There are many challenges to public procurement currently. Public sector budgets are tight, scrutiny on spending is high and demonstrating value for money has never been more important. All of this while procurement teams are having to adapt to the new regulations under the Procurement Act 2023 and balance priorities such as social value, greater transparency requirements and the need to embed sustainability, as well as the cost considerations of every project.
Under the new procurement rules, the landscape has changed and while cost savings are still important, they are not the ONLY measure of success. Procurement professionals have to take multiple factors into account when planning strategy and making decisions.
This guide explores the different types of potential cost savings in procurement, how this works with the other requirements and how public sector organisations can achieve the best possible outcomes, at the lowest possible cost, through smarter procurement strategies and utilising tools and solutions.
Jump to:
● Why cost savings in procurement still matter
● Types of procurement savings
● Practical tips for making procurement cost savings
● How ‘value’ is evolving in public procurement
● How Procurement Hub can help you make cost savings
Why cost savings in procurement still matter
The Procurement Act 2023 encourages contracting public bodies and authorities to consider cost alongside broad outcomes such as innovation, resilience, and social value. It’s important to note that these wider objectives don’t replace cost efficiency under the new regulations, but instead sit beside it.
Cost savings remain a fundamental measure of procurement success because they:
● Demonstrate accountability: Public sector buyers must show that they’re delivering value for taxpayers. Transparent, measurable savings help to evidence this.
● Improve resilience: Reducing waste, avoiding duplication, and streamlining processes free up resources for future needs.
In other words, while procurement is no longer just about the “lowest price,” it’s still about achieving the best value for money possible, with cost efficiency being a vital part of that equation.
Types of procurement savings
Not all types of savings look the same. Many organisations focus only on price reduction, but there are multiple ways to deliver procurement savings, both directly and indirectly. Understanding these can help teams identify new opportunities to add value, without increasing spend.
Price based procurement savings
These types of savings are the most obvious and easiest to quantify. They include:
● Negotiated discounts: Achieved through competition or volume leverage.
● Market testing and benchmarking: Ensuring prices are in line with current market rates.
● Aggregation: Combining requirements across departments or authorities to secure better pricing.
The issue with a purely price-driven approach is that you might run the risk of overlooking quality, reliability or social outcomes, all of which can lead to higher costs in the long term.
Process based procurement savings
Efficiency in how procurement is carried out can often result in greater savings than price reductions alone. This could include:
Reduced administrative overheads: Using frameworks or other solutions minimises the time and resource spent on tendering and contract management.
Shorter procurement cycles: Faster routes to market can mean earlier delivery and reduced internal costs.
Standardisation: Streamlined processes and templates save time and ensure compliance.
Framework agreements and other solutions, in particular, are a proven way to achieve significant process savings. They remove the need to run a full tender from scratch each time, giving buyers access to pre-approved and compliant suppliers under agreed terms and conditions.
Demand management savings
Managing demand, rather than just cost, can also deliver major efficiencies. This may include:
● Specification control: Ensuring the product or service being bought is fit for purpose, and not over specified with elements included that are not actually needed or beneficial to outcomes.
● Aggregation and collaboration: Combining similar needs across departments or local authorities to reduce the need for separate procurement processes.
Lifecycle cost savings
Initial purchase price is just one part of the cost picture when it comes to procurement. Lifecycle costing considers elements such as:
● Maintenance and support
● Energy use and efficiency
● Replacement cycles and end of life disposal
Choosing solutions that are more durable or energy efficient can reduce total costs over the contract term, even if the upfront price is sometimes higher.
Social and sustainability savings
While often more difficult to quantify, sustainable procurement practices can also lead to cost avoidance and long term savings through:
● Reduced energy consumption and waste
● Improved local economic resilience
● Lower carbon emissions (which may help avoid future regulatory or reputational costs)
This kind of approach aligns closely with the Procurement Act 2023’s focus on public good and seeking value that goes beyond price.
Practical tips for making procurement cost savings
Balancing cost efficiency with wider value objectives is something that needs strategic thinking and smart processes. We’ve compiled some practical ways that procurement teams can deliver measurable savings without compromising on outcomes.
Encourage competition in your procurement process
Encouraging fair competition from suppliers is a cornerstone of procurement savings. By inviting a diverse pool of suppliers, especially SME involvement, it can help to:
● Drive innovation and creative solutions
● Avoid supplier complacency
● Achieve more competitive pricing
If you’re utilising a proven framework agreement from a trusted partner, these often encourage SME participation already, making it easier for contracting authorities to access a wider supplier base without increasing your own administrative burden.
Engage early and define outcomes clearly
Early market engagement helps suppliers understand your goals and propose the most cost-effective solutions when it’s time to bid. Clear specifications and outcome-based requirements prevent unnecessary costs caused by scope creep or misinterpretation, helping buyers to stay in control of the overall project budget more easily.
Leverage frameworks for efficiency
Using a compliant procurement framework offers multiple cost and time savings, such as:
● Reduced administrative costs: No need to run a full compliant tender process from scratch.
● Pre approved suppliers: Save time and ensure due diligence has already been completed.
● Competitive mini competitions: Maintain price tension while keeping a lid on the team workload.
● Standardised terms and conditions: Ensures compliance.
Frameworks often also support collaboration and aggregation, enabling multiple organisations to benefit from economies of scale.
View our current procurement frameworks and other solutions.
Promote innovation
Innovation isn’t always just about new technology, it’s about doing things better. Encouraging suppliers to propose innovative solutions to fulfil the contract requirements can lead to:
● More efficient processes
● Reduced waste or duplication
● Lower lifecycle costs
Framework agreements often include innovative suppliers who are already experienced in working with the public sector and understand how to deliver cost effective outcomes.
Focus on total value, not just lowest price
The cheapest bid isn’t always going to deliver the best value. Assess bids on whole-life cost and quality to ensure long-term savings. Consider how supplier performance, reliability and added value contribute to overall efficiency.
Find out more about supplier evaluation beyond lowest-price procurement.
Measure and report savings consistently
Establish clear metrics ahead of time for tracking procurement savings, including both direct and indirect benefits and always in the context of the wider project outcomes. Reporting on procurement transparently helps demonstrate value for money and supports continuous improvement.
How ‘value’ is evolving in public procurement
The Procurement Act 2023 shifts the focus from lowest cost to best value. This means procurement professionals are now encouraged to think about how savings align with wider goals such as:
● Delivering the best possible outcomes for the communities affected by the project
● Supporting small and medium sized enterprises (SMEs) and the local economy
● Promoting innovation and competition
● Delivering social value and sustainability
● Enhancing transparency and accountability
Cost efficiency remains vital, but the definition of “value” has broadened to reflect the real world and long term impact of procurement decisions.
A modern procurement strategy needs to balance multiple elements, including:
● Financial savings (direct and indirect)
● Operational efficiency
● Social, economic, and environmental outcomes
This holistic approach ensures that procurement delivers lasting value for public money, not just one off savings.
How Procurement Hub can help you make cost savings
At Procurement Hub, we have extensive experience in working with public bodies on procurement strategies and processes, so we understand the many challenges that come with trying to save on costs but still deliver the best outcomes.
Our CIPS qualified procurement specialists have developed a range of flexible frameworks and other solutions to help buyers make the entire process more efficient, with less of an admin burden, while also giving access to top quality compliant suppliers, nationally and locally. Our framework agreements and other procurement solutions are designed to help you achieve the best possible value for money, while also achieving the outcomes needed.
Get in touch to find out more.