Driving public sector efficiency savings using eProcurement Solutions

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Driving public sector efficiency savings using
eProcurement Solutions

• Sarah Cotgreave
• Director of eCommerce
• OGCbuying.solutions
• 5-6 April 2006

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Efficiency Procurement What Do We Need To
Achieve?
21.5 billion a year efficiency gains by 2008
8 billion efficiency gains to come from
procurement
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Hot eProcurement News

• EU Ministerial Declaration on Transforming
  Public Services
• By 2010
• all EU public administrations across Europe will
  have capability to carry out 100 of their
  procurement electronically,
• at least 50 of public procurement above OJEU
  threshold will be electronic.

Declaration is available at http//www.egov2005
conference.gov.uk/documents/proceedings/pdf/051124
declaration.pdf
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Hot Procurement News
New UK Regulations came into effect
31 January 2006 Implementing EU directives
and outlining more legal certainty for
eAuctions Framework Agreements
New OGC guidance outlining good practice under
the new regulations is available on the OGC
Website www.ogc.gov.uk under Policy
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Savings, Value Efficiency On A Major
Scale eProcurement

• In March 2004 the National eProcurement Project
  identified opportunities in local government
  alone
• Reduction in cost of goods and services
• through good procurement
• through ePurchasing
• through eAuction
• Overall average potential saving was estimated at
  2.8 of total non-salary related expenditure. No
  public sector organisation should disregard
  eProcurement

1.1bn
64
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1
2.8
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eProcurement Solutions
Management Information /Aggregation
Collaboration / Communicate
Payment
Specification / Notice
Invoice / GPC
eSourcing, eAuctions, Supplier Databases
Expression of Interest
Receive
Zanzibar, GPC Visa
Feedback / MI Best Practice
Invitation to tender
Order
Approval
Evaluate
Negotiate / Reverse Auction
Selection /Requisition
Award
Content Management
Contract Management
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eProcurement Solution Toolkit benefits

• Commercial Off The Shelf products
• Easy to use technology
• Hosted solutions scalable for large customer
  numbers requiring no technology investment
• Security accreditation to support 90 of Public
  Sector
• Tools and MI support collaboration between
  customers
• Integration of GPC for payment
• Standard protocols / open source software if
  possible
• Enabling time savings in regulated processes
• Effective Disaster Recovery and contingency plans
  

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eSourcingGetting Into The Game
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eSourcing Managed Service
The eSourcing managed service is provided by
BravoSolution, under a four-year framework
agreement. Four modules which are provided on a
hosted basis including a range of core services
with additional services available.
Initiate Project
Establish Business Need

• The eSourcing managed service
• means
• no procurement is necessary
• modular deployment
• compliancy with EU Procurement Directives
• value for money
• leading solutions with best practice templates
• security accreditation
• extensive support

Develop Business Case
Assess Market
Produce Requirements
Define Procurement Strategy
Advertisement/Notice
EOI/PQQ
ITT/ITN
Negotiate/Auction
Award Contract
Implement Contract
Close Project
Contract Management
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Impact of new regulations
Contract Notice published in OJ
Receipt of EOI/ PQQ responses
Invitation to Tender
Receipt of Tender responses
Contract Award
Open
Restricted
Negotiated
Competitive Dialogue
-16
-23
77
-19
65
-19
52
40
37
37
30
30


Pre-ITT phase only
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Fully managed hosted service

• Shared HW/SW technology infrastructure
• Common security architecture
• SOP for maintenance/upgrade/backup
• Unified disaster recovery plan
• Aggregate bandwidth management

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eSourcing Delivering Savings, Efficiency Value
8bn
25 Customers combined spend
400 - 2bn
eTenders run
5000

• suppliers involved

At least 25
typical efficiency improvements
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Case Study - WMCOE

• Signed April 2006 OGCbuying.solutions eSourcing
  Managed Service provided by BravoSolution.  
• West Midlands Centre of Excellence Organisations
  participating
• Birmingham City Council, Walsall Metropolitan
  Borough Council, Malvern Hills District Council,
  Staffordshire County Council, Solihull
  Metropolitan Borough Council, Prime Focus Group
  Warwickshire County Council, Worcester City
  Council, Warwickshire Police Stoke-on-Trent City
  Council, Bromsgrove District Council, West Mercia
  Police and Dudley Metropolitan Borough
  Council             
• Objectives
• improve procurement efficiency as under
  increasing pressure to contribute efficiency
  gains
• minimise implementation costs
• create opportunities for collaborative
  procurement in region

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eAUCTIONS Getting IntoThe Game
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eAuctions Delivering Savings, Efficiency Value
Pre-auction value of Goods/Services procured
using OGCbuying.solutions eAuction framework
contracts since 2003
Nearly 400m
92m

• Amount saved using OGCbuying.solutions eAuction
  framework contracts since 2003 (23)

80m
Pre-Auction value of goods/services procured
through OGC funded auctions since April 2005
Over 22m
Amount saved through OGC funded auctions since
April 2005 (27.5)
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eAuctions Success Stories..from bandages to
bedding plants!
42 saving
220k saving
1.8m saving
3.2m saving
31 saving
- 12.5m saving
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eAuctions Future Potential
Average cost of running an eAuction.
Under 10,000
800,000
Average savings from an eAuction
eAuctions are business as usual in public
sector procurement 4 providers available on
OGCbuying.solutions framework agreement
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Case Study Wheelie Good!
A consortium of NW Councils led by Warrington
Borough Council requirement - 2 Wheeled Plastic
Refuse Bins in Nov 2005 BT Transact e-Three
managed process from OJEC Expression of Interest
to the final pricing via an eAuction. Objective
- improved pricing from a qualified pool of
suppliers. - 43 Potential suppliers identified
from the UK (11), Germany (4), Spain (4), and
Italy (6). Results 12 suppliers
participated in ITT gt25 savings from a large
qualified supply base!
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Zanzibar Managed Service
Payment

• The Zanzibar Managed Service allows government
  buyers to trade securely with suppliers over the
  internet
• 3 main features
• Hosted eMarketplace connecting buyers and
  suppliers, containing Supplier content allowing
  search and comparison of goods and services
• Pan-Public Sector Data Warehouse
• Optional P2P Online Requisition, order and pay
  using GPC or e-invoicing

Invoice / GPC
Receive
Purchase to Pay
Data Warehouse
Order
Workflow / Approval
Selection /Requisition
Content Management
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The Vision

• Availability of procurement management
  information across the Public Sector
• Single point of access to the government market
  for buyers and suppliers
• The integration of different IT systems enabling
  electronic documents to be passed between systems
  and understood.
• First customers
• 22 organisations from CCG, Health and Education
  currently going through Scope and Readiness
  Assessments to subscribe to Zanzibar
• Data about spend patterns/suppliers - enable
  better future contracts

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What is the Zanzibar solution?
Traditional eProcurement environments, have some
automated functionality, but still rely on
manual processing at key points. Leading to a
disjointed procurement process. . . Zanzibar
provides a fully integrated eProcurement solution
where data persists throughout
Paper
Paper
Paper
Paper
Paper
Paper
Paper Invoice
Manual
Paper Invoice
Manual
Manual
Paper Invoice
Manual
Paper Invoice
Purchase
Purchase
purchase
Paper invoice
Purchase
Purchase
Purchase
Sourcing
sourcing
Sourcing
Sourcing
Order
Order
order
Order
Order
Order
Electronic
Electronic
Electronic
Electronic
Electronic
Electronic
Electronic
Electronic
Goods
Reconciliation
goods
reconciliation
Requisition
Approval
requisition
approval
Receipt
receipt
Zanzibar
eProcurement
Electronic
Electronic
Electronic
Electronic
Electronic
Electronic
Electronic
Electronic
Electronic
Electronic
Electronic
Electronic
Electronic
Electronic
Reconciliation
supplier
Invoice /
invoice /
Goods
goods
Supplier
reconciliation
Order
order
Approval
approval
Requisition
requisition
PCard
PCard
Receipt
receipt
content
Content
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Zanzibar components

• The Zanzibar system is a hosted solution based
  upon COTS products combined and tailored to meet
  the needs of the UK Public sector.
• When you subscribe to Zanzibar you get all the
  components needed in a turnkey solution for the
  whole environment.
• Provides a fully paperless procurement process to
  both suppliers and buyers
• Provides a level playing field for all suppliers
  no matter what their size
• Enables genuine savings in back-office processes
  (reconciliation, payments etc)
• Provides ready information that allows the
  requisitioner to make value-for-money decisions

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Zanzibar subscriber benefits

• Innovative procurement automation tools open to
  all public sector organisations
• Single point of access for buyers and suppliers
• Lower cost P2P solution for smaller customers
• Centrally managed supplier adoption, suppliers
  manage their catalogues
• Negotiated prices on collaborative contracts
  drives value for money
• Web based ordering and pay using GPC or
  e-invoices
• Reduced buyer and supplier time and cost of
  process
• Ability to enforce processes and contracts
• Access to data about spending patterns,
  suppliers and demand
• A catalyst for collaborative opportunities and
  benchmarking
• Link to marketplace leverages existing
  investments in eProcurement

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Zanzibar supplier benefits

• No charge to suppliers for marketing content,
  goods and/or services to buyers
• Ability to integrate with suppliers back office
• Ability to flip orders into shipping and
  invoice documentation, reducing re-keying and
  errors
• Lowers barrier to entry Puts all suppliers on
  an equal footing with potential customers
• Single entry, multiple use Enter catalogue
  information only once, content managed and easy
  on-line interaction with customers
• Rich set of supplier enabling tools regardless
  of e-commerce capability
• Lowering the costs of electronically transacting
  with multiple organisations in the public sector
• Single point of catalogue provision
• Single point of transacting
• Streamline back-office processes

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Supplier e-enablement

• Zanzibar will have many e-enabled suppliers
  available
• OGCbuying.solutions frameworks available from
  day one
• Existing suppliers already enabled by the
  consortium
• Large suppliers 100
• SMEs 12,000
• Other collaborative / consortia contracts will be
  loaded
• As more buying organisations join, more suppliers
  will become available for all customers to access
  if desired
• The consortium has pioneered methods of
  organising, running training and bringing
  suppliers online

• Nationwide team to provide hands-on support
• Regular open meetings and webinars

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The costs of Zanzibar

• The costs are split into three components

• Set-up which includes
• Connection and configuration of the technical
  components
• Training Departmental staff train the trainer
• Department specific supplier adoption
• Project management/ stakeholder management
• Scope and readiness assessment

• Annual subscriptions which include
• Access to the Zanzibar environment and components
  (marketplace, P2P, MI data warehouse, supplier
  portal)
• Ongoing supplier adoption
• Comprehensive support and maintenance including
  buyer and supplier helpdesks
• Comprehensive service and account management

• Value-Added-Services

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How to Join

• Simple engagement OGC framework contract,
  pre-approved costs and use of central OGC rates
• Scope and Readiness Assessment
• Simple pricing based on annual procurement spend
  on goods and services'
• Purchase-to-pay system and the e-marketplace, or
  only the e-marketplace.
• Once these two factors have been agreed, this
  then determines the two cost elements, a set up
  fee and an annual subscription.
• Discount structure for groups of organisations
• Average 2 3 months implementation

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P2P and Marketplace- Savings Benchmarks

• An overall saving of 41 per fully automated
  transaction (from requisition to payment).
• A saving of 6 per transaction is available to
  Buying Organisations not currently using
  eInvoicing.
• Savings available from effective use of
  Procurement Management Information 3-8 (of Total
  Spend) - Source Dun Bradstreet.
• Savings achieved by Essex County Council using
  the IDeA Marketplace 9 (of Total Spend) -
  Source IDeA.
• Savings achieved by the Scottish Executive 2-3
  (of Total Spend) - Source Scottish Executive
  User Group.
• Savings forecast by the Norwegian Government
  eProcurement Programme 4-7 direct savings on
  Total Spend.
• Aberdeen Group Report Spend Data Management
  Unlocking Value Across the Extended Enterprise,
  November 2003 Effective management and spend
  data can deliver savings of 2 - 12 (of Total
  Spend).

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Visa Government Purchasing Card

• GPC Visa combined with e-procurement leads to
  higher process savings
• Clear audit trail to individual for one off or
  emergency purchases
• Reduces and identifies maverick spend
• Limits can be set at transaction and monthly
  levels
• Only 0.000007 of Visa Commercial transactions
  are claimed as fraud
• gt 825,000 suppliers in UK alone, over 14,000
  providing line item data
• Some suppliers are offering discounts for payment
  by GPC Visa
• Visa banks can provide integration software for
  legacy systems
• Average 28 per transaction saving available
  using GPC Visa
• and its free for buyers

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Case Study Kent County Council

• Royal Bank of Scotlands TDM system automated
  payment and data matching solution
• has been implemented to manage invoices from, and
  payments via GPC Visa to, providers of
  domiciliary care.
• Objectives
• to enhance the quality of life for individuals
  in the KCC area
• to streamline processes and
  managed in the most cost-effective manner to
  redeploy resources into frontline services
• Results
• a 99 acceptance rate against orders -
  outstripped expectations in terms of matching
• estimated to process around 30 million worth of
  care payments p.a.

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Change Management

• eProcurement tools cannot just be parachuted
  in..
• Best Practice available from OGCbuying.solutions
• Assessing readiness (and capacity) for change
• Making Policy decisions for implementation
• Programme Management
• Managing Stakeholders, e.g. finance, audit
• Re-engineering processes and procedures
• Training
• Motivating affected staff
• Monitoring performance and compliance

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eProcurement Solutions

• Dependable web based Managed Services to e-enable
  
• the Procurement workflow for the Wider Public
  Sector
• eSourcing, eAuctions, Zanzibar, GPC, Supplier
  Databases, Change Management
• Available to all Public Sector organisations
• Services updated so you can concentrate on core
  activities
• Access to expertise within OGCbuying.solutions
  eCommerce team
• Managed service model releases time for other
  operational activities
• eProcurement Best Practice available from
  eCommerce team and User Groups
• Aggregated buying power and facilitation of
  collaborative activities
• Ensures security of supply and service level
  achievement

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Useful weblinks

• www.ogcbuyingsolutions.gov.uk
• www.nepp.org.uk
• www.purchasingcard.info
• www.idea.gov.uk/knowledge/eProcurement
• www.ogc.gov.uk
• www.buyitnet.org/Best_Practice_Guidelines/e-Procur
  ement/index.jsp
• www.capsresearch.org
• www.idea-knowledge.gov.uk/idk/aio/70780
• www.eprocurementscotland.com/
• www.zanzibaronline.gov.uk

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• Questions?
• sarah.cotgreave_at_ogcbs.gsi.gov.uk