Post Office (Hansard, 23 October 1986)

§ Mr. Howard

The report is published today.

The Commission was asked to investigate the efficiency and cost of the way goods and services are purchased by and distributed within the Post Office, whether the efficiency of these procurement activities, costing some £380 million in 1985, could be improved and whether they had improved since the telecommunications business was separated from the Post Office in 1981. In its report the commission has taken account of the effect on the arrangements for procurement of a major structural reorganisation, announced by the Post Office during the commission's inquiry, which establishes separate letters, parcels and counters businesses.

The commission found that since 1981 purchasing standards in the Post Office had been improved substantially and in general had secured value for money, 938W but it recommends a number of ways in which purchasing, stock management and distribution and staffing practices should be further improved.

The commission found that the Post Office largely shared its views on actions to be taken to improve the efficiency of procurement activities and is already putting in hand many of the necessary changes, although progress has in some cases been relatively slow. It did not find that the Post Office was pursuing a course of conduct which operates against the public interest.

The commission considers it essential that goods purchased centrally should be offered to users in the separate businesses at prices which take account of all the costs of procurement (including distribution) so that they may be compared with the cost of direct purchasing by the businesses. It considers that where the businesses' own choice would be direct procurement this should be refused only when there is a clear advantage to the Post Office as a whole.

Among its more detailed findings the commission sees the development of management information arid accounting systems as important, in particular, in determining the charges to users for goods and services and in the improvement of demand forecasting and stock management. It recommends careful control of current computer systems development to assure achievement of these objectives.

The commission makes several recommendations aimed at correcting shortcomings found in stock management. It recommends a reduction in stocks (excluding strategic stocks) to an average by value level of three months by not later than August 1987 and that consideration be given to whether there is scope for further reduction to two months. It recommends a review to determine whether any of the goods stocked would be better supplied directly from the manufacturers to the users under centrally negotiated contracts.

The commission recommends specific measures to improve procurement in particular areas of goods and services which it had considered in detail, including stamps, vehicles, uniforms, advertising and building and engineering maintenance.

The commission was concerned to discover that in the regions the Post Office had, until very recently, no method of assessing the effectiveness of expenditure of £80 million per annum on goods and services and maintained no central record of regional stocks, the number of stores or the number of staff employed in them. The commission considers that the recent appointment of regional purchasing and supply officers should improve purchasing in the regions. It recommends closer control of local stores by the new businesses, and that each should he obliged to account for its stocks and review stockholdings.

The commission makes recommendations relating to the staffing of procurement activities, including the measurement and monitoring of work loads, regular external reviews of staff levels, local productivity schemes, closer budgeting and reduction of overtime. It found that the pay rates of storekeepers, which were under review when the commission completed its work, are much higher in the Post Office than elsewhere and recommends that they should be brought into line with remuneration for comparable work in other organisations.

The Post Office will he producing written responses to the commission's findings and I shall report on those statements at the appropriate time.