Payment Solutions framework helps increase efficiencies and rebates for 3 government departments

This case study explores the benefits the Foreign, Commonwealth & Development Office, FCDO Services and the Department for Work and Pensions saw when they consolidated their procurement card programmes.

Background

Through a joint contract, The Foreign Commonwealth and Development Office (FCDO) and FCDO Services (FCDOS) annually spend over £100m on procurement cards. The cards are primarily used to purchase low-value goods and services such as catering, training and stationery.

The FCDO began to develop a new category strategy for payment solutions in late 2018. It aimed to use their significant spend on procurement cards to leverage greater business and cost efficiencies.

It was the first full category strategy developed by the FCDO under Chief Commercial Officer, Tracey Williamson. The strategy included a phased approach to raising card limits because the FCDO wanted to enjoy their existing benefits – such as a rebate and a streamlined buying process – but on a greater scale. This could only be achieved through channeling greater spend through their card programme. 

 The Department for Work and Pensions (DWP) annual spend around £3.7m per year through their card programme – predominantly purchases of low value goods and services and car hire. Until July 2020, it was a standalone programme for the DWP.  

The clustering agreement

Through better category-level dialogue between commercial departments, the FCDO, FCDOS and DWP identified an opportunity to utilise Lot 1 of the CCS Payment Solutions agreement to set up a ‘clustering’ agreement. A clustering agreement allows a buyer to allow other contracting authorities to contract together, under a single call off. 

In this case, clustering allowed the DWP to join the FCDO/FCDOS call-off contract with the current provider, Royal Bank of Scotland, and leverage FCDO/FCDOS’ considerable spend through the contract. 

As procurement card rebates are stepped – with rebate size in direct correlation to total spend – consolidating the card spend of the FCDO, FCDOS and DWP results in a higher combined card spend under one contract, meaning both departments would receive a higher rebate from the supplier than would be achieved if each department held an individual contract.

The DWP card programme moved on the combined FCO/FCOS contract with RBS – via the clustering mechanism – on 1 July 2020. A Memorandum of Understanding (MoU) was arranged between the departments, to ensure future responsibilities and accountabilities were clear.

Outcomes

In combining their spend through the clustering mechanism, the DWP were able to benefit from access to an established contract, saving valuable staff time on a new procurement.

The aggregation of spend also meant that DWP benefited from the highest rebates available from the bank, maximising the amount of money returned to the public purse via the rebate.

After 5 months on the programme:  

• both departments are receiving a higher rebate from the supplier – meaning more money generated and returned to the public purse
• DWP forecasts a rebate improvement of £48,000 per year (based on pre-COVID spend volumes)
• the project delivered a quick Public Contract Regulation (PCR) compliant way for DWP to call off and enjoy the benefits of economies of scale while saving tendering and transition time
• the changeover between old and new DWP contracts was seamless, with no disruption for DWP cardholders. There was no need to reissue cards, for example 

In reviewing the success of the programme, both departments noted that others looking to follow in their footsteps should:

• all parties on the original contract – in this case, FCDO and FCDOS – must reach early agreement on the principle of clustering
• regular dialogue and updates helped FCDO and DWP move the clustering proposal along towards a conclusion
• ensure all parties are clear on their future responsibilities, including management of their individual programmes and consulting on plans with other clustering parties – the MoU proved an important document in this
• commercial departments and CCS should ensure ongoing strategic engagement to help develop similar synergies and opportunities in future

What they said

Rakhee Dave-Shah, Head of Corporate Category, FCDO Commercial, said: 

The development of a new Payment Solutions category strategy was an excellent way to deliver clear business improvements. Using Crown Commercial Service’s clustering provisions under their Payment Solutions framework means we are now taking a wider, strategic approach and are more joined-up with our partners. The new clustering agreement will deliver added value for all involved.

Kirsty Turner, DWP Commercial, said: 

As with all government departments, DWP is keen to achieve best value for money in all areas of spend. While planning for the future of the service after July 2020, we engaged with stakeholders beyond our immediate team and in doing so identified an opportunity to utilise the clustering provision. 

The FCDO and FCDOS commercial team were supportive throughout and although DWP’s spend does not materially increase rebate advantage for them, aggregation in this way has enabled DWP to benefit from an increase. 

Our agreement has provided structure and a joint understanding of the roles and responsibilities of all parties during the term of the contract and on a day-to-day basis, DWP will manage their service provision independently, removing any burden on FCDO/FCDOS in allowing DWP to utilise the contract. 

Our joint engagement, and using the CCS framework, has facilitated further conversations and sharing of best practices adding more value to the agreement. This has been a really positive example of how departments can work collectively to achieve best outcomes across government.

Start benefiting today 

Whether you’re already using procurement cards and want to further harness their power, or if you want to introduce them into your organisation, you can quickly and easily start enjoying the benefits. 

Already using procurement cards?

If, like most, your organisation already uses procurement cards, we recommend that you conduct a thorough review of all current and future purchases to see where there’s an opportunity to spend more on cards. 

New to procurement cards?

If your organisation is not currently using procurement cards, or are interested in switching providers, contact our team today. 

You can also find out more about the agreement on our Payment Solutions web page.