17 March 2015
Chair: Sharon Robson, Stockport, Trafford and Rochdale (STaR) Procurement Programme
Write up of the key points from this session including links to slides by Phil Swan
Leading practice: Lessons from reforming procurement at Birmingham University
Jonathan Jones FCIPS, Assistant Director of Finance (Procurement), University of Birmingham
Jonathan’s slides are available online here: https://knowledgehub.local.gov.uk/group/inetworkformerlynwegg/library?p_p_id=20&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&_20_struts_action=%2Fdocument_library%2Fview_file_entry&_20_fileEntryId=12985056
Jonathan opened his session reflecting on his past in NHS and local government in a variety of roles.
He discussed what appears to be a public sector specific issue in that procurement is typically not well represented at board level. Conversely in private sector organisations of equivalent size of spend, procurement is given much higher profile, although this may be in part because of the size of other departments in councils.
Perhaps controversially, Jonathan stated that procurement officers might not be talking the right language with chief officers or have with a big enough remit or department. Where procurement is most successful is in organisations where the Chief Executive appreciates its potential.
Procurement people “get” the benefits of good procurement, however they sometimes fail to convey this in terms that have resonance with organisational priorities – for example environmental, sustainability, economic development and savings.
With this in mind, Jonathan talked through a number of compelling examples of great procurement starting with home to school transport e-auctions.
Reflecting on e-auctions he noted that some organisations have failed to get these right and that the key is a good specification. For example, no one would sign up to cut price journeys for kids with special educational needs. However there is a case for better value in these activities. The benefits which come from good procurement begin with really understand the costs, getting the specification right and examining the potential.
Another example was checking duplicate payments in care services which helped recover £700k at a single council. It made the case for electronic monitoring. Other councils then looked at this and found the same. One lesson is that many of the components and tools used are transferrable and we should invest time in this, avoiding developing our own “echo chambers” instead.
He talked through an example relating to Supported Living which has resulted in £150,000 saving per person by rethinking the scope of what is delivered and challenging over specification. Suggested looked at the “5 yeses” model proposed by CIPS.
Jonathan then reflected on activities at Birmingham University where there are 6,700 staff and 27,000 students. Spend is £160- 200m p.a. and there is three year procurement strategy with an overall savings target of £9m this year in place which each member of team looks to achieve against. Their procurement strategy is now available online. No rocket science really: savings, capacity, systems and process, ethical procurement, supplier relationships.
They have brought in many of major suppliers to consider where savings could come from and how could they work differently and would encourage organisations to do this if they haven’t already. There is also a range of pipeline projects: consolidating MFDs on different arrangements, and other examples of duplicate activity.
His lessons on transferring from local government to university sector: Local government is a long way ahead of significant parts of the sector as a whole, largely as a result of pressure on the sector. Universities are catching up though.
Finally he challenged the audience to ask what people’s savings targets they have and what capacity they have to deliver them. At Birmingham University each procurement officer’s savings is on average £524k p.a. based on last 5 years’ analysis. This 14:1 savings ratio gives a very compelling case for investment in procurement capability.
Summing up Jonathan touched on the University’s projects database and how it works in his team and the benefits it gives them and their key stakeholders.
“Where Achieving a Lot More with a Lot Less is New Normal – The Schools Basic Need Challenge”
Phil Cresswell, EC Harris LLP, Account Leader for Education and Local Government
Phil’s slides are available online here: https://knowledgehub.local.gov.uk/group/inetworkformerlynwegg/library?p_p_id=20&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&_20_struts_action=%2Fdocument_library%2Fview_file_entry&_20_fileEntryId=12985129
Having talked through his public sector background and EC Harris, Phil moved on to talk about challenges in the sector and the savings requirements in the context of the rising construction costs.
Starting by looking at schools capital and the funding avaiable in AGMA he asked the question “is it enough?”.
The focus for schools building is on standardisation and driving out costs in construction, however costs are increasing year on year as contractors have more choice in what they do and what they turn down. There are also large batches of school development coming through from national programmes at set costs which is going to put more pressure on schools outside those batches. As a result target benchmarks are becoming harder to predict.
Phil then walked through some good practice which helps minimise the risks – including early supplier engagement, market insight reports, managing price points clearly rather than these being defined for you. He made some specific points about suppliers always specifying and pricing at the high end and to watch out for multiplier mark ups happening through subcontractors all taking a percentage.
Building on this Phil talked through a variety or risks and how to address them. One key point was lack of experienced resources as so many people have left the sector. There is a generation gap in procurement.
There are some huge increases in construction demand emerging which is further impacting on capacity and that councils should be mindful of this over the medium term horizon in their capital planning.
Phil wrapped up with some points out modular buildings which might offer a solution given the pressure on finances and increasing costs.
Category news and framework opportunities
Wendy Clarke, YPO
Wendy’s slides are available online here:
Wendy opened with a number of useful updates. She talked through the Pro5 branding retirement then moved on to talk about several frameworks:
– temporary staff or CLASS,
– enforcement agencies (over 50 authorities already been in touch),
– insurance 2nd generation contract (stakeholder days being planned for Liverpool and Lancashire),
– vehicle telematics,
– managed services for materials stores,
– fleet and workshops, and
– postal services being the latest one.
Wendy then explained YPO’s SEED initiative “Supplier Engagement and Economic Development”.
The title is self-explanatory with a range of enabling activities including reviewing YPO tenders and advertising, upskilling suppliers, running supplier events, using different types of lotting strategies, trying to remove barriers to SMEs, ensuring that invoices are paid on time, giving feedback on tenders, and ensuring products and services meet customer needs.
Given the importance of social value in procurement this was widely welcomed.
YPO is looking at working with larger suppliers on how they influence their supply chains upstream.
Colleagues discussed the priorities for the coming year and highlighted two key areas:
Health and social care co commissioning and procurement
Getting the right people in the room, targeting the right people in their sphere of activity. PSR reform group contacts are needed. Need better understanding of landscape and complexity and good examples.
Applying and using the EU regulations (https://www.gov.uk/transposing-eu-procurement-directives)
Points included: insufficient guidance, £25k rule on Contacts Finder and different organisations interpretation of the law, the Lord Young elements, poor training, PQQs and supplier suitability, problems with Contact Finder, lack of guidance for staff, Ts and Cs for sub-contractors, examples for district councils.
The feedback from this session and the Network Leadership Group earlier in the day helps inform the overall set of activities for 2015-16 and the next two sessions in particular.
Following the priorities discussion there were short updates on the NAG group activity, sharing forwards procurement plans and the CHEST retendering.
June 2015, date to be confirmed shortly