Delivered at no cost to the BID Recycling Ealing, Newbury, Winchester, Fitzrovia Energy supply. Purchased. BID (age)

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1 BID Management Certificate Structured Research Report Frances Forrest, VauxhallOne September 2013 The Benefits of Joint Purchasing by a BID 1 Executive Summary This report considers the benefits and relevance of joint purchasing/making BIDs cost neutral to businesses, and, in light of evidence collected, whether more joint purchasing services should be offered. It considers a range of services currently being jointly purchased by Business Improvement Districts (BIDs) on behalf of their members, the various procurement methods in use by the BIDs, and identifies good practice amongst certain BIDs. It also contains case studies highlighting different approaches to joint purchasing and assesses the appetite amongst BIDs for merging some procurement practices. An analysis of VauxhallOne businesses views of joint purchasing is included, as VauxhallOne is considering further options for joint purchasing and exploring different approaches for achieving this. The report contains recommendations for further action by BIDs in general, and VauxhallOne BID in particular. 2 Introduction Procurement is more important than ever in demonstrating the benefits to businesses in joining a BID, particularly during this period of austerity when businesses are fighting for survival and need to cut costs as much as possible. Joint purchasing enables BIDs to get the best possible prices for services for their members, requiring only minimum time and effort from the businesses themselves. For BIDs the opportunity to negotiate prices for services on behalf of their members offers the chance to demonstrate to member businesses that they can often save far more than their annual levy payment, as evidenced in Case Study 2 below. This enables those businesses to experience benefits of being a BID member, even if they choose not to participate in other BID activities. This research has been carried out with the aim of identifying the services that other BIDs are already purchasing for their members, the different procurement approaches being used, together with views of BID member businesses as to the value to them of joint purchasing, together with an assessment of further services that could be jointly purchased. 3 Methodology Internet research was carried out to identify the range of services on offer by a number of BIDs, and this information was used to compile a questionnaire sent to a number of BIDs. The findings are summarised and analysed below. The questionnaire asked about services jointly purchased, the procurement approach, Page 1

2 and the views of that BID on its most popular and least popular service jointly purchased. In addition a different survey was sent to several VauxhallOne BID members as to 1) which jointly purchased services in addition to recycling (which they already receive) might be of interest to their company, and 2) how important joint purchasing was to their company. 4 Research and Findings The table below lists the different services on offer through joint purchasing, which BIDs of those who responded offer the services, and how the services are provided. Services %age of BID respondents offering service Purchased wholly BID (age) by Subsidised by BID Delivered at no cost to the BID Recycling Ealing, Newbury, Winchester, Energy supply BID Ealing, Newbury, Winchester, Pest Control Ealing, Newbury, Telephony Supply Cost reduction assessments - general Newbury, Pat Testing Newham, Courier service Fire alarm testing Insurance WiFi All BIDs surveyed provide a free or heavily subsidised recycling service and subsidised waste collection to their members. In itself the recycling service often saved businesses an amount at least equivalent to their levy contribution, together with bringing additional environmental benefits to the area such as removing the Page 2

3 need for bulky and unsightly eurobins and reducing the number of suppliers and waste collection vehicles working in the BID area. When asked which jointly purchased services had proved most popular, 75% of BID respondents replied provision of utilities, on the grounds that it offered the most savings, in many cases off-setting the levy, was a quick win and it was easy to arrange. 25% said recycling was the most popular, although no explanation was offered. When asked which jointly procured services had proved least popular, one BID respondent named their courier service, the reason being that its introduction had been delayed, while another said a utilities service, because the performance of the intermediary had been unsatisfactory. This is outlined below in case study 1. Services which BID respondents are considering for future joint purchasing are shown in the table below. Future joint purchasing Telephone and Broadband Credit card machines for small businesses Window cleaning Food waste recycling WiFi Courses BID Winchester Winchester Ealing Ealing Ealing Encouragingly, 100% of BID respondents said they would be interested in joining forces with other BIDs to get the best deals for their members. From BID answers to a question about suppliers located in close proximity to the BID, it was clear that many suppliers were not particularly close to that BID. However the experience of Winchester in Case Study 1 indicates that local suppliers who can provide quality and cost effective services will always bring added value to the contract. To gain further insight into business needs, a selection of VauxhallOne businesses were invited to comment on their experience of joint purchasing, and their priorities for the future. It was interesting to find that 66% of VauxhallOne respondents had not found recycling had made them BID neutral. Further investigation revealed that this was partly because the service offered had not been taken up as one respondent was locked into a national contract and partly that another respondent had a large levy although relatively small recycling needs and had only recently signed up to the recycling offer. Page 3

4 Considerable interest in joint purchasing was expressed by VauxhallOne respondents, suggesting that joint purchasing other services would be a popular move in Vauxhall. VauxhallOne businesses ranked the following services possible for joint purchasing, in priority order to their company: 1 st WiFi 2nd 2nd 4th 4th Energy supply Telephony Supply Testing of electrical equipment Pest Control 6 th Fire Alarm testing 7th Courier Service In addition, one business suggested office consumables would be of interest to them. In terms of services provided by local suppliers, VauxhallOne respondents placed quality and cheap services, either subsidised or ideally free, above having services delivered by local companies unless the local companies were able to offer comparable cost savings and service quality Analysing the responses to questions of relative priorities of preferred services, it is hardly surprising to find that different businesses within a single BID had very different priorities. The overall conclusion of this part of the survey was that many businesses already appreciated their recycling service, the possibility of further cost reductions were extremely attractive, and a pick and mix option, where businesses select discounted services from a menu of options might be a good way forward. 5 Case Studies Case Study 1 (provided by Catherine Turness, BID Manager at Winchester BID) Winchester BID implemented a procurement service with XXX company (redacted for reasons of confidentiality) in August The service was successful and produced significant savings for a small number of BID levy payers. The most significant was an annualised saving of 6,000 for a Thai restaurant on the outskirts Page 4

5 of the City Centre. Although there were successful results when using XXX (redacted), the scheme did not achieve the engagement required as their model is to charge BIDs for the Account Manager s time (see case study 2).. The budget was limited to one operative visiting Winchester BID once a month and their Relationship Customer Advisors calling businesses once a week. Feedback from businesses was that the cold calling approach by XXX (redacted) was too sales orientated and the staff could not relate to Winchester and the needs of its businesses because they were based out of the region. Given the feedback and the budget available, the BID decided to end the arrangement with XXX (redacted) to find a local and well recommended provider. Zenergi was considered honest and their concentration on the businesses needs appealed to the BID. Their ethos is not focused on savings but to avoid monetary wastage and achieve good value for money through effective contract management, on an on-going basis. The Zenergi office is located close to Winchester and the majority of staff live in or around Winchester so access to account management, meeting and engaging with BID members is easily achievable and they have committed to visit on a weekly basis to sign up new business and account manage existing contracts. They also offer telephone and support. Case Study 2 (provided by Catherine Turness, BID Manager at Winchester BID) XXX (Redacted for reasons of confidentiality), a national company providing cost reduction services to several BIDS, met with Tanoshii of Winchester, explained the procurement service provided to them on behalf of their local BID. After obtaining the authority and necessary documents, an energy review was carried out straight away. The owner had continually renewed their contract with the same provider and so opted into tariffs, which weren t cost effective XXX (redacted) advised on the client s contract end dates, current rates and annual consumption. Tanoshii s supply was not on particularly high rates, but bills were very high due to the large usage. Several visits and calls later, the client was advised of the considerable savings achievable. This led to XXX (redacted) sourcing prices using the whole market, and finding prices best suited to the energy usage. Both gas and electricity were moved to new contracts, resulting in an annual saving of over 3000 on electricity and 2000 on gas. Case Study 3 Waterloo Quarter had recently gone through a complete retendering of their recycling contract, when they were approached by a neighbouring new BID, VauxhallOne, whose staffing structure was not sufficiently in place to go through a whole procurement exercise. Waterloo Quarter agreed to share their skills on a consultancy basis, and drafted a service specification for a pilot period, which the Waterloo Quarter supplier was asked to quote against. The service specification took Page 5

6 account of Vauxhall s unique characteristics. The arrangement worked well with the same company contracted to supply both neighbouring BIDs whilst meeting the different service needs of both BIDs. This enabled VauxhallOne to provide its members within a very short period of winning its ballot, with a proven service, tailored to the unique needs of Vauxhall s varied night time economy as well as day time businesses. A free allocation of recycling sacks, based on the rateable value of each business, was offered to Vauxhall businesses, together with subsidised general waste collection and food waste collection. Helen Santer of Waterloo Quarter said We were delighted to assist VauxhallOne on this occasion. We definitely see advantages in sharing procurement processes with other BIDs so long as the unique characteristics of each BID are preserved. The recycling initiative with VauxhallOne demonstrated that, even without contract dates coinciding, there are many opportunities for BIDs to collaborate in this respect. 6 Joint Purchasing Methods Joint purchasing methods identified through the survey, case studies and discussions with BID peers are: contracting with a provider after a standard tendering process following the drafting of a specification and invitation to tender being issued piggy backing on another BID s procurement process for a trial period Entering into a partnership with a company to give them preferred supplier status. The company then offers their service to BID members, in the expectation that the supplier would gain long term loyalty from each company that signs up to receive the free or discounted service for a limited period. entering into a partnership with suppliers and paying them a set amount per customer/bid member to promote their service(s). From the data collected thus far, it is evident that further case studies of different types of joint purchasing would be helpful, and also that there is scope for innovative techniques to be shared and rolled out. Of the above, the preferred supplier approach appears the most innovative and could even produce a revenue stream for BIDs. To work satisfactorily, preferred suppliers would need to be vetted carefully, with adequate quality checks in place to ensure each supplier was reliable and offering a genuine saving to businesses in the BID. 7 Key Observations arising from the research 7.1 Best practice Many examples of good practice were found. Case Study 1 is yet to be tested, but was considered worthwhile for inclusion in this report because it demonstrated that constant evaluation of services and feedback, and taking action to find a better supplier, often pays dividends. Page 6

7 The original energy supplying service provided through one supplier (Meercat Associates) (see Case Study 2) clearly brought significant savings to the business involved, although ultimately the costs of the service, which was strictly limited, on the grounds of cost, indicated that this model is unlikely to be attractive to many BIDs on a tight budget. Case Study 3 demonstrates the value of BIDs working in partnership to purchase joint services for the benefit of their members. It also demonstrated that BIDs buying in expertise can still ensure that the service eventually provided is tailored to the needs of their unique mix of businesses. 7.2 Suppliers Locality and BID Specialists BIDs tend to invite tenders from companies supplying to other BIDs. While this is natural as BIDs are a unique and specialist community, BIDs may be able to drive costs down further by inviting tenders from a wider audience. Although companies with limited understanding of BIDs may struggle in the short term to submit winning tenders, many will find out how to tailor their services and tenders to the BID community once they are aware of the opportunities for contracts of up to five years. BIDs are always keen to offer supply opportunities to their own members or nearby businesses, but need to ensure that there is competition in terms of quality and cost. No BID can afford to offer sub standard services to its members as its reputation would be at stake. Quality of service matters most and for this reason all companies need to be given clear criteria prior to submitting their tender which includes and a score for quality of service, and might include a score for geographic proximity to the BID area together with the percentage for each criterion. 7.3 BID Staff Skills levels Most BID staff team members have a wide range of responsibilities which may bring creativity and innovation, but there is a risk that procurement practices may not be sufficiently thorough or specialist to drive down costs for BID members. 7.4 Other Issues Many large corporates are locked into national contracts and are unlikely to ever take up joint purchasing benefits. BIDs need to be aware of this and find other ways to meet the needs of those businesses. It must be noted that the survey samples were very small. More responses from other BIDs, possibly from outside the UK, would be extremely useful, together with further case studies. 8 Conclusion Page 7

8 Based on responses to the surveys, it is clear that cost reduction initiatives are appreciated by all businesses although not all businesses are in a position to take up all jointly purchased services on offer by their BID. Most businesses welcome cost reducing initiatives so long as they are simple, flexible, good quality and meet the needs of that individual business. Based on the survey, cost reduction proposals consistently feature as making being a member of the BID worthwhile. Overall this indicates that BIDs should look to providing a suite of jointly purchased services which can be selected by members as and when they consider appropriate. It is evident that joint purchasing by BIDs has achieved much already, that lessons can be learned from sharing the experience of colleagues and that there are many more opportunities for a wider range of jointly purchased high quality services which will achieve greater savings for BID members in the future. 9 Recommendations for further action 9.1 It is recommended that this report is offered to British BIDs for their consideration of the following recommendations: BID staff nationally should be encouraged to undertake BID management training as a way of demonstrating their professionalism and in depth knowledge of the BID industry, and the training should cover procurement principles and practices. A directory of jointly purchased services currently on offer by all UK BIDs to be produced and regularly updated at least annually, together with current suppliers, contact details and joint purchasing toolkits. Consideration to be given to ways in which large corporates with multiple locations in different BIDs may be able to benefit from joint purchasing, funded by those BIDs 9.2 It is recommended that BID Managers, particularly those who have participated in the BID Academy training, consider the recommendations below for further action: Develop the ideas in this report and contribute to on-line forums and conferences for BIDs in order to share good practice in procurement and contract management, and identify opportunities for collaboration. Consider merging procurement activities to increase their own efficiency and drive costs down. This could involve inviting tenders from local companies and wider afield, to supply several BIDs. To guard against the individual characteristics of different BIDs not being catered for when several BIDs join forces to bulk purchase, the requirements of individual BIDs would need to be stated clearly in the service specification and each BID would have its own individual contract with the supplier. Page 8

9 Invite local suppliers, and a variety of both BID specialist and non BID specialist suppliers to tender/quote to supply jointly purchased services. 9.3 A summary of this report to be presented to VauxhallOne for considering options for joint purchasing of further services for their members. References: Responses to survey of BIDs pdf attached (1) as appendix 1 Responses to survey of VauxhallOne businesses pdf attached as appendix 2 Page 9