ARGYLL AND BUTE COUNCIL SUPPORT SERVICES REVIEW PROCUREMENT, COMMISSIONING AND CREDITORS EXECUTIVE SUMMARY- NOVEMBER 2011

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1 ARGYLL AND BUTE COUNCIL SUPPORT SERVICES REVIEW PROCUREMENT, COMMISSIONING AND CREDITORS EXECUTIVE SUMMARY- NOVEMBER Introduction 1.1 This review covers the work of three distinct teams within the Council. The Procurement Team within Exchequer Services is responsible for letting contracts and managing supplier performance across the full range of Council services. The Commissioning Team has a more specialised role, providing a full commissioning and provider monitoring service for all forms of care provision. The Creditors Team handles the payment of all invoices for the Council, processes all expense payments to Members and staff, and maintains the Members register of expenses. Whilst the work of the payroll team was originally within scope for this workstream, it was also reviewed as part of a cross service workstream covering both HR and payroll. The options from that cross service workstream scored more highly than the payroll only options, and hence the payroll only options were removed from this workstream. The proposal is that the payroll team transfers from Exchequer Services to form an integrated team with HR under the Head of Improvement and HR and that is covered by a separate report. 1.2 The aim of the service review is to deliver an enhanced service as well as operate sustainably with a 20% cost reduction on the present model of delivery. The Head of Customer and Support Services, Exchequer Services Manager and Commissioning Manager have jointly developed the preferred option arising from this review. 2 Baseline Report 2.1 The 3 teams outlined above total 36 FTE split as follows: Managers 2 FTE Procurement team 10 FTE Commissioning team 14 FTE Creditors team 10 FTE The baseline report identified a significant number of strengths in procurement and commissioning in developing innovative strategies and achieving appropriate outcomes for service departments. The procurement team have been successful in winning GO Scottish Procurement awards in both 2010 and 2011, in 2010 for best sustainability initiative of the year and in 2011 for best customer engagement initiative of the year. In 2011 they were also finalists for best procurement team of the year, and best procurement innovation or initiative of the year. 2.2 The teams have excellent inter agency relationships with Scottish Procurement and Commercial Directorate, Scotland Excel, Association of ~ 1 ~

2 Directors of Social Work contract officers, COSLA national care home contract working group 2.3 The creditors section has well trained knowledgeable staff with a concentrated area of expertise and there is experience of using electronic purchase to pay systems, predominantly the Pecos system supplied through the Scottish Government. There is some moderate use of purchasing cards at present. There are projects under way to extend the use of purchasing cards into catering, and to roll out Oracle purchasing to all areas where purchase orders are currently issued manually. Just under 155,000 invoices are processed annually and c 73,000 associated payments of which c 16,000 are via cheque and the remainder via BACS. 2.4 Several weaknesses were also identified in the current procurement and commissioning performance; contract management is still relatively weak and the level of contracted spend is lower than in the best performing Councils. There are relatively few qualified staff within procurement although a training programme is in place to remedy this. The annual Procurement Capability Assessment has, however, shown consistent year on year improvement from 21% in 2009 to 36% in Processing of invoices within the Council is still largely a manual operation and the process is slower than is desirable for a public sector organisation, with the percentage paid within 30 days showing a marked decline in Benchmarking Report 3.1 The Procurement function within the Council is measured in terms of capability against all other Scottish Councils in the annual Procurement Capability Assessments and scored within the top quartile in 2010, being ranked 8 th equal. In relative terms we scored highest for how we define the supply need. The weakest area was in contract and supplier management, where we scored 10 th highest. There are strong correlations between size of procurement function and score obtained. Consideration needs to be given to the possibility of benefits from further investment outweighing additional costs. 3.2 The Creditors section are the third most expensive of all Scottish councils in terms in terms of the cost per invoice at However there is a huge variation which reflects the fact that this measures the cost of the central creditors unit inly and does not attempt to measure the cost of the whole purchase to pay process. In Argyll and Bute council, the central creditors team deals with all Pecos invoices (c 40% of invoices) in terms of matching these to orders and receipts, as well as more traditional batches of authorised invoices collated and authorised within departments before being forwarded to creditors for payment. This degree of centralisation varies considerably between councils. The Council s performance in paying invoices within 30 days has deteriorated over the past year and the SPI for 2010/11 is recorded at 89% against the Scottish Average of 89.5%, leaving the Council ranked a distinctly average 17 th in performance terms against other Councils. ~ 2 ~

3 4 Future Challenges 4.1 There is still uncertainty over the future Government direction of who does commissioning for social work and health care and it is not known whether this will continue in whole or in part to be provided from Councils or whether this will move to the Health sector. In terms of opportunities, the current economic situation provides keen market conditions. Internal service reviews are increasingly considering outsourcing of services and alternative delivery mechanisms, and to develop innovative sourcing strategies to achieve appropriate outcomes for service departments. The procurement and commissioning team are key contributors to this process. 4.2 Increased demands from government and industry for shorter payment terms will put added demands on the P2P process, and the electronic systems to cope with this are still at a relatively immature level within the Council. 5 Stage 1 Options Appraisal 5.1 Procurement and Commissioning presented five options within the Stage 1 appraisal, including remaining as two separate units, discontinuing the service altogether and outsourcing.. The options are as follows: Continue as we are Discontinue the service Outsource the service in whole or part Capture previously identified underspends and planned rationalisation of staff including progressing merger of procurement and commissioning teams Continue to develop collaborative procurement for local category C (regional/local) commodities The last two options scored well; one to increase collaboration with other organisations and the other, to rationalise the structures and merge the procurement and commissioning teams. These options are not mutually exclusive. The second involves some additional resource which reduces the initial savings to be made but which could be potentially offset by the savings which this additional resource will generate on improved contracts. Both these options were therefore progressed to stage 2 as a single combined option. 5.2 Seven options came under consideration for creditors, including outsourcing the service and combining with another organisation. The options were as follows: Continue as we are Discontinue the service Outsource the service in whole or part Develop a shared service with other public bodies Capture previously identified underspends and planned rationalisation of staff one post given up at 31 March 2011 ~ 3 ~

4 Targeted action plan of improvement in receipting of purchases and improved level of payments by BACS Re-work of end to end purchase-to-pay process. More specialised ordering from fewer staff The last 3 options together produce a modest level of savings which does not reach the 20% target, although this is met across the workstream as a whole. Whilst there are major savings to be made from re-working the purchase-topay process these will be experienced by other departments as, if anything, more of the work will shift to the central creditors team. These 3 options were amalgamated into a single option to be taken forward to stage 2. 6 Stage 2 Options Appraisal 6.1 The favoured option at Stage 1 for the merger of the Procurement and Commissioning teams was developed at Stage 2 to show a unified structure under a combined Procurement and Commissioning Manager. The key staffing changes are as follows: Rationalising management arrangements to provide 1 combined Procurement and Commissioning Manager. The LGE14 Exchequer Manager Post to be removed from July 2012 with the post-holder taking voluntary redundancy. Removing 2 LGE9 Monitoring Officer posts in Dec 2011 from the staffing structure with the post holders taking voluntary redundancy. Removing 1 LGE9 Trainee Purchasing Officer in March 2012 from the staffing structure. This post is currently filled by a temporary postholder engaged on a project which will conclude within the year. Capture previously identified under spends from the Service and remove the current vacancies being LGE11 Team Leader and LGE3 Clerical Assistant. These vacancy savings have already been taken. Removing a further trainee purchasing officer post in October 2013 when current trainees should be CIPS qualified and promoted to Category Management Officers Removing one Performance Improvement Officer post from commissioning and replacing this with a new CIPS qualified PIO post responsible for the Category Management Officers. The overall staffing changes proposed are as follows: Procurement with 10 FTE and Commissioning with 14 FTE becomes Procurement and Commissioning with 18 FTE staff, through the loss of five Main Grade staff (LGE9-11) and one Clerical Assistant (LGE3). Creditors with 10 FTE loses one member of staff at LGE9, leaving 9 FTE. Along with the loss of one third tier manager post, there is a total reduction of 8 FTE, from 36 to 28 FTE. ~ 4 ~

5 The Manager will have four Performance Improvement Officers reporting to him/her in future as follows; two replacing the current three Performance Improvement Officers looking after Commissioning, one that is specifically legally qualified and responsible for developing contracts and service level agreements, and one that is a professionally qualified in procurement and is responsible for the Category Management Officers. This post will remain vacant until the second phase of the restructure in October At this point the Council will have a sufficient number of professionally qualified purchasing staff (professional membership of CIPS) to compete for the vacant post. The Purchasing Officers will take up Category Management Officer posts as they become professionally qualified. The development of Category Management Officers will have a positive impact on front line services. This will increase the quality of new contracts put in place, as well as the quality of contract monitoring. Services should experience tangible benefits from this in the form of additional savings on goods and services procured. The practice of collaborative procurement with other Local Authorities or public sector partners is an integral part of the Procurement and Commissioning Team s work plan for 2011 onwards. The remit of the existing LGE8 Admin Officer post will be changed as this post will provide analysis of procurement data across the Procurement and Commissioning Team as well as providing support on key contract management. The proposal is that the job title will change to Procurement Analyst. 6.2 The number of Monitoring Officers reduces from four to two with some supplier monitoring falling to Community Services in line with the outsourcing of the Home Care service. Overall there is a potential for one compulsory redundancy from these changes. All other changes proposed will be covered by vacancies or VER applications. 6.3 The preferred option for creditors included the introduction of re-working the end to end purchase to pay process which would contribute to the savings target. However it should be noted that this option is not expected to produce any additional savings in addition to the savings already taken through the vacancy saving and budget challenge process which amount to 38,127. Central to these improvements is the introduction of Oracle purchasing. A formal project to progress this has been established in August 2011 with Bruce West, Head of Strategic Finance as Project Sponsor and funding is available in the IT capital programme. This involves the introduction of a full Purchase to Pay system for the whole Council and this will be delivered using Oracle Purchasing as the core, with interfaces from Pecos, Tranman, Property Management and CareFirst. This is a complex project, both technologically and from a change management ~ 5 ~

6 perspective but will bring significant benefits to payment, management information and budgetary control when it is fully implemented. This process will be managed under formal Prince2 governance. It is also proposed to acquire a purchasing card management system with interfaces to the Royal Bank of Scotland and Oracle GL which will allow the extension of purchase cards to catering. At present much of the management of purchase cards is manual and time consuming. Purchase cards are highly suited to high volume, low value purchases and this will provide much needed management information to bring added control to this area. The benefits of the proposed introduction of Oracle purchasing and the reconfiguration of related procurement applications can be summarised as follows: The Council will be able to meet the accounting requirements to provide accounts on an accrual basis; The introduction of commitment accounting will provide enhanced budgetary control; The requirement under the Procurement Capability Assessment to have all purchasing information in one place for reporting purposes will be realised; All invoices will be sent directly to the finance office providing the opportunity to increase the percentage of prompt payments to suppliers. A unified purchase to pay process will allow the Council to take full advantage of any electronic invoicing programme proposed by the Scottish Government; The introduction of formal ordering and approval processes will provide greater assurance that all orders have been properly authorised prior to being placed with suppliers. 7 Implementation Plan 7.1 The implementation plan is reasonably straight forward in terms of staffing and involves individual members of staff taking on new duties or different ways of working, all of which are within the scope of their current competencies. Gaps will be identified and filled within the timescale of the implementation 7.2 The final phase of the implementation will be completed in late 2013 when the current Purchasing Officers become professionally qualified and the Purchasing Improvement Officers and Category Management Officer roles are fully fulfilled. 7.3 The most complex part of the implementation is the Purchase to Pay project, which will be closely managed and monitored to ensure that it delivers to expectations. 7.4 A detailed Implementation Plan which identifies the key tasks for action has ~ 6 ~

7 been prepared and this will be monitored by the Departmental Management Team and Transformation Board to ensure that savings are realised. All actions are expected to be completed by October Employee Engagement 8.1 The service review is the culmination of a plan to merge the procurement and commissioning teams that was first mooted in early 2010 and consultation has been on-going. All of the team members were involved in developing and scoring the options at Stage 1 and all have been consulted on the detail at Stage Similarly, the prospect of full electronic purchase to pay has been discussed with the creditors team on several occasions and everyone has engaged with the review process at each stage. 9 Customer and Community Engagement 9.1 Discussions have taken place with Community Services regarding the future shape of the Commissioning service. Some of the planned changes in terms of monitoring of service providers are dependent on changes in the delivery of the home care service 9.2 The prospect of a merged Procurement and Commissioning team in the Council, the first to be managed in this way in any Scottish Council, has been discussed at various forums, both commissioning and procurement, over the past year. 10 Third Sector Engagement 10.1 There are no aspects of this review which would affect the Third Sector as it is expected that the reduction in the number of monitoring officers will be matched by increased resource from Community Services. 11 Social Impact 11.1 There is no significant social impact from this internal organisational change. 12 Equality Impact Assessment 12.1 An equalities impact assessment has been carried out for this review and no positive or negative impacts have been identified. 13 Sustainability Assessment 13.1 A sustainability assessment has been carried out for the review, and given that the terms of this nurture the skills development within the procurement and commissioning function, there are significant positive aspects to the review. Qualified and experienced category managers will be able to deliver ~ 7 ~

8 increased sustainability from the Council s suppliers. 14 Conclusions 14.1 The review represents a positive move to deliver an improved professional procurement and commissioning and creditor payments service to the Council at a lower cost. This is being achieved though the integration of the procurement and commissioning teams and implementation of improved purchase-to-pay processes. ~ 8 ~