Transforming Procurement

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REGIONAL CENTRES OF EXCELLENCE PROCUREMENT
PROGRAMME

• Transforming Procurement
• Changing the way Local Government does Business
• Nicol Thornton
• Assistant Director
• RCE Procurement Programme

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Key Drivers

• Local Government White Paper emphasises
  collaboration and smarter procurement

• CSR 07. Local Authorities could be facing a cash
  saving target of 5 billion

• Citizens expect improving services

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How Big is the Procurement Business?

• Local Authorities will spend about 100 billion
  annually throughout the CSR 07 period

• Over 40 of spend is on contracts with the
  private and third sectors

• After schools expenditure is taken into account,
  the proportion of spend on third party contracts
  is about 60

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Where does the money go?
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What is the scope for savings?

• About 12 billion is spent on construction
  related goods and services

• The use of regionally based framework
  contracts pioneered in the East Midlands and the
  South East supported by the RCEs are already
  aggregating over 1 billion of construction
  related expenditure with predicted savings in the
  millions. These arrangements are ripe for
  systematic promotion and roll out to all regions

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What is the scope for savings?

• About 12 billion is spent on construction
  related goods and services

• Reverse e auctions for commonly needed
• repairs components and materials for social
  housing have resulted in contracts open to the
  sector that can save millions.

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What is the scope for savings?
About 12 billion is spent on commodity goods and
services

• Reverse e auctions supported by the RCEs have
  resulted in excellent contracts open to all waste
  collection authorities for wheeled bins with a
  price reduction of over 30 thanks to the
  aggregation of buying power achieved through the
  events

• Difficult markets like energy ( almost 1 billion
  spend in local government) need to be approached
  with top level category expertise in a strategic
  way. The RCEs have published a comprehensive
  guide to effective procurement in this market.

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What is the scope for savings?
About 12 billion is spent on commodity goods and
services

• The use of national and regional contracts
  avoiding the need for expensive and time
  consuming procurement activity at local authority
  level can typically save over 5. The North West
  RCE has successfully promoted these sorts of
  contracts and the RCEs have now established an
  open contracts database which will be promoted to
  all local authorities in each region.

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What is the scope for savings?
About 6 billion is spent on care services for
adults and children

• Care costing tools supported by the RCEs are
  beginning to result in less variation in price
  for expensive care packages but need to be used
  universally

• The use of e-procurement tools in paying for
  domiciliary
• care is producing major savings

• Regional commissioning and contracting models
  are
• beginning to be explored

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What is the scope for savings?

• About 3 billion is spent on environmental
  services

• Millions can be saved by jointly procuring waste
  collection and disposal solutions

• A framework approach is being developed to
• aggregate demand

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What are the obstacles to optimising savings?

• Procurement Landscape

• Lack of procurement expertise

• Lack of Market Intelligence

• Failure to optimise buying power

• Self imposed rules

• Autonomous behaviour culture

• Lack of capacity to improve resulting in missed
  opportunities

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Non Collaborating Landscape
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Aggregation via Buying Organisation
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New Collaborative Arrangements
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Managed Landscape
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Why manage the landscape?

• Leverage public sector common spend
• Coordinate approaches to markets
• Optimise collaborative procurement
• Deliver consistently high quality management
  information
• Deliver against the various policy requirements,
  e.g. the sustainability agenda
• Engage with suppliers to drive innovation and
  shape markets

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RCE Procurement Programme

• The programme seeks to identify and promote to
  local authorities via the 9 RCEs the very best
  practice and deal opportunities so that savings
  can be optimised
• We are beginning to look hard at the link between
  our products and services and cash savings at
  local level
• Creation of Procurement Advisory Groups (PAG) to
  deliver guidance and best practice through the
  involvement of a cross section of market
  specialists

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What needs to be done?

• Collecting analysing and using market
  intelligence to develop and implement procurement
  strategies across authorities and regions
  focussing on the big spend areas

• Concentrating procurement expertise in far fewer
  highly professional organisations who operate on
  behalf of the many

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What needs to be done?

• Aggregation of buying power in key markets to the
  correct level for sustainable value for money

• Procuring contracts that are open to the many
  not
• not restricted to the few

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What needs to be done?

• Managing and wherever possible reducing demand

• Entering markets that require moderation

• Rationalising supplier bases

• Deploying e-procurement tools effectively

• Doing these things with partners

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• Thank you for your attention
• and I look forward to your
• questions at the end of the
• session