Colin Cram - Background Director, North West Centre of Excellence - 47 local authorities Director, Research Councils’ Procurement Organisation Director, North West Universities’ Purchasing Consortium Director, Benefits Agency Contracts Organisation Central Unit on Purchasing Cabinet Office, Treasury, Central Government generally Senior Adviser to Office of Government Commerce Member of Society of Local Authority Chief Executives -SOLACE Fellow of Chartered Institute of Purchasing and Supply Honorary Fellow, Manchester Business School Institute of Directors: ‘Towards Tesco’

TOPICS 1. Context for Procurement 2. How the Public Sector Creates Cost 3. Taking Out Cost/Savings 4. Procurement Models Delivering Significant Procurement Savings is Not Easy District Councils are Too Small to Obtain Good Overall VFM Supply Chains are Increasingly Global No Perfect Procurement Model

£220 Billion pa £3,500 per Adult and Child pa One Third of Total UK Public Spending One Sixth of UK Gross Domestic Product (GDP) 0.75% of Global GDP Size makes it Critical to Delivery of Public Services Effective Management is Essential to Reduce Public Spending Deficit and Deliver Government Procurement Policies LOCAL GOVERNMENT PROCUREMENT - £42+bn Alone would put UK in top 25% of national GDPs

65% Non-Central Government 50% Common Categories, Goods, Services Professional Services £35bn Construction £21bn ICT £10bn Facilities Management £10bn Energy £4bn Reprographics £3bn Travel £3bn Fleet £3bn Food £2bn

FEATURES OF LOCAL GOVERNMENT SPEND Asset Management Corporate Services Social Care Waste 96%

Some Major Central Government Department Organisations Some Large Specialist Organisations NHS Outsourcing Buying Agencies: 40+ Office of Government Commerce and Category Teams Several Thousand Small to Medium Procurement Units 40,000+ Procurement Points BUT Increasing Collaboration/Joint Procurement

Indiscipline Different Procedures/Contract Ts and Cs Complexity – e.g. Tender Procedures Multiplicity of Tenders Multiplicity of ‘Duplicate’ Contracts and Contract Managers Inconsistency of Expertise/Capability/Processes/Procedures Inconsistency of Specifications

Varied Specifications/Reinventing the Wheel Indiscipline/Disaggregation Duplication Inconsistency of Expertise, Processes and Procedures AND cannot use industry best practice supply management

Furniture 30% FM/Outsourcing/Major Contracts Up to 35% Laboratory Consumables Up to 90% IT 5 – 80% Construction 5 – 25% Excellent Construction Management 5 – 15% Social Care 10% Legal Services 10% Good Contracts Management 5 – 35% © C M Cram

Right Procurement Structures/Joint Procurement Common and Complete Databases Common Information/IT Systems Common Procedures Common Specifications Commodity, Markets, Procurement Expertise Specialist Management Best Practice Procurement Techniques

PRACTICAL WAYS TO TAKE OUT COST Understand Procurement Spend – Great Start! How much does Essex need to save? Look at the big spends Opportunistic Spends Bankable Cash Savings Negotiate – e.g. IT or IT software

PROCUREMENT MODELS OBJECTIVE / COLLABORATIVE MODELIndep- endence Bench- mark Limited Collab Geogr- aphical Hub 1. Identify and Deliver Savings 2. Negotiation 3. Reduce Costs for Suppliers 4. Consistent Contracting Expertise 5. Consistency of Specifications (to reduce cost) 6. Best Practice Techniques 7. High Levels of Service TOTAL © C M Cram

WORKSHOP AGENDA How to Save Evaluation of Procurement Models Agree Objectives Agree Possible Models Evaluate Models Rules of Thumb for Successful Collaboration

Thankyou Colin Cram Marc1 Ltd Tel: Mobile: © C M Cram

WORKSHOP AGENDA How to Save Evaluation of Procurement Models Agree Objectives Agree Possible Models Evaluate Models Rules of Thumb for Successful Collaboration

PRACTICAL WAYS TO TAKE OUT COST - continued Do things differently Re-visit specifications Question/challenge specifications Challenge need for procurements Cut out what is not essential – consultancy? Internal Discipline Competition Use Best Practice Procurement Manage Internal Demand Apply Project Disciplines to Larger Procurements Right Expertise, Resources, Authority, Motivation

PRACTICAL WAYS TO TAKE OUT COST: COLLABORATE Price benchmark with other local councils/SEIEP Use Office of Government Commerce recommended arrangements Expenditure benchmark – with other local councils Identify spend with common suppliers with other councils Collaborate on Specifications, Procedures, Processes Joint Negotiations – aggregate suppliers/commodities – then negotiate Collaborate on individual procurements/framework agreements Use consortia, purchasing agreements, Buying Solutions Engage with RIEP Joint Procurement Organisation with other councils?

REPOSITION PROCUREMENT REGENERATION MARKET ENGAGEMENT CONSTRUCTION ROADS MAINTENANCE SCHOOLS MAINTENANCE TRAINING LOCAL LABOUR PROCUREMENT WHERE IS MARKET ENGAGEMENT MOST EFFECTIVE? © C M Cram X

PROCUREMENT MODELS OBJECTIVE / COLLABORATIVE MODELIndep- endence Bench- mark Limited Collab Geogr- aphical Hub 1. Identify and Deliver Savings 2. Negotiation 3. Reduce Costs for Suppliers 4. Consistent Contracting Expertise 5. Consistency of Specifications (to reduce cost) 6. Best Practice Techniques 7. High Levels of Service TOTAL © C M Cram

RULES OF THUMB FOR COLLABORATIVE PROCUREMENT

Clear and Realistic Objectives Clear Business Plan Strong Project Team Business Case Select Right Model Consider Constitution: Set of Club Rules Right Governance Strong Support from the Top

RULES OF THUMB FOR COLLABORATIVE PROCUREMENT Good Quality Analysis Clear Understanding of Costs Performance Measurement Suitable Contract/SLA Flexibility - Government Policies - CSR07/10 Compatible Standing Orders Don’t Start unless Determined to See it Through Do Not Avoid Issues Use Proven Documents

RULES OF THUMB FOR COLLABORATIVE PROCUREMENT Only Collaborate with those Fit to Collaborate Only Collaborate with Those Who Wish to Collaborate Clarity Over who Does the Work Maintain Internal Support

PUBLIC SECTOR PROCUREMENT IN 5 YEARS TIME? Central/ Major Departments/ Buying Solutions Industry Specific Regional P Hubs/ Medium Depts Local/Med/ Small Departments Major National Contracts/Suppliers ** Common Categories ** Relationship Management ** Market Management ** Industry Specific ** PPIs/Major Project Support * ** Regional/Large Local Contracts/Suppliers * Small Local Contracts ** Discipline/Implementation/ Compliance ** © C M Cram

INDEPENDENCE COLLABORATION INTEGRATION © C M Cram PUBLIC SECTOR PROCUREMENT: THE FUTURE?