what do we have to do to get it right? Have our procurement processes kept up with the times? Are we making the best use of the internet? And what support is out there?
One fairly recent DCSF development to support schools and colleges is the use of the Online Procurement for Educational Needs (OPEN) marketplace for schools. It has been developed to safely guide schools into electronic purchasing and payment for goods and services online. OPEN allows users to readily and securely access local contracts and e-catalogues for goods and services as well as opening up access to regional and national contracts which could provide better value for money than existing providers.
OPEN has five key elements:
- an electronic marketplace of hosted catalogues with direct links to supplier websites
- a purchase-to-pay (P2P) system via a web browser
- a data store with secure access to all the user information from the system
- a supplier portal which allows approved suppliers to upload catalogues, receive orders and send invoicesfacilities to integrate existing e-procurement, finance
- and sales ordering systems.
For those familiar with online ordering it has an instantly recognisable format with the ubiquitous online shopping basket. What is very useful is the facility to display and compare multiple goods so that best value can be achieved. For most schools the system will link directly with the their financial management systems, so orders can be immediately raised and sent electronically to the supplier. The invoicing is also electronic and will match to the order.
To provide for non-standard items there is a free text order facility which enables you to type in your request, which can still be logged back to the school. The system offers further flexibility in a ‘request for quote’ facility, enabling schools to write orders and tender specifications to be written and submitted to a number of suppliers. This route can open up access to an increased number of quotes without spending hours searching for new suppliers. Full information is available through the DCSF website: www. dcsf.gov.uk/open/about_us.html.
This process is also supported by the school quote system Schoolquote Intelligent Buying Communities (IBC). This is a means of supporting schools to share their buying experiences and purchasing intelligence using an e-procurement system for education, by bringing together all the schools within a local authority area. Schools can through this route operate as a buying community, benefiting from each other’s knowledge of specifications, suppliers, quality and cost. Information on this is available at www. schoolquote.co.uk.
The move into the e-commerce era may well require a school to change its financial regulations, and it is essential to safeguard those involved in purchasing by having all of these regulatory changes approved by the governing body. For community schools the local authority standing orders and financial regulations will need to be complied with, and whereas some local authorities have taken the lead and moved with the times others have been slow to keep up with the changes. It is important to note that in some cases local authorities have authorised contractors and standing orders that mean that only authorised contractors can be used. Also there may be a requirement to have the contract checked, or drawn up, by independent lawyers or the local authority solicitor.
To further aid procurement in schools the DCSF produced a useful guide to tendering that contained ten steps to an effective specification of Statement of Requirements (SoR). This guide sets out the following steps:
- Set out the context
- Consult with users
- Details of service delivery
- Encourage innovation
- Check supplier is following legal requirements e.g. health
- Be clear and specific
- Focus on output specifications
- Do not specify brand names unless unavoidable
- Avoid revisions
- Ensure that performance measures are included
It then takes you through the process in a step by step guide. Full information about this can be found at
Schools that are being rebuilt or refurbished under BSF or the Primary Schools Building Programme will be well aware that there are European Union rules over tendering and procurement. Breaking the EU rules can lead to significant penalties so it’s worth checking if you’re in any doubt, and most local authorities will have a department that deals with EU procurement rules. General information is available at www. ogc.gov.uk.
The issue of sustainability is very much on everyone’s agenda and schools are encouraged to promote sustainable development and this can have a direct impact on procurement. Many schools are seeking or attaining eco-schools status, building sustainable development into their purchasing decisions. There are also large numbers of schools developing ‘Fair Trade’ policies where the link with procurement is important.
Many schools have already taken action to improve their energy efficiency with the use of energy saving light bulbs and policies to switch off the lights and leave nothing on standby. The concept of embedded energy is important in terms of changes to school buildings and nearly all schools have recycling programmes for paper, glass, cans, cardboard and plastic bottles. One of the biggest challenges, and a potential big winner both in terms of carbon footprint and financial savings, is trying to reduce the amount of paper used. Sticking the label ‘only print out if necessary’ on the bottom of all electronic communications and using electronic communications for most parents now instead of newsletters home is a start. All other ideas gratefully received!
Malcolm Trobe works full time for The Association of School and College Leaders (ASCL) as Policy Director.
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