Procurement Transformation Recurring Procurement Presentation by Bruce Fletcher Director General – CASMS - PWGSC November 15, 2006 Seoul, Korea

2 Objective Describe the processes and mechanisms commonly utilized by the Canadian federal government to acquire goods and services on a recurring basis To discuss the related departmental Procurement Transformation activities that are currently underway to achieve best value for Canadian Taxpayers

3 Acquisition Program PWGSC is a common service agency that purchases $13 Billion in goods and services annually on behalf of federal departments and agencies ~ 80,000 transactions per year Individual departments have delegated authority to contract for goods and services within specified $ limits (typically up to $25,000) Significant portion of Recurring Requirements are for Low $ Value, common goods and services CHALLENGE Implement appropriate contract mechanism and practices to secure best value result for clients and taxpayers

4 Standing Offers The Standing Offers is the most common method of supply used to acquire the same range of goods and/or services on a repetitive basis Process and Features 1.PWGSC solicits Standing Offer proposals from suppliers for specified goods or services 2.Suppliers offer to provide the goods or services on an as-and-when- required basis at pre-arranged prices and under set terms and conditions 3.PWGSC issues Standing Offer agreement to supplier 4.Offer is open for acceptance by one or more authorized users on behalf of Canada during the period of time that the SO is in effect. 5.A separate contract is formed each time an order (“Call-Up”) is placed against a Standing Offer

5 Standing Offer Method of Supply Application Repetitive requirements for well-defined goods, services Actual demand (quantity, delivery date, delivery point) not known in advance Pre-arranged pricing basis can be established at the outset No further negotiation required at time of call-up Coverage Depending on circumstances, can be national or regional in scope and used by a single client or, as appropriate, many clients

6 Procurement Transformation 2005 Parliamentary Task Force Report on Government- Wide Procurement found system to be slow, fragmented and not achieving best value Resulting Transformation / Reform initiatives intended to streamline process and generate $2.5 Billion in acquisition savings over 5 year period. Role of Recurring Procurement Consolidated usage of commodity-managed, strategically- sourced Standing Offer arrangements a primary generator of efficiencies and savings

7 Origins: Procurement Transformation Budget 2005 Task Force on Govt.- wide Procurement’s Recommendations Expenditure Review Committee Recommendations Departmental Initiatives Govt.- wide Efficiencies Procurement savings targets of $2.5B over 5 years Supports government’s 2006 priorities & budget commitments

8 Acquisitions “Way Forward” initiatives Better pricing through Commodity (Supply) Management Mandatory use of Standing Offers Government of Canada Marketplace Shared Travel Service Initiative The transformation agenda will mature over the next three years and aims to yield the following results:  Cut the costs of goods and services by 10%  Reduce the procurement time by 50%  Reduce the cost of purchasing by 10% Buying Smarter - Procurement Reform Way Forward Initiatives

9 Supply Management (SM) SM Approach  Comprehensive, government-wide  Strategic planning, organizing, control & coordination  Complete life cycle  Innovative ways to deliver services smarter, faster and at a reduced cost  Balanced with policy objectives (e.g., regional, SMEs, Aboriginal, green, innovation) Benefits 1.Ensures operational requirements are met 2.Achieves the best value for Canada in an open, fair and transparent way 3.Contributes to broader objectives (socio- economic and environmental) 4.Provides better predictability for all stakeholders 5.Addresses inefficiencies in the supply chain Suppliers will also benefit in terms of:  Greater predictability  More consistency in government procurement practices  Lower cost of contract administration (e.g., bidding costs, financing period)

10 Strategic sourcing IM/IT People / Organization Procurement Processes & Policies Commodity Management Supply Management Enablers The CM Framework integrates input from all stakeholders to enable implementation of optimal strategies across the commodities Supply (Industry) Demand (PWGSC Clients) Client engagement is essential to success Supplier engagement is essential to success

11 Strategic Sourcing of Common Commodities Commodity teams Expert Knowledge Specifications Transparency and competition organized strategically up front Suppliers GoCM STSI Who is buying What they’re buying The price they’re paying Results <Cost >Business Simpler demand Move from a series of instruments to a strategic sourcing approach Results <Time (to 1-4 days from days) <Cost Approach: Strategic Sourcing vs Decentralised Procurement Supply Arrangements (National & Regional) Information and Exceptions Client

12 Government and Supply Management Objectives PWGSC Procurement transformation through government-wide supply management activities will require extensive analysis and stakeholder consultations to achieve appropriate best value balance to the benefit of Canadian Taxpayers Supply (Industry) Demand (PWGSC Clients) Federal Departments and Agencies Programs and Operational Requirements Budget 2006 Plans and Priorities (Savings) Objectives Socio-economic (SME) impact Green Procurement Legal/ethical obligations and policies Best Value Results for Canadian Taxpayers

13 CategorySub-category Telecom Wireless Phase II Service Canada / Information and Communication Technology Renewal Network Equipment Support Services Phase I and Phase II Network Infrastructure Management Services Collective Network Services (various ones) IT Hardware Wintel Servers, Desktops, Notebooks Unix Servers, Tape & Optical Archival Storage Area Network / Network Attached Storage Imaging Managed Print Solution Printers Envelopes Reprographics Commercial Print Promotional Items Professional Services Temporary Help Services Informatics Professional Services Vehicles Passenger Cars and Light Trucks Medium Trucks Heavy Trucks Furniture Office Supplies Travel Hotels Rental Cars Knowledge Sharing Teams Audio Visual Equipment Medical Equipment and Drugs Fuels and Lubricants Courier and Freight Specific Commodities being Reviewed