Tuesday, June 19, 2007

The Book of Efficiency, Chapter One - Part One

Efficiency is the degree to which something is done well or without wasted energy, that is the productive use of resources.

Ghana as a nation as we are told by the Government lacks adequate resources for delivering all the services citizens expect and demand. I believe it is not just a ‘lack’ of resources but the inefficient application of the little we have which is the main problem. As the Government of Ghana tries to formulate and implement policies on e-Governance, using a Public Private Participation (PPP) approach in hope of improving efficiency in governance, let us together discuss successes and failures in improving efficient governance from other countries.

The Government of UK is promoting efficiency in Government Departments and Agencies (GDA) by requiring GDA to achieve certain targets in efficiency-targets and prompt payment legislation and also through the National e-Procurement Strategy.

This post is about a program introduced by the Treasury, in partnership with Visa Europe and a consortium of seven visa-issuing banks, which introduced a card purchasing programme called the Government Purchasing Card (GPC).

The GPC Visa programme was formally launched by the Treasury in October 1997 as a tool to purchase and pay for low value goods and services efficiently and cost effectively. GPC provides substantial benefits for users by providing a streamlined process for low value, ad hoc purchases. Improved management information allows users to monitor and evaluate purchasing activity and to collaborate with others to secure improved terms with suppliers.

GPC Visa 2005 in figures
No. of GPC Visa schemes in operation: 526
No. of GPC Visa cards in use: 70,078
Total spend on GPC Visa cards: £527,287,340
No. of transactions on GPC Visa: 2,882,974
Average spend per transaction on GPC Visa: £182.90
Monetary savings: £80,723,272 (Average of £28 per transaction)
Paper savings: 28,829,740 sheets of A4 paper

Top 5 Merchant categories of GPC Visa Spend in 2005
Travel 24.22%
Office Stationery, Equipment and Supplies 19.46%
Hotels and Accommodation 10.12%
General Retail and Wholesale 9.09%
Miscellaneous Industrial/Commercial Supplies 6.35%

It has been identified that in order for a GDA to implement the scheme successfully, three sections are involved;

 Senior Management should be the driving force behind the programme, pushing strong implementation practices
 Relevant departments such as Finance and Procurement should be involved as early as possible.

 A simple straight-forward process for purchasing, which must be relevant and convenient for cardholders.
 Cardholders must be trained in use of GPC prior to implementation and cards issued to end-users(the people who make the actual purchase)
 Relevant financial thresholds set to capture a large percentage of low value purchases with appropriate controls, but minimizing restrictions.

 Centralized policy / guidelines and a central competence centre used to disseminate Best Practice information and discuss common issues/opportunities and also share knowledge with other GDA
 Supplier strategy to devise recruitment strategies, assess the data and communication capabilities of suppliers.
 GPC should be used as a catalyst for change to re-think accounting and purchasing procedures to leverage the opportunities it presents.

The benefits of GPC Visa are numerous;
1. Prompt payment The City of Edinburgh Council managed to use a tailored web-based solution involving GPC Visa and additional software to reduce payment periods to contractors from above 30 days (which is the legal limit set by contractors before charging interest in Edinburgh) to 36 hours or 48 hours depending on the contractor’s bank.
2. Administration/Paperwork reduction; The City of Edinburgh Council expected to cover works amounting to about£13million in 2005 which meant about 14,000 invoices to be processed with a cost of about £65 per transaction. Using the solution mentioned above they processed only 12 invoices, 1 each month from their bank.
3. Better Management Information; GPC Visa provides management information (minimum being card number, transaction date, merchant details, currency of transaction and amount.) delivered in a variety of ways including the internet and tailored to the specific requirements of each programme. In the case of the Metropolitan Police (UK’s police service, aka The Met), which has processes about 6,000 flights per year, a significant portion being outside UK, this information is useful to The Met in knowing how and where there is scope to negotiate discount fares and find further ways to economise, a notable advantage with travel booking on such a large scale.
4. Empowers workforce; GPC Visa replaces bureaucracy and is a simple to use payment system which can have appropriate levels of control added, and therefore empowers end users utilising appropriate levels of control. Accountability is key with centralised electronic reports producing a clear audit trail identifying exactly who has made each purchase. Since each programme is fully customized the end users get to choose processes they want and are comfortable with and not someone else’s ideas.
5. Small and Medium Enterprise friendly; Significantly, GPC Visa allows public sector bodies to trade effectively with small and medium enterprises (SMEs) which are essential to the economic vitality of a locality or region. Increasing use of e-procurement solutions by the public sector is sometimes seen as a threat to SME suppliers. However, making Visa payments through an e-procurement system is no different from paying for goods online using a supplier website. Suppliers taking Visa payments are therefore more able to engage with an organisation’s e-procurement solution. Again this is mutually beneficial because the buyer receives greater control and spend compliance, whilst the supplier can retain their trade with the Government organisation by trading electronically.

PART TWO will delve into issues of the implementation of such a system in Ghana.