Public sector years ahead of private sector in savings on travel costs
As the recession took hold the public sector was quick to embrace online travel booking. The private sector is lagging years behind.
The complex process of managing business travel budgets has developed in leaps and bounds over the last few years and in the vanguard of these changes is the public sector, driven by travel budgets slashed to the bone during the recession.
Progress has been nothing short of startling and public sector organisations are now setting the standards for private sector companies to emulate.
In the public sector cost reduction targets have been met consistently. A staggering £20 million has been saved over the last four years by the Cabinet Office and this is typical of the success stories. It is something that Frances Maude, Minister of the Cabinet Office, was happy to shout about. “We saved £5m per year over the four years,” he said.
For once a politician was underplaying a success story. “Those savings were in transaction fees alone; we saved them more than that in travel,” pointed out Mark Bowers, CEO of Redfern Travel, the travel management company (TMC) that has brought about the seachange in government travel procurement processes.
Redfern has achieved this at more than a dozen public sector organisations, including DCLG, HMRC, DWP, The Environment Agency, the Government Procurement Office, Arts Council England and many former Primary Care Trusts.
Redfer's business model is driven by technology. It has moved the majority of travel bookings online, reducing human interaction and dramatically reducing costs. Some 95% of its business is online and 92% of that requires no human intervention.
The company’s success with the Department of Community and Local Government and DEFRA, for example, led to Redfern landing the largest contract central government had ever awarded to an SME in 2011.
Redfern’s online model works for simple point-to-point journeys that are largely domestic; anything more complex –which usually means overseas travel - does require human interaction and it is for this reason that another travel management company, HRG, was awarded the overseas contracts in 2011.
There was resistance to the move to online but these pockets of non-compliant employees have largely been eradicated by the overwhelmingly positive benefits of the change.
The litmus test is whether private sector companies will follow suit. “Not yet,” says Bowers. He reckons they are three years behind public sector companies. “There is a different approach to an online culture in the public sector that’s more difficult to copy in the private sector,” he says.
Change management is one major hurdle; another is the value that a TMC brings to the table, specifically the fees they charge. These are usually no more than 5% of total travel cost and are often offset by the commissions and refunds received by suppliers.
Another area of concern is a lack of will to invest in new technology, to eradicate for example, the laborious manual expenses process. Many private sector companies still raise Purchase Order Numbers and the time it takes to fill these forms out and gain approval often leads to missed savings opportunities for air tickets and hotel rooms.
“I find that remarkable but it is commonplace,” says Bowers. “No one in the world can enjoy that process.”
Systems are available today that will, for example, integrate a Sage accounting tool with an Oracle expenses tool.
Technology is also available that will allow travellers to manage their expenses by uploading a photo of their receipt automatically to the expenses tool from a smartphone. This system is quicker, more accurate and also means that the traveller is remunerated faster.
The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of The Information Daily, its parent company or any associated businesses.
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