Purchasing is an important lever for public-sector performance improvement. Because the spending base is quite large—purchased goods and services account for one-third of total public spending, or about 5 to 8 percent of GDP in most Organisation for Economic Co-operation and Development (OECD) countries—improvements can have a substantial impact on budgets, freeing up resources for other priorities (Exhibit 1).

And the potential for improvement is large. In fact, in the more than 500 purchasing projects that McKinsey has supported in both the private and public sectors over the past five years, we have seen that improved purchasing yields an average of 15 percent savings, with projects in the public sector delivering the highest savings—an average of 28 percent. In our work with one European central government, we helped the client achieve savings of €65 million, or more than 40 percent of the addressed spend base, in the first eight months of the program alone. But even a 15 percent savings would be quite significant for a typical public-sector budget.