Data Analytics Transforming our Understanding of Procurement in Local Government

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1 Data Analytics Transforming our Understanding of Procurement in Local Government Chris Newman MBA Director ArcBlue Consulting 21 November 2014 ArcBlue Consulting Group

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3 ArcBlue Government Procurement Development Activity across Australia/NZ WA Local Government Procurement Training Program Spend Analysis SA Local Government Roadmap Program Regional Opportunity Analysis SA State Government Procurement Transformation VIC State Government CIPSA Certification Training and Development Procurement Capability Assessment / Development Qld State Government Translink Contract Management Capability Assessment Gold Coast Council Capability Development and Contract Management Training NSW State Government Accreditation Program preparation and assessment Procurement Project support NSW Local Government Roadmap Program with LGP Procurement Leadership Program Social Procurement Development Metro and Regional Collaborative Procurement development Federal Government State Government Local Government Federal Government Contract Management Development Regional Procurement Development Programs VIC Local Government Procurement Roadmap development Contract Management Guidelines and Training NZ Government Departmental reviews

4 Procurement Development Why Procurement? Procurement is moving from an administrative role to a strategic one E.g. NSW $30bn/ year State Gov t $25bn/ Local Gov t $5bn More than half of most councils overall expenditure Has received little focus (administrative not strategic) Local Government Procurement Roadmap and Spend Analysis Programs Councils now recognising the importance of a structured approach to procurement capability development Supported by Regional Groups and other peak Local Government Procurement Bodies around Australia 180 Councils across 3 States have participated since Councils now with Procurement Dashboards in place 2013/ 2014 NSW Regional Programs NOROC, Riverina, WSROC, Centroc 2015 Programs in planning

5 Centroc Regional Procurement Roadmap Program - Objectives and Process Program Objectives: Make sustainable savings & create efficiencies Stimulate local and regional economic and social development Improve probity and reduce risk Build staff and organisational capability in procurement Strengthen regional collaboration Joint Council Kick off Data Collection Individual Council Workshops Individual Council Roadmaps Detailed Joint Spend Analysis Opportunity Analysis and Validation Workshops Regional Roadmap Priority Project Identification Progress Reviews and Support

6 NOROC Regional Procurement Roadmap Program - Objectives and Process Program Objectives: Make savings and create efficiencies by sustainably reducing the cost of goods, services and infrastructure sourced through external suppliers Stimulate economic activity across the Region through providing broader opportunities for local suppliers of the goods, services and infrastructure Provide a structured model and Regional Roadmap to strengthen on-going collaboration and regional cooperation

7 Organisational Assessment External Focus Strategic Procurement Internal Focus

8 Regional Roadmap Example Priorities Wave 1 Wave 2 Road Reseal Street Sweeping Bulk Cartage Waste Management including leverage NORMA contract Line Marking EWMS Building Maintenance & Cleaning ICT Services Panel Including Shared Portal Rubble Raising & Crushing Heavy Plant & Equipment sharing Materials supply

9 Procurement Transformation and Collaboration Benefits Sustainable savings in external expenditure through: Strategic Council contracts Expanded use of LGP contracts Regional collaborative procurement Demand management strategies Increased usage of local and regional suppliers, e.g. Gold Coast spend through local suppliers increased from 49% to 63% over 2 years Improved performance, e.g. Increased completion rates for Capital Works Improved Contractor Performance Streamlined internal processes Targeted productivity savings Improved probity and reduced risk Social Procurement - Employment generation for local and disadvantaged communities, e.g. G21 GROW Project cross sector development of job creation strategies through procurement GSW Social Procurement Taskforce 29 ArcBlue Consulting 2014

10 Procurement Model in Local Government National Contracts (National Procurement Network) Structured National Governance single contracts negotiated nationally State Peak Body Local Government Procurement Wide range of contracts in place Supporting procurement capability development/ excellence Regional Bodies Collaborative Governance Regional Development Focus Resources to herd cats and support regional arrangements and bring organisations on to State/ National contracts Individual Organisations Well structured Procurement organisations Centre led Models to support contract take up and capability building National State Regional Local

11 Procurement Opportunities through Reform Structures New economies of scale and maturity leading to new Centre led structures Collaboration Opportunities for stronger collaborative models and approaches Across Councils Local, Regional, State wide Resourcing Organisational restructuring new opportunities for strengthened procurement commitment Contracts Reset of contracts creates an opportunity to move beyond business as usual

12 Data Analytics

13 Data Analytics Transforming Local Government Data analytics is transforming our understanding of local government procurement. Regional Procurement Roadmap Programs across NSW and SA in 2014 have incorporated new technology and data collection and analysis Dashboards tailored specifically for local government. The Dashboards create a new understanding and capacity for driving cost savings, compliance and regional economic development outcomes. There is much broader application of data analytics in transforming our capacity to understand and drive individual development and regional and sector collaboration across a wide range of council activities 33 ArcBlue Consulting 2014

14 Why analyse spend? LG Sector generally has a poor understanding of what we spend and who we spend it with Reduces Councils ability to: Analyse spend and transaction patterns, and strategically plan for better procurement (opportunity analysis) Easily track spend and performance by category, supplier or contract Track compliance, cumulative/purchase card spend etc. Quickly and effectively report on procurement and performance Reduces Regional/ sector ability to: Track spend patterns and identify opportunities to improve existing contracts or identify new ones Accurately monitor and measure contracts and suppliers Benchmark performance All rights reserved 34

15 Spend analysis challenges Reasons for lack of spend analysis in LG Sector: Range of financial systems used: Civica, Tech One, Oracle etc. makes it difficult to extract and then consolidate data Systems are set up for finance processes, not procurement Data in the systems is often poor quality (not clean not categorised, inconsistent supplier names used, etc.) Spend analytics done in-house is often time consuming and expensive because skills are underdeveloped in the sector All rights reserved 35

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17 Procurement Dashboards Overview

18 Procurement Dashboards Categories

19 Procurement Dashboards Sub Categories

20 Procurement Dashboards Suppliers

21 Procurement Dashboards Geo spend

22 Procurement Dashboards Transactions

23 Procurement Dashboards Spend Patterns

24 Procurement Dashboards Contracts

25 Procurement Dashboards Purchase Card Tracking

26 Regional Demographics All rights reserved 46

27 Procurement Dashboards Regional Overview

28 Procurement Dashboards Regional Geo spend

29 ArcBlue Dashboards overview Tailored application using modern Business Intelligence software standardised set of interactive, user driven Dashboards designed specifically for Local Government Displays categorised areas of spend with the ability to drill down to enable detailed review Data can be both aggregated at national, state and Regional level or drilled down for use by individual Councils Intuitive and visually attractive Easy to use and understand Online interactive Dashboards that allow flexible analysis and reporting Very Cost Effective Solution for Councils and Regions All rights reserved 49

30 Spend and Opportunity Analysis Process Spend Analytics Opportunity delivery Cleanse data Categorize data Initial spend analysis Develop hypotheses Validate Implement Initial review Define output requirements Define coding structure Check sufficient data granularity exists Import additional data sets into database if necessary Agree which fields are to be used for the analysis Review current coding structure Remove irrelevant categories Implement consistent coding structure Develop graphs and analysis on spend Highlight influenceable spend Add in contract view to understand contracted spend Create hypothesis opportunities Hypotheses cover areas of potential opportunity that has been highlighted through the spend analysis process Validation to review priority potential opportunities Detailed spend analysis per opportunity Review of constraints (eg contracts) Discussion with key stakeholders Validation of opportunity Development of implementation plan Establish Governance and Implementation Team Confirm resourcing Provide implementation support where required On going review and tracking of progress

31 Applying Dashboards Fit for the Future Regional Joint Organisations (JO) Dashboards Strategic Alliance Development Collaboration Procurement Shared Services Benchmarking Managing and measuring on-going performance Contract spend Compliance HR Customer Service Asset Management All rights reserved 51

32 Next Steps Roadmaps New Programs for individual and Regional Council Procurement Roadmap development, including Spend Analysis and Dashboard provision Spend Analysis and Dashboards Individual Spend Analysis Regional/ Sub-Regional/ Spend Analysis and Dashboards Savings Programs Procure-to-Pay Health Check and Productivity Program Opportunity Analysis and Savings delivery Targeted Demand and Process Management Programs All rights reserved 52

33 Questions

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