[size=55:2dl8w4c8]BBC 11 October 2010

'I'd be bust if I ran my business the way government does'



PROFILE: SIR PHILIP GREEN

Sir Philip Green is one of the UK's most successful retailers.

With a personal fortune of more than £4bn, he owns the Arcadia Group, whose fashion chains include Topshop, Burton, Dorothy Perkins, Evans and Miss Selfridge.

In 2009 Arcadia made pre-tax profits of £213.6m, 13% higher than the previous year.

Sir Philip also owns department store chain BHS, whose fortunes he has transformed since he purchased the then ailing company in 2000.

The government will be hoping that Sir Philip can transfer his renowned ability to trim costs from the private sector to the civil service.

He will also bring a proven record in procurement, and aims to reduce the cost of the government's purchasing contracts.

However, despite Sir Philip's successes, his appointment may still raise eyebrows.

His wife Tina is the direct owner of Arcadia, and she is officially a resident of Monaco. This enabled her to gain a tax-free £1.2bn dividend in 2005.

Sir Philip also made headlines in 2004 when he made a failed hostile takeover bid for Marks and Spencer.
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Sir Philip Green told me that if he ran his businesses the way the government does, the lights would go out.

Sir Philip Green

What he says he's uncovered is a culture where there are grotesquely inadequate controls of spending on everything from mobile phones, to travel, to property and paper.

The budgets he looked at are worth £191bn in total - and he believes billions could be sliced off that, if the government did simple things like centralising purchasing and monitoring expenditure properly.

For example, he argues that the public sector is spending around £700m a year too much on telecoms alone.

It’s the many smaller examples of waste that some will see as shocking, such as that on a single IT contract, 400 private sector employees are being hired at a daily rate of more than £1,000 per day, for tasks that Sir Philip was unable to identify.

He also highlights:

1) the existence of 71,000 central government buyers, who can spend up to £1,000 a month using “procurement cards” without any checks or oversight;


2) in general, the government permits spending of up to £1,000 “without monitoring or authorisation”;


3) £104m a year is spent on printing, with some departments paying 11p per leaflet while others pay £1.31;


4) there is £551m of annual travel spending by central government, with very little co-ordination of the purchases;


5) even more is spent on travel by the rest of the public sector, but the precise amount was impossible for Sir Philip to obtain;


6) some £38m a year is spent on 400,000 overnight hotels in London alone, with prices per room varying from £77 to £117;


7) some £84m goes on office supplies, with prices paid for ink cartridges varying from £86 to £398 and on paper from £8 per box to £73;


8) £61m is spent on laptop and desktop computers, from 13 different IT services providers, with no standard specification across departments and prices paid per laptop varying from £353 to £2,000.

9) one provider takes 98% of the £21m a year spent on mobile phones, which has nonetheless negotiated 68 different contracts with government departments - implying that the government is not benefitting from any economies of scale;


10) £25bn a year is spent on property, but only 6% of the entire estate is overseen by a central team;


11) the government is poor at taking advantage of break clauses in property leases, to rationalise use of office space.

That is just a selection of the myriad examples where Sir Philip believes the government can make very substantial savings, perhaps as much as 50%, on £191bn of procurement and property costs.

He is keen to point out that the savings he is suggesting would not involve a single public-sector redundancy: all of the squeeze would be on private sector suppliers (who probably won’t thank him).

Perhaps his most controversial recommendation - which he made in his interview with me but is not explicit about in the report - is that government departments pay their suppliers far too quickly.

He says that the norm in most departments is to pay suppliers in five days, compared with the standard 30 days payment period for most private-sector transactions, and 45 days demanded by some bigger companies (like his own).

If the government demanded a minimum of 30 days of credit from suppliers, it would save hundreds of millions of pounds in financing costs.

This would of course be painful for those suppliers, especially smaller companies.

The previous government made it a matter of explicit policy to pay suppliers as quickly as possible, to help them through the recession.

Sir Philip Green is saying that priorities should now change - and that the government should take advantage of its sheer size and credit-worthiness to extract the best possible terms from all those who sell to it (and never mind if they don’t like it).

Update 1430: I’ve had a brief chat with Peter Gershon, who advised the previous government from 2000 to 2004 on how to make savings in procurement.

He says that he is supportive of Sir Philip Green’s central argument, that there should be more centralisation of purchasing by the public sector (or what Gershon calls more "
aggregation of demand"
).

He says that in his work for the then Chancellor of the Exchequer, Gordon Brown, he put in place systems to facilitate the centralisation of purchasing.

But Brown did not order departments to centralise purchases.

And nor was there any serious move to standardise specifications for goods and services bought by different departments.

Different parts of government retained considerable discretion to choose different kinds of computers, and stationery, and mobiles phones, among others.

Which of course meant that their individual orders were smaller, and therefore there was less scope to yield savings from placing huge orders.

The corollary is that taxpayers arguably ended up paying more than was necessary to equip the public sector.

Well written Ashley .This was most informative ,interesting and educational for folks like me the common workingman(err retired man;
lol) to read.I am sure if this had been written in a normal newspaper it would have been different according to political persuasion but I found it to be a peice of good honest journalism .
Give yourself some Karma points [You must be registered and logged in to see this image.]

With the British government its a case of "
do as I say and not as I do"
looking at the topic here its quite obvious that they could start to save money by firstly cleaning up their own problems with spending Willy nilly

BG you hit it right on the head bud ,but they have been so busy with their feet in their troughs that they dont really care plus with many large organisations they quickly learn not to make waves

Goodness me is this how the government has been doing business for the last 12 years!

If any other business would run in this way it wouldn't even last a year and go bankrupt, hence the position of the UK.
Although I am not a familiere with Sir Philip Green, it was a good idea for a business man of his stature to review the situation, it was very clever of the coalition team not to be accountable of exposing what has been happening, because they were also a part of these practices, Politians are not business minded including those who claim to be economists, why hadn’t they done their homework and reported previously?
It appears the last government had an approach of free for all between all departments, this attitude is too common within government organisations which are inherently bureaucratic, its ridiculous and needs to be stopped! Its no wonder why public sector workers can't survive in the private sector.

Taxpayers money has been spent on an easy come easy go basis for far too long and if the government had, had to work hard like businesses do for their turnover they would have put people in charge who understood how to run the country as a successful business instead of ruining it.
The amount of waste is scandelous whike billions of pounds paid to lenders in interest unnecessarily, anyone who cannot see how badly and quickly somesort of restructuring should be done needs their heads examined

This is all very familiar stuff and happens every time there is an efficiency drive. The mandarins nod their heads, go tut-tut and then continue their discourse in Arabic Nothing changes

"
Consultants charge £1,000 per day to big business whether public or private."
in fact it's because of the private sector why the Government has to pay such ridiculous rates, it's pathetic

This doesn't surprise me in the slightest. I used to work in private sector procurement and EU procurement law is bonkers, most of the processes are designed to increase accountability and transparency In practice they demotivate the procurement staff, who have to spend most of their time filling in forms to satisfy an audit trail rather than getting the best deal for the taxpayers,the temptation will be to put more rules in place to make sure this doesn't happen again by giving the buyers less room, since this idea has failed every time it was implemented can we tear up the rule book and just let the buyers get on with their jobs?

Part of the Problem with buyers is that they have always(been looked after )by the sellers and this in one form or another will always go on .All of us like summatt fer nowt ,giving to us donr we .well this brings out the jealousy factor so we create paper systems to try to stop it .Everyone of us has some kind of clever angle whether its an out an out fiddle or we employ respectable thieves like accountants to hide behind .We wouldn't necessarily need these parasites if the government were run efficiently and honestly so until such wonderful things keep happening we shall have to be content with the chicken and egg job and carry on grumbling which of course is easier than doing something about it .Hey Ho we cant change the world can we .??????? orrrrrrrrrr could we ??????????? answers on a postcard please addressed to your local MP [You must be registered and logged in to see this image.]

The first step to minimise wastage is to get rid of fancy reports which only tell us the obvious and get on with the matter in hand, and then make purchasing departments responsible for cutting costs and put an end to local council gravy trains where Councils pay over the odds for goods and services

sarah