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Transcript of C o n s u l t i n g a n d e B u s i n e s s Southend Borough Council © Purcon (Consultants) Ltd...
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Best Value Procurement Review
Procurement Workshop6 September 2002
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Agenda define Procurement
what are we talking about? why is it important? and what are the risks if we get it wrong?
improving procurement performance some general issues some Southend-specific issues
the planned review scope process
any other questions
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
DefinitionsProcurement
This encompasses the whole process of acquisition of goods, services, and works, from third parties, from the initial assessment of business need through to the end of the life of the asset or service. (Byatt Review, Terms of Reference)
Supplier Any external organisation paid to provide
services, goods, or supplies
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Procurement
It usually involves a central Procurement function
for part, or sometimes all, of the necessary activities
users and budget holders for part, or sometimes all, of the necessary activities
a process which people should follow systems support
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
The Role of Procurement
To add value to the organisation through the effective development and management of the supplier base
The best have total acquisition and lifetime costs which are 20%, or more, better than the worst
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
What If You Get It Wrong?
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Commercial Risk? high prices extras
delivery charges packaging handling certificates
poor quality and service undue maintenance costs over-long contracts
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Legal Risk?
You ‘phone and ask a supplier to deliver some goods, but you do not confirm anything in writing.
Do you have a legally binding contract? If so, whose terms apply?
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Statutory Risk?
You breach EU procedures, or UK public sector procedures and get sued
or worse . . . . . . get fired!
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C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Compounded Risk? The sum of various risks taken together
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C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
The Byatt Report“Delivering better services for citizens” – published 2001 Better procurement should be an integral part of best value within
every authority, as the achievement of best value depends on good procurement.
The procurement function should have a much higher profile and be more strongly staffed: the responsibility of a senior officer and be part of the remit of a
member Procurement experts should guide any delegation of individual
procurement to officers in service areas Robust and clear procedures should be set out for appraising and
implementing large and complex contracts, drawing from current best practice
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Improving Procurement Performance
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Some General Thoughts
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
transactional
commercial
strategic
increasing sophistication
quantum leap
worldclass
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
supp
lier’s
pric
e
profit 10%
value added 30%
materials 60%
Unsophisticated buyers: squeeze the margin, might achieve 3-5%
Sophisticated buyers: target the 90%, might achieve 40%
The Illustration
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
supp
lier’s
fee
profit 10%
overheads 50-40%
direct costs 40-50%
The Service Model
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Change the Way You Think
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
A Fundamental Truth
Suppliers treat theircustomers differently
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C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
The Big Issue
Ensure your suppliers try harder for you than they do for anyone else . . .
You do not want them to take short cuts with you
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Some Techniques
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
How Do Suppliers View You?
ease of dealing with you
your spendlow high
high
low
Development Core
Nuisance Exploitable
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Are You a Nuisance?
ease of dealing with you
your spendlow high
high
low
Your business not wanted - typified by poor service and rising prices
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Are You a Development Customer?
ease of dealing with you
your spendlow high
high
low
Your business wanted - operational people at supplier give good service to you but limited opportunity to negotiate
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Are You an Exploitable Customer?
ease of dealing with you
your spendlow high
high
low
only top people at supplier want your business - difficult to arrange good deals
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Are You One of Their Core Customers?
ease of dealing with you
your spendlow high
high
low
supplier’s most favoured customers - partnerships sought, high service levels given, negotiations relaxed and easy
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
The Purchasing Portfolio Matrix
Impact of supply
problems
Annual Spendlow high
high
lowStreamline - manage the
admin.
Manage the risk
Short term deals - manage
the price
Long term deals - manage the relationship
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Southend-specific Issues
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Parameters £103 million external spend 6,000 suppliers
170 > £100,000 pa top 60 = £40 million (40% of total spend)
119,000 transactions (incoming invoices) pa 28% < £100 they are worth £1.6 million (excluding VAT) this is 1.6% of total spend
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
CategoriesKey spend areas are: £ million social care “contractors” £26.5 other contractors £17.4 capital £9.8 stationery / desktop support £3.0 furniture £2.8 asylum seekers £2.4 transport £1.9
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C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Procurement Expertise and Attitudes no centre of procurement expertise
limited co-ordination
highly fragmented approach
few (if any) corporate contracts for stationery, furniture, etc
no fast-track process for the low-value purchases
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C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Working Practices limited capability pre-assessment for suppliers
approved lists in TS, but “approval” a bit hit and miss
environmental procurement important but not yet practised
still a long way from e-procurement
risk assessment and management is not a routine part of purchasing process
poor contract database - so compounded risk is an issue
no on-going supplier performance monitoring
no procurement performance monitoring – so how will you know what improvements are achieved?
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Where Are You Now?
We use a simple model to benchmark procurement performance
It uses 22 indicators grouped into 7 key areas
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
A Model for Procurement
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
A Model for ProcurementBack wheels:
Performance & risk management:
performance measures
risk management
Processes:
their emphasis
supplier selection
payment processes
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
A Model for ProcurementFront wheels
Sourcing & supplier management:
supplier evaluation
supplier relationships
supplier monitoring
environmental management
specifications
Systems support:
procedures & processes
information
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
A Model for ProcurementEngine
Structure & resource level:
type of department
training & skill mix of those involved
career development
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C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
A Model for Procurement
Driver
Strategy & Vision:
overall objectives
marketing
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C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
A Model for Procurement
processes
performance & risk management
sourcing & supplier management
systems support
structure & resource
strategic direction
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Role
The car also has a perceived role: How do others see it?
high status and strategic . . . . . . or low status and administrative?
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C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
A Model for ProcurementRole
We look at 5 indicators of perceived role:
internal perceptions
location of department
supply chain integration
coverage
involvement
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C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
What Sort of Model Have You Got?
good procedures and controls, but little or no emphasis on support information and supplier management
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C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
What Sort of Model Have You Got?
a Procurement rescue service, when budget holders foul it up
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
What Sort of Model Have You Got?no engine, very little emphasis on suppliers or on support information, just lots of controls (audit trail) and procedures
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
What Sort of Model Have You Got?
?
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C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
0
2
4
6
8
10
Overall objectives
Marketing
Internal perceptions
Location of Department
Supply Chain Integration
Coverage
Involvement
Measures
Risk Management
Type of department
Training & skill mix
Career development
Supplier evaluation
Supplier relationships
supplier monitoring
Environmental management
specifications
emphasis
supplier selection
payment practices
information
procedures and processes
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
What Sort of Model Do You Want?
a winning model
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
What Sort of Model Do You Want?
robust, stylish, versatile, go-anywhere, safe, do anything . . .
or
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Your Aims Should Be . . .
Dramatic improvements in Procurement performance for Southend through:
Better commercial deals leading to lower costs
5% saving is £5 million
Better supplier responsiveness and quality leading to improved service delivery
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
The Planned Review
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C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
ScopeFour key outputs recommendations for a corporate procurement function
what sort? how big? what should it cover? where should it sit?
recommendations for e-procurement recommendations for green procurement mechanisms for achieving better value for money
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C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
How Do You See Procurement Impacting on Local Economy?
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C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Some Suggestions Whatever the scope, the review should look at how well you
currently procure, and should recommend a realistic way forward covering: procurement resource and structure needed people involved, and their skills and knowledge working practices, formal and informal systems support (IT) changes to standing orders / contract regulations target setting and performance monitoring way forward and implementation plan improvement potential available
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Purcon Role at Southend Council
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Working with the Best Value Review TeamBaseline assessment through consultation with
key stakeholders users and budget holders senior management suppliers
information collection and analysis
audit of processes, working practices and procedures (how, and why, not compliance)
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
comparison with external best practice
challenge
throughout the process
specific challenge workshop
your opportunity to challenge our findings
competitive recommendations with outline costs and benefits of the proposed changes
outline implementation plan
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Timings Our work starts today Baseline assessment / competition / comparison /
options for the way forward mid November
Service delivery options / recommended way forward mid January
Final report mid February
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
The InterviewsOne-to-one and private, covering what sort of Procurement individuals are involved with -
types of contract types of supplier
what do they do? why do they do it that way? constraints? needs? wants? ideas for improvement
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Establishing the Business Case
Developing the Specification
Inviting suppliers to bid
Evaluating suppliers bids
Negotiating contracts & relationships
Managing supplier performance
Managing & monitoring commissioning performance
Variations & extensions
Market / industry research & analysis
Internal & external procurement marketing
Developing & implementing procurement strategy
The Conceptual Procurement Process
requisitioning, ordering, goods inward, payment processing
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
The Team
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Will Parsons FCIPS 22 years in Purchasing consultancy experienced at all levels recent clients:
Chelmsford BC Gwyned Council Herts Police Kraft Foods Sevenoaks DC Watford Council
contact Will on 01527 832555
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Mark Allen
MBA – Cranfield University senior purchasing executive with strong business experience experience gained in many different parts of the world recent clients:
Bae Systems Milton Keynes Council London Borough of Southwark Watford Council Surrey County Council
contact Mark on 01780 721664
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Questions?
© Purcon (Consultants) Ltd 2002
C o n s u l t i n g a n d e B u s i n e s s
Southend Borough Council
Will Parsons
Head of Training and Consultancy
Purcon (Consultants) Limited
Telephone 01527 832555
Fax 01527 836608
e-mail [email protected]