Procurement Strategy. Homes for Haringey

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1 Procurement Strategy Homes for Haringey Achieving value for money should always be a priority for government, and it is never a finished process. Challenging economic circumstances impact directly on the public finances, and mean that the current drive for efficiency will be important to supporting continued improvement and investment in frontline services. This new operating environment comes after more than a decade of record levels of investment in public services. Some efficiency savings take time to deliver, requiring changes to contracts or major restructuring of services. That is why it is right to look ahead into the next spending review period as well as looking for short-term savings. (Source: Operational Efficiency Programme, Final Report 2009) 1. Introduction... Page 2 2. Background and Achievements Page 3 3. Strategy Review. Page 4 4. The Future Aspirations for the Next Five Years Page 6 5. Aspirations in Action. Page 7 Appendices to Strategy Appendix 1 Action Plan for Procurement: Years 1 and 2 Appendix 2 Larger Procurement Projects to be completed in Appendix 3 Current Situation Appendix 4 List of Procurement Team Authorities 2010 (to be completed) Appendix 5 Function of the Procurement Team (to be completed) Appendix 6 Key Performance Indicators Appendix 7 Tender Flowchart Appendix 8 Value for Money Reporting Homes for Haringey Limited: Procurement strategy 1

2 1. Introduction 1.1 Homes For Haringey Homes for Haringey Ltd was set up in 2006 by Haringey Council as an Arms Length Management Organisation (ALMO) with the aim to manage over 21,000 tenanted and leasehold homes. The procurement activity is integral part of the organisation s business and is delegated across the service departments Procurement occurs in cases where commercial transactions result in acquisition of goods, services and works from third parties. The concept of public procurement relates to the fact that Homes for Haringey Ltd is a public service organisation and its employees spend public money, consequently the organisation is required by law to comply with EU procurement directives and UK regulations in relation to the way it spends public funds. Public procurement is about Compliance, Risk and Cost Reduction Scope of this Strategy This strategy applies to staff with procurement responsibilities, budget holders, Executive Management Team and Senior Managers at Homes for Haringey, and anybody who by virtue of their professional position carry out procurement activity, or is a stakeholder to whom procurement is accountable, e.g. residents This strategy refers to any spend with third party providers funded by Homes for Haringey s management fee Relationship of Procurement Strategy to HfH Vision and Business Plan Homes for Haringey s vision is to be an outstanding provider of housing management services. To realise this vision the Executive Management Team have identified the role that Procurement must fulfil and the contribution and benefits this will bring to the organisation The effect of this role, and the impact of this strategy, will be to ensure leadership in all strategic and significant Procurement activities. This strategy will: facilitate the introduction of procedures to ensure that Procurement is regulatory compliant; will mitigate Risk and deliver consistent Value for Money. The supply chain will reflect Homes for Haringey s commitment not only to Sustainable Development but also for safe, healthy, working practices enjoyed by equal and diverse workforces This focus on Procurement will ensure that in-house personnel concerned with non strategic and transactional purchasing are advised and guided as to the most appropriate routes to market to ensure Value for Money is achieved. This may be by use of existing Haringey Council collaborative contracts, participation in other collaborative Framework Agreements negotiated by the Office of Government Commerce (OGC), or other recognised collaborative purchasing organisations or by benefiting from Homes for Haringey s devolved position to undertake specific procurements on their own behalf. Homes for Haringey Limited: Procurement strategy 2

3 1.3.4 The objective of this strategy is to shape the future activity of Homes for Haringey s Procurement to ensure achievement of the Vision. 1.4 Value for Money More than any other department Procurement must demonstrate that Value for Money has been achieved. In practical terms this necessity to concentrate on how the money is spent must be driven by a clear analysis of where the money is spent in relation to Homes for Haringey s Business Plan, market conditions, suppliers and spend categories. 2. Background and Achievements 2.1 Haringey Council Procurement Service Over the period the procurement activity was supported entirely by Haringey Council s Corporate Procurement Unit (CPU). CPU led the repairs and maintenance services procurement project on behalf of Homes for Haringey Client Department. CPU also directed a range of procurements within Homes for Haringey Design and Engineering Service. To date Homes for Haringey continues to procure most of the common goods and services using collaborative contracts originally set up by Haringey Council CPU. 2.2 Internalised Procurement Service In 2009 as a result of a Value for Money review a Procurement Manager post was created and filled to provide advice and support in an operational environment which has increasingly become more and more regulated. Over the period procurement has played a significant role in increasing value from external services. 2.3 Procurement Projects completed in Replacement of Fleet of Vehicles for the Repairs Service This was a further competition drawn from collaborative Framework Agreement. A contract was awarded at the level of approximately 7m over a period of four years. The market testing led to a saving of 900,000 compared to the previous contract which represents per cent saving. This procurement contributed to cost avoidance of 720,000 enabling the business unit to keep within budget Introduction of e-procurement card for fuel As a high volume, low value commodity, fuel was a suitable supply for e-procurement cards. This e-procurement card was introduced following an award from Procurement for Housing Single Supplier Framework Agreement. In addition to financial savings there have been significant process and environmental benefits Voids Subcontractors Repairs and Cleaning Services An EU tendering process was completed to support the Vacant Properties Repairs and cleaning services at 1.3 mln annual value and a multi-supplier Framework Agreement was awarded across three areas of activity. If contractors are used to the same level as previously the annual savings are up to 258,000. Homes for Haringey Limited: Procurement strategy 3

4 This project achieved a major supplier rationalisation by reducing significantly the number of suppliers used and exercised supplier leverage in that existing suppliers retained level of business at significantly reduced prices. It is considered that the use of an e- Auction necessitated further price reductions by the suppliers Stores Options: Procurement Analysis of Stores Operation Stores analysis identified areas of improvement of the in-house stores operation and materials sourcing. If the project is undertaken by the business, the savings generated on spend of 1.742m will be between 186k and 226k in year one, and 148k pa thereafter Spend data analysis and carbon audit Homes for Haringey were the first ALMO to undertake spend data analysis and have ongoing access to the Observatory database for up-to-date elaboration on spend. This facilitates the rapid interrogation and graphical presentation of all aspects of Homes for Haringey s spend data. The spend data analysis will also provide a carbon audit which will define the carbon foot print of the suppliers used by the organisation and the actions necessary to reduce the carbon impact of the business on the environment Introduction of e-procurement systems at Homes for Haringey Ltd and transforming tendering activity to e-tendering A range of e-procurement tools have been introduced in the business. These tools will generate both cashable and non-cashable efficiencies including environmental benefits contributing to Homes for Haringey s green agenda. E-notice, e-tender, erfx and e-auction tools have been introduced in the service and are currently utilised by relevant staff. 3. Strategy Review 3.1 This Procurement Strategy covers the period Reviews will be undertaken annually to reflect not only achievement of objectives but also changing market conditions, government policies and other factors, presently unforeseen, which will impact upon the strategy. 3.2 Major principles The following major principles are deemed inherent within and to the application of this strategy All aspects and actions consequent with the implementation of this Procurement Strategy, both internal and externally facing, will be undertaken in accordance with and strict adherence to Homes for Haringey s principles and policies in respect of: equality and diversity sustainability value for money continuous improvement through innovation and lean structures and systems stakeholder involvement (tenants and leaseholders) Homes for Haringey Limited: Procurement strategy 4

5 3.3 Current Situation In the last full financial year Homes for Haringey did business with 325 trade suppliers, spending approximately 17.9M, which equates to 68% of the management fee. Suppliers based within the London Borough of Haringey accounted for 8.48% of the spend. Please see details in Appendix There is significant duplication of resources in both purchasing processes and authorities. The impact of these duplications is to obscure inefficiencies and the failure to maximise purchasing power, supplier leverage or achieve full Value for Money The lack of a central contract database prevented a number of tenders being subjected to the full tender process; consequently Value for Money will not have been achieved The successes of the procurement projects undertaken within 2009 / 10 demonstrated the benefits which can be enjoyed by the move away from the existing, traditional tender process and the adoption of E-procurement and the creation of a partially centralised procurement function. In addition to the financial, cashable savings realised to date the new technology and procedures introduce a unified tendering process which not only sets out a consistent, methodical approach it will also produce non-cashable savings, in respect of process efficiencies, and environmental benefits resulting from the significant reduction in both paper and other stationery products. Homes for Haringey Limited: Procurement strategy 5

6 3.3.5 Strategic procurements to be undertaken within the next financial year are shown at Appendix The Future Aspirations for the Next Five Years 4.1 Procurement will be recognised as a leading contributor to the Homes for Haringey vision. 4.2 The prime objective to ensure regulatory compliance in all Procurement activity will be achieved. No challenges will be made as a consequence of the Remedies Directive which came into force on 20 December No Contract Awards will be deemed ineffective or set aside, no financial penalties, or delays incurred as a consequence of Homes for Haringey Procurements being challenged by unsuccessful bidders. 4.3 Homes for Haringey s objectives, reflecting Government Policy in respect of Value for Money and Sustainable Procurement will continue to deliver both financial and non financial benefits. 4.4 The strategic approach adopted to the reduction of costs, the increase in value and obtaining more for less will deliver significant financial benefits. All targets for cashable savings and cost avoidance will be achieved or surpassed. 4.5 The Procurement Team will have been self financing since formation. 4.6 Systems will be implemented for professional operation of a partly devolved, partly centralised procurement function. 4.7 Waste levels will be significantly reduced and the ongoing practice of the doctrine Reduce, Re-use, Recycle will continue to deliver environmental benefits and reduce Carbon Footprint further. 4.8 The 2010 Inspection will identify procurement within Homes for Haringey as having demonstrated Significant Prospects for Improvement. 4.9 The rationalised and reduced Supply Base will continue to supply goods and services of the required quality at competitive prices. All Contracts will be procured utilising E-procurement methodologies The Supply Base will reflect the demographics of the London Borough of Haringey and will comprise SME s, BME s, larger organisations, the voluntary sector and Partnerships. All suppliers will endorse and practice Homes for Haringey s policies and principles in respect of Equality and Diversity. Personnel will work in safe, healthy environments The Supply chain will sponsor and administer training schemes to assist the unemployed return to the workplace Suppliers will adopt and implement measurable continuous improvement programmes. Homes for Haringey Limited: Procurement strategy 6

7 4.13 Our supply partners will be accredited to specific oversight organisations such as Constructionline / CHAS (Contractors Health and Safety Assessment Scheme) to ensure ongoing compliance with Health & Safety and other applicable legislation. Homes for Haringey require suppliers not only to work in a safe manner but also to have employee safety in mind at all times. Our Suppliers will be encouraged to achieve OHSAS18001 certification Suppliers will be encouraged to achieve recognised external Quality Standards. e.g. ISO Our suppliers will be encouraged to implement appropriate environmental policies, ISO14001 or BS8555. The resulting benefits of these policies will be publicised to encourage other companies to adopt similar policies Homes for Haringey will work with the supply chain to implement the Sustainable Procurement Agenda making them aware of the needs and benefits the introduction of these policies will bring to all Homes for Haringey will undertake an extensive audit programme to address all aspects of a supplier s business in line with the Value for Money Strategy Existing Service Level Agreements, with both external organisations and London Borough of Haringey will be reviewed through Best Value and principles of efficiency, effectiveness and economy. 5. Aspirations in Action 5.1 People Forming and resourcing a procurement team with the necessary skills and attributes will be the first priority. Appendix 4 contains the relevant authorities and Appendix 5 functional responsibilities The strategy will be communicated to stakeholders by undertaking training events, briefing sessions and publications on website. Homes for Haringey Procurement Code of Practice will be developed as an operational tool for staff on procurement. Please see Appendix 7 for Homes for Haringey Tender Flowchart. 5.2 Processes Introduction of a consolidated contracts register and procurement calendar will enable procurement to have sight of, and address any issues to ensure compliance with procurement legislation Homes for Haringey will undertake a range of actions on the development of a procurement infrastructure and processes governing the relationships between procurement and users. This will reduce the number of authorised procurers and result in greater control and oversight of spend These actions will also include category management to comply with aggregation rules, the organisational wide roll out of e-procurement Homes for Haringey Limited: Procurement strategy 7

8 tools and systems for tender management, contract management; and Purchase-to-Pay systems The procurement transformation will include actions such as introducing p-cards where appropriate. Efficiency savings will also be achieved by reducing the number of purchase Invoices currently processed. The introduction of Fuel Cards has already shown the impact this technology can achieve. The wider introduction of Purchase Cards will not only further rationalise supplier base but also further generate non-cashable and environmental benefits. 5.3 Providers In accordance with the EU regulations our providers will be sourced by way of competitive tendering processes undertaken by Homes for Haringey, or other public sector bodies such as Office of Government Commerce, Haringey Council, Procurement for Housing, etc Homes for Haringey will investigate and wherever possible, involve the voluntary sector Homes for Haringey will investigate opportunities for entering into Partnering Contracts where it is considered they will deliver long-term benefits Rationalisation of the supplier base will provide greater opportunity for suppliers to develop strategically and subsequently to ensure maximum value is obtained from these strategic suppliers We will communicate with our suppliers to increase their understanding of our sustainable development, best value and equality objectives Suppliers who currently generate an excessive number of purchase invoices will be approached to provide consolidated monthly invoicing Regular reports on performance against key performance indicators will be provided (see Appendix 6) Value for Money Reports will be provided (see Appendix 8) The action plan, attached at Appendix 1, will be implemented. 5.4 Perceived Risks Non-compliance for challenges Failure to resource, both financial and human resources Lack of suitable working environments Stakeholder acceptance of strategy Expedience supersedes procedural and regulatory requirements Changes in government policy impacting on housing management services Homes for Haringey Limited: Procurement strategy 8

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