Value for Money Examination  12;  Procurement in Universities   Summary


Background

The seven Irish universities covered in this examination spend approximately ?310m annually of which approximately ?76m relates to the procurement of goods and services.

Universities are autonomous, independent bodies which receive the bulk of their funding from the State by way of grants issued through the Higher Education Authority (HEA). Because of their historical autonomy, the policy of the HEA has been to regard procurement as an internal matter for each of the universities. However, the HEA has, over the years, encouraged universities to co-operate in some areas of procurement.

In general, universities delegate budgetary and procurement responsibilities to their academic and administrative departments. The extent of the decentralisation varies between the institutions, with the retention of some central procurement and storage responsibilities at institutional level.

UK universities which have similar devolved management arrangements, have made a number of advances in procurement practice, particularly through better co-ordination of purchasing. These advances have resulted in considerable savings.

The study focused on 

  • the adequacy of procurement arrangements within each university
  • areas where combined purchasing arrangements might be applied
  • whether university procurement policies are in line with best practice.

Procurement Practice

Nine categories of goods and services were examined which collectively account for over ?17m annually. Wide variations were found in the prices paid for similar items both within and between universities. For example

  • cleaning costs per square metre varied from ?4.87 to ?8.73
  • security costs per square metre varied from ?2.20 to ?5.69
  • discount on books purchased varied from nil to 10% depending on the supplier and the university
  • the prices for chemicals varied widely. Acetone ranged in price from ?0.97 to ?12.00; Ethanol ranged from ?2.15 to ?26.00.(Prices are based on units of 2.5 litres.)

 

The findings suggest that significant savings could be achieved by better procurement management.

Procurement Management

The study identified the following potential improvements to procurement management.

  • Collaborative arrangements between universities would reduce costs. The universities have two such agreements in place in the area of information technology (IT). The HEA and the universities should co-operate in further developing such arrangements.
  • Clearly defined policies and procedures are required which will provide comprehensive guidance on procurement matters and ensure that procurement activities are properly controlled and economically and efficiently operated. Only two universities have issued comprehensive statements.
  • Management reporting and control procedures are required since effective procurement management is heavily dependent on the generation of good information. Without this, management cannot evaluate the durrent position and monitor purchasing effectiveness. None of the universities examined generate regular or comprehensive purchasing information.
  • Focused training and development opportunities should be provided to all relevant staff which would be likely to show immediate benefits. Universities in general had not addressed the development and training of purchasing staff.

Savings of between 5% and 15% have been achieved in other public bodies and UK  universities by adopting the recommended procurement management approach.