David Smith CB FCIPS PROCUREMENT SYSTEMS PERFORMANCE

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David Smith CB FCIPSPROCUREMENT SYSTEMS
PERFORMANCE

• A UK GOVERNMENT CASE STUDY

David Smith CB FCIPS
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David Smith CB FCIPS

• Former Commercial DirectorUK Department for Work
  and Pensions
• Former Deputy CPO UK Government
• CIPS Past President

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Why is Procurement so important to Public and
Private Sectors?
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Procurement is Big Business
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Procurement is Big Business

• UK Central Government spends over 66 billion per
  year on Goods and Services (non military)
• UK Public Sector spends over 250 billion per
  year on Goods and Services
• from paperclips to prisons

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Government Policy touches its citizens lives and
defines them ..and can save them Procurement is
often at the forefront of delivery of key
services JUSTICE, HEALTHCARE AND HOSPITALS,
SOCIAL CARE, CULTURE, TRANSPORT, EMERGENCY
SERVICES, WELFARE REFORM
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Old Thinking

• The commercial function in Government
• used to be seen as
• A Barrier
• A Process
• All about requisitions
• Just Negotiation!
• Limited Added Value

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The General Election in the United Kingdom in
2010 brought

• The first coalition government since 1945
• The worst financial position in generations
• An agenda to tackle the financial deficit first
  and foremost
• An agenda to reduce expenditure
• An agenda to address waste and inefficiency
• An agenda that promoted procurement as a key
  enabler to deliver efficiencies and savings yet
  improve public services

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• Top suppliers asked to contribute to Governments
  efficiency drive

Government to re-negotiate with its suppliers
Quick Wins Needed
Procurement at the heart of Governments
efficiency drive
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Delivery of best value for money
Cost Reduction
Efficiencies
Quality Services
Propriety
How are we being measured?
Absolute reduction in Spend
Reduced staff numbers and overheads
Speed of delivery
More sustainable outcomes
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Pre 1980
1980s
1998-2014
Effectiveness Collaboration Efficiency Procurement
an established profession Making a business
Contribution Board Level Recognition/Presence Poli
cy through procurement E-enabled
solutions Minister for Procurement
Introduction of Professional Purchasing
Requisitions - Low Level Activity
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2010-14 The Key Features of Procurement Reform

• Key Suppliers
• Controls and Approvals
• Capability
• Common Commodities
• Growth
• Organisation Shared Service
• Demand Management

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• The role of procurement in Growth
• Small Local Businesses
• Lean Process
• Licence to Operate
• Early Engagement with Market
• Transparency,
• Reducing Expenditure and delivering vfm

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Issues!

• Implementing cultural and behavioural change
  quickly
• Transforming the Centres capability to give
  Departments the confidence to centralise
• Delivering more with less!!!!!

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Whats Gone Well?

• Government/Ministerial commitment given
  procurement higher profile than ever.
• Crown management of key suppliers.
• Level of efficiency savings.
• Freezing discretionary spend, reducing demand.
• Simpler, faster procurements.

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The Enablers to Change

• Systems , Processes, Technology and Knowledge -
  Data
• Influence
• Suppliers
• People

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The Enablers to Change

• Systems , Processes, Technology and Knowledge -
  Data
• Influence
• Suppliers
• People

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Basic Data

• How much do we spend?
• Who do we spend it with (and why)?
• What do get for our money?
• Then make informed choices!

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The Enablers to Change

• Systems , Processes, Technology and Knowledge -
  Data
• Influence
• Suppliers
• People

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The Board
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Measurement!

• Delivering!!
• Cost of Function
• (absolute and )
• Third Party Expenditure against total Headcount
• Reduce cost of function and improve Rate on
  Investment

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The Enablers to Change

• Systems , Processes, Technology and Knowledge -
  Data
• Influence
• Suppliers
• People

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Working with our Suppliers

• Out of every 100 we have we spend 50 with our
  suppliers (65 of this is with our top ten) Our
  suppliers play a crucial role in delivering both
  front line as well as support services
• Our challenge is to ensure that our suppliers can
  stay long enough to contribute to delivering VFM
  and improving our efficiency

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Suppliers

• Government being seen a single customer
• Getting Better Value
• Competition and the role of Local Small
  Businesses
• Supply Chain Management
• Who is being managed?

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Supply Risk ManagementIs this the most important
thing that we do?

• Understanding dynamics of key suppliers
• Understanding their Supply Chain
• Contingency planning
• Understanding the Risks
• Risk Mitigation
• Supplier Relationship Management

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• Who are your key Suppliers?
• By Value?
• By Criticality?
• By Vulnerability?
• Who are their key Suppliers?
• What are their risks?
• Who is a more important customer than you?

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The Enablers to Change

• Systems , Processes, Technology and Knowledge -
  Data
• Influence
• Suppliers
• People

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Our People!
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What do we expect from the next generation of
public sector procurers?

• Act with Propriety
• Know what they want to buy and why
• Market Aware
• Commercially and financially aware
• Act on behalf of the public sector

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What do we expect from the next generation of
public sector procurers?

• Improve and drive value from existing contracts
• Manage corporate demand,
• Understand the future supply chain
• Is not averse to risk in procurements but knows
  decisions must be managed, commercially
  advantageous and legally sound

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Ambition?

• World Class Commercial Function
• Staff 100 Commercially Aware
• 100 decisions Sustainable
• An organisation that understands and wholly
  manages supply risk and delivering value

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Current Issues keeping Procurement at the Top
Table

• MONEY!!!!!!
• The Economy
• Supplier Vulnerability
• Understanding dynamics of key suppliers
• Contingency planning
• Global Market
• Data Management
• Delivery!

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Issues being addressed personally by CPOs

• ETHICS FRAUD
• SUPPLY CHAIN RISK

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Is it our time and our opportunity to make a
difference!
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Thank you for listening and enjoy