Public sector procurement: why assumptions come at a cost

If you’re responsible for procuring energy in the public sector, you probably have a tried and tested way of approaching each contract that may be very similar to what your colleagues in other organisations are doing. However, sticking to the same procurement strategy simply because it’s worked in the past means missing out on the opportunity to take a different approach that could save your organisation significant sums of money. Many organisations have a procurement strategy that doesn’t work as well as it could, simply because some common assumptions have gone unquestioned.

Public buying organisations: not always the best choice for energy

Perhaps the biggest incorrect assumption about procurement is the idea that public buying organisations are always the best (or indeed compulsory) route for your purchasing needs.  In England, there is no obligation for public sector bodies to use a public buying organisation, and when it comes to trading energy, you may find that specialist energy consultants can deliver much better value and lower energy costs.

Moving away from a buying organisation that you have used for years can feel like stepping outside your comfort zone, but taking a fresh approach to procurement could help you to save your organisation a surprising amount of money, without compromising on due process. You just need to make sure that you use a supplier that operates within an OJEU-compliant framework. For example, many of BiU’s clients are NHS trusts, so we have been appointed as a consultant many times through the NHS Shared Business Services (SBS) framework. Our frameworks are OJEU-compliant, which means due diligence is done both when we are appointed and when we secure the supplier contracts.

The difference between us and a public buying organisation is that BiU are likely to deliver much better results in terms of saving you money. We offer a full energy management service, not just procurement, and we have a wealth of experience in saving public sector organisations money on their utility bills.

In one example we investigated, an NHS Trust paid £25k to £30k per annum for renewable power procured through a public buying organisation. BiU would have been able to secure localised, renewable energy for around £2k per annum – a fraction of the cost.

Greenwashing risk

One of the biggest administrative headaches for NHS trusts is your annual ERIC (Estates Returns Information Collective) report. And now it’s even tricker, because from January 2021 you have to specify what proportion of your energy comes from renewables. Unfortunately, the best-known and biggest public sector buying organisations don’t necessarily share the government’s low carbon agenda. This means you have to check and double-check that the energy contract you’re getting is truly green. It is entirely possible that the energy you buy is “greened” through so-called REGOs, Renewable Energy Guarantee of Origin certificates. Despite the name, these offer no guarantee that your energy supplier actually has any contracts with renewables generators, because they can be bought separately from the energy itself.

BiU does the homework for you by making an effort to find suppliers who have contracts with local renewable generators. Our REGO certificates are all linked to specific generators and list which renewables projects the power comes from. The allocation of the REGO certificates are audited and have the Carbon Trust seal of approval for transparency. We also work hard to source the renewables assets as close to the customer’s sites as possible – in some cases just a few miles away.

Unlike many other consultants, we will also discuss alternative ways to support renewables projects, such as taking out a power purchase agreement (PPA) with a generator. We steer our clients away from the greenwash towards genuine support for new renewables.

Big isn’t always better

Another surprisingly common myth in the public sector energy procurement world is the idea that buying big means big savings. The truth is that volume makes no difference whatsoever when it comes to trading energy, and the price is the same regardless of whether you buy 1 kWh or 100 million kWh. It’s the timing of your purchase that affects the price, and this is where BiU have much more experience than many public procurement organisations. We will work with you to develop a risk management strategy that suits your organisation, then optimise within that strategy to secure the best price possible. Some of our clients have a huge energy spend because they have a large number of sites, but it’s our expertise that helps them make savings, not their size.

Public sector budgets are under a lot of pressure, yet basing your procurement strategy on outdated assumptions could be wasting significant sums. If you’d like to take a fresh approach, BiU would be happy to help. As well as procurement services, we can also support you with financial reporting, giving your organisation greater visibility on spend against budget.

For information and advice, get in touch with our team on hello@biu.com