Collaborative buying, demand management and supplier relationships will be at the heart of procurement’s reaction to yesterday’s UK Budget, according to Whitehall commercial directors.

In the Budget speech, Chancellor George Osborne promised average cuts of 25 per cent in annual spending within government departments by 2014-15. Only health and international aid spending would be exempt, he told parliament.

David Smith, commercial director at the Department for Work and Pensions, told SM the cuts would be a significant challenge for procurement, but they had been expected for some time. “Much of this will come through procurement working with third party [suppliers] through contract renegotiation. The formation of better collaborative arrangements will also make a contribution.”

Smith said the DWP was working closely with the Home Office and HM Revenue & Customs on joint buying arrangements, through the newly formed Efficiency and Reform Group, part of the Cabinet Office. “The formation of the ERG will be at the centre of procurement’s contribution, which will be significant,” he said.

Procurement chiefs would also be working closely with top-level stakeholders to help them understand where the cuts could be made, Smith added. “We have a close relationship with the chief executive and stakeholders… to make sure that it is done in the right way. We will be looking at the commercial agenda and demand management. That’s what our governance looks like.”

Procurement could support suppliers by helping them to work across government departments, Smith said.

Speaking shortly before the Budget was announced, Home Office group commercial director John Collington told SM that rather than being nervous about the cuts, suppliers were gearing up for the challenge.

“Suppliers are looking forward to the debate with government on how to do this differently. We have got to put together a new model to identify what we want and what can be learnt from other contracts, to see how we can drive efficiency across the whole lifecycle between suppliers and government.”

CIPS chief executive David Noble believes procurement professionals will be needed now more than ever following the UK’s austerity Budget. “This four to one ratio of spending cuts and taxes to cut the deficit is no great surprise but is still unheard of in recent times.

“Procurement professionals will be much needed by the government now as smart purchasing strategies will help reduce the pain of making these savings to some extent.”