Transforming Procurement

1
REGIONAL CENTRES OF EXCELLENCE PROCUREMENT
PROGRAMME

• Transforming Procurement
• Improving Service
• Steve Holland
• Director
• Regional Centres of Excellence
• Procurement Programme

2
Scale of Procurement

• Local Authorities will spend about 100 billion
  annually throughout the CSR 07 period

• Over 40 of spend is on contracts with the
  private and third sectors

• After schools expenditure is taken into account,
  the proportion of spend on third party contracts
  is about 60

3
Where does the money go?
4
Where does the money go?

• Construction accounts for approx 30 of external
  spend

• Social Care Environmental Services are the
  leading local government specific spend areas
  with 15 and 7 of third-party spend respectively

• Relatively high spend in Consultancy category
  (3rd in rank). Proclass classification includes
  construction consultancy in this master category
  and makes a significant proportion of the total
  category spend

• Other significant spend areas include Finance
  Services Human Resources ICT Facilities
  Management Transport Utilities. These area
  align to the major categories identified with the
  wider public sector

5
Where does the money go?
6
Where does the money go?

• Level 2 Proclass classification has 160
  categories that enable further breakdown of
  spend. The top 5 spend categories
• Construction Buildings (17)
• Social Care Adult Services (13)
• Environmental Services Waste Management (7)
• Construction Roads (6)
• HR Temporary Agency Staff (5)

• The top 10 categories account for 60 of the
  spend
• The top 22 categories account for 80 of the spend

7
What is the scope for savings?

• No one knows just how much cash can be saved
• however about 12 billion is spent on commodity
  goods
• and services

• Wheeled bins reverse e-auction saved 30

• Use of pre-procured national contracts can
  typically save 5 plus

• Postal services contracts can save up to 10

• There are wide variations in price for many
  commonly procured goods

8
What is the scope for savings?

• About 12 billion is spent on construction
  related goods and services

• The use of regionally based construction
  framework agreements is already saving seven
  figure sums

• Reverse e-auctions for common

9
What is the scope for savings?

• About 6 billion is spent on care services for
  adults and children

• Care costing tools are already saving up to 10
  for a range of services

• E-procurement is already saving significant sums
  in the cost of paying for domiciliary care

10
What is the scope for savings?

• About 3 billion is spent on environmental
  services

• Millions can be saved by jointly procuring waste
  collection and disposal solutions

11
What is the scope for savings?

• About 8 billion is spent on a wide range of
  other goods and services

• Best practice guides have been published in
  relation to Agency Staff, Energy, Postal Services
  and Consultancy with potential savings of 10 plus

12
What are the obstacles to optimising savings?

• Procurement Landscape

• Lack of procurement expertise

• Lack of Market Intelligence

• Failure to optimise buying power

• Self imposed rules

• Autonomous behaviour culture

• Lack of capacity to improve resulting in missed
  opportunities

13
What needs to be done?

• Collecting analysing and using market
  intelligence to develop and implement procurement
  strategies

• Concentrating procurement expertise in far fewer
  organisations who operate on behalf of the many

• Aggregation of buying power in key markets to the
  correct level for sustainable value for money

• Procuring contracts that are open to the many not
  restricted to the few

14
What needs to be done?

• Managing and wherever possible reducing demand

• Entering markets that require moderation

• Rationalising supplier bases

• Deploying e-procurement tools effectively

• Doing these things with partners

15
What about some help?

• Local authorities and other local services
  providers will require focussed and effective
  support if they are to access the deals and
  better practice opportunities that are and will
  become available

• Local authorities facing common issues should
  seek that support collaboratively to reduce costs
  and delay and speed up benefits realisation

16
What about some help?

• Effective and well resourced arrangements
  building on the success already achieved will be
  needed if the challenging targets for cash
  savings are to be reached

• Procurement savings could provide the lions share