Review your procurement past to chart a better procurement future The MAV LEAP Program Cameron Spence MAV Tony Kerr ArcBlue Consulting 1

What will we address in this session? 2 1.Introducing the MAV LEAP Program, its principles and objectives 2.A summary of program findings to date 3.How the program works 4.Organisational spend analysis – what we can and have learned 5.Sector trends and emerging initiatives 6.What can be achieved through a regional approach

What you need to know about procurement? 3 Who are my top suppliers? What is my cumulative spend with suppliers? How much spend is under contract? Are they good contracts? How much do I spend with local suppliers? How many purchase card transactions? Which are my top categories? Do I have category strategies in place? What is my savings plan? How many invoices am I processing? How many invoices are worth less than $100? When is most of the spend happening? By whom? What are other councils buying? From whom? When and how should we collaborate?

How much procurement does Council do? “On average, Council procurement spend represents 40% - 60% of overall expenditure. It is commonly greater than salary expenditure.” ArcBlue Benchmarking Procurement represents a unique opportunity in a rate capping environment

How does Local Government get the best out of procurement? 5 Savings Benchmarking Compliance Local Economic Development Sustainability Efficiency Collaboration Social Procurement Category Strategies

Sustainable Savings “the adoption of better practice procurement across the sector has the potential to yield annual savings in the order of $ million per annum” Ernst & Young, Local Government Procurement Strategy 2008 The LEAP Program is designed to enable the realisation of these savings as well as many other benefits through supporting the development of the LG Sector’s capability. 6

The MAV LEAP Program  A continuous improvement program designed to assist organisations, regions and sectors to:  Achieve and demonstrate sustainable savings and value for money  Support local and regional economic development and other triple bottom line objectives  Identify and pursue shared services opportunities  Improve probity management and compliance  Improve organisational and sector capability  24 Councils underway including all of Gippsland as a Region 7

Councils Participating to date 8 1.Banyule City Council 2.Bass Coast Shire Council (GLGN) 3.Baw Baw Shire Council (GLGN) 4.Bayside City Council 5.Casey City Council 6.City of Greater Dandenong 7.East Gippsland Shire Council (GLGN) 8.City of Greater Geelong 9.Indigo Shire Council 10.Knox City Council 11.Latrobe City Council (GLGN) 12.Manningham City Council 13.City of Melbourne 14.Moira Shire Council 15.Monash City Council 16.Moreland City Council 17.South Gippsland Shire Council (GLGN) 18.Stonnington City Council 19.Surf Coast Shire Council 20.Wellington Shire Council (GLGN) 21.City of Whittlesea 22.Yarra City Council 23.Golden Plains Shire 24.Cardinia Shire Council

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14 The MAV LEAP Program – How it works

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LEAP is Ongoing Continuous Improvement 16

17 Spend Analysis - What we can learn

Our buying picture … 18 Shared LEAP Council Spend Overview  Top Categories  Top Suppliers  FY Breakdown

What are key engineering categories showing – Roads … 19 Roads □ $532.86M spend □ 474 suppliers What the screen shows  Category & sub- category Spend/suppliers/ transactions/ percentage spend Category Options  Investigate sub- categories  Target areas with unexpected high number of suppliers  Review spend by date / business area

What are key engineering categories showing – Engineering Consulting Services … 20 Engineering Consulting Services □ $34.55M spend □ 271 suppliers What the screen shows  Sub-category Spend/suppliers/ transactions/ percentage spend Category Options  Forward planning bundling projects – shape to suit market  Consider best procurement method (D&C, Traditional etc)  Consider panel  Supplier relationship management

Where does our procurement spend go … 21 GEO Spend □ 87.6% in Vic What the screen shows  Spend by payment location Category Options  Support local procurement policy and local economic development  Investigate non local spend and target appropriate categories to increase local spend

Where are efficiencies found … 22 Transaction trends □ 60-80% of transactions are below $1K across LG Sector What the screen shows  Payment volume / amount by standard levels  Payment effort by payment amount per supplier Category Options  Target large volume low value suppliers for process efficiency improvements  Identify inefficient or infrequently used suppliers and set appropriate strategies for payments (p cards or period invoices)

What are our sector spend trends … 23  High levels of low value transactions  High numbers of suppliers in key categories  A large number of key suppliers working across a number of Councils  Majority of spend with small number of high value suppliers  Long tail of unmanaged spend with low value invoices  An increase in spend in the last month of financial year

What initiatives are emerging across Councils / Regions … 24  Establishing Procurement Steering Groups  More proactive category management  Exploring Panel opportunities  Sharing of forward procurement plans  Standardising of documentation including specifications to reduce burden for suppliers  Integration of activities with professional bodies e.g. IPWEA  P Card programs for operational efficiency  Supplier relationship management – better performance through existing contracts  Capability development & training programs

MAV Training Program … 25  Full suite of procurement and contract management courses available  Council in–house options  eLearning coming soon

The MAV LEAP Program is designed to help! 26  Delivering and demonstrating savings, value and productivity improvements  Data-based decision-making  Taking a structured approach  Building the right skills and capacity  Balancing commercial and community  Delivering the real benefits of collaboration

What can be achieved … The Barossa Region 27 Barossa Region No. of Councils5 Procurement Spend$55.1 M Regional Spend25% ($13.8M) Total no. of suppliers2,553 No. of local suppliers1,006 Population74,000 Regional Procurement Shared Service 1 1% increase in local/regional spend = $1.84M additional to the local economy 5% savings target = $9.2M >$1,000,000 savings in first 18 months

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