Section 5: Procurement and value for money print

Tue 13. Jun 17 18:12

Unit 4: Procurement and value for money

Goods and services bought by schools are paid for with public funds. This means that schools not only need to maintain the integrity of public funds, but must also be seen to do so.

The diagram 'Maintaining the integrity of public spending' shows the four distinct aspects that public services must consider when spending public money.

This unit discusses:

  • good practice for procurement
  • procedures relevant to the type and value of the purchase
  • e-procurement
  • how to ensure value for money is obtained
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Learning outcomes
On successful completion of this unit, you will be able to:

know the importance of establishing sound procurement processes if the school is to use the public funds allocated to it efficiently and effectively
understand the processes necessary for procuring different types of services and resources
apply the concept of best value to the school's procurement processes
report on the evaluation of the value for money obtained through the procurement of specific school resources

Useful documents
For this unit, you will need to refer to the following documents from your school:

financial procedures manual
tender documents
Academies Financial Handbook/local authority procurement guidelines
Schools Financial Value Standard (SFVS) for local authority maintained schools or Financial Management and Governance assessment (FMGS) for academies

Concepts used in procurement

Procurement refers to the whole process of evaluating the need for goods and services and is an activity that consumes billions of pounds of taxpayers' money each year. Therefore school business managers have a duty to ensure that public money is spent in ways that achieve best value, by supporting delivery of their school's objectives in the most efficient and cost-effective way. Procurement comprises of the following steps:

assessing options
planning the process
choosing within a competitive market
making the purchase and managing that purchase through the life of the appropriate contract or use of goods
disposal or completion of contract
lessons learned from the full process

Effective procurement is dependent on exercising a degree of planning and management which is proportionate to the value and inherent risk of each purchase. The diagram 'Procurement process based on value and levels of risk' provides an overview of the different approaches to procurement, depending on the value and risk.



The concept of financial probity is discussed in detail in Unit 1, 'Principles of school financial management'.

Probity in relation to procurement means that all transactions must be underpinned by the principle of fair and open competition. The full process of procurement must be recorded and notes and evidence supporting decisions must be retained.

School business managers must also be aware that the procurement activities of public sector organisations, such as schools, are heavily regulated and you need to be mindful of the legal framework surrounding the process.

In general terms, there are four layers of regulation:

  • European rules – which only apply to large purchases such as buildings and major equipment
  • UK rules – set out in statute law
  • local authority contract standing orders
  • school standing orders
The thresholds above which a particular number of quotes or tenders need to be sought will be found in your local authority’s scheme for financing schools and other guidance.

Typical thresholds are:

  • low value – under £10,000
  • medium value – between £10,000 and £40,000
  • high value – over £40,000 but below the EU threshold
  • EU thresholds – purchases with a value above approximately £160K for goods and £4 million for buildings (the OJEU tendering process must be used for these)
The threshold value of a contract is determined by its lifetime value not its initial purchase price.


4.1: Probity and purchasing
Using your school's financial procedures manual and other best practice guides regarding internal controls, evaluate your school's current arrangements for ensuring probity with regard to its procurement activities.

Use the table (shown below and available to download from 'Resources' at the end of this topic), respond to each question and then make recommendations for any necessary corrective actions.

In column 2, indicate your response to each question using the following descriptions:

Excellent – the school is a model of good practice.
Good – in general adequate procedures are in place and these are followed the vast majority of the time.
Average – the school has procedures in place, but these are not always followed or monitored.
Poor – the school’s procedures are weak; individuals often fail to follow procedures and these failures are not acted upon.


Segregation of duties

As discussed in 'Principles of school financial management', segregation of responsibilities must be maintained using properly authorised members of staff.

Segregation of duties can be a problem in small schools and in these cases the governing body should undertake a risk assessment and then agree compensating controls to support the notion of segregation of duties as an internal control strategy.

Value for money

All SBMs are keen to get the best possible value for money (VfM) from their purchases. In this video, you will hear tips from some of our SBMs about some of the strategies they use.

The concept of value for money is now embedded in all public sector organisations which must demonstrate how value for money has been achieved in the use of their resources. All staff in schools should be looking at what money is being spent on, in order to question whether they are achieving value for money.

Knight (1993:21) suggests that you should "always ask yourself – if this was my business, would I spend my money like this?"

The table below 'The 3 Es' shows the three main elements of value for money.


Clarissa Williams, School Business Manager

We aim to achieve value for money in all that we do. When it comes to procurement we often collaborate with our neighbour schools and with our feeder schools in our pyramid to get best value for money. That means efficiencies and economies of scale. We often tender as a whole group of schools and that can find real savings, financial savings.

Kerry Snell, School Business Manager

You often hear the terminology of 'well we've always done it that way' and that's one thing that I tried to avoid at all times and an example I can give is in terms of service level agreements where you buy in services from your local authority. In my previous school I was able to save eight thousand pounds per year on a rolling programme simply by looking at a particular service that the school wasn't utilising fully and therefore was able to create value for money and then devolve that money into other areas.

Dawn Fenton, School Business Manager

I think my school's worst buy was probably an environmental garden that we seemed to pay an awful lot of money to a landscape gardener to design and come and actually plant up but then the member of staff who had actually been leading that project seemed to do so in isolation and when they left it didn't have the momentum to carry on and therefore the staff who were left behind didn't either have the knowledge or the understanding of how to develop it further and it became a bit of a white elephant that needed much more money spending on it to bring it up to standard.

Husham Kham, School Business Manager

Value for money is even more important now, certainly with more challenging budgets and one of the ways that we've looked at value for money at the schools I work at is by looking at the service level agreements and, whether they're with private providers or local authority providers, we look at those, the service level agreements, for all functions on an annual basis and quite often we do that through like a Dragon's Den approach, so we'll invite the providers to come and pitch to myself including the head teachers and then we'll make a judgement and a decision based on that.Hide transcript



By assessing value for money, schools may be able to free up resources for other uses in support of the school improvement plan.

The diagram opposite shows the three main questions you need to ask to ensure the school is getting value for money.

Schools financial value standard

To ensure that schools understand the quality of financial management which they should aspire to achieve, the government drew up the Schools financial value standard (SFVS), and its equivalent for academies the Academies financial management and governance self-assessment (FMGS).

SFVS provides a framework for dialogue between the governing body and the senior leadership team to allow the governing body to carry out its responsibility for the management, deployment and safeguarding of public funds. It consists of 23 questions which governing bodies should formally discuss annually with the headteacher and senior leadership team. Section C sets out six standards relating to value for money, and these are highly relevant to all school settings.

Best value
Best value includes the concepts of VfM but goes beyond that by taking into account the outcome value achieved over the life of the goods or services. Best value helps to develop a partnership process between key stakeholders that reviews, and challenges the use of resources as a means of raising standards and continuously improving performance.

The 4Cs of the best value principle are:
  • challenge
  • comparison
  • consultation
  • competition
Challenge requires schools to:
  • review and question their performance, routines and processes
  • challenge the school's management and leadership
  • probe key areas of performance and the processes that affect performance
Comparison involves schools in:
  • analysis of performance data
  • developing appropriate improvement actions based on analysis and benchmarking
Consultation helps schools to:
  • better understand the needs of its pupils
  • define clearer priorities
  • forge more effective partnerships with outside bodies
Competition ensures the school is:
providing or buying the appropriate service at the best possible price


4.2: Value for money and best value
This activity requires you and your colleagues to be very honest with yourselves.

Reflect on what you have just read about value for money then answer and discuss with some of your work colleagues the following two questions.

What is one of the best things your school has purchased in the last two years? (This could be a physical or human resource.)
What is one of the worst things your school has purchased in the last two years? (This could be a physical or human resource.)

Note down the reasons for these judgements.

Procurement processes
The procurement process consists of a number of stages which are likely to involve different members of staff. It is important that everyone involved understands and complies with the process, as laid out in the financial procedures manual, 'Identification of needs'.

The stages of the procurement process are:

  • identification of procurement need (linked to the school improvement plan)
  • requisition note identifying items required from budget holders
  • official orders committed on financial software, signed and sent to suppliers
  • receipt of goods delivered
  • payment of invoices
  • entry in inventory/security marking if applicable
  • writing off any obsolete/damaged or lost goods
Collaborative procurement

The term term 'collaborative procurement' is used to describe two separate practices:

  • Collaboration between schools – where two or more schools join together to engage in procurement activities. This may be schools in a local area, or schools across the country who have the same sponsor/trustee.
  • Purchasing consortia or Public Sector Buying Organisations (PSBO) – where groups of local authorities form mutual supplier organisations offering goods and services at favourable rates to public sector bodies in their areas.
Both practices use the same principle – economies of scale. Greater purchasing power and better discounts can often be achieved when schools organise themselves into a group or consortium.

This also has the added advantage of spreading the effort of identifying and negotiating prices across a number of school business managers, as well as sharing the diversity of procurement experience and market understanding across the group as a whole.

Alternatively, there are a number of local authority purchasing organisations and groups which specialise in supplying public service organisations. Again, by pooling resources such as staff and supply chains (warehousing and transport), PSBOs are frequently able to directly source many of the commonest goods and services used by schools and other local public sector bodies, and supply these at significant discounts to the private sector supplier catalogue costs.

Schools can also purchase other types of services, for instance a consortium of primary schools could band together to secure a school business manager, or an ICT co-ordinator.

Some schools are already well advanced in their collaborative arrangements.

In this Transcript, you will hear how a cluster of schools has come together to jointly purchase and provide a number of services.


When considering sharing services with other schools, because we're such a large school and the schools around us are very small what we've over the I would say the last four years managed to do is deliver various services out to those schools which they feasibly can't arrange for themselves. So the first one was the ICT and that's a very large service and we deliver technical support to nine other schools, some of which are in our cluster some are outside of cluster which have joined the service level agreement really through its reputation. And we developed it through the framework for technical support so we managed it carefully to make sure that we were continually evaluating the service delivered and meeting all the expectations that were under that framework.

We now actually make a small profit on that service level agreement and that now funds the training and development of the technicians. One of the technicians we actually have for fifty percent of his contract wholly at our school which without the service level agreement we wouldn't be able to afford having that person so by all the schools sharing in it, we benefit from having those people on site and having their expertise and the control. The other schools benefit because they don't actually have to employ anybody but get higher level service.

In terms of other services we deliver, we share high level teaching assistants so that supports other schools with things like savings in supply cover and PPA time. Premises support we go out and manage small schools with fire risk assessments and play ground safety and that we're looking to expand that in the next year or two and start manning some remedial service to small schools. Quite often small schools don't have a caretaker, they might have someone that cleans and opens and closes and that's it so it would cost them quite a lot of money just to go and get say a hinge on a window fixed whereas if we've got someone on site that they can use, at obviously a very much reduced cost.

And nurture support is another one we deliver out which is actually grant funded at the moment but the other schools were given grants and didn't have any way of using it, we had the expertise in school so they gave us their grants and we provided them with staff so many hours a week to actually implement what those grants were about so they've had behaviour support, emotional literacy support, and other types of intervention groups that we have been providing for them. And we are looking to try and continue that ourselves and we're hoping that the schools having now had that for free will not want to lose the benefits of having that expertise and will come to us and we'll continue to deliver that for them.

And they're just the first suite of services that we're delivering, we're just working in collaboration at the moment with all our partner schools and looking at other ways that we can help each other so it might not necessarily be about us doing everything, it might be that another school perhaps has a maths specialist and we can use that person around the cluster so it's kind of something we're used to but we're looking to develop a lot lot more and possibly receive as well as deliver ourselves.

Some schools are already well advanced in their collaborative arrangements.

In this video, you will hear how a cluster of schools has come together to jointly purchase and provide a number of services.


E-procurement can offer significant benefits in facilitating many of the administrative aspects of the procurement process. When used effectively, e-procurement can enable the sourcing, ordering, commissioning, receipting and payment for the whole range of resources and services that schools purchase to be conducted as a single automated process.

Purchases from the internet have some inherent issues that need to be considered.

  • Is the purchasing process via a secure method?
  • Is the supplier authentic and reliable?
  • Are the goods genuine and of the required quality?
  • Will a proper VAT invoice be provided?
  • Are the terms and conditions reasonable?
4.3: Purchasing strategies

For each of the purchasing strategies identified in column one, comment upon your experience of each method from the perspective of efficiency, cost-effectiveness, and security.

Identify examples of when the school has used the following purchasing strategies:

  • collaborative procurement with other local schools
  • using local authority purchasing consortia/PSBOs
  • using e-procurement
  • ad hoc purchasing processes
Briefly comment on these examples, considering:

  • efficiency
  • cost effectiveness
  • security

Leasing, renting or purchasing

Schools often find that they can afford to obtain goods on lease that they could not afford to purchase outright, for example photocopiers, minibuses and hardware for ICT. It is important that all options are considered before a contract is signed to ensure best value.

Before considering leasing equipment, it is critical that you understand the legal and financial issues involved for a school entering into a financing arrangement for procurement purposes.

There is often a good financial case to be made for leasing, however schools must be aware of the differences between the two main categories of lease:

  • operating leases
  • finance leases
Operating leases are leases where the goods remain the property of the lessor, and the lessee (the school) pays for the use. The lessor, ie the owner, remains responsible for the maintenance.

Finance leases are very similar to hire purchase agreements, where the goods become the property of the lessee who effectively borrows the purchase price. Since schools which are publicly funded are not allowed to borrow, they are not allowed to engage in financial leases.

In practice, there is little difference in cost between the two types of lease so it is usually not difficult to structure any desired lease as an operating lease. The option of renting a piece of equipment can be a worthwhile consideration, particularly if the need is short term or the equipment is likely to become obsolete quickly such as computers.

Short-term rental may cost a fraction of the purchase price but long-term rental may ultimately be more expensive than outright purchase.


4.4: Leasing
Describe a lease arrangement that is in place in your school.

Explain the procedures you followed before you signed the leasing agreement.

Evaluate these procedures using these questions to prompt your thinking:

Did you use the 'four Cs' (challenge, comparison, consult, competition) before coming to a decision?
Were three quotes obtained and compared against outright purchase?
What happens to the equipment at the end of the contract?
Who is responsible for insurance?

Tendering is the process whereby orders, especially large ones, are tendered for by a range of potential suppliers. This allows the best supplier to be identified.

Tendering is the subject of many local government and public service regulations and these should always be set out in financial regulations. The process is a confidential one and is almost always assessed whenever large sums of public money are involved in order to show that probity has been observed and best value obtained.

Tendering is the formal procedure by which suppliers are invited to submit a sealed bid to a purchaser for goods or services over a prescribed value. The threshold level for the value of goods and services above which the tender process must be used will vary from school to school and will be set out the financial regulations. European Union law requires public bodies to follow specific procedures with regard to tenders and contracts above a certain amount. The values of these thresholds should be detailed in your school's financial procedures manual.

There are three basic types of tender:
  • open
  • restricted
  • negotiated
Open tender
This is where all potential suppliers are invited to tender. It is the preferred method of tendering as it is most conducive to competition and the proper use of public funds.

Restricted tender
This is where certain suppliers are specifically invited to tender. Restricted tenders are appropriate where:
  • a large number of suppliers would come forward
  • specific suppliers can be expected to supply the school's requirements
  • the costs of publicity and advertising are likely to outweigh the potential benefits of open tendering
Negotiated tender
The school may negotiate the terms of the contract with one or more suppliers of their choice. This is appropriate in specific circumstances where:
  • open and restricted tendering have both resulted in either no tenders or unacceptable ones
  • only one or very few suppliers are available and therefore direct negotiation with each supplier will prove more effective than attempting an open or even a restricted tender
  • extreme urgency exists
  • additional deliveries or services by the existing supplier are justified
Tenders should be submitted as sealed bids by a specified time and day. They should be opened as soon as possible by those who have been delegated the responsibility under the school's financial regulations.

The tenders are evaluated against specified criteria by a team normally made up of the user, the purchaser and a technical expert if this is appropriate. The evaluation process should involve at least two people for small contracts, with a report to the governing body about the decisions made. The governing body or a committee should be involved in decisions concerning larger contracts. There should be no conflict of interest for those involved. The final decision should be recorded and all tenderers should be informed.

4.5: Tendering for goods and services
Review a tendering process that has taken place in your school against the following prompts:

  • compliance with your school's financial procedures
  • whether the tender was open, restricted or negotiated
  • whether each tender was compared against the others, and whether you were comparing like with like
  • whether the financial status of the supplier was checked
  • whether there was any misunderstanding arising subsequently from the specifications within the tender such as after-sales service or delivery dates or times
  • whether the supplier had met financial or other targets
Finally, ask yourself the following question:

  • Do you think that, overall, the tendering process was carried out appropriately?
  • Did the school achieve value for money from this process?


Before the governing body enters into any contract, it should consider whether or not to take legal advice. Factors to consider are:

  • the size of the contract
  • the nature and extent of the liabilities to be taken on by the school
  • the likely cost of obtaining legal advice
  • whether there are any special conditions to be incorporated in the contract
When evaluating the cost benefit of different options for procuring services, schools should be mindful of the relative merits and constraints of the main options:

  • in-house
  • local authority
  • external provider
The in-house option may appear in some instances to be the cheapest. However, factors such as disruption of activities, overload of members of staff, quality and level of current expertise, cost of management and administrative time, and management risk should be considered.

The local authority option, if available to schools, should be held up for comparison against other contractors to ensure that the local authority provision is competitive. Schools should consider the quality of service received in the past and quality of service expected in the future, together with cost compared with that of other providers.

External providers often provide competition, which enables schools to improve value for money. As with local authorities' services, schools should consider the quality of service received in the past and quality of service expected in the future, together with cost compared with that of other providers.

Contracts are essentially of three types and schools must consider the costs and benefits of each:

  • Pay as you go (hourly rate) contracts are straightforward, but may give the supplier little incentive to control their time, as the cost is passed on. If a school needs to use the service more than anticipated, the additional costs will be met by the school.
  • Fixed entitlement contracts allow the exact cost to be known in advance. This aids budgeting and planning. However, suppliers may be tempted to inflate prices in anticipation of problems and therefore may be more expensive.
  • Insurance-type contracts are most appropriate where usage is difficult to predict in future periods such as legal advice or personnel advice. The school pays a premium to ensure unlimited access to a service if and when certain conditions are met.
In order to ensure that value for money is obtained in the long term, the school should review and renegotiate all contracts at regular intervals.

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