The Improvement and Development Agency (IDeA), a body that helps councils to adapt to changing circumstances, is due to announce in two weeks that it is launching an online marketplace for local government purchasing. The move will inject welcome focus into what has so far been a confused scene.

The IDeA is planning a site with which councils in England and Wales can register and then use to buy most revenue items, from office stationery to temporary staff. The market is worth £25 billion annually.

The potential for savings on product prices, and particularly transaction costs, that this offers to councils of all sizes should give a big boost to a sector that has not been among those leading the way with e-commerce.

But to suggest that purchasers in local government have been dragging their feet would be unfair, says Dave Wheller, head of corporate procurement at Essex County Council and chair of the Society of Purchasing Officers in Local Government (Sopo). Many councils have been early adopters of particular technologies, he adds, pointing to the fact that many use purchasing cards, including Leicestershire County Council and the London Borough of Havering.

Essex is starting a trial purchasing card scheme this month, Kent County Council has been using electronic data interchange-type ordering since the 1970s, and West Sussex County Council has already used electronic tendering.

“Everyone’s doing something,” says Wheller, “but, as with national government, there has been a need to take a step back and re-evaluate the way forward for e-procurement”. One advantage of the hype surrounding e-commerce has been the identification of some basic issues relating to transaction costs. “Many of the benefits of e-commerce can be delivered by other means. Consolidated invoicing, for example, doesn’t actually require the use of the Internet,” adds Wheller.

Steve Gilbey, head of contracting at Hertfordshire County Council and chairman of the Central Buying Consortium (CBC), which has 17 local authorities as members, confirms this. “Most councils need to start from scratch - what are the process costs, how do they arise, and can they be eliminated without advanced technology? Only when you have the answers to those questions can you start looking at electronic catalogues, purchasing cards and the other aspects of e-procurement.”

Following rounds

Pending the development of the IDeA marketplace, local government might take its cue from the e-commerce activities of major suppliers. One source of inspiration might be the recent deal between computer services provider ICL, e-commerce software group Infobank and government body The Buying Agency (TBA) to develop a marketplace for TBA’s clients.

Another might be the latest e-commerce developments within the various local authority purchasing consortia, although progress has been patchy. At one end of the scale, John Woodward, sales manager at Yorkshire Purchasing Consortium, concedes that its plans are at an early stage. At the other end, the Wiltshire-based Consortium for Purchasing and Distribution recently launched its Consortium Online catalogue, offering a full electronic service. This includes goods selection, availability confirmation, delivery-date commitment, order tracking and online checks on account balances.

Document company Xerox is hoping to become a major e-commerce partner with the local government sector. But Carol Griffiths, marketing manager at Xerox Public Sector, its specialist local government division, says: “Our experience is that most e-procurement delivery is at the planning stage. We are approached to provide guidance, ideas and even assistance in developing e-commerce strategies, but we haven’t supported a full system implementation yet.”

This is not down to a lack of awareness, she adds. Her company is in talks with several organisations. Wheller points out that Sopo’s April conference, which concentrated on e-procurement, was massively oversubscribed, while several sessions will be devoted to aspects of e-procurement at its annual conference in October.

Councils and consortia are, however, wary of some of the private sector’s promises. “One of local government’s greatest concerns is the number of dot.coms that think they can set up a website and expect schools and other bodies to place their orders,” says Wheller. “They show little understanding of the regulations that we have to work under.”

Nor are the motives of private-sector operators entirely trusted. Brian Saberton, head of purchasing services at the Authorities Buying Consortium in Scotland, says that his organisation has been approached about putting its catalogue on the web. “But it concerns me that some companies seem to be over-interested in getting control of our database and order processing. The fear is that they intend to cut us out and go direct to our customers.”

The Scottish Executive is, however, making funds available for e-commerce projects among its own councils. Other initiatives are also under way. The CBC has been awarded a modest budget, according to Gilbey, along with the Office of Government Commerce, to investigate various aspects of e-procurement. Purchasing is also one of the core areas for IDeA Knowledge, a wide-ranging best-practice group that is due to start work later this year.

E-commerce camps

Mike Kendal, financial controller at the Eastern Shires Purchasing Organisation (Espo), explains that its members fall into two camps over what they want from e-procurement. “One group is looking for a full e-commerce system that will give complete control of who buys what and where, with comprehensive links to their financial systems through, say, a website catalogue. The other group wants that sort of facility from purchasing cards, which now offer a long list of options and facilities, including the ability to control spending limits - albeit perhaps not with the same sophistication.”

These members are looking at the transaction-cost benefits of receiving a single invoice from the card company and having the analysis posted electronically into their ledgers. Espo is currently developing its own website, with the aim of minimising transactional processing for its members, and also reducing manual re-keying by the consortium. As Kendal says, “customers are very focused on transactional costs in the context of demonstrating best value”.

E-commerce will undoubtedly become a central element in local government’s quest for best value. Local authority procedures will have to be modified, but equally, private-sector partners will have to understand and adapt to the special constraints that apply to those charged with spending the public’s money.

Griffiths identifies a number of factors that may have constrained councils’ adoption of e-procurement. “Many are finding that it isn’t enough to develop an e-commerce strategy in isolation,” she says. “Their processes have to be understood and streamlined, so that electronic transactions do not simply emulate paper-based processes that do not add value.

“To date, we haven’t seen evidence of funds being committed to these projects. A lot of requests are for advice and guidance, and conversations about funding for subsequent work have been hesitant.”

Sopo’s Wheller concedes that greater resources and effort are probably going into developing the electronic interface with the public and the electronic delivery of front-line services. And Griffiths adds: “Councils, quite rightly, are exploring their options. Identifying which suppliers in the marketplace have the necessary technical ability, combined with the organisational-change techniques that are vital for success, is an important process.”

Sam Tulip is a freelance journalist specialising in purchasing and supply issues