PROCUREMENT STRATEGY MAKING THE CHANGES MAXIMISING VALUE

Transcription

1 PROCUREMENT STRATEGY MAKING THE CHANGES MAXIMISING VALUE Page 1 of 29

2 CONTENTS INTRODUCTION 3 1 ABOUT THIS STRATEGY 1.1 SCOPE IMPORTANCE TO THE COUNCIL STRATEGY PURPOSE STRATEGIC CONTEXT REVIEW PROCESS 6 2 OPERATING ENVIRONMENT 2.1 CORE PRINCIPLES DUTIES AND POWERS PUBLIC PROCUREMENT POLICY & LEGISLATION ROLE OF MEMBERS ROLE OF THE COUNCIL MANAGEMENT TEAM ROLE OF SERVICES ROLE OF CORPORATE PROCUREMENT BASELINE PROGRESS PROCUREMENT EVOLUTION 11 3 MOVING FORWARD OUR DELIVERY THEMES 3.1 INTRODUCTION ACHIEVING STRATEGIC AIMS & POLICIES MINIMISING COST & MAXIMISING VALUE ORGANISATIONAL PROCUREMENT STRUCTURE, SYSTEMS & SKILLS EXTERNAL COLLABORATION SOUND GOVERNANCE & PRACTICE CUSTOMER SERVICE & PERFORMANCE 21 APPENDIX A GLOSSARY 24 APPENDIX B STIRLING COUNCIL S SPEND PROFILE 26 Page 2 of 29

3 INTRODUCTION This Procurement Strategy builds on the Council s previous strategy, and aims to develop further the Council s procurement capacity and capability. The main message to be taken from this Strategy is that Procurement is changing. Not what we do, but how we do it. The Council needs to use new tools, techniques and approaches to meet these new challenges. This Strategy identifies new ways to support procurement activity within Services in this more challenging economic environment. This Strategy impacts on everyone involved in procurement activity. It affects: Members, when considering contract award recommendations and taking contract award decisions The Chief Executive, Assistant Chief Executives and Heads of Services, when considering proposals to improve procurement performance or taking decisions on how and where to spend public money Service Managers, when taking decisions on where public money will be spent and if it needs to be spent at all All Council officers undertaking tender and RFQ exercises All Council officers placing purchase orders or making payments on behalf of the Council The Strategy does not represent any major change of direction in the Council s approach to Procurement. The Strategy does, however, recognise that there is now a more challenging external environment impacting upon procurement activity and outcomes. New opportunities exist through the Scottish Government s Procurement Reform Agenda, while the current economic climate challenges our capacity to reduce costs. A more collaborative approach, both internally and externally, will be critical, if the Council is to meet the economic challenges ahead. Page 3 of 29

4 1 About this Strategy This section sets out the scope of this strategy and summarises why it has been produced. 1.1 Scope Procurement concerns the acquisition, management and disposal of all influenceable 1 goods, works and services. In financial terms this is equates to revenue and capital spend averaging 100M per annum and this is typically the second largest annual item of spend outside employment costs. The breadth of services and equipment purchased each year is extensive with 44% of total spend being spent on social care provision and education. Managing this portfolio requires skill and expertise: financial resources are growing ever more scarce and services provided by the Council remain critical to many members of the local community. A brief summary of the Council s procurement business metrics is attached at Appendix B. Although the complexity of the Council s spend portfolio varies considerably (e.g. the skills needed to construct a new school are somewhat more complex than acquiring office furniture) the processes used are very similar. Figure 1 shows the main common activities that are undertaken to some extent or another for any procurement process. Identify Need (Output Based) Commercial Assessment Solution Provision Make or Buy) Tendering and Contracts Relationship Management Figure 1 Main activities in the Commercial Cycle 2 These activities set the scope for this strategy and also determine the types of policies that will be needed to achieve the goals that we have set in this strategy. 1.2 Importance to the Council Procurement is not just about routine purchases. Most of the annual 100M spend goes to the provision and maintenance of: Key infrastructure for Stirling, such as all buildings, roads, housing and communications Front line services, such as care provision, street cleaning, waste collection, recycling and libraries Supporting equipment and services, such as translation services, ICT, books, materials to maintain the infrastructure, and vehicles Utilities, such as electricity, gas and water 1 By influenceable we mean where the cost, quality, service level or trading process can be affected by human intervention. Excluded are items such grants, precepts, pension contributions, taxation and staff expenses 2 Often referred to as the Procurement Cycle Page 4 of 29

5 The importance of this to Stirling Council can be summarised as contributing to: Service Outcomes the quality and frequency of what is delivered to local people set against increasing demand in many areas and changing demographics Cashable Savings to limit council tax, operate within a decreased financial settlement and avoid waste and duplication of effort Use of Resources funding new projects and improvements from within constrained budgets while maintaining and improving standards in areas such as care provision and educating our young people Local economy the amount of money spent with suppliers in the local economy through a coordinated and consistent approach to local businesses particularly in the current economic climate Sustainability working with providers to ensure continuing improvement in the quality of the environment and use of scarce resources The local economy features as a distinct priority for the Council in its Strategic Plan (Single Outcome Agreement 3 ). In addition, in a time of reducing budgets, effective procurement outcomes have become even more critical. 1.3 Strategy Purpose The recognised importance of making the most of the Council s third party spend and taking the right decisions to achieve the right outcomes means that that we need a dynamic strategy for ensuring there is a clear framework for achieving a continuous programme of improvement and value. This is because the Council needs to be able to respond quickly and proactively to economic, social, legislative and political factors and policies as they change. Even since the Council produced its first procurement strategy in 2006, the policy outcomes required from procurement activity have rebalanced, with a much greater focus on cost than had previously been the case. 1.4 Strategic Context This Strategy has to be capable of adapting to changes of policy, technological advances and the resource constraints of an operational business. It is an important component of the Council s overall strategic policy framework with direct links to the Single Outcome Agreement, Strategic Plan and other key documents. The external environment has a critical impact on our strategic approach. The overall budget position is challenging, and the Council s supply chain is likely to remain under significant pressure from increased raw materials costs and inflation. This will increase cost pressures on the Council. The Strategy also defines the Council s plans in relation to the National Procurement Improvement Programme, as identified through the Scottish Procurement and Commercial Directorate (SPCD). 3 This covers six main topics all related to Stirling s future development Page 5 of 29

6 1.5 Review Process Although it covers the period , this Strategy will be reviewed annually by the Corporate Procurement Team to ensure that it continues to be relevant to the needs of the Council and its residents. The results of the Procurement Capability Assessment carried out on behalf of the Scottish Government will feed into that annual review, as will any reviews of the Council s Single Outcome Agreement and other strategy documents. As a dynamic document, the Council will ensure that its contents and goals are publicised at all levels where procurement activity is undertaken. It is only through ownership by those involved in decision making that the main policies will be successfully realised. Page 6 of 29

7 2 Operating Environment This section summarises where the Council are at operationally and what has been achieved with procurement since the first procurement strategy was approved in Core Principles Public procurement is based on four basic principles: Transparency - The reasons for procurement decisions must be clear for all to see Accountability - Public bodies are accountable for the decisions they make when spending public monies. This principle requires that decision-making can be audited to ensure consistency with other principles and that any potential conflicts of interest are avoided Fairness - All parties involved in procurement decisions must be treated fairly, with no potential supplier being treated either more or less favourably than any other potential suppliers. This also means that contract opportunities must be advertised widely enough to ensure that genuine competition between suppliers is possible Proportionality - The requirements made of potential suppliers must be on a scale which is consistent with the type and size of the contract opportunity. 2.2 Duties and Powers The Council holds key duties and powers that directly impact on its procurement activity: Achieving Value Taxpayers and electors expect their contributions to be spent wisely and with due regard to achieving value for money rather than necessarily getting the lowest price. This allows consideration of both cost (in the sense of whole life costing 4 ) and quality (in the sense of fitness for purpose) to be the joint drivers of procurement decision-making. Community Well-being The Council has a power of community well-being, which derives from the Local Government in Scotland Act This allows the Council to seek outcomes from its procurement activity that promote community well-being, where this is relevant to the procurement requirement under consideration. 2.3 Public Procurement Policy and Legislation Public procurement operates in a regulated environment that is governed by legislation and policies set internationally by the European Union as well as by the Scottish Government Role of the European Union The EU Consolidated Public Procurement Directive was adopted into UK law on 31 January The Directive gives detailed instructions on how public procurement exercises should be carried out, and also identifies practices that are inappropriate. These instructions are complex, and continue to evolve through new case law. In December 2009, the Remedies 4 The total cost of an item / asset over its working life. Elements will include purchase price, purchase to pay cost, operating cost, maintenance cost and disposal cost. Page 7 of 29

8 Directive was also adopted into UK law and set out further procedures for handling public procurement exercises, including the remedies available to potential suppliers when a contracting authority has not respected the legislative requirements. Broadly speaking, although the basic rules are unchanging, interpretation and case law are constantly evolving. This means that public procurement is carried out in a dynamic environment that requires practitioners to be well informed and trained to minimise the risks of appointing ineffective suppliers and / or suffering legal challenge. Failure to adhere to the provision of the EU Directive can result in the Council becoming subject to Court action or enforcement action by the European Union. Access to funds available under the European Regional Development Fund or from the European Investment Bank may also be adversely affected for the Council as a whole if persistent breaches occur Role of the Scottish Government Responsibility for procurement policy is a responsibility devolved to the Scottish Government. The Scottish Government has made significant strides with developing best practice procurement since the publication of the McClelland Review in 2005 and the creation of a dedicated core team (Scottish Procurement and Commercial Directorate - SPCD) to transform the Scottish procurement landscape. The SPCD is responsible for procurement policy and guidance in Scotland, and its publicly stated objectives are: Capability - To ensure that procurement activity and decision-making is conducted to the highest possible standard; effort is not duplicated; and that resources are allocated where they are most needed. Competitiveness- Scotland is seen as a good place to do business by making it as easy as possible to compete for public sector contracts, particularly for Small, Medium Enterprises (SMEs). Capturing Savings and Benefits - Procurement across the public sector delivers further, real and lasting benefits on the ground. Coverage - Improved procurement has the widest possible coverage across the Scottish public sector. Collaboration - The Public Sector is working collaboratively, ensuring that effort is not duplicated, that best practice is shared and we learn from each other. Corporate Social Responsibility - Procurement activity and the activity of those awarded public contracts conform to robust ethical standards and contributes fully to sustainable development. Communications - Greater awareness of how procurement contributes to public services making the best use of public money and on helping the Scottish Government achieve its overarching purpose of sustainable economic growth. As well as this role, the SPCD also acts as a Single Point of Enquiry for suppliers wishing further advice on procurement legislation and policy, as well as a complaints process should they wish to challenge procurement decisions. Page 8 of 29

9 Although the SPCD is technically advisory, the Council, along with all other Scottish public bodies, support its objectives and work at a local level to ensure the best possible local implementation Role of Procurement Scotland Procurement Scotland is the National Centre of Expertise for public sector procurement in Scotland. The Centre leads on national contracts covering all of the public sector. The Council makes use of a number of these contracts, including Postal Services, IT Hardware and Utilities Role of Scotland Excel Scotland Excel was established on 1 April 2008 as part of the overall central procurement reform programme. Its primary purpose is to lead the development of collaborative contracts and facilitate improved procurement practices within the local government sector. This role includes undertaking Procurement Capability Assessments (PCA 5 s) on behalf of the SPCD, which are designed to ensure continuous improvement across the whole of the public sector, measured against common standards. Stirling Council is a member of Scotland Excel along with all other Scottish local authorities. The Council uses Scotland Excel contracts unless there are compelling commercial or political reasons for not doing so. The contract portfolio, at present, mainly relates to routine commodity items. As Scotland Excel develops its more strategic approach to procurement, it is likely that the proportion of Scotland Excel contracts utilised will increase. 2.4 The Role of Members Members have specific formal roles to play in Procurement, in addition to their role in setting strategy and policy for the Council. Members are formally informed of forthcoming tenders and RFQs through the weekly Members Information Bulletin. Members approve the Council s Contract Standing Orders (CSOs). As detailed in the CSOs, Members have a formal role in awarding contracts on behalf of the Council. Generally, Approval to Accept a bid lies with the Executive (for contracts valued at over 250,000) and the full Council (for those valued at over 1 million). With some exceptions, responsibility is delegated to officers for lower value contracts. All contract awards valued at over 10,000 are also reported in the Information Bulletin. A Member also represents the Council on the Scotland Excel Board. 5 These are undertaken on an annual basis under eight major evaluation criteria. Page 9 of 29

10 2.5 The Role of the Council Management Team The Management Team have set up the Procurement Workstream as part of the Council s Change Programme. The Workstream is leading on the Procurement change programme and reports progress to the Management Team. 2.6 The Role of Council Services All budgets for third party spend are under the direct control of operational Services. Services are responsible for undertaking their procurement exercises and managing the resultant contracts. This is done within the Council s corporate policy and legal framework which governs the way all procurement exercises are undertaken and subsequent contracts let and managed. Depending on the requirement, transactions can vary from a simple transactional process, such as the on-line ordering of basic stationery supplies, to the complexity of a PPP project. 2.7 The Role of the Corporate Procurement Team In order to support procurement activity within Services, the Council has a well established Corporate Procurement Team 6 (CPT). The CPT is responsible for the strategic direction of procurement within the Council and for providing procurement guidance, advice and support to Services. The CPT has developed strong relations with all Services and influences an increasing proportion of Council spend, with plans to extend this to a majority of influenceable third party spend by the end of The CPT is staffed by well trained procurement practitioners who are positioned to add value to every stage of the Commercial Cycle. 2.8 Progress Since Approval of Previous Strategy The Council s first Procurement Strategy was approved in October 2006 and concentrated on six themes: Good Procurement Practice Effective Communication Minimising Costs and Maximising Value Achieving Strategic Aims through Procurement Collaboration Continuous Improvement The Council has made strong progress against each theme in the last five years at all levels in the organisation. Some of its macro achievements include: Achieving full commitment from the Council s Management Team Gaining active engagement from Services 6 Established initially in 2002 in the Environment Directorate but now reporting to the Head of Finance and Procurement. Page 10 of 29

11 Developing and undertaking a significant training exercise, for all Council staff involved in procurement activity Officers were trained in total in Purchase to Pay administrative processes in the full Commercial Cycle from inception to contract management Delivering over 4 million of recurring net cashable savings by 2010/11 where it has completed or been involved in contract renegotiations Introducing a highly successful Purchasing Card Programme which now processes 7.8 million of transactions per annum ( 9 million inclusive of VAT) Implementing Easybuy 7, the local implementation of the eprocurement Scotland system Opening up public procurement opportunities through advertising all contracts valued at over 10,000 on Public Contracts Scotland, the procurement portal for the Scottish public sector Taking an active role in collaborative procurement with partners including Scotland Excel, Procurement Scotland and the Joint Buying Arrangement 8 as well as identifying and building ad hoc collaborative procurement projects with HMRC and other public sector bodies in Scotland. As a result of these actions, Stirling Council remains one of a few Councils who have not yet had to defend a procurement decision in the courts. 2.9 Procurement Evolution Since our first strategy was produced in 2006, the financial climate in which the Council operates has changed significantly. As with most public bodies, the Council continues to face difficult decisions and hard choices which have involved the reduction of staff numbers and significant service redesign. This has meant that the Council has needed to become far smarter in the way it makes its main spending decisions. It is neither practical nor desirable to make decisions on the basis of the way things have always been done and always assuming that what was right in the past is going to be right for the future. As the procurement function within the Council evolves, the structure of procurement and the skill sets required across the Council must also evolve. While procurement might once have been seen as being about the acquisition of commodities and the management of processes, the reality is that the role is far more wide ranging, being an integral part of the activities that make up the commercial cycle that is set out at Figure 1. This change of emphasis, together with the financial climate, presents the Council with new and different challenges. It is how the Council understands and responds to these challenges that determine the content and direction of this revised strategy. 7 This is set up by the Scottish Government in 2002 using the PECOS system. It is being introduced by the Council on a phased basis with the goal of getting about 45M (over 40%) of the spend going through the system within 2 3 years. 8 A procurement partnership with Clackmannanshire, Falkirk and Stirling Councils. Page 11 of 29

12 3 Moving Forward Our Delivery Themes This section sets out the six delivery themes and is the Strategy core. Each theme is subdivided under definition, importance, current position, direction of travel, final destination and what success looks like. The last point also covers how success will be measured. 3.1 Introduction The first Strategy covered six main themes which are still relevant to any procurement organisation at an early stage of evolution. However, the environment in which this strategy is being implemented is not static which means that it is impossible to repeat these themes for ongoing comparative purposes. We have kept as closely to these themes as possible for the purposes of comparison, but have made changes to reflect the dynamic nature of the commercial environment and the levels of cultural and organisational change now being demanded across the UK public sector. More detailed information on operational activity, timings and objectives can be found in the following documents: Procurement Transformation Plan Category Management Model Team Make Up and Process Each of these documents, alongside the Corporate Procurement Team Service Plan , cross references with and supports this Strategy. 3.2 Achieving Strategic Aims and Policies Definition and Scope This is ensuring that this Strategy fully integrates with, and supports, the delivery of the Council s core corporate and business plans such as its Strategic Plan (Single Outcome Agreement). It also covers the implementation of specific policies where procurement decisions are likely to have a major input such as on the use of local suppliers/providers for economic regeneration, use of small and medium enterprises and sustainability. Why is this important? Procurement is not a standalone activity but encompasses a range of business activities and processes. While it is widely accepted that procurement decisions contribute directly to cost incurred, quality of outcomes and the use of the Council s internal resources, they also contribute indirectly in other areas including: the well being of local businesses which in turn determines the prosperity of the local economy the environment through carbon emissions generated by the Council s suppliers / providers the freeing up of resources which can then be used to help the Council fulfil its other policy priorities Page 12 of 29

13 Where are we at today? While these strategic and policy links have previously been acknowledged, more effort is required to make these links a reality. Much of this is about making sure the links from this Strategy are reciprocated in other policy and strategy documents/plans and ensuring that the machinery is in place to synchronise policies when future reviews become due. Where do we want to be in 2015? We want this Procurement Strategy to have supporting / reciprocating links into the revised Strategic Plan We want the impact of procurement decisions on economic regeneration and sustainability fully defined and publicly stated We want to develop and embed a Sustainable Procurement Action Plan How are we going to get there? The integration between strategic / business plans cannot be achieved in one go as the extent of the link will develop in direct relation to the understanding and acceptance of procurement / commercial skills as core business disciplines. However, a start is being made in 2011 with the publication of the new quotation / tendering documentation, which more clearly address wider policy objectives and the revision of the Selling To The Council guide for local businesses (see also 3.7 Customer Service and Performance) The development of a Sustainable Procurement Action Plan will include Targets to maximise access to procurement opportunities for local businesses Increased consideration of carbon reduction measures Increased support for the achievement of community benefits in procurement Proposals to minimise any cost implications of meeting the Council s sustainability objectives What does success look like? Cross referenced Strategic Plan to this Strategy (Measure Cross reference successfully made) Defined and linked policies between procurement and economic regeneration and sustainability which are publicly available to all local businesses (Measure Cross reference successfully made and latter policies publicly available) Sustainability objectives are embedded in procurement practice Targets arising from the Plan are achieved Savings targets are achieved Page 13 of 29

14 3.3 Minimising Costs and Maximising Value Definition and Scope This is about seeking opportunities to minimise costs and maximise value at every step of the commercial cycle to deliver savings targets. This will assist the Council in delivering a balanced budget. This includes using proven commercial techniques and broadening the scope and levels of collaboration internally between Services and externally with other public sector bodies This is the primary measure used to define the contribution and effectiveness of any procurement function and the one against which much of this Strategy has been prepared Why is this important? Contributing to the delivery of new sources of sustainable cashable savings on a far greater scale than ever before over the three year period 2011/12 to 2013/14, with minimum original expectations of 1M delivered from procurement activity across all Services during the three-year period Where are we at today? The Procurement Workstream was originally set a savings target of 1M over the three year period 2011/ /14 The Corporate Procurement Team was asked to assist Services to deliver the 1M savings target Following the budget process, a savings target of 1.25M was set for 2011/12 and targets for future years will be set in due course. The Council Management Team has accepted that new forms of cashable savings need to be made and has approved the cross-council implementation of new procurement tools and techniques Significant savings have already been made since the publication of the last Strategy and the Corporate Procurement Team is expected to assist Services to deliver cashable savings for at least a further five financial years Current projections are that the savings target for 2011/12 will be achieved, but it must be noted that the level of savings projected for 2011/12 is unlikely to be repeated in future years. In the current financial climate it is inevitable that the Council will have no option but to accept price increases, particularly in volatile commodity markets, so the objective on many occasions is to minimise the level of price increase, rather than delivering savings Where do we want to be in 2015? We want to have assisted Services to deliver and exceed the savings targets set for the Procurement Workstream We want to be exploiting new sources of cashable savings through internal and external collaborative working, particularly e-auctions and supplier relationship development We want to have established the appropriate category management teams and successfully embedded them across the Council Page 14 of 29

15 We want price uplift management controls to be in place so that all requests for cost increases are reviewed and challenged, with justifiable and unavoidable price increases minimised before being accepted by the Council We want 85% of all influenceable spend to be covered by a dedicated category team or subject to input by someone with recognised commercial expertise How are we going to get there? Ensuring that all staff involved in procurement activity recognise that there are essential differences in the maturity of markets, the availability of suppliers, trading capability and that in some areas the objective will be to develop choice and contain cost increases rather than make cashable savings Getting the right structures and policies in place particularly the establishment of category management teams to provide focused commercial expertise and analysis. This will mean that people with a commercial focus will be able to contribute to (not control) spend decisions for all major third party spend Providing commercial and procurement expertise to the Category Management teams Providing targeted training for those staff involved in the new category teams Making ownership of savings a shared responsibility between Services and the Corporate Procurement Team (CPT), with the CPT providing the appropriate levels of support and guidance required to assist Services to deliver savings Implementing and embedding price uplift management controls and processes across all Services What does success look like? Savings targets delivered and if possible exceeded (Measure Percentage of savings target met) Savings from procurement activity delivered year on year during the period of this strategy Minimising the financial impact of justifiable and unavoidable price increases, particularly in volatile commodity markets Most influenceable third party spend conducted either through a category team or subject to involvement by someone with recognised commercial expertise (Measure 85% of influenceable spend going through this route) Savings targets are achieved 3.4 Organisational Procurement Structure, Systems and Skills Definition and Scope This is about having the right organisational procurement structure and systems in place across the Council. This requires having appropriately qualified skilled people in post in order to achieve the Council s strategic objectives, supported by the most effective systems. This will support the Council to meet and exceed approved targets, providing sound and timely advice to budget holders for all spending decisions and ensuring that the Council is able to make most of its financial resources. Page 15 of 29

16 Why is this important? This is the means by which success in terms of meeting targets set and implementing policy will be achieved. This is done by: People having the right knowledge and skill sets People being able to access the right information to develop options and make sound decisions People having access to effective technologies to maximise process efficiencies Procurement being organised in such a way as to make the most of the existing skills and capabilities for the Council s benefit Decision-makers being in possession of the information required to take informed and sound commercial decisions Being ready to react and deal with implications of the Public Reform Programme Where are we at today? The Corporate Procurement Team and the levels of awareness about the scope and value of sound procurement to the Council have developed significantly since In the last two years, the Council has accepted the contribution that a strong procurement function within the Council can have, and with this in mind, it has: Agreed that the structure and organisation of procurement across the Council needs to be changed with a view to adopting a category management based structure and committed resources to support this change accordingly Rolled out a successful Purchasing Card programme, minimising administrative procurement processes Committed resources to a full implementation of Easybuy with the goal of getting 75% of spend processed through this system by 2015 Approved the development and running of Make or Buy programmes for appropriate members of staff involved in Make or Buy assessments Where do we want to be in 2015? We want to have ensured delivery of appropriate category management training to all category teams We want to have established at least seven category teams (Social Care, Fleet and Transportation, Utilities, Corporate Spend, ICT and Telecoms, Environment and Waste and Construction and Civil Engineering) We want to have progressed the implementation of Easybuy, having at least 75% of third party spend being processed through that route We want to continue to utilise technologies, expanding upon the e-tendering capacities of Public Contracts Scotland We want to ensure that members of staff in service departments directly involved in procurement activity are competent to the appropriate level and / or have been on accredited training and development programmes We want to ensure that all appropriate officers involved in Make or Buy assessment have completed the Council s Make or Buy development programmes Page 16 of 29

17 How are we going to get there? Making the category teams effective from the outset by allowing the organisation to learn by experience and recognising that this is as much an exercise in cultural change as organisational development Ensuring that all Category Teams have available to them the right mix of technical experts, customers and other stakeholders, as well as appropriate procurement, legal and finance support. We also want to ensure that each category team includes a sustainability champion to mainstream sustainability considerations into the procurement activity of the category team. Developing a full category management training programme, drawing on expertise within the public sector, where available Diverting resources and efforts away from routine purchasing / order placement through utilisation of Easybuy s automation capability towards intelligent contract and supplier management Ensuring that all officers undertaking procurement activity are aware of e- Tendering options and the use of them to streamline procurement processes Raising levels of awareness and core competencies in service departments to ensure a commercial focus and that the make or buy judgements are properly researched and the implications and risks fully understood What does success look like? Successful implementation of the new category structure with strong partnership working with, and across, Services in helping them deliver their required outcomes (Measure number of category teams in place and the level of savings achieved measured against their annual running cost) Automation of all routine processes and low value transactions through Easybuy or Purchasing Cards (Measure percentage of spend processed through Easybuy and Purchasing Cards and the volume of transactions routed via both solutions) E-tendering is utilised for the majority of procurement exercises Availability of specialist training and development programmes for people in corporate procurement and in service departments / category teams (Measures percentage of people from available target group that have attended recognised training programme percentage of people from available target group that have attended the Council s Make or Buy programme) Savings targets are achieved 3.5 External Collaboration Definition and Scope This is about actively working with other public sector bodies in Scotland (and beyond where appropriate) to ensure that the Council is able to develop an understanding of where maximum influence can be applied. This could be for reasons such as: Gaining advantage and/or leverage in a commercial situation, such as influencing a market to adapt, negotiating with a supplier or driving down unit costs Page 17 of 29

18 Accelerating the development of a project or programme to reduce timescales, costs and/or better outcomes Making better use of existing resources such as utilisation rates of equipment or people Sharing a cost to reduce spending or access a resource typically beyond affordability Why is this important? An analysis of the Council s top suppliers by spend shows clearly: Regular duplication / overlap of major suppliers with other public organisations not only local authorities but NHS, Emergency Services and Higher Education Nearly all the top suppliers by spend were involved in waste, construction, social care provision or utilities all of which are critical areas for the council in terms of service delivery and risk management The companies were split evenly between public listed companies (PLCs) and private companies. The latter were often part of larger conglomerates including some with Dutch, Spanish and Italian ownership There was a strong Scottish presence in terms of companies (i.e. with registered offices in Scotland) many of which appeared to trade only within the country and often mainly with public sector organisations. In some instances work from the Scottish public sector accounted for over 80% of turnover In addition, it is important to get as many organisations as possible to collaborate in order to achieve volume when acquiring tactical services / products via e-auction or on trading markets such as with energy Where are we at today? We work with Procurement Scotland on the development of national contracts and commit to buying from these contracts where cost and other benefits will accrue to the Council. We joined Scotland Excel in 2010 / 11 and, where beneficial, the Council is using Scotland Excel contracts, while carrying out further bench-marking to assess the benefits potential in other contracts. We have developed various ad hoc collaborative procurement exercises with Her Majesty s Revenue and Customs, Falkirk and Clackmannanshire Councils, Dumfries & Galloway Council and the Assessor for Central Scotland. Where do we want to be in 2015? We want formal, and well coordinated collaborative sourcing programmes with other Scottish public bodies, particularly involving the use of e-auctions and the use of supplier relationship development We want to be able to withdraw from sourcing / managing low value / tactical commodity contracts and be able to use existing arrangements let by other public organisations which are guaranteed to deliver the lowest costs and maximum value, at the same time as maintaining high levels of client service and reliability / quality We want to be undertaking far more shared contracting activity with other Forth Valley local authorities and other public sector organisations Page 18 of 29

19 How are we going to get there? Active participation and lobbying through Procurement Scotland, Scotland Excel and the Scottish Procurement and Commercial Directorate Influencing the Scotland Excel strategic procurement agenda Preparation of category focused business cases to justify collaboration to other organisations Benchmarking across the public sector Proactive lead by the Council s Management Team to gain wider buy in for collaboration and lobby like minded organisations What does success look like? Increased collaborative procurement working with Procurement Scotland (Measure Proportion of contract spend established under Procurement Scotland contracts) Increased collaborative procurement working with Scotland Excel (Measure Proportion of contract spend established under Scotland Excel contracts) Active collaborative relationships and joint contracting with other local authorities / public sector bodies regionally and sub-regionally (Measure at least 20% of our third party spend being processed through collaborative contracts) Rolling programme of e-auctions in place and Supplier Relationship Development projects with the Council s top providers / suppliers (Measure number of e-auction programmes in place by 2015 and Supplier Relationship Development programmes in place for at least five of the top fifty suppliers / providers by annual spend) Most spend involving routine, lower value, low risk items such as office furniture and supplies, janitorial products, some Agency staff to be purchased through collaborative arrangements (Measure 90% by value of agreed tactical items purchased through collaborative contracts without the need for the Council to undertake any sourcing) Savings targets are achieved 3.6 Sound Governance and Practice Definition and Scope This is about promoting good procurement practice throughout the Council by supporting, training and advising Council officers / elected Members engaged in all procurement activities / decision making to secure best value outcomes on every occasion. It also covers the need for the Council to: Comply with all relevant legislative requirements Maintain the highest professional ethical standards Ensure strict financial governance and the minimisation of undue financial loss Support a transparent audit process including the ability to respond to the Procurement Capability Assessment (PCA) Where appropriate manage demand for goods and services to deliver savings (eg temporary labour, printing, consultancy and office furniture) Page 19 of 29

20 Why is this important? The Council, as with all public organisations is regulated and also subject to strict rules governing probity and transparency of decision making. Also, having sound governance and good practices in place also helps in the effort to reduce cost and make scarce budgets extend further. Where are we at today? We have achieved our goals set in the original Strategy of ensuring that the agreed procurement processes are compliant with legislation and with the Council s Contract Standing Orders. While no organisation can claim 100% compliance, we can be confident that all major procurement exercises have complied with both legislative and probity standards. We have also introduced mechanisms to ensure effective governance in contract use and in management processes. Easybuy supports effective governance in relation to authorisation to buy and to pay for goods and services, which in turn increases the transparency of procurement activity. Where do we want to be in 2015? We want to maintain and, if possible, improve existing arrangements and processes in terms of governance and advice and training where applicable We want to make further progress with financial management and sound governance, particularly through the ongoing developments with the Council s Purchasing Card programme, the use of Easybuy and the restriction of price uplift opportunities We want to make further progress with the automation of low value transactions either through the Purchasing Card or Easybuy How are we going to get there? The creation of category teams will change the role and remit of the Corporate Procurement Team. As procurement and commercial skills and knowledge increase within category teams, the Corporate Procurement Team will be freer to seek procurement improvement in more strategic areas to the benefit of the Council. This will also allow us to focus on: Supplier Relationship Development Increased procurement collaboration Ongoing developments with the Purchasing Card programme The optimum utilisation of Easybuy The implementation of price uplift controls as approved by the Council Management Team The introduction of demand management techniques Assisting in the identification and delivery of savings opportunities Page 20 of 29

21 What does success look like? All routine third-party spend being processed through Easybuy and/or Purchasing Cards (Measure 75% of third party spend processed via Easybuy or Purchasing Cards) Price uplift controls in place with a strong rate of successful resistance to increases (Measure - at least 50% of price uplift requests by value successfully reduced or avoided completely) Demand management in place for non essential categories where volumes can be restricted and cashable savings achieved (Measure demand management introduced for temporary agency staff, consultancy and office furniture) The Purchasing Card programme extended to maximum capacity ( Measure - at least 7% of the Council s third party spend going through Purchasing Cards) Automated low value transaction (Measure at least 90% of transactions under 500 in value going through Easybuy or Purchasing Cards) Processes related to the introduction of new technologies are subject to sound governance arrangements Standard procurement documents are updated regularly Savings targets are achieved 3.7 Customer Service and Performance Definition and Scope This is about the third party relationships which the Corporate Procurement Team and in due course, the category teams, have with their stakeholders. For the purpose of this document, Customers are those to whom the Team provides a direct procurement service, while stakeholders are those to who the team delivers outcomes. These can be: Internal customers the people / groups that have a need to be fulfilled External providers suppliers / providers both private and third sector Collaborative partners The Scottish Procurement and Commercial Directorate The Council Management Team Lobbying and economic development organisations Why is this important? Strong, professional relationships and a focus on the quality of services to customers are critical success factors as to how the overall procurement operation is performing. In addition, this is the public image of the Council and with that image travels a reputation for professionalism. Where are we at today? We have already: Made contract opportunities widely available to potential suppliers / providers on the Council website and on Public Contracts Scotland Page 21 of 29

22 Published existing contract information on the Council website to allow potential suppliers to access sub-contracting opportunities Ensured that the appropriate web-pages are up to date with all potential business opportunities valued at over 10,000 Ensured that all relevant and appropriate guidance and information on procurement regulations, obligations, processes, best practice, etc is available on The Source and that generic procurement documentation compliant to all legal requirements is available for download and use from The Source Where do we want to be in 2015? We want to ensure that the relationship with all our providers / suppliers is professional and flexible. They need to be able to experience this in all their dealings with the Council We want to have customers that are highly satisfied with the outcomes achieved in working with the Corporate Procurement Team / category team on their acquisition(s) and in relation to training, support and guidance. This includes response / turn-around times We want third sector / local business organisations to find it easy to bid for business, with slick procedures and associated paperwork being written in plain language We want to use a robust set of meaningful KPIs, linked to the national Best Practice Indicators. How are we going to get there? We will update and modernise our: - Procurement Intranet pages - Selling to information on the Council website, leading to production of a formal guide to selling to the Council - Quotation / Tendering documentation including terms and conditions Continuing with our Meet the Buyer programmes, but targeted at markets where we need to encourage more suppliers and competition. These will be done independently and/or in collaboration with other Forth Valley public sector organisations, wider public sector organisations and business networks. Undertake Customer Surveys and Feedback to establish exactly what customers think of the service provided and what changes they would like to see to improve on the service provided. Undertake Supplier Surveys and Feedback to establish what suppliers think about the procurement documentation and processes, how the documentation and processes could be improved to make bidding for Council business easier and how the Procurement site on the Council website could be improved for suppliers. What does success look like? The Procurement Capability Assessment shows evidence of continuous improvement, with the Council moving towards an Improved rating KPIs demonstrate continued improvement Page 22 of 29

23 Selling to Guide and quotation / tendering documentation widely acclaimed with positive feedback from suppliers (Measure 80% highly acceptable approval rating in annual survey) Improving ratings from suppliers and line customers in terms of their dealings with the Corporate Procurement Team and category teams (Measure 95% satisfaction rate achieved through either service level (internal stakeholders) or annual survey (external survey) More suppliers / providers bidding for work in targeted areas as a result of Meet the Buyer events (Measure six new supplier/ providers identified each year in agreed target categories) Savings targets are achieved Page 23 of 29

24 APPENDIX A GLOSSARY Category Management: a new approach to procurement which has been extensively utilised outwith the Scottish public sector for many years. The approach is characterised by significant internal collaboration, and a team approach to the category of spend under consideration. Spend categories are aligned to the external market, rather than to the Council s internal Service structure. Category Management Teams will typically include Service-based technical experts, finance and procurement support, a sustainability champion and legal advice when required. Customers and other stakeholders might alo be involved as appropriate. Contract Standing Orders: are the rules that the Council has adopted to govern its procurement activity. Easybuy: is the Council s electronic procurement system. It is based on the system developed by the Scottish government. It allows us to automate the entire administration of a purchase, from placing the initial order to authorising payment. Individual users are authorised to carry out different activities, depending on their roles. Easybuy is being rolled out across categories of spend, and offers increased efficiency as well as sound governance arrangements. E-Auction: a tender process where the tender price is established through a reverse auction, where bidders can see the prices being submitted by their competitors, and can reduce their submitted prices to increase the chance of winning the competition. E-Tender: a tender exercise carried out electronically. Traditional paper documents are removed from the process, with all documentation securely posted and submitted on-line. Influenceable Spend: spend where price, cost, quality, service level, service delivery or the business process can be influenced and affected by human intervention, typically by competent staff who possess the required commercial skills and knowledge. Examples of non-influenceable spend where human intervention can have no effect include payments relating to PAYE, union contributions and road tax. National Procurement Improvement Programme (NPIP): the national procurement change programme, led by the Scottish Government. This developed from the Review of Scottish Public Sector Procurement carried out by John McClelland and published in Procurement: means all of the activities and processes required to acquire the goods and services that the Council needs. As distinct from purchasing, procurement involves the activities involved in establishing fundamental requirements, sourcing activities such as market research and supplier evaluation and negotiation of contracts. It can also include the purchasing activities required to order and receive goods Procurement is often described as a series of Rights, obtaining The Right goods or services At the Right Time To the Right Place In the Right Quantity To the Right Quality From the Right Source At the Right Price Page 24 of 29