Commissioning and Procurement Strategy

Transcription

1 Cardiff Council Commissioning and Procurement Strategy Delivering Quality and Value Proud to Deliver

2 Contents Foreword Part 1 - Introduction 1.1 Purpose of the Strategy 1.2 Why Commissioning and Procurement Matters 1.3 Vision and Key Priorities 1.4 Commissioning and Procurement Capability Framework Part 2 - Direction Setting 2.1 Citizen Focus 2.2 Value for Money and Efficiency 2.3 Economic, Social and Environmental Wellbeing 2.4 Governance and Risk Part 3 - Creating Value 3.1 Commissioning 3.2 Category Management 3.3 Strategic Sourcing 3.4 Collaborative Sourcing 3.5 Supplier and Contract Management Part 4 - Enabling Value 4.1 Organisational Structure and Alignment 4.2 Partnering and Collaboration 4.3 Core Processes and Controls 4.4 Effective Use of Technology 4.5 People Capability and Development 4.6 Information and Performance Management Part 5 - Commissioning and Procurement Policy Glossary of terms and abbreviations Contacting Us Page Commissioning and Procurement Strategy

3 Foreword The Council is facing an unprecedented challenge to balance the ever increasing demands and expectations for services at a time when budgets are being reduced. This is made all the more challenging by the need to support the economic, social and environmental wellbeing of our citizens and communities. This strategy acknowledges the key role commissioning and procurement will play in enabling the Council to meet these challenges and outlines our ambitions and priorities for the next three years. With annual spend on bought-in goods, services and works of over 300 million, it is imperative we manage this responsibly to ensure we obtain value for money for our citizens and support our wider objectives. In response to this challenge we need to ensure that: Our citizens, communities and customers are at the heart of our decision making and that services are delivered based on need and outcomes through intelligent and innovative commissioning We engage and work in partnership and collaboratively with organisations and suppliers across the public, private and third sector We effectively manage our spend on bought-in goods, services and works across the Council We acknowledge that delivering this ambitious strategy will require a major change in commissioning and procurement across the Council, with the introduction of new ways of working and changing roles and responsibilities, which the Council will support through clear leadership and investment in its people. Jon House, Chief Executive Commissioning and Procurement Strategy

4 Part 1 - Introduction 1.1 Purpose of the Strategy Cardiff Council spends over 300 million a year through commissioning and procurement. It is the Council s responsibility to manage this money efficiently and effectively to achieve Council objectives. The purpose of this strategy is to set out how we are changing procurement and commissioning within the Council and to provide the vision and strategic direction necessary to better achieve our objectives. This strategy is aimed at promoting effective commissioning and procurement across the whole organisation. It will assist all internal officers who are involved in commissioning and procurement to better understand their role in supporting the delivery of this strategy. It also provides a basis for interaction with other key stakeholder groups; primarily our suppliers, the wider public and their elected members. The aims of this strategy are to: Establish a clear strategic direction and priorities for change Establish key commissioning and procurement policy principles Set out what we are going to do and how it will support delivery of our vision Provide a framework to plan and deliver the changes required to meet the vision 4 Commissioning and Procurement Strategy

5 1.2 Why Commissioning and Procurement Matters Cardiff Council is a unitary authority the largest in Wales and is responsible for the delivery of a wide and diverse range of statutory and discretionary public services. The total cost of delivering Council services for 2011/12 is 760 million. In addition, the Council will spend 110 million on capital investment. Figure 1 Spend by Category 2010/11 ( millions) The Council delivers its services through a mixed economy acting as both a provider, through direct provision of services using its own workforce, and an enabler with services delivered through private and third sector organisations. The Council spend through commissioning and procurement during 2010/11 was 316 million and the key areas of external expenditure are summarised in Figure 1: All Service Areas depend on external organisations for the provision of bought-in goods, services and works and it is important that we maintain a clear strategy for planning and managing the use of these resources. The Council recognises that the decisions we make in terms of what we buy, how we buy it and from whom we buy it need to play a key role in supporting the delivery of the Council s Corporate Plan 2011/14 and the What Matters Strategy. Commissioning and Procurement Strategy

6 1.2.1 Supporting the Corporate Plan and What Matters Strategy The Council s Corporate Plan 2011/14 sets out what it will achieve over the next three years in support of its aim to make Cardiff Council the best European City Council by The plan is structured in line with the Council s seven strategic outcomes contained within the Integrated Partnership Strategy What Matters. The What Matters Strategy was developed in consultation with public, private and voluntary sector organisations and will shape how Cardiff moves forward over the next 10 years. What Matters is based around the delivery of 7 key strategic outcomes, which will improve the quality of life for everyone. Fig 2 - What Matters Strategic Outcomes Now more than ever, we need to work together with other partners to better understand what matters in our communities and to the people of Cardiff. In this way we can target our resources towards those who need it most and improve the effectiveness and efficiency of our services. The Council recognises that an effective commissioning and procurement strategy is fundamental to achieving organisational success for the Council and is instrumental in the delivery of the Council s Corporate Plan, Priorities and Objectives because it: Has a direct impact on overall spend, savings, value for money and the cost of service provision to the people of Cardiff Can help to shape the delivery of services to meet the needs of citizens, communities and customers Contributes to the achievement of corporate and service objectives Provides a mechanism for delivering key policy objectives, including sustainability, partnership working, equal opportunities and economic development Operates within a complex regulatory framework that must be adhered to Is an area of potentially high risks; with impact on service, financial and legal issues and the reputation of the Council Develops the role of the Council as community leader particularly in relation to sustainability and local economic development The Council is aware of the impact a reduction in overall spend could have on the local economy and over the next few years the Council will have to make some difficult decisions to balance the need for savings with support for the local economy. By improving the management and transparency of our commissioning and procurement activity within the Council, we will be better placed to manage and communicate these decisions to our citizens, communities, and suppliers. 6 Commissioning and Procurement Strategy

7 1.3 Vision and Key Priorities The Council s Vision for Commissioning and Procurement is: By 2015, through effective Commissioning and Procurement, Cardiff Council will deliver citizen-focused services which are sustainable and offer value for money by adopting new ways of working, enhancing the capability of its staff and driving collaboration This vision will ensure we focus delivery against four key strategic priorities: Citizen Focus Value for Money and Efficiency Economic, Social and Environmental Wellbeing Governance and Risk We need to focus on doing the right thing to meet the needs and outcomes of citizens, communities and customers We need to make sure we are doing it in a way that is efficient and delivers value for money We need to do it in a way that maximises the social, economic and environmental benefit derived from our commissioning and procurement activity We need to ensure we are doing it in a way that is legal, reflects best practice and manages risk In delivering this vision by 2015 we will: Develop and implement a coherent and consistent approach to commissioning across the Council to ensure services meet our statutory obligations and deliver positive outcomes for our citizens, communities and customers Manage and organise all of our procurement activities using category management to ensure effective prioritisation and coordination of resources across the Council Use strategic sourcing to lever our scale by aggregating related spend across the Council and managing demand to avoid unnecessary costs and spend Strategically manage markets and key suppliers with a stronger focus on supplier relationship management and contract management Recognise the value and importance of partnering and collaboration across the public, private and third sectors Make use of and support collaborative sourcing where it represents value to the Council Invest in our organisational structure and ensure people are aligned across the Authority to deliver the new ways of working Invest in the development and capability of all Council staff involved in commissioning and procurement Simplify and standardise our core processes and ensure our controls deliver compliance with process, contracts and suppliers Invest in effective use of technology to underpin and simplify our core processes for both staff and suppliers Create and share information to allow effective performance management and decision making Commissioning and Procurement Strategy

8 1.4 Commissioning and Procurement Capability Framework This strategy has been structured around the framework set out below which identifies the three levels upon which commissioning and procurement capability will be built, sustained and measured. Fig 3 - Commissioning and Procurement Capability Framework Direction Setting This level sets the overall direction for Commissioning and Procurement in the Council. It supports the achievement of the Integrated Partnership Strategy, What Matters, and the Council s Corporate Plan for 2011/14. The key strategic priorities are set out in more detail in Part 2 of this strategy. Creating Value This level sets out the new ways of working which will identify and deliver improved outcomes and savings through Commissioning and Procurement. Commissioning will ensure we are designing services to meet the needs of citizens, communities and customers. Category Management, and its associated processes, will ensure we are managing procurement effectively to deliver value for money on all bought-in goods, services and works. An explanation of Commissioning and Category Management and its associated processes is contained within Part 3 of this strategy. Enabling Value This level sets out the key enablers required to deliver the new ways of working in respect of Commissioning and Procurement. Of critical importance will be establishing an organisational structure across the Council which has sufficient capacity and capability to deliver the change required. An explanation of these enablers is set out in more detail within Part 4 of this strategy. 8 Commissioning and Procurement Strategy

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10 Part 2 Direction Setting 2.1 Citizen Focus We need to focus on doing the right thing to meet the needs and outcomes of citizens, communities and customers Why This Is Important There are increasing demands and expectations being placed on our services with reducing budgets. This means the way services are delivered in the future will need to change and citizens and communities need to be at the heart of this change. As we move towards a new emphasis on individual and social responsibility we need to design services with citizens at the centre, using the principles of co-production. This strategy is underpinned by a focus on meeting citizen and community needs through an engagement and involvement approach which identifies key outcomes and measures the impact of services arranged to meet those needs. A Citizen-focused service equals a high quality service which promotes citizen confidence in the Council s services, produces high levels of satisfaction, demonstrates value for money to taxpayers and contributes to the achievement of public policy goals. It is also important to note the key role that service providers can and will need to play in the design of services. Where We Want To Be We want: To establish joint strategic commissioning arrangements with our partners which reflect the delivery of the key outcomes identified in the What Matters Integrated Partnership Strategy Citizens, communities and service providers to be engaged and consulted in the development of services To use co-production to open up opportunities and enable local charities, social enterprises, private companies and employee-owned co-operatives to offer high quality services To have greater confidence that intelligent commissioning will deliver services which provide value for money, are fit for purpose, and will meet the expectations of citizens Realistic expectations about what can be achieved with limited budgets Community leadership to give neighbourhoods more power to take decisions to shape their area The success of our services to be measured on the delivery of positive outcomes for citizens and communities Funding and commissioning of services to encourage, where appropriate, early intervention and a preventative approach to service delivery 10 Commissioning and Procurement Strategy

11 How We Intend To Get There We will: Develop and implement a common commissioning framework for the creation of service area specific commissioning strategies and plans which encourage active citizen and provider engagement and participation Ensure service area commissioning strategies are rooted in a deep understanding of the needs and aspirations of citizens, communities and stakeholders Work with Intergrated Partnership Board partners to consider the establishment of joint commissioning arrangements. This will support the delivery arrangements of the new Integrated Partnership Board which will oversee the delivery of the What Matters strategy Seek to transfer the vision and aims of the Commissioning and Procurement Strategy to partner organisations Play an active role in the development of regional commissioning arrangements to ensure that the right services are in place to deliver outcomes Ensure citizens, communities and suppliers are consulted and informed of our commissioning plans and intentions Consider opportunities afforded by grant funding through the Cardiff Funding and Commissioning Framework 5 Commissioning and Procurement Strategy

12 2.2 Value for Money and Efficiency We need to make sure we are doing it in a way that is efficient and delivers value for money Why This Is Important The Council has always had a duty to ensure we can demonstrate value for money in the delivery of our services. With increasing budgetary pressure and the need to balance cost reductions against the increasing demand on services, achieving value for money on our bought-in goods, services and works is more important to the Council than ever. Although we will want to make sure we are buying at the most competitive price available, value for money does not just mean buying at the lowest price. It is just as important that we make sure we are buying the right thing and that we take into account the whole life costs of our commissioning and procurement decisions and their impact on the local economy, society and the environment. In addition, the administrative cost of sourcing, ordering and paying for goods, services and works is significant. We therefore need to ensure that the way we work is efficient and effective. Where We Want To Be We want: Significant savings ( 18.5 million by 2014/15) and non-cashable benefits to be achieved through the implementation of category management and strategic sourcing. Greater focus on demand management. At a strategic level this means reviewing the whole activity to determine whether it meets the needs and objectives of the Council. At a tactical level, this means staff questioning the need to spend money in the first place A culture of compliance in place across the Council in terms of process, contracts and suppliers Greater attention given to supplier relationship management and contract management to ensure that our contracted outcomes and continuous improvement are achieved Focus on strategic procurement activity, such as the development and implementation of category plans and sourcing strategies, and supplier relationship management A shared approach to reducing costs with our suppliers, so that suppliers achieve a fair profit but at a substantially lower cost to the Council and our partners Greater investment in e-procurement so that the majority of our business transactions are carried out by electronic means to reduce transaction costs for both the Council and its suppliers 12 Commissioning and Procurement Strategy

13 How We Intend To Get There We will: Use category management to manage and organise all of our procurement spend and resources to ensure we are buying as one organisation Use strategic sourcing to identify, develop and deliver opportunities to deliver cashable savings of 18.5 million by 2014/15 Align our category plans with the Council s financial targets to ensure new savings opportunities are identified to create a pipeline for future savings Strategically manage markets and key suppliers with a stronger focus on supplier relationship management and contract management Train our category managers and contract managers in supplier relationship management techniques Proactively participate and influence collaborative sourcing in Wales to ensure arrangements can positively contribute to the Council s priorities Implement further improvements in e-procurement, procureto-pay processes and management information, so that the Council and its suppliers maximise the benefits of electronic procurement Monitor compliance with process, contracts and suppliers and take action where necessary in accordance with agreed escalation arrangements Commissioning and Procurement Strategy

14 2.3 Economic, Social and Environmental Wellbeing We need to do it in a way that maximises the social, economic and environmental benefit derived from our commissioning and procurement activity Why This Is Important The Council supports the Welsh Government s Sustainable Development Charter which commits the Council to improving the long-term economic, social and environmental wellbeing of people and communities in Wales. The Council s spend is a major driver for local economic development and creation of a thriving and prosperous economy, particularly when spend is with local small and medium sized enterprises (SME). However, the need to deliver savings and efficiency improvements will invariably lead to a reduction in the number of suppliers and contractors that directly trade with the Council. It is important that we look for ways to improve access to the Council and its business opportunities and support the development of local suppliers. Where We Want To Be We want: Our policies and procedures to encourage creativity and innovation in a diverse supply base that encompasses small firms, ethnic minority businesses, social enterprises and voluntary and community sector suppliers Equality and diversity considerations built into all stages of the commissioning and procurement process, so that we only do business with suppliers who share our commitment to the equalities agenda and meet the obligations of equality legislation Our procurement activities to minimise our impact on the environment by reducing demand, developing environmental friendly specifications and supporting initiatives such as the Council s carbon reduction programme. The Equality Act 2010 contains a public sector equality duty to eliminate discrimination, advance equality of opportunity, and foster good relations between people who share a protected characteristic and those who do not. This general equality duty applies to all public procurement and is supported by regulations put forward by the Welsh Government, which require public authorities to have due regard to whether award criteria should include relevant equality and diversity criteria. 14 Commissioning and Procurement Strategy

15 How We Intend To Get There We will: Continue to support the Council s Sustainable Development Policy and Environmental Policy and to implement the Council s Sustainable Procurement Policy. Ensure that our suppliers show the same level of commitment to the equalities agenda as we do ourselves, through effective supplier selection, management and review Work with our prime contractors both at tender stage and during the life of the contract to establish the contribution that small firms, ethnic minority businesses, social enterprises and voluntary and community sector suppliers can play in the supply chain Resource and progress the Source Cardiff initiative to create a more open and accessible tender process and improve the capability of local suppliers to bid successfully for public sector business Include social clauses, where appropriate, as special conditions in terms of the performance of a contract, to assist in delivery of community benefits. For example, a social clause may require the contractor to take on a number of apprentices or recruit a number of long-term unemployed people Aim to control our consumption of and demand for those goods and services which have a direct impact on our environment (such as printing, utilities and travel) and encourage waste reduction, reuse and recycling Increase use of the Welsh Government s Sustainable Risk Assessment (SRA) tool to help our staff increase the positive benefits and reduce negative impacts of our major contracts on society, the economy and the environment Use guidance put forward by the Welsh Government and Equality and Human Rights Commission about how best to include equality and diversity considerations into procurement processes Continue to implement the requirements of the Sustainable Procurement Assessment Framework (SPAF), so that the Council achieves a minimum of level 3 in all areas by 2014 Provide appropriate training to officers involved in commissioning and procurement in respect of sustainability and responsibilities regarding equality and diversity Commissioning and Procurement Strategy

16 2.4 Governance and Risk We need to ensure we are doing it in a way that is legal, reflects best practice and manages risk Why This Is Important We have a duty to our taxpayers to apply controls and consistent standards across the Council to provide value for money. Good governance is needed to ensure key decisions and working practices are legal, reflect best practice and maintain an appropriate level of control across the Council. Public Procurement in the UK is subject to European legislation to ensure free trade between member countries. The Council is required to demonstrate that its procurement activity is compliant with the legislation and the EC Treaty principles of fairness, nondiscrimination and equality. Failure to comply is increasingly leading to legal challenge. In addition, individual services will have specific legislation and guidance which they will be required to follow. Where We Want To Be We want: Clear visibility and accountability for all key commissioning and procurement decisions All procurement to be appropriately managed and controlled and comply with mandatory procurement policies, processes and procedures, including legal obligations (EC public procurement regulations and other UK legislation) The development and implementation of our commissioning strategies and plans to reflect relevant legislation, guidance and best practice To identify and minimise key risks in the procurement lifecycle It is also critical that the Council effectively manages risks within its supply chain which could impact on service delivery, the Council s reputation and financial and legal exposure. 16 Commissioning and Procurement Strategy

17 How We Intend To Get There We will: Develop a coherent and consistent approach to commissioning which will ensure best practice guidance is considered Develop our core processes to ensure they are efficient for both the Council and our suppliers and have effective controls to manage compliance with both process and contracts Revise our internal Contract Standing Orders and Procurement Rules to ensure enforcement of corporate contracts and procurement policy Ensure that all our contracts have a named contract manager and that all contracts with a total value exceeding 1m have a senior accountable officer Put in place arrangements to oversee the contract award and contract management processes within the Council Ensure staff have the appropriate competencies, skills and knowledge to fulfil their roles Ensure that elected members have an awareness of the commissioning and procurement process sufficient to meet their identified needs and to enable them to exercise their roles as appropriate Continue to obtain assurance, to a level proportionate to the risk involved, of the viability of the business continuity plans of the Council s significant suppliers and partners Ensure that we continue to improve risk management by reviewing and implementing changes in respect of supplier selection and accreditation both ahead of contract award and annually throughout the duration of contracts Monitor compliance with process, contracts and suppliers and take action where necessary in accordance with agreed escalation arrangements Ensure that we effectively plan for two languages and provide for two languages in all goods and services that we procure and commission in accordance with the Welsh Language Act 1993 and Welsh Language (Wales) Measure 2011 Commissioning and Procurement Strategy

18 Part 3 Creating Value 3.1 Commissioning We need to ensure Service Areas have specific commissioning strategies and plans tailored to the needs of our citizens and communities How We Define Commissioning Commissioning of public services is about public sector agencies working with purchasers, providers and, most of all, communities, to identify and understand end users needs so that services can be designed to meet them. This is done by working within a structured and planned process, called a commissioning cycle (see below), which ensures services are improved and developed against past experience and current community need. The Cabinet Office action plan Partnership in Public 1 Services defined commissioning as the cycle of assessing the needs of people in an area, designing and then securing appropriate service with the emphasis on the importance of identifying the need and then meeting it. The action plan also contained eight principles for good commissioning which are set out in the table below and which Cardiff will incorporate within its Commissioning framework. EIGHT PRINCIPLES OF GOOD COMMISSIONING Understand the needs of those using the service Consult provider organisations when setting priorities Put outcomes for users at the heart of the process Map the fullest practical range of providers Consider investing in the provider base Ensure contract processes are transparent and fair Ensure long term contracts and risk sharing Seek feedback to review effectiveness of the commissioning process 1 Partnership in Public Services: Cabinet Office (2006) 18 Commissioning and Procurement Strategy

19 Commissioning Cycle The commissioning cycle shown here, taken from Fulfilled Lives, Supportive 2 Communities Commissioning Framework Guidance and Good Practice, illustrates the relationship between the activities involved in commissioning and procurement. Although specifically developed for social care, we will use this cycle as the basis of developing a commissioning framework for Cardiff. Fig 4 - Commissioning Cycle How It Will Deliver Value Where Council services directly impact upon communities and influence the day to day lives of citizens, such as in the field of Social Care, service areas will use the commissioning cycle to develop specific strategies and plans which adhere to the eight principles of good commissioning. Commissioning Strategies will: Contain the intentions of the service areas about how they will contribute to achieving corporate goals and plans in meeting the needs of the citizens and communities they provide a service to Link the Council s statutory duties, regulatory requirements, assessments of need and the resources the Council can bring to bear Lay out how citizens and communities contribute to identifying and achieving key outcomes Describe the approach service areas will take to service delivery and the principles which will underpin resource allocation decisions Describe the outcomes which will be delivered through intelligent commissioning and procurement plans Adopt a co-production approach to citizen and community engagement. Co-production means delivering public services in an equal and reciprocal relationship between professionals, people using services, their families and their neighbours. Where activities are co-produced in this way, both services and neighbourhoods become more effective agents of change Where Council services have less interaction with citizens and less influence on daily lives, we acknowledge that it may not always be appropriate for them to develop specific commissioning strategies. In these cases we expect service areas to document their approach to commissioning and procurement in the business planning cycle, clearly embedding the eight principles of good commissioning in Service Plans. 2 Welsh Government (2010) 5 Commissioning and Procurement Strategy

20 3.2 Category Management We will organise and manage our procurement activity in a structured way across the organisation and according to relative risk and value Fig 5 Category Management Cycle How We Define Category Management Category Management is the best practice approach to managing procurement. It works by organising our spend and resources into specific spend categories and provides a clear, structured framework aimed at delivering improved value. Our Procurement Category Management approach, shown, consists of four distinct phases: Identify this phase involves a high-level application of strategic sourcing to identify improvement opportunities and to develop a Category Plan for each category Develop this phase involves an in depth application of strategic sourcing to develop sourcing strategies for categories that are high cost and of strategic importance to the Council Deliver - this phase will more often involve the application of traditional procurement tendering and contracting although improvements may result from improved compliance with existing arrangements or new policy development Manage this phase will ensure new arrangements are adopted consistently and that benefits are delivered through effective contract management and by developing stronger supplier relationships 20 Commissioning and Procurement Strategy

21 Although Category Management will change how we manage all of our procurement activities and processes, the following three key value creating processes are explained in more detail within this strategy: Strategic Sourcing Collaborative Sourcing Supplier and Contract Management How It Will Deliver Value Category management is an approach to procurement that delivers improved value from the organisation s external spend on goods, services and works by challenging what the organisation buys (demand) and improving how it is bought (supply). It will deliver savings from better procurement by ensuring there is greater: Knowledge of the supply market Understanding of business need Connection between strategy, commissioning, tendering, contracting and contract management Ownership for post contract adherence and compliance Attention to contract management and driving value for money Leadership in innovation in procurement The approach ensures spend is aggregated across the organisation, which allows the opportunity for price reduction through volume leverage. In Cardiff, like most local authorities, our external spend is very diverse with high levels of spend across all Service Areas. We have recently segmented all of the Council s expenditure into categories based on six discrete market-facing areas: Social People and Professional Services Construction and Special Projects Environment Transport & Facilities Management Corporate & ICT Over the next three years all spend categories will be reviewed by a crossfunctional team of Procurement and Service Area specialists to identify and implement the optimum sourcing strategies and improvements for that category. Commissioning and Procurement Strategy

22 3.3 Strategic Sourcing We will ensure that sourcing strategies are based on a full understanding of business need and market analysis How We Define Strategic Sourcing Strategic Sourcing is the key process at the heart of category management. It is used to actively challenge current practices, and to stimulate the creative and innovative thinking that will generate value. By using cross-functional teams we will develop and deliver categoryspecific sourcing strategies based on an understanding of our business needs and market analysis. The Chartered Institute of Purchasing and Supply (CIPS) define strategic sourcing as: satisfying business needs from markets via the proactive and planned analysis of supply markets and the selection of suppliers with the objective of delivering solutions to pre-determined and agreed business needs How It Will Deliver Value Our strategic sourcing process identifies a number of drivers (or levers) which aim to deliver improved value. These levers are split into demand side and supply side: Demand Side levers focus on understanding and managing demand better Supply Side Levers focus on optimising the Council s position in the market place and working with suppliers to minimise the overall supply chain cost whilst increasing value delivered 22 Commissioning and Procurement Strategy

23 The following table contains the key Demand Side and Supply Side Procurement levers. LEVER DESCRIPTION Supply Side Demand Side Buy less or eliminate spend Standardise or change specification Substitution Aggregate or Bundle Spend Change Nature of Supplier Relationship Understand Total Acquisition Cost To reduce or eliminate non-essential spend will deliver immediate reductions in cost. To consolidate all possible specifications, product types and ranges, scope of service etc to reduce expenditure across a category and channel demand to lower cost options To substitute key products, services etc with suitable lower cost contracts / suppliers / products or service ranges to reduce overall expenditure Bringing together all of the organisation s spend on a particular category. Collaboration across the organisation and with the wider public sector when appropriate Ensure the right supplier relationship for each specific category with focus on supplier relationship management and outcomes to deliver added value such as improved productivity, service quality and innovation Determine key cost drivers to each element including: supply chain costs, in-house transaction costs, failure costs, supplier value chain costs. Obtain overall cost transparency for products and services. Develop strategies with suppliers to reduce and manage each element 5 Commissioning and Procurement Strategy

24 3.4 Collaborative Sourcing We will ensure that collaborative opportunities are used where they add value and positively contribute to the Council s priorities How We Define Collaborative Sourcing Collaborative Sourcing involves working jointly across public sector bodies to create additional value in the procurement process. We see collaborative sourcing as a key aspect of our strategic sourcing process with expectations to increase the number of future collaborative contracts. Collaborative Sourcing is a key objective for Value Wales, the Welsh Government s procurement arm, who have developed the following vision for the future of procurement in Wales which was endorsed by the Efficiency and Innovation Procurement Board. We will transform public procurement in Wales to world class collaboration, leading changes which improve public services and drive economic renewal. 3 3 Buying Smarter in Tougher Times, Conclusions and Recommendations of the Efficiency and Innovation Board Procurement Taskforce, February 2011 How It Will Deliver Value We will continue to actively contribute to the collaborative agenda in Wales, through the Welsh Purchasing Consortium, to ensure procurement opportunities are progressed through the aggregation of buying power and opportunities to share resources. There are three key ways in which collaborative sourcing can benefit the Council: More competitive pricing as a result of greater economies of scale by aggregating common and repetitive spend across a number of organisations both at a national, regional and local level More effective use of scarce procurement resources by reducing unnecessary duplication of activity Sharing of knowledge, expertise and documentation to ensure good practice is followed 24 Commissioning and Procurement Strategy

25 3.5 Supplier and Contract Management We will ensure that relationships with suppliers are managed in accordance with their strategic importance How We Define Supplier and Contract Management Contract Management is the process which ensures that both parties to a contract fully meet their respective obligations as efficiently and effectively as possible, in order to meet the business and operational objectives required from the contract and in particular to provide value for money. Supplier Relationship Management is focused on building relationships and working with our suppliers and contractors to deliver continuous improvement to the benefit of both parties. How It Will Deliver Value Once the procurement procedure has been completed and a contract has been let, it is important that the contract is effectively managed, particularly where the contract is complex and / or high risk. This involves rigorous performance measurement and regular meetings between internal customers and contractors supported by the Commissioning and Procurement Service. Good contract management means becoming an intelligent customer with a solid understanding of the contract, business requirements and cost drivers, and becoming a customer of choice. We will continue to work with our suppliers developing a more structured approach to Supplier Relationship Management (SRM) in order to identify opportunities for improvement and efficiencies by understanding the operation and management of their businesses. Some of the outcomes from effective SRM include: The reduction of joint costs Identification of wider supply chain issues and opportunities Greater integration of operations Ongoing benchmarking to ensure competitiveness Potential for open book accounting arrangements Commissioning and Procurement Strategy

26 Part 4 Enabling Value 4.1 Organisational Structure and Alignment We will ensure that the organisation is aligned to deliver value Why This Is Important To create value, we must be able to design, shape and develop services and the market which delivers them. Implementing commissioning and category management across all of the Council s spend will help the organisation to meet these aspirations. In order that the Council can support and deliver this change, it needs to be restructured to align roles and responsibilities, both within the Commissioning and Procurement Service and across Service Areas. Alignment should support the new processes and ensure that both the capacity and capability is in place to support their implementation. Where We Want To Be We want: The Commissioning and Procurement Service to have the authority, capacity and capability to influence across all of the Council s spend on bought-in goods, services and works. We want to work in collaboration with service areas to understand, support and respond to their business need but will also challenge needs identification and sourcing arrangements The Executive, Corporate Management Board and Senior Leadership Team to actively support and champion our corporate approach to commissioning and procurement and provide strong leadership at all levels to drive organisational change Ownership, engagement, buy-in and support for the category management programme from senior executive level down, with cross-functional resources available and prioritised How We Intend To Get There We will: Promote a Commissioning and Procurement Strategy which supports the Council s Corporate Plan and is fully integrated into wider corporate policy Ensure that the Executive, Corporate Management Board and Senior Leadership Team actively support a corporate approach to commissioning and procurement, ensuring the Council obtains benefits delivered through the application of effective and best practice commissioning and procurement to all areas of significant spend Build capacity and capability to support a modern, strategic approach to commissioning and procurement, and to position the Commissioning and Procurement Service as the recognised centre of expertise Ensure that devolved commissioning and procurement resource is co-ordinated and supported and that relationships with all internal customers, including schools, are developed and maintained. 26 Commissioning and Procurement Strategy

27 4.2 Partnering and Collaboration We will ensure that we proactively develop effective partnerships across the public, private and third sector Why This Is Important Partnering is the creation of sustainable, collaborative relationships with suppliers, service providers and contractors in the public, private, social enterprise and voluntary sectors to deliver services, carry out major projects or acquire supplies and equipment. The partnering approach can lead to better designed solutions, access to new and scarce skills and community benefits. Working in collaboration with other public sector organisations is recognised within Wales as key to supporting more effective commissioning, procurement and service delivery. Value can be delivered by combining buying power, jointly procuring or commissioning goods, services or works or creating shared services. Where We Want To Be We want: Appropriate partnerships and collaboration agreements in place where they best help deliver better services to citizens To be seen as a centre of excellence within the Welsh Public Sector for local authority commissioning and procurement To act as the procurement lead on specific commodity areas on behalf of external public bodies To support the use of the collaborative opportunities offered via the Welsh Purchasing Consortium and Value Wales How We Intend To Get There We will: Develop sustainable partnerships between the Council and suppliers in the public, private, social enterprise and voluntary sectors where they can help deliver better services to citizens Continue to actively collaborate with public sector organisations and bodies including the Welsh Purchasing Consortium and Value Wales where they can help deliver better value through combined buying power and creation of shared services Share knowledge of markets, suppliers and innovation across the public sector Commissioning and Procurement Strategy

28 4.3 Core Processes and Controls We will ensure that processes are easily understood, simple to follow and reflect best practice and appropriate levels of governance Why This Is Important Where We Want To Be How We Intend To Get There If we are to deliver value for money citizen focussed services, which comply with our legal obligations and support our commitment to sustainability and equalities, it is essential that our commissioning and procurement processes and controls are designed to achieve these goals. By designing commissioning and procurement processes which can be easily understood and are simple to follow, the Council will create the conditions to make it easy for staff to comply. We want: A coherent and consistent set of core processes and controls which support delivery of the key strategic priorities of the Council and are aligned to the Council s strategy, policy and procedures Our processes and controls to be clearly documented and communicated to ensure all staff have a full understanding of what is expected from them Our processes and controls to be simple and efficient but with levels of control appropriate to the value and risk The Commissioning and Procurement Service, with the support of the wider organisation, to create the conditions for a culture of compliance We will: Map, evaluate and re-design the key Council commissioning and procurement processes and controls to ensure they are efficient, effective and consistent across the Council, taking account of relevant external guidance Design and implement a toolkit of templates and guidance which is easily accessible to ensure they are adopted consistently across the Council Implement new processes based on the latest technology to support faster and simpler purchasing transactions 28 Commissioning and Procurement Strategy

29 4.4 Effective Use of Technology We will ensure that technology will be used to simplify processes and deliver efficiency with greater transparency Why This Is Important Where We Want To Be How We Intend To Get There Technology has a key role to play in delivering efficiencies in the procurement cycle for both the Council and its suppliers. It plays a key role in improving control and managing compliance and enables the capture of management information which is critical to support category management and strategic sourcing. e-procurement is the collective term for a range of technologies that can be used to automate the internal and external processes associated with all aspects of procurement. This will range from technologies such as web-based catalogues and procurement cards which support day-to-day buying through to complex applications which support tendering and contract management. We want: To continue the development and exploitation of e-procurement to improve efficiency and reduce transaction costs for both the Council and its suppliers Our systems to effectively provide management information and support compliance with procurement procedures, policies and contractual arrangements Staff to be supported, through learning and development opportunities, to understand and utilise the technology available to support their roles An integrated and joined up approach to systems and technological solutions to improve efficiency and effectiveness across the supply chain lifecycle We will: Define the business requirements of commissioning and procurement and combine them with those from the wider organisation to develop an Enterprise Architecture which supports the needs of the Council as a whole Develop and implement an e-procurement Strategy which supports the delivery of the Commissioning and Procurement Strategy Work with suppliers to promote adoption of e-procurement tools to eliminate paper based information and reduce transaction costs 5 Commissioning and Procurement Strategy

30 4.5 People Capability and Development We will ensure that our people are provided with the skills and knowledge necessary to support the new ways of working Why This Is Important Where We Want To Be How We Intend To Get There A key aspect in delivering effective commissioning and procurement is ensuring that all Council officers involved have appropriate skills, knowledge and competence to support the processes and procedures which are designed to support the new ways of working. Category management and the associated responsibilities of the Category Managers are very different to the traditional procurement approach and will require a wider skill set, including an ability to influence senior officers within the Council. However, we will need an ongoing programme to support all staff involved in commissioning and procurement activities. We need to enhance talent, develop and retain people with the capability to deliver strategic direction to ensure successful delivery of Commissioning and Procurement vision and strategy. We need to recognise that on occasions we may need to bring in specialist expertise to support Council staff. We want: To define a clear statement of skills and competencies required to perform the roles and responsibilities within commissioning and procurement. Council staff involved in commissioning and procurement to possess the appropriate level of skills and competencies required to successfully perform their role To ensure that staff involved in commissioning and procurement activities are supported by the organisation to develop the professional skills and competencies required to successfully deliver commissioning and category management We will: Introduce a technical commissioning and procurement skills and competency framework which will identify the levels of knowledge, ability, aptitude and attitude required to manage and perform the activities within Commissioning and Procurement processes Perform a staff impact assessment to understand the development requirements of individuals Develop a plan to address any capability gaps and support staff in developing the skills and competencies required by a combination of training, learning and development events 30 Commissioning and Procurement Strategy