Local gov spending remaining with top suppliers

New research has found that, despite the collapse of Carillion, more than half of English council spending goes to a handful of the top suppliers.

Spend management company Ivalua sent freedom of information requests to English councils and revealed that an average of £52.5 million has been spent by councils on their top five suppliers in the last 12 months, equating to 55 per cent of their total spend.

Given that 22 per cent of councils worked with Carillion, the findings reflect that the failure of just one supplier could present a major risk for many councils, possibly bringing critical public services or infrastructure projects to a halt. Therefore, the warning highlights the benefits of having two or three suppliers for goods and services, thereby reducing exposure to failure and improving the ability to mitigate the impact of unexpected supply disruptions.

Examining the savings made through local government procurement teams over the last year, the research also revealed that councils have saved an average of £1.74 million through procurement during this time.

Alex Saric, smart procurement expert at Ivalua, said: “The data suggests that, while there are notable exceptions, too many councils are not considering a change their approach to supplier management, continuing to concentrate spend with just a handful of strategic partners. If there’s one thing Carillion can show it’s that bigger is not always better when it comes to supply chain risk. The findings published by the Public Administration and Constitutional Affairs Committee showed the need for a more measured approach to supplier management that balances cost savings along with other objectives, including mitigating risk. Focusing on supplier diversity and innovation will encourage sustainable cost savings that are driven by the supplier rather than the buyer.”