Procurement strategy

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1 Procurement strategy Contents 1. Introduction Background Supplier Spend Local Impact Scope of the strategy Drivers and Challenges As part of our strategic review of procurement, we have identified the following challenges and drivers for change: Legislation and Regulation The Commissioning and Procurement Cycle Definitions Financial Implications Value for Money Resources Risk Management Performance Management Framework Procurement Strategic Aims and Objectives Social Value and Sustainable Procurement Economic Social Environmental Equality and Diversity Consultation and Communication Monitoring and Review

2 Strategy date Strategy owner New or review 31st May 2015 Ian Ankers, Director of Strategy & Partnerships Review Internal/ Customer facing Internal & external Version no 1.0 Approved by: Board Date approved Review date: 31 st May 2018 Date of Equality Analysis n/a 2

3 1. Introduction 1.1 Background This strategy sets out our position towards delivering a more strategic commissioning and procurement approach over the next 3 years. It is aligned to our corporate objectives, new strategic themes and business values. The external environment has become more challenging with reduced public spending, greater public scrutiny and emphasis on value for money and managing financial risk. We need to deliver a more transparent and sustainable commissioning and procurement strategy which goes beyond continuous improvement, efficiency savings and cost effectiveness. We are aware that our current procurement activity lacks strategic direction, is decentralised and not optimising value for money and therefore needs refreshing. In addition, we want to embed social value into our business operations at all levels, including procurement and contract management to maximise the impact of each pound that we spend. 1.2 Supplier Spend As a registered provider and charity, we spend approximately in excess of 50m each year on goods, services and works with over 1,000 suppliers. We aim to align each pound that we spend to our corporate objectives and strategic themes to deliver the greatest economic, environmental and social impact and benefits to our customers and the local economy. All the goods, services and works that we procure should result in the best price, for the highest quality that meets customers and stakeholders needs whilst also driving continuous improvement. 1.3 Local Impact We are a strategic partner within the local area and through our procurement activity can contribute to the wider Greater Manchester Strategy and objectives by delivering economic, social and environmental benefits. These include: tackling food and fuel poverty; raising wages and living standards; tackling worklessness; regenerating the local economy; having a positive environmental impact and supporting 3 rd sector, social enterprises and small and medium sized (SMEs) businesses to grow and flourish. 2. Scope of the strategy This strategy covers the development and implementation of a strategic approach to commissioning and procurement for grants, consultancy support, goods, services and works above agreed threshold levels. It aims to capture all corporate spend with third party external suppliers as well as with internally delivered services and works to ensure that all options are fully appraised. It also extends to our wider sphere of influence as a buyer in terms of brokering contracts on behalf of customers with partners and suppliers through other procurement opportunities such as shared services, collaborative agreements, external frameworks and affinity marketing programmes. Our new procurement strategy provides will therefore underpin all our future commissioning and procurement decisions, and is supported by our: Continuous Improvement & Value for Money Strategy Creating Social Value Strategy Environmental Sustainability Strategy 20X16 Financial Regulations and Scheme of Delegations Financial Procedures (formerly Standing Orders: (Contracts) 3

4 It aims to reflect our status as a registered provider post-stock transfer and fully integrate this with our role as a charitable business. Under this new framework, we aim to more effectively meet the needs of all our stakeholders including regulators, funders, local and sub-regional authorities, partners, customers, staff, board, suppliers, 3 rd sector and local businesses. For an overview of our vision of our future model under our new structure, please refer to Appendix 1: Procurement and Contract Management Systems Model. This shows how our more integrated procurement and contract management systems will link to our new strategic themes and how they will be underpinned by ICT systems. 3. Drivers and Challenges 3.1 As part of our strategic review of procurement, we have identified the following challenges and drivers for change: Drivers (External) Challenges (Internal) 1. Impact of Welfare reform and Universal Credit on customers and income 2. Meeting efficiency savings targets and demonstrating value for money 3. Complying with changes to regulatory requirements and increased emphasis on risk management 4. Responding to the impact of reduced public spending on the local economy and our customers 1. Developing a strong vision, leadership and increasing transparency on our procurement 2. Delivering a common procurement approach and developing tools to support implementation 3. Understanding procurement spend and planning spend by type of activity 4. Moving from short term pricing to longer term whole life costing 5. Implementing more robust procurement controls supported by ICT 6. Addressing recent contract management challenges identified by Internal Audit reports 7. Being more pro-active via market engagement, consultation and collaboration 8. Embedding social value across the business and within the procurement process 9. Delivering on the Environmental Sustainability agenda 10. Driving innovation and exploring new technology, products and delivery models Our procurement strategy aims to address the above within the next 3 years. 3.2 Legislation and Regulation The external environment is also governed by changing legislation and regulation. As a public authority, we need to become more flexible and responsive to any future changes in order to ensure compliance and meet or exceed relevant standards. The following are some of the current legislation and regulation that apply to us: HCA Regulatory Standards: Value for Money; Governance and Financial Viability Charity Commission Guidance: Governance and Risk Management HM Treasury Rules: Best Value and Value for Money 4

5 EC Procurement Directives and EC Treaty common principles: Equal Treatment; Non-discrimination; Transparency; Open Competition and Free Movement of Trade Public Regulations Act 2015 Equality & Diversity Act 2010 Social Value (Public Services) Act The Commissioning and Procurement Cycle 4.1 Definitions Commissioning and procurement are inter-related, forming a cyclical process that assesses what an organisation needs to achieve in terms of outcomes and how best to meet that need by using cost-benefit analysis and options appraisal. Commissioning is therefore the informed design of what we want to deliver to meet our strategic objectives and outcomes whilst procurement is the process of acquiring goods, services and works covering purchasing from both third parties and in-house providers. The whole life cycle therefore spans the identification of needs (including preparing the business case), options appraisal and the critical make or buy decision, through to the end contract delivery and/or useful life of an asset. For a full glossary and definitions of common terms used within this document, please refer to Appendix 2. 5

6 Diagram 1: Strategic Commissioning and Procurement Cycle Strategic Outcome Setting Needs Analysis Priorities Commissioned Contract Management Procurement The diagram above demonstrates the cyclical nature of the commissioning and procurement process and how each stage of the process links together. We are aware that as part of our strategic review of procurement, we need to forward plan more effectively and strengthen our pre-procurement and commissioning stage to improve the identification of need. As part of strengthening our financial viability, we also need to develop a more robust approach to options appraisals and compare financial and social returns on investment. 5. Financial Implications 5.1 Value for Money A key driver for our strategic review of procurement is to comply with regulatory standards and ensure that it is aligned to our continuous improvement and value for money (CI&VFM) objectives. Procurement can help to deliver better value for money by driving competition and delivering continuous improvements leading to higher outputs and outcomes for fewer inputs. It can also deliver additional Social Value, leading to additional outputs and outcomes for the same inputs. The diagram on page 7 demonstrates this link and through supply chain management, we aim to strengthen our value for money self-assessment and deliver greater financial and social returns on our investment. 6

7 Value for Money Continuous Improvement Diagram 2: Continuous Improvement and Value for Money Model Economy Minimising costs ( ) when buying Inputs Efficiency Obtaining best use of inputs Outputs Effectiveness ensuring best results for customers (quality and quantity) Outcomes 5.2 Resources As part of our strategic review of procurement, we plan to re-allocate existing resources to create a central team under the Procurement Hub. This team will act as the gatekeeper for all procurement and contract management above agreed threshold levels using The Chest e-tendering portal and APEX contract management module. It will develop standardised Quality Assurance and Control systems, provide guidance, advice, support and deliver awareness and training to key stakeholders to ensure compliance and develop competencies. The Director of Strategy and Partnerships will lead on our Corporate Procurement and take responsibility for implementing our new Procurement Strategy and ensuring compliance across the organisation. Please refer to Appendix 3: Procurement Hub Organisation Chart for further details. 5.3 Risk Management Through the implementation of this Procurement Strategy and supporting annual Procurement Action Plan, we aim to develop a more pro-active approach to identifying, assessing and managing all contract risks and liabilities with 3 rd parties and across the business. This will help to strengthen our governance and financial viability Performance Management Framework Managing and developing relationships with key suppliers, driving value for money and continuous improvement and innovation are key objectives which are identified within our Procurement Strategy. We also want to develop a more commercial approach to strengthen our market position in the longer term. We therefore aim to develop a market engagement strategy at pre-procurement stage for suppliers and partners to stimulate competition and gain a better understanding of needs. We plan to develop more sustained supplier and partner relationships which assess contract risk and manage performance. This will be achieved through staff training and guidance in contract management, a review of contract management processes, implementation of new ICT systems and the development of a Performance Management Framework for all suppliers. This will provide a high level exception reporting to Management and Board on key metrics and performance indicators. Our 7

8 longer term goal is to work collaboratively with suppliers and partners to test and develop more mutually beneficial commercial incentives. 6. Procurement Strategic Aims and Objectives One of our key business objectives is Keeping a strong, financially viable, socially responsible, well governed business. Our procurement strategy therefore aims to support this objective and the our continuous improvement and value for money strategic objectives including: implementation of CI&VFM model within the business awareness and development of competence in CI&VFM attainment of the national standard on Value for Money recording and tracking cashable and non-cashable efficiencies In order to achieve our strategic aim, we have set out the following key objectives: Overall Aim 1. Strategic Approach 2. Develop QAC systems 3. Manage the Supply Chain 4. Embed Social Value 5. Develop Competence To develop a strategic approach to procurement and ensure that our procurement strategy is aligned to our corporate objectives Develop a strategic approach to procurement and contract management across the organisation to support Value for Money and Financial Viability Develop a standardised procurement and contract management QAC system to ensure compliance and build organisational capacity Manage supply chain performance to create commercial incentives and develop risk management reporting systems to mitigate against risk Embed the delivery of Social Value, including economic, social and environmental value within the procurement and contract management processes Increase awareness and develop competence in procurement and contract management with relevant stakeholders Our strategic aims and smart objectives are set out fully within our Procurement Action Plan 2014/15 and 2015/16 in Appendix Social Value and Sustainable Procurement Delivering sustainability and being socially responsible are essential to our procurement strategy. We want to assess measure and maximise the community benefits including social, economic and environmental impacts that we can achieve within the local area. We will include social value requirements in our tender processes and work collaboratively with our supply chain and partners to measure our local impact and support the development of socially responsible businesses. 7.1 Economic As part of our sustainable procurement strategy we aim to have a positive economic impact within the local economy and have a good understanding of how and where every 8

9 pound is spent. We have established a baseline and target of % spend within the local economy. We will work with suppliers, partners and businesses to monitor this and develop a diverse supply chain in order to meet our corporate targets. We will review our support for SMEs, Social Enterprises and 3 rd Sector organisations to ensure that we do not directly or indirectly discriminate against these within our procurement activities. 7.2 Social Bolton is a local authority area within the Association of Greater Manchester (AGMA) and is ranked as 48 th out of 328 most deprived districts (Index of Multiple Deprivation 2010) and now falls within the bottom 15% of most deprived areas. Many of our customers and communities face social exclusion, food and fuel poverty, poor health and lack the educational attainment and qualification to access employment and training opportunities within the wider Greater Manchester area. As part of our charitable objectives and as a social housing provider with broader regeneration objectives, our procurement strategy aims to address some of these social imbalances and supported by our Community Investment Programme, to tackle social exclusion, worklessness and health inequalities. We will explore methodologies to measure our social and financial return on our investment as part of our procurement review. 7.3 Environmental Our 20x16 Environmental Sustainability Strategy sets out our approach and key actions required to reduce our carbon emissions and the impact of our business. It is typically defined as Meeting the needs of the present without compromising the ability of future generations to meet their own needs. Our vision for environmental sustainability includes: Providing new and existing homes that are energy efficient, sustainably powered and heated and use sustainably supplied materials Promoting and raising the profile of environmental sustainability amongst our staff, partners, contractors and communities in which we work. By developing a more strategic and sustainable approach to procurement, we can help to have a more positive environmental impact through improved decision making and behaviour change across all our stakeholders including: staff, board, customers, suppliers and partners. We aim to embed environmental sustainability decision making into our procurement and contract management processes and consistently consider the environmental costs, benefits and impacts of purchasing decisions on our business and the supply chain. 8. Equality and Diversity We are committed to valuing diversity and ensuring fairness in all our business operations including our procurement. We aim to promote positive action to ensure that equality and diversity needs are met for all groups with protected characteristics. As a registered provider, we also have a general duty to consider equality under our public functions, in housing and related activities. Equality and Diversity will be considered at the pre-procurement stage of tendering and where appropriate, an equality analysis will be conducted with relevant stakeholders including customers. 9

10 9. Consultation and Communication Key stakeholders including staff, trade unions, customers, board, and strategic partners have been consulted as part of the development of this strategy to enable a shared vision and common understanding of our strategic approach to procurement. We aim to further consult with suppliers and strategic partners and other relevant stakeholders during as part our Communication Plan and during the implementation phase in order to create an ongoing dialogue to improve communication, increase transparency and develop shared ownership. 10. Monitoring and Review This Procurement Strategy will be reviewed every 3 years by Bolton at Home Management Team and Board with consultation with relevant stakeholders. Key actions arising from the strategy will be included in a Procurement Action Plan which will be monitored quarterly with annual reporting to Internal Audit, BHMT and Board. We look forward to working with all our stakeholders in developing and implementing our new procurement strategy. 10

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