031114 PhD thesis final copy

Improving the Strategic Contribution of Purchasing:
A local government perspective

James Gordon Murray MSc

Faculty of Social Sciences

2

of the
University of Ulster

Thesis submitted for the degree of Doctor of Philosophy

November 2003

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Table of Contents
ACKNOWLEDGEMENTS………………………………………………………..…………………..9
SUMMARY………………………………………………….…………………….………………... 10
NOTE ON ACCESS TO CONTENTS. …………………...………………….……………………...11

1 INTRODUCTION.................................................................................................................14
1.1 Background to the research.........................................................................................................14
1.2 The research problem..................................................................................................................15
1.3 Methodology ..............................................................................................................................17
1.4 Outline of the Thesis...................................................................................................................17
1.5 Terms used within the thesis.......................................................................................................19
1.6 Conclusion .................................................................................................................................20
2 LITERATURE REVIEW AND DEVELOPMENT OF THEORETICAL MODEL
........................................................................................................................................................21
1.7 Introduction.................................................................................................................................21
1.8 Local government........................................................................................................................21
2.1.1 Local government structure..................................................................................................22
2.1.2 Local government power......................................................................................................24
2.1.3 The 6th Force and towards a definition of business success................................................24
2.1.4 Stakeholder Accountability..................................................................................................27
2.1.5 Local democracy..................................................................................................................27
2.1.6 Policy creation......................................................................................................................28
2.1.7 Local objectives...................................................................................................................29
2.1.8 The ‘Best Value’ regime......................................................................................................30
2.1.9 The objectives of local government ....................................................................................33
1.9 Purchasing Strategy.....................................................................................................................34
2.1.10 What is strategy?................................................................................................................34
2.1.11 Corporate Strategy and alignment .....................................................................................34
2.1.12 Strategy development.........................................................................................................37
2.1.13 Strategic Purchasing and Purchasing Strategy...................................................................43
2.1.14 The foundations of Purchasing Strategy as an academic discipline..................................46
2.1.15 Purchasing objectives.........................................................................................................52
2.1.16 Purchasing strategies..........................................................................................................66
2.1.17 Purchasing tactics...............................................................................................................70
2.1.18 Government purchasing strategy........................................................................................70
2.1.19 The cascading of central government purchasing strategy to local government...............80
2.1.20 Delivering Better Services for citizens – A review of local government procurement in
England.........................................................................................................................................80
1.10 Economics perspective..............................................................................................................83
2.1.21 Resource-Based View.....................................................................................................84
2.1.22 Transaction cost economics ...........................................................................................85
2.1.23 Principal/Agency Theory...............................................................................................86
2.1.24 Resource-based view and institutional economics; clash or complementary? .............87
2.1.25 Implications of the economics perspective....................................................................87
1.11 Models of Purchasing’s Strategic Evolution.............................................................................89
2.1.26 Reck and Long ..............................................................................................................89
2.1.27 Cammish and Keough....................................................................................................90
2.1.28 Syson..............................................................................................................................90
2.1.29 Implications for local government ................................................................................90
1.12 Change Management.................................................................................................................91
2.1.30 Types of change.............................................................................................................92
2.1.31 The change agent............................................................................................................94
2.1.32 Overcoming resistance to change...................................................................................94
2.1.33 The change process........................................................................................................96
2.1.34 Lessons for achieving effective change.............................................................................98
1.14 Structure and organisation.........................................................................................................99
1.15 Critical review of the literature...............................................................................................102

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1.16 Theoretical model for improving the strategic contribution of local government Purchasing
.........................................................................................................................................................105
3 RESEARCH METHODOLOGY......................................................................................112
1.17 Introduction.............................................................................................................................112
1.18 Research agenda......................................................................................................................113
3.1.1 Purpose...........................................................................................................................113
3.1.2 Analytical framework.........................................................................................................115
1.19 Research methodology............................................................................................................118
3.1.3 Epistemological arguments and ontological approach...................................................118
1.20 Investigative approach............................................................................................................123
3.1.4 Literature review............................................................................................................123
3.1.5 Methods of data collection and triangulation ................................................................123
3.1.6 Documentary analysis........................................................................................................125
3.1.7 Postal surveys.....................................................................................................................128
3.1.8 Single in-depth case study..................................................................................................136
3.1.9 Mini case studies including semi-structured interviews ...................................................139
1.21 Summary of Limitations.........................................................................................................142
3.1.10 The phenomenological methodology...............................................................................142
3.1.11 Unreliability of documents ..............................................................................................142
3.1.12 Size of the sample ...........................................................................................................143
3.1.13 Collusion within councils in responding to surveys........................................................143
3.1.14 The mini-case studies are atypical...................................................................................143
3.1.15 Use of prompts in both the pilot survey and the interviews ...........................................144
3.1.16 The validity of the in-depth case study............................................................................144
3.1.17 Confusion of definitions...................................................................................................145
3.1.18 The passage of time .........................................................................................................145
1.22 Conclusion...............................................................................................................................145
4 ANALYSIS OF NORTHERN IRELAND COUNCIL CORPORATE
STRATEGIES...........................................................................................................................146
1.23 Introduction.............................................................................................................................146
1.24 Methodology...........................................................................................................................146
1.25 Analysis...................................................................................................................................147
4.1.1 Explicit references to Purchasing’s strategic contribution.................................................148
1.26 Conclusion ..............................................................................................................................149
5 ANALYSIS OF BELFAST CITY COUNCIL DOCUMENTS....................................150
1.27 Introduction ............................................................................................................................150
1.28 Methodology...........................................................................................................................150
1.29 Organisation............................................................................................................................150
1.30 Vision and Strategy.................................................................................................................151
1.31 Environment Policy.................................................................................................................153
1.32 Corporate Goals......................................................................................................................153
1.33 Conclusion...............................................................................................................................155
6 TRIPARTITE SURVEY OF U.K COUNCILS ..............................................................156
1.34 Introduction.............................................................................................................................156
1.35 Methodology...........................................................................................................................156
6.1.1 Survey response.................................................................................................................157
6.1.2 Test for non-respondent bias .............................................................................................157
6.1.3 Tests for representativeness...............................................................................................157
6.1.4 Tests for significance and reliability..................................................................................159
6.1.5 Comments..........................................................................................................................160
1.36 Findings...................................................................................................................................160
6.1.6 The objectives of local government...................................................................................160
6.1.7 Presence of documented Purchasing Strategies.................................................................163
6.1.8 The perceived current and potential strategic contribution of Purchasing ........................163
6.1.9 The ‘fit’ between the current objectives of local government and Purchasing objectives.164
6.1.10 Purchasing Performance Measures..................................................................................167
1.37 conclusions..............................................................................................................................168
7 IN-DEPTH SINGLE CASE STUDY ..............................................................................169
1.38 Introduction.............................................................................................................................169

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1.39 Methodology...........................................................................................................................169
1.40 Case study findings.................................................................................................................170
7.1.1 Moving from a ‘Clerical position’.....................................................................................170
7.1.2 Participation in high-level cross-functional teams ............................................................171
7.1.3 Involvement beyond purchasing........................................................................................172
7.1.4 Marketing ..........................................................................................................................172
7.1.5 Professionalising Purchasing.............................................................................................173
7.1.6 Development of an aligned Purchasing Strategy ..............................................................174
7.1.7 Accommodating external impacts on the documented strategy.........................................178
7.1.8 Purchasing Performance Measures ...................................................................................179
7.1.9 Improved strategic contribution through alignment .........................................................183
1.41 Analysis of case study.............................................................................................................185
7.1.10 Can contribution be improved? (Research Question 1)...................................................185
7.1.11 The importance of aligned Purchasing objectives (Research Question 2).......................185
7.1.12 The importance of an aligned Purchasing Strategy (Research Question 3).....................188
7.1.13 The importance of aligned Purchasing performance measures (Research Question 5)...188
7.1.14 The lead in repositioning Purchasing (Research Question 6)..........................................188
7.1.15 The appropriateness of existing evolutionary models (Research Question 4) ................189
7.1.16 Explanation of model.......................................................................................................193
1.42 Conclusions.............................................................................................................................195
8 MINI CASE STUDIES........................................................................................................196
1.43 Introduction.............................................................................................................................196
1.44 Methodology...........................................................................................................................196
1.45 Improving Purchasing’s strategic contribution.......................................................................199
8.1.1 Current strategic contribution............................................................................................199
8.1.2 The importance of a Purchasing Strategy..........................................................................201
8.1.3 Key steps in improving contribution..................................................................................202
1.46 The strategic alignment of Purchasing objectives...................................................................203
1.47 The presence of strategically aligned Purchasing Strategies .................................................208
1.48 Evolutionary development .....................................................................................................212
1.50 Strategic alignment of Purchasing Performance Measures.....................................................217
1.51 The lead in repositioning Purchasing .....................................................................................219
1.52 Conclusions.............................................................................................................................222
9 CONCLUSIONS, CONTRIBUTION TO KNOWLEDGE AND IMPLICATIONS
......................................................................................................................................................224
1.53 Introduction.............................................................................................................................224
1.54 The knowledge gap ................................................................................................................225
1.55 Conclusions and research issues.............................................................................................227
9.1.1 Need for strategic alignment..............................................................................................228
9.1.2 Need to develop an aligned Purchasing Strategy ..............................................................230
9.1.3 Classification of Purchasing objectives.............................................................................232
9.1.4 Need for aligned Purchasing Performance Measures........................................................233
9.1.5 Need for Purchasing change agents...................................................................................234
9.1.6 Need for incremental change ............................................................................................235
9.1.7 Professionalising Purchasing.............................................................................................237
1.56 Implications for improving the strategic contribution of local governemnt Purchasing........237
1.1 Summary of answers to the Research Questions and implications for further research ..........243
9.1.8 Research Question 2: ‘Are Purchasing objectives aligned with the objectives of the
council?’ .....................................................................................................................................243
9.1.9 Research Question 3: ‘Are strategically aligned Purchasing Strategies in place?’ ...........245
9.1.10 Research Question 4: ‘Are the existing models of evolutionary development applicable to
local government?’......................................................................................................................246
9.1.11 Research question 5: Are strategically aligned Purchasing performance measures
utilised? ......................................................................................................................................247
9.1.12 Research Question 6: ‘Within councils, who leads the repositioning of Purchasing?’ . 248
9.1.13 Research Question 1: Could local government Purchasing improve its strategic
contribution, and if so, how?.......................................................................................................248
10 REFERENCES....................................................................................................................250

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Appendix 1: Tripartite Questionnaire .............................................................................................
.............................................................................................................................................................252
Appendix 2: Covering letter to Leaders of councils ..................................................................................
.............................................................................................................................................................261
Appendix 3: Covering letter to Chief Executives (1) .................................................................................
.............................................................................................................................................................262
Appendix 4: Covering letter to purchasing managers.................................................................................
.............................................................................................................................................................263
Appendix 5: 1st Reminder letter.................................................................................................................
.............................................................................................................................................................264
Appendix 6: 2nd Reminder letter.................................................................................................................
.............................................................................................................................................................265
Appendix 7: Extract from Belfast City Council Purchasing Strategy: Value for Money Strategy .............
...................................................................................................................................266
Appendix 8: Extract from Belfast City Council Purchasing Strategy: Development of SMEs and ‘Ease
of Access’ Strategy ..........................................................................................................
...................................................................................................................................268
Appendix 9: Belfast City Council Mini-cases ..........................................................................................
...................................................................................................................................270

Appendix 10: Comparative analysis of Belfast City Council ‘intended’ and ‘realised’ Purchasing
Strategy ...........................................................................................................................
...................................................................................................................................277
Appendix 11: Council purchasing managers semi-structured interview questions ....................................
.............................................................................................................................................................288
Appendix 12 Covering letter to Chief Executives (2).................................................................................
.............................................................................................................................................................291
Appendix 13: Chief Executive Questionnaire (2).......................................................................................
.............................................................................................................................................................292
Appendix 14 : Mini case study analysis of Purchasing Strategies..............................................................
.............................................................................................................................................................294

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LIST OF FIGURES

Number Page
2.1 The Six Forces 23
2.2 A Stakeholder map for local Councils 24
2.3 Strategy development routes 35
2.4 The evolution of strategic thinking in local government 40
2.5 Forces governing competition in an industry 45
2.6 The Value Chain 47
2.7 Determinants of National Competitive Advantage 48
2.8 Some objectives of Purchasing 53
2.9 Kraljic’s Model 57
2.10 The local government strategic purchasing process 99
2.11 Time-line of Purchasing’s strategic objectives 103
2.12 Theoretical model for improving the strategic contribution of 106
local government Purchasing
3.1 Triangulation and the investigative approach 119
6.1 Representativeness of Chief Executives responses by Council 151
type
6.2 Political persuasions of councils from which Chief Executives 151
responded.
6.3 The perception of actors on the objectives of local government 155
6.4 Strategic gap analysis: The Chief Executive’s perception of 156
Purchasing’s contribution to the achievement of local
government objectives
7.1 References in Belfast City Council Minutes to 176
purchasing/procurement
7.2 Timeline of strategic evolutionary model characteristics in 180
Belfast City Council
7.3 Evolution of Belfast City Council’s Purchasing objectives 181
7.4 Draft model of local government Purchasing’s evolution 182
9.1 Theoretical model for improving the strategic contribution of 211
local government Purchasing
9.2 Local government Purchasing development model 223

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LIST OF TABLES

Number Page
2.1 Council Responsibilities 21
2.2 The objectives of Purchasing 50
2.3 Potential Purchasing strategies 62
2.4 Customer – Supplier Relationships 64
2.5 Local Government Lean Supply Model 65
2.6 Potential Purchasing strategies alluded to in Government 68
Purchasing
2.7 Typical change models 92
3.1 Features of the two main paradigms 112
3.2 Comparing features of Qualitative and Quantitative research 113
4.1 The strategic objectives of the Northern Ireland councils 141
6.1 The perceived objectives of local government: A comparison 153
of two investigations
6.2 Fit between Corporate objectives and Purchasing objectives 158
7.1 Linkage between Corporate Plan key issues and Purchasing 168
objectives
7.2 Purchasing objectives 169
7.3 Belfast City Council Purchasing objectives and performance 172
indicators
7.4 Belfast City Council Purchasing performance indicators 174
(post-1996)
7.5 Chief Officer’s perception of the strategic contribution of 175
Purchasing
7.6 Summary of Belfast City Council case study analysis 177
8.1 Chief Executives examples of strategic contribution made 189
8.2 Chief Executives views on the importance of a Purchasing 189
Strategy
8.3 The perceived importance of a Purchasing Strategy 190
8.4 Comparison of purchasing managers objectives, perceived 194
strategic contribution and explicit Purchasing objectives
8.5 Presence of aligned Strategies 197
8.6 Purchasing performance indicators 204
8.7 Purchasing change leaders 205
8.8 Summary of mini-case study analysis 208

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9.1 The contribution to knowledge 213
A7.1 Short-term Value for Money Opportunities 267

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ACKNOWLEDGMENTS

I wish to thank and credit Professor Andrew Erridge, University of Ulster
(Jordanstown), for early encouragement to embark upon this research and for his
support throughout.
I am grateful to my current and former employers, IDeA (The Improvement
and Development Agency for local government), the Chartered Institute of Public
Finance and Accountancy/Institute of Public Finance and Belfast City Council for
their support and assistance.
Thanks are also due to the Members and staff of the following councils who
provided input to this research: Angus Council, Armagh City and District Council,
Belfast City Council, Brent Council, Barnsley Metropolitan Borough Council,
Blaenau Gwent County Borough Council, Carmarthenshire County Council,
Castlereagh Borough Council, Cheltenham Borough Council, City of York Council,
Congelton Borough Council, Edinburgh City Council, Essex County Council, Fife
Council, Flintstone County Council, Hastings Borough Council, Leeds City Council,
London Borough of Enfield, London Borough of Havering, London Borough of
Islington, London Borough of Richmond-upon-Thames, New Forest District
Council, Newtownabbey Borough Council, North Norfolk District Council, North
Somerset Council, Tamworth Borough Council, Scottish Borders Council,
Shewsbury and Atcham Borough Council, Southampton City Council, St. Albans
District Council, The Borough of Basingstoke and Deane, Vale of Glamorgan
Council, Warrington Borough Council, Wokingham District Council, together with
those who preferred to remain anonymous.
Patricia O’Neill and Leah Murray are given particular thanks for their
conscientious proof reading of the thesis at its various stages. Naturally full
responsibility for all errors and omissions rests solely with the author.
By no means least I am grateful to my wife Leah who never doubted my
ability to complete the investigation, and my children Hannah, Phoebe, James and
Maeve who let the research capture so much of our home life.

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SUMMARY

Key words: Local government, Purchasing Strategy, Strategy.

This investigation is exploratory and makes use of a phenomenological approach to
identify how the strategic contribution of local government Purchasing could be
improved. The investigative techniques used include documentary analysis, a
tripartite postal survey, a single in-depth case study and mini-case studies.
The UK Best Value regime emphasises the need for councils to review how
they provide services and to ensure that all functions of the local authority, including
Purchasing, are strategically aligned with the ultimate needs of citizens. This places
a responsibility on Purchasing to consider its strategic contribution and to identify
whether that contribution could be improved.
Confirmation is found that the local government Purchasing function could
improve its strategic contribution and a theoretical prescriptive model for improving
contribution is developed.
The research demonstrates that Chief Executives have a wider view of
Purchasing’s potential strategic contribution than practitioners do. The lack of
effective use of performance measures is also highlighted.
The research challenges the need for a Purchasing Strategy and the
timeliness of its alignment. It is argued though that an aligned Strategy, authored by
practitioners, which sets out Purchasing’s programme for contributing to the
council’s objectives, embraces change management and has Member ownership,
would be helpful, as would aligned performance indicators.

The appropriateness of existing models of Purchasing’s strategic
development is also challenged; it is argued they fall short of the needs of local
government. A staged incremental approach to change in objectives progressing
from a ‘Clerical’ stage, through a ‘Private Sector Imitator’ stage, to a ‘Strategic
Breakthrough’ stage is advocated.
The investigation classifies Purchasing objectives into four discrete and
progressively stretching schools of Purchasing objectives, namely, ‘Classic’, ‘Cost
reduction’, ‘Cost reduction/Quality Improvement/Innovation transfer/Delivery
improvement’, and ‘Contingency’ schools.

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NOTE ON ACCESS TO CONTENTS

I hereby declare that with effect from the date on which the thesis is deposited in the
Library of the University of Ulster, I permit the Librarian of the University to allow
the thesis to be copied in whole or in part without reference to me on the
understanding that such authority applies to the provision of single copies made for
study purposes or for inclusion within the stock of another library. This restriction
does not apply to the British Library Thesis Service (which is permitted to copy the
thesis on demand for loan or sale under the terms of a separate agreement) nor to
the copying or publication of the title and abstract of the thesis. IT IS A
CONDITION OF USE OF THIS THESIS THAT ANYONE WHO CONSULTS IT
MUST RECOGNISE THAT THE COPYRIGHT RESTS WITH THE AUTHOR
AND THAT NO QUOTATION FROM THE THESIS AND NO INFORMATION
DERIVED FROM IT MAY BE PUBLISHED UNLESS THE SOURCE IS
PROPERLY ACKNOWLEDGED.

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1 INTRODUCTION

1.1 BACKGROUND TO THE RESEARCH
U.K. local government provides a process for delivering public services to local
populations through a democratically elected and publicly financed structure. It
exists to ensure that each U.K. citizen is delivered essential services in a way that
best reflects the diverse needs of their locality (Stewart, 2000, pp. 26-27; DTLR,
2001, para. 2.10). In fulfilling those needs U.K. local government is a major
purchaser, spending in the region of £75 billion each year, which represents
approximately 25% of public spending (Byrne, 1994, pp. 2-4; DETR, 1998, p. 13, p.
44; Stewart, 2000, pp. 90-91). Yet while local government has received significant
scholarly attention (for example, Rhodes, 1988; Byrne, 1994; Caulcott, 1996;
Corrigan and Joyce, 1997; Hill, 1997; Joyce, 2000; Rao, 2000; Stewart, 1999 and
2000) that interest has not extended to the local government Purchasing function and
how it carries out its activities in a way which contributes to the strategic objectives
of the council.
The Best Value regime (Local Government Act 2000) has emphasised the
need for councils to review how they provide services to citizens and to ensure that
all functions of the local authority, including Purchasing, are strategically aligned
with the ultimate needs of the citizen. This places a responsibility on Purchasing to
consider its strategic contribution and to identify whether that contribution could be
improved.

Beyond local government the importance of strategic alignment or ‘fit’ has
been emphasised by a number of authors. Porter (1996) has argued the need for
three-dimensional fit, between corporate and functional objectives, across functions
reinforcing each other’s strategies, and collaboratively through better coordination,
creating synergies and eliminating waste. In a Purchasing context Virolainen (1998)
and Cavinato (1999), while reiterating the need for strategic alignment, have
highlighted that Purchasing must sit within the wider context of the organisation as
opposed to being a ‘stand alone’ functional unit.
There is a significant body of knowledge on purchasing both in the context
of a function and as a process (for example, Lamming, 1993; Monczka et al, 1993;

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Ellram and Carr, 1994; Gadde and Hakansson, 1994; Saunders, 1994; Carter and
Narasimham, 1996; Carr and Smeltzer, 1997; Cavinato, 1999). Most of that
literature though has been either conceptual (Ellram and Carr, 1994), focused on the
private sector, manufacturing industry (Brandes, 1994) or written from the
perspective of narrowly defined operating strategies (Virolainen, 1998).
Comparatively little attention has been given to the role of the local government
Purchasing function. This situation has created a vacuum which only a few authors
have sought to fill (for example, de Boer and Telgen, 1998; Erridge and Murray,
1998a and 1998b; Murray, 2000, 2001b and 2002) and these discussions have
tended to focus on the practice of local government purchasing as opposed to its
strategic contribution.
There is therefore an absence of literature on local government Purchasing
and specifically how its strategic contribution could be improved. Yet cognisant of
the significant sums of money spent by local government and the Best Value
imperative to ensure all functions are strategically aligned, it is appropriate to
challenge the strategic contribution of local government Purchasing.

1.2 THE RESEARCH PROBLEM
This thesis therefore explores an under-researched area and answers the question:

‘Could local government Purchasing improve its strategic contribution, and if
so, how?’

Extant theory has provided a foundation on how strategic contribution could
potentially be improved. On that basis the following secondary research questions,
derived from the wider body of knowledge, are utilised:

 ‘Are Purchasing objectives aligned with the objectives of the council?’
 ‘Are strategically aligned Purchasing Strategies in place?’
 ‘Are the existing models of evolutionary development applicable to local
government?’
 Are strategically aligned Purchasing performance measures utilised? and
 ‘Within councils, who leads the repositioning of Purchasing?’

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The investigation is confined to U.K. local authorities even though local government
is a worldwide phenomenon. U.K. local government provides a homogeneous
research sample with similar local priorities, a common language and common
pressures from U.K. central government. From a practical perspective, confining
the research to the U.K. increased the range of investigative techniques available, for
example, face-to-face interviews.
The thesis provides confirmation that the local government Purchasing
function could improve its strategic contribution, challenges the appropriateness of
existing theory and proposes an incremental prescriptive model for improving its
contribution.
The context for investigation is set through consideration of local
government and its objectives. The thesis draws upon existing theory relating to
strategy development, Purchasing Strategy and Purchasing objectives, economics
and change management. The literature relating to issues of staffing, competence
and structure are also considered.
The thesis makes a contribution to knowledge through confirming that the
strategic contribution of local government Purchasing could be improved, and
outlining how that improvement could be brought about, particularly through
improving the level of professionalism and better alignment with the wider
objectives of local government. The research demonstrates that council Chief
Executives have identified potential strategic contributions beyond those that
Purchasing is currently contributing to - pursuit of those objectives, it is argued,
would improve contribution.
The thesis classifies Purchasing objectives into four schools. Such a
classification adds to the body of knowledge and contributes to an incremental route
map which Purchasing could follow to improve its strategic contribution. In parallel
the research challenges the applicability of existing models of Purchasing’s strategic
evolutionary journey (Reck and Long, 1988; Cammish and Keough, 1991; Syson,
1992) and through the stages of the investigation develops an alternative model
which it is argued better reflects local government.
Further contributions are made through identifying: that while documented
Purchasing Strategies may be important they are not critical in improving local
government Purchasing’s contribution; that while Purchasing objectives may be

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aligned with the strategic objectives of councils they are not uppermost in the minds
of purchasing managers on a day-to-day basis; that strategically aligned Purchasing
performance measures are not widely utilised in local government – all these areas it
is argued through the thesis provide opportunities for local government Purchasing
to improve its strategic contribution.

1.3 METHODOLOGY
The investigation is exploratory and makes use of a phenomenological approach.
The investigative techniques utilised include documentary analysis, a tripartite
postal survey, a single in-depth case study and mini-case studies. The rationale for
adopting the phenomenological paradigm is that it is an accepted approach for
exploratory areas of enquiry, offers the opportunity to ‘really understand’ the
dynamics of what happens in local government Purchasing, is informed by theory
but not constrained by it, encourages reporting of findings using the language of the
researched and offers flexibility in research designs and methods.
Throughout the investigation a prescriptive model for improving the strategic
contribution of local government Purchasing is developed. A theoretical model is
first developed as an outcome of the literature review. That model is then redefined
at the end of an in-depth case study before further development as an outcome of the
mini-case study empirical research.

1.4 OUTLINE OF THE THESIS
Chapter 2 sets the foundation for the thesis. It commences by setting the context of
the investigation and providing background information on the role and scope of
U.K. local government prior to discussing its strategic objectives and decision-
making processes. Theory relating to strategic purchasing is then reviewed,
followed by a discussion on central government purchasing strategy. An economics
perspective is then considered prior to a review of theory relating to change
management. Chapter 2 closes with a critique of the theory and then develops a
theoretical model of how local government Purchasing may be able to improve its
strategic contribution.

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Chapter 3 develops the research agenda and methodology. The research
questions are then formulated. The chapter considers alternative research paradigms
and techniques. It sets out the justification for the adoption of a phenomenological
approach and the qualitative techniques utilised prior to explaining the detail of how
the investigation was carried out.
Chapters 4, 5, 6, 7 and 8 set out the findings of the investigation.
Chapter 4 reports the findings of a documentary analysis of N.I. council
Corporate Strategies. It suggests the strategic objectives of local government and
signposts some of those objectives to which it was anticipated Purchasing would
contribute.
Chapter 5 provides further validation of the strategic objectives of local
government through an analysis of Belfast City Council documents. The analysis
confirms a potential strategic contribution for Purchasing.
Chapter 6 reports the findings of a tripartite survey of U.K. councils. It
provides insights of a potential contribution identified by Chief Executives which is
not currently being realised, provides information on the presence of Purchasing
Strategies, the ‘fit’ between council and Purchasing objectives, and the type of
Purchasing performance measures used.
Chapter 7 comprises the findings of a single in-depth case study of Belfast
City Council. The case study demonstrates that it is possible to align Purchasing
Strategy, objectives and performance measures with the higher-level objectives of
local government. The case study demonstrates that it is possible to improve
Purchasing’s strategic contribution through adopting a more professional approach
and adapting private sector good practice. The case study provides the basis for the
development of a model for improving Purchasing’s contribution which is
subsequently tested in Chapter 8 and further developed and explained in Chapter 9.
Chapter 8 reports the findings of the nine mini-case studies. Findings from
face-to-face interviews, analysis of Purchasing Strategies and a postal survey of
Chief Executives are utilised to not only test and further develop the model but to
identify the scope for improving local government Purchasing’s contribution,
through professionalisation, better strategic alignment and effective use of
Purchasing performance measures.

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Chapter 9 draws together the investigation and makes recommendations for
improving the strategic contribution of local government Purchasing. The
contribution to knowledge is set out and suggestions for further research made.

1.5 TERMS USED WITHIN THE THESIS
Outlined below are the key terms which will be used in the thesis; these terms will
be substantiated in the ensuing discussion:

‘strategic’, refers to those issues which are non-routine, have an impact on the
council’s long-term direction and are likely to have an impact beyond the
function;
‘strategic objectives’, refers to principal priorities which the council has set
out and is trying to achieve, these will have been developed as an outcome of a
political process and are likely to be based upon the dominant party’s political
manifesto;
‘Purchasing’ (capital ‘P’), refers to the specialist functional unit or section in
the council;
‘purchasing’ (lower case ‘p’), refers to the activity of acquisition;
Purchasing acts as a strategic function when it “directs all activities of the
purchasing process toward opportunities consistent with the organisation’s
capabilities to achieve its long-term goals”(Ellram and Carr, 1994; Carr and
Smeltzer, 1997);
‘local government strategic purchasing’, is the process of determining the
corporate purchasing strategy, mapping and overseeing the high-level
purchasing portfolio, defining and challenging the desired purchasing
outcome, determining and managing specific purchasing plans, identifying,
evaluating and challenging purchasing service delivery options, contract
award, post-contract management and review;
a ‘Purchasing Strategy’ (capital ‘P’ and ‘S’), is a document that sets out the
specific actions Purchasing, as a function and a process, may make to achieve
its objectives and how it intends to get there”(Ellram and Carr, 1994; Carr and
Smeltzer, 1997). The Purchasing Strategy document is differentiated from the
implied but not explicitly stated ‘purchasing strategy’ (lower case ‘p’ and ‘s’)

20

which refers to specific actions the Purchasing function may take to achieve its
objectives which need not be documented;
‘value’, is either a qualitative or quantitative net benefit gained;
‘value for money’, is the optimum mix of quality and cost to match the
customers needs.

1.6 CONCLUSION
This chapter laid the foundations for the thesis. It introduced the research problem
and provided the justification for the investigation. The methodology utilised was
briefly described and the report structure outlined. On these foundations, the thesis
can proceed with a detailed description of the literature review.

21

2 LITERATURE REVIEW AND DEVELOPMENT OF
THEORETICAL MODEL

1.7 INTRODUCTION
This section of the research builds a theoretical foundation for the investigation. It
seeks to establish the background of local government, its purpose and the
environment within which it functions. The review then identifies the strategic
objectives of local government since it is against those objectives that the strategic
contribution of local government Purchasing should be measured (Fitzpatrick, 1995;
Carter and Narasimhan, 1996; Virolainen, 1996; Cavinato, 1999).

Having identified the strategic priorities of local government the research is
in a position to ask ‘How could Purchasing improve its contribution to those
objectives?’ A discussion on strategy follows which seeks to provide a grounding
on the theory of strategy. In the absence of a significant body of knowledge on local
government Purchasing, a detailed analysis of how private sector and central
government seek to improve Purchasing’s strategic contribution is considered
together with comments on the DTLR/LGA review of local government
procurement in England (Byatt, 2001).
That is followed by an economics perspective which suggests potential new
roles for Purchasing. Since the investigation implies a change will be required,
literature on change management is reviewed along with a discussion on staffing,
competence and structure.
The concluding section presents a critique of the literature before drawing
upon the key signposts from the review and on that basis, suggests how local
government Purchasing could improve its contribution.

1.8 LOCAL GOVERNMENT
This section reviews the role, purpose and strategic objectives of local government.
It sets the context for the investigation and the backdrop against an improved
strategic contribution from Purchasing would be compared.

22

2.1.1 Local government structure
Local government provides a process for delivering public services to local
populations through a democratically elected, publicly financed structure. It ensures
that each U.K. citizen is delivered with essential services in a way that is most
appropriate to the specific locality (Stewart, 2000, pp. 26-27; DTLR, 2001, para.
2.10).
Although local government has undergone many changes, until 1996 a two-
tier system existed, with England and Wales having county and district councils,
Scotland having regional and district councils, and Northern Ireland having district
councils. Since 1996 however, there has been a progressive shift towards the
creation of unitary councils, which have greater responsibilities and replace some of
the smaller councils. Each of the different types of council has slight variations of
responsibilities. While a detailed discussion of the various responsibilities would
add little to this research, Table 2.1 shows the particular services each of the local
councils provide.

23

English English English English London NI Scottish Welsh
County District Metropolitan Unitary Borough District Unitary Unitary
District
Arts √
Baths & Public Halls √ √ √
Car Parks √ √ √
Caravan Sites √ √ √ √
Car Parks (off street) √
Cemeteries & √ √ √ √ √ √ √
Crematoria
Consumer Protection √
Development Control √
Education √ √ √ √ √
Education & Youth √
Employment
Electoral Registration √ √ √ √ √ √
Environmental Health √ √ √ √ √ √ √
Services
Food & Drugs Act √ √ √ √ √
Highways √ √
Housing & Slum √ √ √ √ √ √ √
Clearance
Housing (reserve √ √
powers)
Leisure √ √ √ √ √
Licensing & √ √
Registration
Local Authority √
Airports
Local Roads √
Markets & Fairs √ √ √ √ √
Museums & Arts √ √ √ √ √ √ √
Galleries
National Parks & √ √ √ √
Countryside
Offices, Shops & √
Railways Act
Parking places for √ √
vehicles
Parks & Open Spaces √ √ √ √ √ √
Passenger √
Transportation
Planning √ √ √ √ √
Police, Fire & Civil √
Defence
Public Libraries √ √ √ √ √ √
Refuse Collection & √ √ √ √ √ √ √
Street Cleansing
Refuse Disposal √ √ √ √ √ √ √
Social services √ √ √ √ √ √
Strategic Planning √
Traffic & √ √ √ √
Transportation
Traffic Management √
Weights & Measures √ √ √ √ √

Table 2.1: Council Responsibilities. (Source: Municipal Yearbook and Public
Services Directory 1998)

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2.1.2 Local government power
Collectively U.K. councils spend in the region of £75 Billion each year, which
represents approximately 25% of public spending (Byrne, 1994, pp. 2-4; DETR,
1998, p. 13, p. 44; Stewart, 2000, pp. 90-91), yet on their own, local authorities have
no power (Caulcott, 1996, p. 36). Their authority is delegated, usually from
Parliament (Harvey and Bather, 1973, pp. 468-477), who provide enabling
legislation through the introduction of ‘Acts of Parliament’, ‘Orders in Council’ etc.,
(Harvey and Bather, 1973, p. 470; Hill, 1997, p. 178). The authority may take the
form of enabling the council to raise a certain amount of money in order to deliver
specific ‘public goods’ (for example, ‘The Miscellaneous Provisions (Northern
Ireland) Order 1992’ which permitted spending of “2p in the pound product of rates”
on local economic development). Alternatively the authority may take the form of a
detailed set of instructions/restrictions leaving little room for interpretation or
flexibility (for example, ‘The Public Supply Contract Regulations 1995’).

Given the above, it is therefore clear that some authority is ‘obligatory’,
while some is ‘permissive’ (Harvey and Bather, 1973, p. 470; Caulcott, 1996, p.
36-46; Hill, 1997, pp. 177-195; Stewart, 2000, pp. 36-39). Of specific relevance to
this research, local councils may choose not to take action on local economic
development issues, while they must conform to public procurement legislation.
Equally, in the absence of an obligation to produce and act upon a Purchasing
Strategy setting out Purchasing’s contribution, councils can ‘opt out’ of such
perceived good practice.

2.1.3 The 6th Force and towards a definition of business success
Power cannot be exercised in isolation. Porter (1980) has presented the argument
that organisations are shaped by ‘5 Forces’, while Freeman (1984) has argued that a
‘6th Force’, the power of stakeholders must also be recognised (Figure 2.1):

25

Relative Power
of other
stakeholders

Relative Power Rivalrous activity Relative Power
of suppliers in the industry of customers

Threat of Threat of
new entrants substitutes

Figure 2.1: The Six Forces (Source: Freeman, 1984, p. 141)

… a stakeholder is any group or individual who can affect, or is affected by, the
achievement of a corporation’s purpose. Stakeholders include employees, customers,
suppliers, stockholders, banks, environmentalists, government and other groups who can
help or hurt the corporation. The stakeholder concept provides a new way of thinking about
strategic management – that is, how a corporation can and should set and implement
direction (Freeman, 1984, p. vi).

Recognising the importance of the stakeholder concept within local government,
stakeholders could be viewed as assets and stimuli for continuous improvement.
Equally important, the concept suggests that unless strategies are
customer/stakeholder driven, waste will be generated as a result of misdirecting
resources from the areas of priority (Osborne and Gaebler, 1993, p. 184).
Furthermore interest groups drive politicians and ‘political satisfaction’ is a primary
measure of performance for council officials (Osborne and Gaebler, 1993, p. 20).
That being the case a definition of local government business success (Cox, 1997a)
and its subsequent functional strategies must be stakeholder focused and driven.
This perspective on business success is fundamentally at variance with that of Cox
(1997a, p. 105), who is of the opinion that “companies exist to appropriate and
accumulate value for themselves”.
Within a local government environment, stakeholders could be identified and
mapped as in Figure 2.2.

26

Central European
non local
Politicians
local
Global
Government
Suppliers
Media
Local
Council other
local councils
community
Special
organisations
interest Ratepayers
groups
Business
Officers
Environmentalists Domestic
Figure 2.2: A stakeholder map for local councils.

Each stakeholder has a specific vested interest in the activities of the council,
consideration of the Purchasing function may provide elucidation:

Politicians may want to show patronage to their favoured local constituency suppliers and in parallel
want to ensure that political policies are being implemented.
Central government may want to ensure that purchasing is carried out in line with national policy to
encourage the growth of SMEs, that competition is the core ethos, that environmental impact is
minimised or that contracts are not awarded on the basis of ethnic bias.
European government may want to ensure freedom of movement for goods and services between
member states, while also aiming to assist the growth of SMEs and minimise environmental impact.
Global government, for example the ‘1992 Earth Summit’, may wish to ensure that local government
facilitates local communities in reducing environmental impact but not at the expense of non-
developed countries.
Local suppliers could be expected to have self-interest in local sourcing.
Non-local suppliers could be concerned that they have a fair opportunity to compete for council
business.
Ratepayers would be expected to have a concern that local services are delivered cost effectively, to
appropriate quality standards while at the same time reducing local unemployment and
environmental impact.
Media could be expected to show concern for a newsworthy story, particularly one that undermines
public confidence as a result of highlighting inefficiencies and inappropriate behaviour of council
officials.
Officers are likely to be concerned that they receive operational support but also that contracts are
awarded to suppliers who match their needs.

27

The above overview illustrates potential conflict and trade-offs between
stakeholders wishes. A political process has therefore evolved to achieve consensus
through bargaining or sufficient power to drive preferred policy through the decision
making process (Pfeffer and Salancik, 1998, p. 94). Nevertheless cynics would
claim that stakeholders tend towards personal needs as opposed to the ‘greater
good’. It has therefore become necessary to build in suitable policing and protective
arrangements for stakeholder accountability.

2.1.4 Stakeholder Accountability
Prior to the nineteenth century, local community government lay in the hands of the
aristocratic elite who were criticised for corruption and protecting their own interests
(Hill, 1974, pp. 25-27; Rao, 2000, pp. 8-20).

Faced with urban deprivation, the Victorians set about introducing
democracy in the hope that it would not only reduce corruption but also improve
efficiency (Hill, 1974, p. 131). Concern with the avoidance of corruption and the
resultant need for bureaucratic procedures still dominates the ethos of public
accountability.

Local councils, as stewards of the public purse, have a responsibility to
behave in a manner that is professional open, transparent, free from undue influence
and demonstrates value for money. Consequently the Purchasing function in local
government has become regulated, process defined and controlled by innumerable
laws, rules and regulations, judicial and administrative decisions, and policies and
procedures (Dobler and Burt, 1996, p. 747).

2.1.5 Local democracy
A fundamental democratic principle is that individuals should have their views taken
into account. To provide that mechanism, local government operates through a
system whereby the local population elects its overseers and representatives – the
local councillors.
It would be naïve to suggest that local councillors are elected as mere
‘overseers’. They are elected on the basis of a manifesto presented to the electorate
to act as ‘change agents’ and ‘catalysts’. Indeed Joyce (2000, p. 83) argues that
politicians are the main source of change in the public sector. At the very centre of
local democratic principles is the view that local people should determine how and

28

by whom they should be governed (Hill, 1974, p. 1). This may vary at different
hierarchical levels of government, for example, local, national or European (Rhodes,
1988, p. 115; Joyce, 2000, p. 58).

2.1.6 Policy creation
Although currently in a state of flux as a result of the modernisation agenda (DETR,
1998), the key process for putting political manifestos into effect is the committee
system (Caulcott, 1996, p. 41; Rao, 2000, pp. 163-190). The committee system is a
fundamental aspect of local democracy since it is the forum for making decisions,
based on the recommendations of professional officers (Joyce, 2000, pp. 39-50;
Stewart, 2000, pp. 43-49).
The committee process enables a unique, diverse mix of essentially lay,
elected representatives, with varying political opinions, and professional
administrators to come together and arrive at a consensus which best fits the locality.
At the committee meeting, the professional administrators responsible for giving
advice are required to justify that advice (Hill, 1974, p. 89; Caulcott, 1996, pp.
56-62). This creates a somewhat unique and challenging arena for the purchasing
manager, since he must communicate best practice to the ‘lay elected members’, in a
jargon free manner. A further unique quality of local government is that, since the
minutes of meetings are published, the local government purchasing manager is
somewhat more exposed to public criticism than his private sector or central
government counterpart (Caulcott, 1996, p. 84). This could be a major contributor to
officers being risk-averse and reluctant to innovate (Cox, 1995, p. 19; Gershon,
1999, para. F5; National Audit Office, 1999, para. 1.14).

The committee system has fundamental implications for this investigation.
Firstly, the committee system limits the centralisation of control and strategy
(Worrall, Collinge and Bill, 1998). As a result, while central government may well
be able to exert strategic pressure throughout its own departments, such pressure
may be strongly resisted at the level of the local council seeking to guard their
autonomy and independence. Secondly,

Strategies in local government cannot be drafted in a vacuum if they are to carry weight in
the organisation but must be developed through a process of deliberation in which the key
power holders will own the ‘outcome’ … because of the seriousness of these issues the
strategy formulation process will give rise to conflict, and so the process of developing the

29

strategy must allow for disagreement, and must be robust enough to cope with this (Worrall
et al., 1998).
It is contended that such an environment lends itself to the rational approach of
decision making as espoused by Simon (Augier, 2001) since the mandate for change
can only be gained at committee level. A third implication of the committee system
and its role in strategic management is that it has been designed primarily to enable
the managers to be held accountable for their performance by politicians (Joyce,
2000, p. 4).

2.1.7 Local objectives
Choi (1999, p. 159) highlighted that the 1980s and 1990s led to a rediscovery of the
customer perspective in U.K. local government with councils having to identify their
customers and provide services that are of value to them. As the U.K. government
tended towards the creation of the ‘enabling authority’ (Clarke and Stewart, 1988),
local government began switching its own emphasis beyond the mere statutory
provision of services, to the exercise of its discretionary powers in other areas that
are of specific concern to local stakeholders. Specifically, Caulcott (1996, pp. 16
and 37) claims that within a span of twenty years local economic development
sprung from nothing to become a major goal of local government. This view was
supported by Mills (1994) who, reporting on 1992 research, claimed local
government was innovating its service provision in the areas of local economic
development, environment and Europe.
The marriage between two of these areas, local economic development and
the environment, has become known as sustainability. This reflects the growth of
importance within local government of Local Agenda 21, a non-statutory role.

Mills’ (1994) research found that:

• 72% of Chief Executives agreed or strongly agreed that ‘the environment is a key
policy issue in this authority’

• 78% of the authorities had, by September 1992, adopted an economic development
strategy.

30

The findings of Mills set alongside those of Bateman (1995) who reported that more
than half of U.K. local authorities had committed themselves to Local Agenda 21,
suggest a shift in local government objectives. This is consistent with the U.K.
government’s wish that councils “… have a duty to promote the economic, social
and environmental well-being of their areas” (John Prescott, Deputy Prime
Minister, DETR, 1998, p. 5) and the 2002 White Paper (para. 2.8):

Strong community leadership means providing the economic infrastructure needed by local
businesses to compete successfully on the local, regional or wider stage. It means
developing social capital by supporting civic engagement and networks of neighbourhood
organisations. It means enhancing environmental quality … and it means safeguarding the
interests of future members of the community. These are not separate goals – sustainable
development means addressing all of them at the same time.

However, when one considers that the origin of local government lay in
improving the quality of life and health of the local population through, for example,
the Public Health Act 1848, perhaps this is more indicative of a return to their
raison d’être.

Stewart (2000) presents an extensive argument that local government is as
much about diversity as uniformity. Stewart rightly highlights that the raison d’être
of local government is to match local needs. Therefore as local needs differ, so too
must local objectives (DTLR, 2001, para. 2.10). Equally one would expect that the
diversity of political ideology would also be reflected in differing objectives. This
need not be seen as contradictory to the findings of Mills (1994) and Bateman
(1995), but instead as acceptance that even though some objectives may be
consistently pursued, they may be given varying levels of priority, while other
objectives will only be pursued in a minority of areas.

2.1.8 The ‘Best Value’ regime
Uppermost in the minds of many local councils during the early 1990s was the need
to comply with the Compulsory Competitive Tendering (CCT) legislation
introduced by the Conservative government of the time (Choi, 1999). The Labour
government, newly elected in 1997, indicated their intention to switch from CCT to
Best Value. That led to Best Value becoming a statutory obligation on English and
Welsh councils in July 1999 (Local Government Act 1999).

31

The ethos of Best Value is that local government exists only to serve its
primary stakeholders, the public (DETR, 1998, p. 65). That being the case the
council must identify the priorities of the local population, how it matches their
needs and demonstrates that, in delivering those needs, it provides Best Value (Local
Government Act 1999). It was hoped, from that informed position, that the council
would form its strategic objectives or ‘corporate view’ (DETR, 1997) and that in
turn would create the overarching agenda from which functional strategies, not only
of Purchasing, but also other specialisms, should flow.
Fundamentally Best Value differs from CCT in that it removed the
‘compulsory’ element, while expanding the remit for accountability to all issues of
importance to the local population (Babcoe, 2001). As a result the Best Value
regime supports ‘discretionary’ actions taken in local government.
Filkin (1997, p. 11) illustrates the characteristics of a Best Value authority as
one which will:

• Find out what the public wants and then commit to delivering this to the
highest quality at the best price
• Constantly search for improvements in its services and believe that this is
possible with good political leadership and management
• Want to find evidence that others can provide better services as this opens up
the possibility that it too can do so
• Want to compare its current performance in each service with other service
suppliers.

On that basis it could be said that Best Value is the manifestation of the quality
movement within local government. Echoing the Modernisation Agenda, Corrigan
and Joyce (1997) see the quality movement as providing an opportunity to provide
the long-term survival of local government, indeed,

for leading politicians and managers it means the possibility of using the issue of quality to
reconstruct the whole nature of state/civil society relationships.
…If the services do become responsive they will be the realisation of a
commitment to change services in a way that improves users. This matters in part because
public service quality, defined as fitness for purpose, cannot be left to professionals or
managers to define. Users have a distinctive stake in service quality and bring an important
voice to the judging of quality. Thus, services need to be evaluated with a direct input from
users and then changed in line with this input, subject to the political direction of elected
representatives (Corrigan and Joyce, 1997).

32

Best Value places on councils an obligation to challenge and justify how services
are currently delivered (Armstrong, Minister for Local Government and Housing,
26.6.97). This has implications not only for strategic contribution but also
operational delivery. That being the case it is argued that councils should consider
whether Purchasing could improve its contribution.
Initially Best Value required benchmarking against other councils, the
purpose being to create an environment of continuous improvement (Local
Government Management Board 1998, Section 3; DETR, 1998; Local Government
Act 1999 Pt I para. 3 and 4). The initial aspiration of councils voluntarily to adopt a
culture of continuous improvement was subsequently mandated in a requirement
placed on authorities to set “cost and efficiency targets over five years that, as a
minimum, are consistent with an overall target of 2% pa efficiency improvement for
local government as a whole” (DETR, 1999a, para. 29).

Early indicators also suggested that Best Value would require a change of the
local council’s role “to one of community leadership and advocacy, requiring much
more time and profile for members and staff out in the community” (Filkin, 1997, p.
15). Aligned with these higher-level impacts on councils are the predicted
implications for purchasing managers “(g)ood procurement practice is essential if
local government is to obtain real improvements to service cost and quality”
(DETR, 1998, p. 71).
Filkin expects that the procurement activities of councils will switch to:
• Greater dialogue with suppliers
• Output specifications
• Less adversarial supplier relationships
• Longer-term relationships.

Best Value can be expected to have a major impact on the local council since the
views of stakeholders, beyond officers and elected members, will be provided with
new opportunities for expression. Equally so, Best Value could provide an
opportunity for Purchasing to participate in the now mandatory ‘make or buy’
(Babcoe, 2001) decision on the delivery of council services.

33

The key strategic choice for local authorities is whether to provide services directly
themselves or to secure them through other sources (DETR, 1998, p. 72).

The duty of best value requires local authorities to make decisions on what services should
be provided and how much they should pay for them, after consulting service users and
others with an interest, within certain national constraints. Without an effective
procurement strategy a local authority will not achieve best value. A Best Value
Performance Plan is required to incorporate a strategic view of how procurement will be
used to help meet the council’s objectives. Best Value reviews should be directly linked to
the procurement strategy of the council and incorporate procurement expertise (Byatt, 2001,
p. 21).

Bovaird’s (2000) analysis of the Best Value Pilots would suggest though that during
the early pilot phase of Best Value, the ‘buy’ question did not appear to be
sufficiently addressed. Having said that, as will be argued later in the thesis, if
Purchasing participate in those decisions there would be grounds for claiming it is
truly strategic (Cox and Lamming, 1997; Ramsay, 2001). Unfortunately previous
research (Murray, 1996; de Boer and Telgen, 1998; SOPO, 1999) would indicate
that many local government Purchasing professionals are likely to be excluded from
such significant decisions. That being the case an opportunity to improve strategic
contribution is being missed.

2.1.9 The objectives of local government
From the foregoing review it can be concluded, at a theoretical level, that the
objectives of local government are public accountability, political advocacy,
sustainability (namely, local economic development, environment, quality of life),
customer focus in service delivery, quality improvement and Best Value. However,
it must be acknowledged that within specific local authorities the diversity and
priority of differing political and social objectives are likely to be reflected. This
investigation picks up on these themes, questions whether Purchasing is contributing
as much as is potentially possible to local government objectives, and aims to
suggest how the existing contribution could be improved.

34

1.9 PURCHASING STRATEGY
While local government has been the subject of extensive debate over the years,
little has been written on local government Purchasing’s contribution. Indeed, from
a research perspective, local government Purchasing appears a neglected area and
therefore offers plenty of potential. It is against that background the research aims
to add to the body of knowledge.
This investigation confines itself to how the Purchasing Unit can improve its
contribution to local government. It is therefore appropriate to review the role of
Purchasing. Acknowledging that little has previously been written regarding local
government purchasing strategy, consideration is given to Purchasing as generally
portrayed in literature. Unfortunately even that literature suffers from being largely
conceptual (Ellram and Car, 1994), manufacturing based (Brandes, 1994), or from
the perspective of narrowly defined operating strategies (Virolainen, 1998).

2.1.10 What is strategy?
Stuart (1996) expressed the opinion that the state of knowledge on how Purchasing
contributes to corporate strategy is primitive. Similarly, others (Steele and Court,
1996, p. 13; Marshall and Lamming, 1997) have concluded that some companies are
confused about what exactly is meant by strategic purchasing and there is still a long
way yet to go before Purchasing becomes truly strategic.
This section aims to set purchasing strategy in context. Firstly the meaning
of corporate strategy is discussed. Having identified the organisational framework
in which Purchasing is positioned, working definitions of Strategic Purchasing and
Purchasing Strategy are presented.
Finally the review discusses current literature relating to strategic Purchasing
and argues that at present four schools exist, namely, Classic, Cost reduction,
Cost/Quality/Innovation/Delivery and Contingency.

2.1.11 Corporate Strategy and alignment
The realm of strategy is considered to be the high point of managerial activity and
yet it is also one surrounded by confusion (Mintzberg, Ahlstrand and Lampel, 1998,
p. 9; Worrall et al., 1998). That confusion may be as a result of the term ‘strategy’
being freely given a variety of meanings, for example:

35

• A plan which provides direction and sets out the route map for achievement of
objectives
• A pattern of consistent behaviour over time
• A position pursued in the marketplace
• A perspective of how the organisation views itself
• A ploy or manoeuvre aimed at gaining an advantage over a competitor or
adversary.
(Mintzberg, et al., 1998, pp. 9-15; Worrall, et al., 1998)

The confusion is compounded when one considers that within the organisation a
hierarchy exists, within which each tier will have its own level of strategy. At the
top echelon of the strategic hierarchy are the corporate objectives of the
organisation. Those objectives are the ends that the firm is seeking to achieve
(Ansoff, 1985, p. 104).
Theoretically, taking a ‘planning’ approach to strategy (Ansoff, 1985;
Mintzberg, 2000), a tightly scheduled, formalised and systematic approach is taken
to identify a gap between the organisation’s current position and the desired
performance. By implication, this approach suggests that if a gap can be identified
between Purchasing’s potential contribution and its current contribution, there exists
an opportunity to improve its strategic contribution. To close that gap and achieve
the corporate objectives, hierarchies of strategies are developed (Ansoff, 1985, pp.
45-47; Joyce, 2000, pp. 72-73). On that basis it has therefore been argued that it is
only after an organisation has developed its core objectives that functional strategies
including those of Purchasing, can be developed (Carr and Smeltzer, 1997). That
creates a dilemma in that it assumes a top down approach to strategy development
and suggests that, in the absence of a clear corporate strategy, functional strategies
cannot be developed.
Given that, strategies are subsequently cascaded to the various divisions,
business units or functions as their functional objectives. (Leenders, Fearon, and
England, 1989, p. 607; Baily, Farmer, Jessop, and Jones, 1994, p. 19; Carr, 1994, p.
17; Hines and Rich, 1997; DETR, 1998). For example, to achieve a corporate
objective of profit maximisation, functional objectives may be set for each function -

36

Manufacturing, to improve the efficiency and output of machines and labour,
Marketing, to increase sales, while Purchasing could be expected to reduce the costs
of bought-in goods and services. However, while a corporate strategy may be to
utilise Purchasing’s cost reduction ability, at a functional level, cost reduction
becomes an objective. “Elements of strategy at a higher managerial level become
objectives at a lower one” (Ansoff, 1985, p. 104).
An alternative view, that of Porter (1996), considers that strategy is primarily
about sustainable competitive advantage gained from positioning in the marketplace.
Such a strategy makes sense in a competitive private sector environment but does
not sit comfortably within local government which is concerned with the strategic
delivery of ‘services’, regardless of the ‘means’ (Osborne and Gaebler, 1993, pp.
25-48).
Porter also argues that ‘fit’ between functions and the synergy produced is
one of the key tenets of strategy. ‘Fit’, according to Porter, is at three levels. First,
consistency between the functional objectives and the corporate strategy. Second,
functions reinforcing each other. Third, ‘optimisation of effort’, which refers to the
co-ordination and exchange of information between functions with a view to
eliminating waste.
Strategy is creating fit among a company’s activities. The success of a strategy depends on
doing many things well - not just a few - and integrating them (Porter, 1996).

Porter’s view of strategic fit has also been recognised in the context of Purchasing:
Procurement cannot operate in isolation from other elements of the business. It is important
that all functional area strategies and capabilities, including procurement, be consistent with
business unit goals and strategy (Virolainen, 1998).

It is imperative that we view purchasing within the context of the firm, rather than as a
stand-alone entity. In an age of downsizing, outsourcing, cross-functional team processes,
increasingly sophisticated information and communication systems, and assessing every
function in terms of how much value it adds to the firm, it is vital to examine how each
group fits within the strategic orientation of the firm as a whole (Cavinato, 1999).

Significantly Cousins (1999a, and with Hampson, 2000, p. 238) argues that without
strategic alignment it will not be possible to effect change in Purchasing as a
strategic function. It would therefore follow that, if Purchasing is to make a
strategic contribution, it should have strategic ‘fit’ and be consistent with the issues
important to the rest of the organisation.

37

2.1.12 Strategy development
Acknowledging that corporate strategy sets out to achieve the strategic objectives of
the organisation, it is appropriate to question ‘How is such a strategy developed?’.
Bryson (1988) argues that rather than an organisation making a ‘one off’ major
strategic change it is frequently more effective to adopt a strategy and then work
within that strategy to bring about long-term change. Johnson and Scholes (1993,
pp. 34-37) recognise a number of different types of strategy development routes,
which are illustrated in Figure 2.3:

Opportunistic Imposed
strategy strategy
Emergent
strategy

Planned
Planned Realised
intended
implementation strategy
strategy

Unrealised
strategy

Figure 2.3: Strategy development routes (Source: Johnson and Scholes, 1993, p.
38)

The classic/logical type of strategy development was typified by Ansoff
(1985) in which a planned or rational approach is taken. Although the planning
approach has largely been discredited (Mintzberg, et al., 1998, p. 63; Mintzberg,
2000), some aspects of the framework are still widely accepted in the public sector
(Joyce, 2000; Stewart, 2000) and particularly in local government as a result of its
committee system (Worrall, et al., 1998). In its purist form the approach is based on
logical reasoning (Ansoff, 1987; Piercy and Giles, 1989), led by a central planning
unit who follow a systematic process of analysing the internal and external

38

environment to determine the strengths, weaknesses, opportunities and threats that
confront the organisation. Based on that assumed ‘comprehensive’ understanding,
the ‘planners’ then aim to make a rational judgement on how the organisation should
move forward (Ansoff, 1987; Bryson, 1988; Mintzberg, 1990; Mintzberg, et al.,
1998, pp. 48-79).
To achieve functional objectives, various short, medium and long term
functional strategies are developed, the most widely recognised being that of the
Marketing Strategy (Ansoff, 1985, pp. 111-112). The Marketing Strategy will focus
on a peculiar mix of products and customers (Ansoff, 1985, pp. 108-111;
MacDonald, 1989, p. 291), prior to determining which of Porter’s generic strategies
namely, cost leadership, niche focus or differentiation (Porter, 1980; MacDonald,
1989, pp. 123-126) should be pursued to achieve those objectives. Unfortunately an
equivalent accepted view of purchasing strategy does not appear to have been
developed although one might argue that if one had been, it would focus on the
parallel variables of suppliers and products.
Using this approach the cascade from corporate objectives continues via
functional strategies (Ansoff, 1985, pp. 180-192; Johnson and Scholes, 1993, pp.
11-14; Cox, 1997a, p. 50), with tactical objectives being set, in a Marketing context,
relating to communications, distribution, pricing, etc.. In turn these are further
cascaded to tactical plans and operational objectives.
Even though widely accepted in local government (Worrall, et al., 1998;
Joyce, 2000; Stewart, 2000), the ‘rational’ approach suffers from considerable
criticism, for example,

1. Social, cultural and political dimensions of organisations are critical factors in
determining the successful implementation of a strategy - they are not considered
in the planning view.
2. The model suggests strategy is a process of ‘conception’ as opposed to
‘learning’.
3. It is introverted, inward-looking and reinforces existing culture.
4. It is cumbersome and further, the fragmented approach may end up with
individuals not actually understanding the whole.
5. There is a high likelihood that the plan is owned only by the ‘centre’ or ‘top’ but
not by the rest of the organisation.

39

6. It suggests that real planning is orderly and rational.
7. There is a danger of assuming that strategy is a document as opposed to the
direction the organisation is moving in.
8. It can become an intellectual exercise removed from the reality of operation.
9. It can become too detailed and miss the major strategic issues.
10.It can reduce the ability to cope with day-to-day responsiveness to the
environment.
11.It is unsuitable for a complex or unstable environment.
12.The planning process itself may become little more than the financial
extrapolation of resources rather than being used for the long-term development
of the firm.
13.An explicit strategy can create a barrier to change.
(Piercy and Giles, 1989; Mintzberg, 1990; Johnson and Scholes, 1993, pp. 42-43).

The primary criticism of the ‘planning’ approach though is that it remains
conceptual and there is a lack of empirical evidence to demonstrate that it actually
works (Mintzberg, 2000, pp. 91-158).
Mintzberg, in an extensive critique identified three ‘fundamental fallacies of
strategic planning’ (2000, pp. 221-322). Firstly, the fallacy of ‘predetermination’
(Mintzberg, 2000, pp. 227-254) which suggests that it is possible for a group of
central planners to systematically conceive a future view of the world and on that
basis predetermine the appropriate course of action, the strategy the organisation
must follow. Mintzberg argues that approach is flawed as organisations are
constrained by bounded rationality and therefore within the limits of their own
knowledge cannot consider all relevant factors. Furthermore most organisations do
not work in a stable environment and therefore will be faced with unpredictable
change.
Mintzberg argues that the second fallacy is that of ‘detachment’ (2000, pp.
254-294). The planning approach assumes those devising the strategy are separate
from those responsible for delivery of the operations. Mintzberg (2000, p. 258)
argues that:

Effective strategists are not people who abstract themselves from the daily detail but quite
the opposite: They are the ones who immerse themselves in it, while being able to abstract
the strategic messages from it.

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