Procurement Strategy Topic Group
Thursday 12 May 2011
Background to scrutiny of the Procurement Strategy
Author: Peter Maguire, Head of Procurement
1.Objectives of the review
The Policy and Resources Panel agreed “that progress against the strategy be reviewed in one year’s time”. It was suggested that this be undertaken through a scrutiny review.
Questions to be addressed by the review:
a)Are we achieving the savings anticipated from Council for the Future (C4F)?
b)Is the Strategy supporting local businesses?
Outcome: That members are assured that the measures contained in the Strategy remain relevant in a changing economic and public sector environment
Constraints: Operational delivery of C4F projects lies with individual project leads (Strategic Procurement’s role is as a co-ordinator and as members of key project boards)
2.The Procurement Strategy background
Cabinet agreed the three year Procurement strategy in June 2010.
The procurement strategy suggested that each year Procurement board would agree an action plan for the coming year with targets and would monitor the previous year’s action plan. This paper focuses on three areas in order to address the questions raised above. The delivery of C4F savings, the development of Supply Hertfordshire as one of the ways of supporting local businesses and the summary of progress against Strategy Plan actions.
3.Council for the Future and the Enhanced Commissioning and Procurement strand
Workstream 5 of C4F addresses savings that can be made from existing and future services which are procured externally. The objectives of this workstream are:
-To oversee all commissioning and procurement initiatives
-To use a rigorous commercial approach to driving value
-To provide professional procurement input into a greater volume of transactions
-To target procurement resources on priority areas.
-To maximise the use of HCC-wide contracts.
-To further enable joint procurement and commissioning, within and outside county boundaries.
-To reduce tendering and contract management costs.
-To drive down unit costs and volumes.
The savings targets for this workstream are:
2010/11 / 2011/12 / 2012/13 / 2013/14 / 2014/15Total Savings (£’000) / 13,667 / 23,275 / 28,604 / 30,463 / 17,233
The year 2010/11 target was achieved. The key achievements included:
Shared Managed Services (SMS) - The SMS contract with Serco was put in place and mobilised on target. The business case for the procurement will be achieved and extra benefits were identified as part of the competitive dialogue engaged in during the procurement process.
Major property projects – A number of new property contracts were procured, including Measured Term and Security contracts, and 3 major frameworks. The framework for Repair, Adaptation & Refurbishment (RARE) framework has been awarded, Property Estates and Consultancy (PESC) is being evaluated, and the Property consultants’framework is at pre-qualification stage. These projects have involved nearly 500 companies, with the frameworks structured in lots to encourage small businesses to apply, and the Measured Term Contracts awarded on a geographical basis.
Highways–The Highways Procurement project has reached the Invitation to SubmitDetailed Solutions stage with three bidders still in the process. Two frameworks - one for carriageways and one for scheme will be advertised
in September 2011. The schemes contract could start early if it becomes the
regional framework. Separate contracts will be let for bridges and traffic signals.
Homecare – the Homecare enablement service went live in August 2010, and the service is working well.
Inflation moratorium–A moratorium on inflationary uplifts to contracts was imposed, resulting in savings of £7.86m gross and £6.17m net on a spend of £620m. Assistance was provided to contract managers in achieving this result. Successes included successful negotiations with Logica and Serco who agreed to forgo their inflation under contract, saving £120k+. A zero % target has been set for 2011/12.
Enforcing payment terms - A review of current payments has shown that a number of suppliers are paid sooner than our standard terms and that consequently HCC is missing out on the opportunity to use its cash more wisely. The decision was taken to enforce the County Council’s standard payments termsof 28 days from the date of an approved invoice which will contribute to further savings without causing disruption to services.
Payment terms will be changed to reflect our standard terms and all new suppliers will only be set up on standard terms unless there is a clear benefit to HCC. A list of legitimate exceptions to this is currently being compiled, these may include areas where payment is often required immediately e.g. property deals and contracts where there is an agreed settlement discount for early or immediate payment.
Supplier meetings – Two Executive Member sessions were held with circa 60 major suppliers to help reinforce the message on inflation and to seek engagement on jointly reducing the cost of doing business with the Council. A further session will be held in June.
Other – A procurement negotiator was appointed on a rolling 3 month contract with savings targets. These targets are being met i.e. saving at least 10 times salary. Negotiations with Manpower were held which resulted in a saving of £207K p.a. on price to 2013.
4.Supply Hertfordshire
The Supply Hertfordshire group has been further developed over the course of the last year. The group is comprised of public sector organisations within Hertfordshire which meet and work together to benefit from collaborative procurement activities. The group has grown to 22 member organisations including the County and District Councils, the Police, NHS, University, Probation Service, LeaValleyPark and several Housing Associations.
The Group works both to find collaborative opportunities to make savings and improve advice and guidance to support local businesses in winning public sector contracts.
Notable developments included:
Development of a single joint portal so that local businesses can see all Hertfordshire public sector tender opportunities in one location.The online tool automatically emails suppliers to alert them of opportunities which may suit them. Quotes and tenders can then be posted online, cutting costs for both providers and the public sector.
Development of a Supplier Toolkit explaining how to compete for contracts, mapping out the process, signposting sources of advice, encouraginglocal business to win their share of Hertfordshire public sector annual spend of over £1billion.
A conferencefor local businesses at which they had the opportunityto meet buyers from Hertfordshire's public sector and find out how they can bid for new business. The conference was attended by over 200 delegates.
Establishment of a joint contract register to ensure collaborative opportunities can be spotted well in advance, and suitably attractive contracting opportunities constructed.
Collaborative savings in the region of £5m were identified over the course of the year.
5.Status report against Strategy
The 2010/11 strategy action plan contained 27 actions with targets. Of these, 12 actions were completed and the target achieved, 1 action was partially completed, 10 actions were on track (ongoing actions) and 4 were categorised as behind schedule.
As well as the developments and achievements already set out in this background paper, there were the following achievements in the Strategy Action plan:
Development of an SMS framework for district councils to buy into
12% carbon reduction
Improvements to HCC procurement documentation to ensure equalities targets are met
Increases in payments made via BACS
Increased use of the Delta e-tendering system
Procurement of a training partner to deliver procurement training, based on the Do, Buy, Share model to HCC staff involved in contracting, this training includes awareness raising of the localism agenda and advice on how to construct procurement processes that encourage SMEs.
A more flexible approach to financial assessment of suppliers to ensure that our processes allow start-up companies to participate.
Development of an approach to encourage apprenticeships in suitable contracts.
Achievement of an 87% satisfaction rating for Strategic Procurement Group with key internal customers.
As well as continuing with the ongoing actions from the 2010/11 plan, the 2011/12 plan will suggest measures to enhance further our work with the local economy, simplify further our standard documentation particularly the pre-qualification questionnaire in line with similar simplifications by Central Government and engage in more supply chain management activity to ensure the ethos of the County Council is reflected in our contracted suppliers.
6.Conclusion
The Procurement Strategy is a three year strategy, and in order to ensure it remains relevant and delivers the outcomes required for the County Council it is important to regularly review it in light of changes both to the external environment and to the County Council’s organisation and ambitions.
There have been, and continue to be, significant challenges in the form of rising external costs e.g. for fuel and food items, increasing demand for services, particularly in the care area and budget reductions, but it is felt that the Strategy continues to deliver both in terms of identifying and achieving targeted savings and in developing better ways to support local businesses and the Hertfordshire economy, and therefore remains relevant in the current climate.
List of Appendices
No. / Name of Appendix / To be read with1. / Executive Summary- Procurement Strategy 2010-2012 / Bullet No.2 of this paper
2. / Council for the Future Programme Structure / Bullet No.3 of this paper
3. / Work Stream 5 Savings / Bullet No.3 of this paper
4. / Herts Procurement Forum Savings 2009/10 / Bullet No.4 of this paper
5. / Procurement Strategy Action Plans Summary / Bullet No.5 of this paper
6. / Procurement Strategy Action Plan 2010_11 - Status / Bullet No.5 of this paper
7. / Procurement Strategy Action Plan 2011_12 - Proposed / Bullet No.5 of this paper
Separate booklet – Supply Hertfordshire toolkit to be issued on the day.
1