Value for money services

by Michael Smith
NBS Information Specialist

Achieving good value for money is important at any time, but in the current economic climate it is vital that all types of business are able to effectively manage their expenditure and get the best possible deal to meet their needs.

A new set of guidance for schools, from the Department for Education (DfE), highlights making use of pre-existing frameworks and contracts that have already been set up by organisations like the public sector buying organisations or the local authority.

This article takes a look at the more general guidance from DfE, which is applicable to the full range of organisations.

Administrative supplies

This spend ranges across a wide range of subcategories, including stationery, postage, furniture and medical supplies. While this cost can be small for some businesses, many do not take advantage of the best deals on the market.

Things to consider:

• Buying frameworks/clubs can experience greater buying power
• Ask suppliers if they offer discounts for buying larger quantities and shop around for the best deals
• Regularly review suppliers and seek several quotes for goods or services to ensure getting the best deal.

Energy

There are a number of reasons why it is important to focus on reducing energy spend. Commercial enterprise energy consumption has increased steadily for the last twenty years. At the same time, energy costs are rising. This means that energy is often one of the largest non-staff costs.

Individual companies are usually unable to buy gas and electricity at the lowest (wholesale) prices, because at least £3 million worth of gas or electricity has to be bought to access these markets. Therefore, there are two potential routes to save money on energy costs: buying from a supplier that uses a good procurement strategy, and reducing energy usage through conservation and efficiency measures at work.

Cleaning

Research has found that cleaning and caretaking services represent a large non-pay expenditure for most businesses, so it's important that to get the best possible value in this area.

Company management must consider the preference of employing cleaners and managing the service in-house, or paying a supplier to provide the service (outsourcing). This decision should depend on: budget, requirements, management resources and location.

Things to consider:

• Identify local suppliers invite them for a site visit so they can provide detailed estimates
• Collaborate on a cleaning contract with other organisations in your area. The increased volume of business will drive down the price and give extra flexibility for covering sickness and holidays.

Building maintenance

This area of spend has a vast number of suppliers of differing sizes and standards, but with good planning and application a best value deal that offers the right requirements can be achieved.

Things to consider:

• Change your supplier and move to framework agreements (traded services) for the provision of buildings maintenance
• Bundle services and use output based contracting and aggressive commercial negotiation.

Water and sewerage

The water supply industry is something of a monopoly, with usually one supplier per region, which makes it impossible to select a supplier based on the value for money. However, there are a number of initiatives to help in reducing water consumption and lower costs, improving your sustainability credentials as a by-product.

Things to consider:

• Check exactly what your supplier can offer in terms of managing your water supply and sewerage disposal services, and the costs involved
• It is possible to apply for a 'wastewater abatement' allowance if it can be demonstrated that more than 10% of the water supplied is not returned to the sewer. Contact your water supplier about this.

There are also some simple and relatively low cost ways to reduce water consumption including:

• Adapting the flow rate on taps and showers through low-flow shower heads and sink spigots
• Installing water hippos in toilets (some water suppliers distribute these for free), which can reduce the amount of water in each flush by up to 3.5 litres
• Checking for leaks in the water system and fixing them quickly.

Catering

The procurement of catering services is influenced by a wide range of variables, not least by the price of food ingredients, which have been increasing in line with the commodity market costs, for example wheat.

Things to consider:

• Be aware of who provides your current contract arrangements
• Know what your current service is costing
• Know when your current contract ends.

Staff

Employment agencies staff can be one of the largest areas of non-pay spend, and for many companies falls within their top five spend areas. However, effective management of permanent staffing needs and improving workforce retention reduces the need for long-term supply staff, thus reducing the long term cost.

Related NBS information:

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August 2011

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