Hampshire County Council Buildings, Land and Procurement Panel Item * 5 April 2005 Corporate Procurement - Progress Report and Framework for Corporate Savings Report by the Director of Property, Business and Regulatory Services

Contact: Andrew Smith Ext: 7826 email: [email protected]

Neil Jones Ext: 6180 email: [email protected]

How the conclusion in this report fits with the Corporate Strategy This scheme will impact on the delivery of the following Corporate Aims Aim 3 - achieving economic prosperity: impact on both the management of the Council's resources and on the local economy Aim 5 - improving services: by promoting a strategic approach to procurement within the County Council Aim 6 - developing councillors and staff: by developing the procurement skills of staff and improving capacity

1	Summary
1.1	The County Council prepared its corporate procurement strategy in 2003 and this identified ten key areas to deliver improvement. The actions contained in the strategy together with those identified in the National Procurement Strategy for Local Government (NPSLG) are monitored by the Corporate Procurement Network and progress has been reported regularly to the Buildings, Land and Procurement Panel (BL&PP). This report provides a further update. It is anticipated that future CPA reviews will focus on how well the Council has performed in this activity.
1.2	The report also raises important issues about the future direction, scale and funding of corporate procurement activity. It recommends that, recognising the wider efficiency agenda created by Gershon and the importance of `cashable' efficiency savings to future budgets, a corporate efficiency plan for procurement as outlined in this report be endorsed over a four year period from 2005 to 2008. (Section 3).
1.3	The report also reviews existing savings and procurement activity for 2004/05 and 2005/06.
1.4	From a procurement perspective it also needs to be accepted that further procurement and efficiency gains will in all probability only come about in a sustained way if they are built into the executive management arrangements of the Council. An approach is recommended in Section 4.
2.	Procurement Action Plan - Progress
2.1	The corporate procurement strategy was adopted in October 2003 and listed over 120 actions. In line with previous reports, progress has continued and around three-quarters of the actions identified have been achieved. A brief summary of the progress made is shown in Appendix 1.
2.2	Other actions identified in the strategy document remain to be completed and a full list of these, together with revised completion dates, is shown in Appendix 2. Several factors have combined to delay the completion of some tasks, but the key factors are: · over the last 18 months, the level of support required from the Procurement Development Team for the implementation of SAP across departments and schools has been greater than anticipated. · the scale of the effort required to achieve a corporate overview of procurement and to deliver the original action plan was underestimated and consequently under-resourced.
2.3	Progress against the milestones contained in the NPSLG was reported to the BL&PP in October 2004 and a revised position statement is shown in Appendix 3. The summary shows that the Council is well placed in relation to the milestones identified for both 2004 and 2005. Future CPA reviews will undoubtedly include an assessment of how well the Council performs against these best practice benchmarks.
	Healthcheck Review
2.4	The completion of a large number of the actions contained in the Council's first procurement strategy, together with the further development of the national procurement agenda, means that it will be necessary to formally review and update the strategy during 2005. This work will incorporate the output from the `healthcheck' review which is to be undertaken over the coming months by independent consultants. The company selected for the review is Qualitar Consulting Limited and a detailed project plan covering around 38 days of external input is currently being prepared.
	Key Performance Indicators
2.5	Individual progress and improvement reports are now being prepared within departments. The content of these reports will follow the model established in 2004 and a summary will be reported to a future meeting of the BL&PP.

2.6	The Corporate Procurement Network is also seeking to develop a range of key performance indicators (KPIs) for procurement. In December 2004, the Audit Commission and the Improvement and Development Agency published a set of thirty-four KPIs. The indicators are organised into four groups (strategy, major projects, purchasing, and equalities and competition). It will be important to select those which aid improvement in performance and not allow the collection of data to become an end in itself.
	Meeting the opportunity - Building further capacity
2.7	Work to support the implementation of the procurement modules within SAP and to deliver the actions contained in the Council's procurement strategy has been largely undertaken by the Procurement Development Team in collaboration with departments. In 2005/06, the costs associated with the current activities are expected to be around £200,000 (excluding the costs of the specialist procurement skills courses that are planned). These costs will be partially offset by additional rebate income (paid to the County Council by suppliers as a percentage of contract turnover) and by e-government funding, but a significant level of support will be required from the trading account of County Supplies. This funding arrangement is not a robust basis on which to secure the next stages of the development of the corporate procurement function (or for the harvesting of efficiency savings in a reliable way). Nor would it provide a response sufficient in scale to meet the challenge and opportunity that exists. Proposals for expanding capacity are described in Section 4 of this report.
	South East Centre of Excellence
2.8	The County Council continues to play an active part in the development of the South-East region's Centre of Excellence. The reference to `procurement' has recently been removed from the title of the centres to reflect their wider role in supporting the implementation of the efficiency review alongside their work on the NPSLG. Members will be aware that there have been moves to establish similar centres across government (for example, within the Department for Education and Skills and the Collaboration and Efficiency Team at the Highways Agency). As a further indication of the status of the nine regional centres, the Office of the Deputy Prime Minister has recently announced a major expansion of funding over the next two years.
3.	Development Issues
	`Corporate Savings Agenda'
3.1	The focus of the Corporate Procurement Network and the Corporate Procurement Unit has so far been on the corporate procurement strategy, its action plan, and on creating an overview of the Council's procurement activity, as opposed to helping departments to achieve savings targets. This has been essential to demonstrate progress against the strategy for CPA purposes, but has so far avoided an examination of procurement activity in some of the largest areas of spending. A substantial `savings agenda' is managed through the current arrangements and this was described in the report made to the BL&PP in October 2004, but it has not yet been closely integrated with the savings and efficiency targets introduced for 2005/06 and beyond. This report sets out how this integration could occur.
	Procurement Benefits
3.2 3.3	The main strands of this agenda are summarised in Appendix 4. This shows that procurement benefits of around £2 million have been delivered and that further gains of £1.3 million are expected from work in progress. Benefits can also be anticipated in three other areas of activity, but it is only possible to make a crude estimate of £1.5 million in the following areas: · non contract buying · process improvement · structure and Business Process Re-engineering The exploration of these opportunities will require the addition of further skilled resources and the assistance and co-operation of departments. One potential example is for a review of corporate requirements for training provision. This has yet to be explored in detail with Hampshire Learning Centre, but the Council's commitments in this area could well be on a similar scale to the agency staff contract. Work is also anticipated to develop corporate policy on the selection and sourcing of furniture.
3.4	The key features of current efforts are: · to extend the proportion of expenditure covered by formal contracts (particularly in the area of `common use' goods and services) · collaboration with other local authorities - the County Council has been a committed member of the Central Buying Consortium for ten years. This theme has emerged as a major feature of both the national efficiency review and the Centres of Excellence · e-procurement - influencing supplier selection, streamlining processes and facilitating the introduction of a standard system for electronic tendering.
3.5	This approach has been successful and has served the Council well. This is illustrated by the following examples: (i) The County Council currently manages a contract for IT hardware against which a large number of local authorities spent a total of more than £30 million in 2003. The Council's own expenditure was a small proportion of this total, but it has been able to achieve purchase costs that are substantially lower than those publicised in national framework contracts by the Office of Government Commerce (OGC). It has also received rebate payments (effectively access charges in these circumstances) on more than £5 million of expenditure by `client' authorities. This contract was recently retendered and an improvement in terms of around 4% was achieved for key categories of expenditure. These additional benefits became effective in January 2005. (ii) The Council's contract for agency staff is now attracting strong interest from neighbouring authorities. In particular, it seems likely that Bracknell Forest Borough Council and West Sussex County Council will make arrangements to access this contract. Preliminary interest has been expressed by district councils in Hampshire. (iii) Monitoring information shows that the prices charged for goods issued through the County Supplies warehouse operation are some 18% lower than in 1995/96. The improvement in affordability in `real' (inflation adjusted) terms has, therefore, been much greater. This trend will carry forward into 2005/06 when prices are expected to rise by less than 0.25%. Against internal issues of around £4.5 million, this will yield a gain of over £100,000 for 2005/06 (against an assumed rate of inflation of 2.5%).
	Limitations
3.6	There is still much progress to be made on the current agenda, but this approach is limited in scope. The principal limitation is that it relates only to purchases of `general' goods and services (about 25% of our spend) rather than major areas of specialist activity (about 75% of our spend). It is axiomatic that potentially bigger savings lie in the latter areas. These are examined in the following paragraphs.
	Scope of activity - Enlarging the Procurement Agenda
3.7	Although the corporate strategy does cover all activity, the main body of the savings initiatives in progress under the corporate banner are currently located within the `general' category of goods and services. This category probably accounts for less than one quarter of spend by the Council and if spend by schools is not included, expenditure is heavily dominated by: · Social Services - residential and nursing care, domiciliary care, service contracts (many with the not-for-profit sector), and commissioning for children and families (c. £120 million in 02/03) · Environment Department - highways, transport and waste (c. £100 million in 02/03) · Property Services - construction and maintenance (c.£40 million in 02/03)
3.8	It is clear that these activities are central to the improvement agenda for procurement. Market conditions and inflationary pressure will vary enormously across these areas so a `one size fits all' approach to savings is unlikely to be successful, but it is inevitable that these areas will be faced with substantial efficiency targets following the 2004 Spending Review and will feature heavily in the formal Annual Efficiency Statement. The suggestion in this paper is that the Corporate Procurement Unit should increase its capacity to become involved in these areas in partnership with each Chief Officer. Chief Officers would be responsible for a range of efficiency reviews conducted in their areas of specialist procurement, but these would be organised and facilitated by the Corporate Procurement Unit. Specific project plans would be established to cover procurement activity in these areas and these would be based around: · Feasibility - Phase 1 · Scope & Objectives - Phase II · Findings and Implementation Plan - Phase III This work itself could cover: · Market analysis · Procurement efficiencies · Cashable and non cashable savings · Non contract buying · Process improvement · Procurement structures and Business Process Re-engineering · Back office functions and IT · Goods and services expenditure Experienced staff are already operating in these areas and much good work will exist so it will be important to complete the work sensitively. To achieve this, appropriate management leadership and specialist procurement skills will be required.
3.9	Procurement arrangements within departments are not static, but their current form and priorities have been shaped by organisational issues and service objectives over a long period of time. There is a strong argument that some further support or assistance will be necessary if a significant change is to be achieved in the results that are obtained. This could be achieved within departments, but the Council has an opportunity to develop the role of the Corporate Procurement Unit further as a central resource and catalyst for change. This would be very much in line with the approach advocated in the original Gershon report. A first draft of the work programme that could be developed with departments is shown in Appendix 5.
	Capacity
3.10	At present, the Corporate Procurement Unit has little capacity to work with departments to improve individual contracts or to review strategies and promote innovation. The Council made payments of at least £360million to commercial bodies for goods and services in 2002/03 and the provision of some central support on a systematic basis across the Council would allow improvements to be identified and delivered. It is envisaged that a joint review process would be established to cover the full spectrum of procurement by the County Council. Such arrangements are well established in many local authorities and would clearly be in line with recommendations made at the national level. It would need to be established within a positive and collaborative framework to maximise the chances of success, but the main criteria would be a genuine contribution to performance improvement and to procurement's share of the efficiency targets.
	Corporate Procurement Network (CPN)
3.11	The CPN has maintained regular meetings throughout 2003 and 2004 to co-ordinate activity on the various strands of the procurement agenda and to formally monitor progress against the Council's action plan. A suggestion has recently come forward from departmental representatives that the CPN should meet less frequently and pass the `hands-on' activities associated with implementing the corporate action plan to a separate `development' or `practitioners' group. This would effectively leave the CPN as a strategic steering group for procurement.
	National developments
3.12	The national procurement agenda is expanding as good practice is recognised and new initiatives are established. Three examples can be taken from information published by the OGC: (i) Details have recently been released about savings achieved through the use of electronic reverse auctions. Over the last 18 months, 47 contracts with a total value of £155 million have been awarded using this method and savings of £32 million (around 20%) are reported over the previous contracts. The County Council is to participate in an e-auction for computer consumables with other members of the CBC and the wider adoption of this technique should be a feature of the Council's future plans. (ii) The OGC is projecting that it will have delivered £3 billion of value-for-money improvements in three years by the end of 2005/06. Half of this total is expected to result from the implementation of the Gateway Review process on major procurement projects. The County Council has adopted formal project management processes for some procurements, but has not established guidelines for this and has not yet addressed the Gateway Model (a key feature of which is independent scrutiny before the individual gates can be passed). This model is being promoted as a key technique to avoid cost and it should provide an opportunity for issues such as sustainability and contribution to the Community Plan and member priorities to be formally considered for all major contracts. The Gateway process has recently been successfully used in the Enhance Nursing Care project. It has undoubtedly added value through a better focus on future risks, and a check on realisable benefits and overall has brought greater certainty to the later elements of the project. (iii) The contracts available through OGCbuying.solutions (the trading arm of the OGC) are claimed to be "on average" 10.5% better than those of other public sector organisations. This is a sweeping statement that is in contrast to some direct evidence held by the County Council, but it clearly warrants further investigation.
3.13	Some of the early suggestions to come out of the discussions prompted by the Centres of Excellence include the following: · scrap any automatic price escalation clauses in contracts · sign major contractors up to cost and efficiency improvements that at least match the requirements placed on local authorities · give a 30% weighting to innovative bidding when evaluating tenders to foster a climate of change and improvement · review all ICT partnerships · ensure that an individual supplier relationship manager is nominated for all suppliers in the Top 100.
3.14	These and many other suggestions will have value for the County Council, but it will take time for these to be prioritised and assimilated into daily practice within departments.
4	Conclusion
4.1	Work already in hand is likely to deliver a further procurement gain of more than £1 million, but the corporate action plan and several new strands of activity are already under pressure from a shortage of the right people having the opportunity to spend time on the creative thinking and investigation that is required. Over three-quarters of expenditure is managed by individual departments and the County Council will need to increase the level of challenge to existing arrangements if it wishes to accelerate the pace of change and position itself to meet challenging efficiency targets. New techniques and advice are being promoted at the national level, but it is likely that these will be examined and adopted at an uneven pace across the County Council unless greater co-ordination is achieved.
4.2	Together these factors have created the potential for a much bigger corporate agenda for procurement within the Council. There is also the possibility that the Council will wish to develop its central capacity further in case the wider market testing of services becomes a necessity.
	Next Steps
4.3	The creation of some further central capacity to work on the extended procurement agenda is appropriate for an organisation of the scale and complexity of the County Council. The next stages of the development of this agenda will require an additional 3-4 staff for the Corporate Procurement Unit to establish a programme of internal reviews that will help departments to achieve targets, increase innovation and the rate at which successes elsewhere can be imported to the County Council.
4.4	A budget provision of a minimum of £150,000 in each of the next four years would be required to take this programme forward. An option would be to add the £150,000 to the £1 million of procurement savings identified in the budget strategy (effectively creating a revised annual target of £1.15 million). This approach has been explored with the County Treasurer, and is recommended for approval.
	A corporate approach to efficiency
4.5 4.6	The programme of work described in this report also needs to be linked to arrangements being developed by the ODPM whereby each Council will need to create an Annual Efficiency Statement of cashable and non cashable benefits that will also be part of the annual inspection of the Council by the District Auditor. The proposals in this report would create: · a forward business plan over several years (for submission to a future meeting) to support corporate efficiency and procurement savings · a management and delivery framework based on the executive management arrangements of departments · sufficient capacity in the Corporate Procurement Unit to extend its activity and support other departments
Recommendation(s)
That the Panel: 1. Notes progress against the local procurement action plan and the milestones contained in the National Procurement Strategy for Local Government. 2. Advises the Executive Member for Policy and Resources that approval be given to: (i) The Corporate Procurement Unit being directed to address the wider procurement agenda (in particular a programme of joint reviews with departments); (ii) Additional capacity being established on the basis of adding a £150,000 of costs to be matched by a similar increase in the corporate savings target; (iii) The Panel receiving further progress reports on the action plan, the outcome of the review by Qualitar Consulting Limited, and the wider procurement savings and efficiency agenda.

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1 Published works

2 Documents which disclose exempt or confidential information as defined in the Act

........................

........................ 

APPENDIX 1

Summary of Progress against Corporate Procurement Strategy Action Plan

1. Summary

1.1 94 (75%) of the 125 actions contained within the corporate procurement strategy have been achieved. The following paragraphs provide a summary of the actions taken to contribute to the achievement of the 10 key objectives within the County Council's Corporate Procurement Strategy.

2. Responsibilities Organisation, Controls and Standards

2.1 National Strategy milestones and checkpoints and the County Councils' Corporate Procurement Strategy actions are regularly reviewed by the Corporate Procurement Network and progress documented and reported to CMT and BLPP. Revised role of BLPP to review all procurement has been agreed and established. Corporate Procurement Network effective in developing and sharing procurement best practice.

2.2 All purchasing reviewed (within constraints of legacy system reporting), procurement portfolio analysis undertaken and detailed supplier analysis undertaken. Summary analysis of staff involved in procurement has been completed.

2.3 Purchasing guidance documents issued to staff and procurement web pages set up on Hantsnet.

2.4 Increase in on-contract purchasing due to support of Corporate Procurement Network, new contracts and implementation of SAP. On-contract purchasing has increased by approximately £7.2 million per annum (estimated full year effect in 05/06) since April 2003.

2.5 SAP Procurement module and the electronic goods and services catalogue (EBP) have been successfully rolled out.

3. Corporate Objectives, Sustainability, Equality and Economic Development

3.1 Green Buying Guide updated and reissued on Hantsnet. Whole life cost analysis to evaluate tenders are becoming more common, particularly for larger contracts and projects.

3.2 60% (£200m) of the County Council's spend (revenue and capital) with `commercial' organisations is with businesses based in Hampshire, Portsmouth or Southampton.

3.3 40% (£134m) of spend is with small and medium sized enterprises (SMEs) and 87% of suppliers are classified as SMEs.

3.4 4% (£13m) of spend is with `new' businesses.

4. Staff Training and Development

4.1 A high level analysis of staff involved in procurement has been undertaken. A procurement competency framework has been developed and is currently being rolled out within all departments.

4.2 A procurement development programme is in place comprising six key courses:

· Procurement Overview

· Procurement Essentials

· Contract and Supplier Management

· Supplier Negotiation

· Specification Writing and Bid Evaluation

· Procurement Partnerships.

4.3 Just under 300 staff have already attended the `Procurement Overview' course and departments are including procurement issues in their revised departmental induction programmes.

4.4 A procurement `e-learning' package is being developed jointly with Hampshire Learning Centre.

5. Value for Money and Management Information

5.1 Agency staff contract is in place and is expected to deliver full year savings of £500,000 per annum. Other savings of approximately £476,000 have been achieved (£428,000 on one-off requirements and £48,000 annual recurring) for departments and schools. About to participate in first electronic reverse auction.

5.2 SAP rollout successfully completed, with the electronic catalogue being used to support around £140 million of spend in the first nine months of the current financial year.

5.3 Further areas for contracting have been identified totalling just over £4 million per annum. Potential savings may be in the region of £200,000 per annum.

5.4 Improved procurement management information is becoming available through SAP, but full year data will not be available until end of 2005/06.

6. Partnership Working

6.1 List of forthcoming tenders published on Hantsweb. A detailed guide for suppliers on `How to do Business' has been prepared and together with a short summary will be placed on the Council's website.

6.2 Key partnership arrangements are in place and developing, particularly via the Central Buying Consortium (CBC) and in waste management, construction and social care.

7. E-Procurement

7.1 An Electronic Tendering pilot is in place. The Council is likely to sign up to the CBC contract for an electronic tendering system for which a business case is being developed.

7.2 Electronic catalogue is in place and used across all departments. The development of electronic links with suppliers is proving to be time-consuming, but the plan is to begin trading electronically with a small number of suppliers by April 2005.

8. Construction

8.1 Regular reports have been made to the Buildings, Land and Procurement Panel. Framework contracts and key performance indicators are in place and are being developed further. Construction Procurement `Best Practice Guide' partly published and is being developed to take account of the `Constructing Excellence' agenda.

8.2 The County Council is leading the Construction Procurement strand for the Regional Centre of Excellence in the South East.

9. Social Care Commissioning

9.1 A more rigorous approach to child care contracting has been developed. Supporting People contracts are in place and high cost placements are under regular review.

10. Procurement of Consultancy Services

10.1 A Best Practice Guide for the procurement of consultancy services is being developed.

11. Performance Management

11.1 Annual Procurement Performance Reports are being produced by

departments and the Corporate Procurement Network. National Strategy milestones are largely being achieved to timescale. Corporate Procurement Strategy action plan being achieved. Key Performance Indictors are being developed and full year reporting available in SAP at the end of 2005/06.

APPENDIX 2 Corporate Procurement Strategy Action Plan - Outstanding Actions (Updated December 2004)
	Detailed Task	Lead Responsibility	Initial Target Date	Revised Target Date	Priority	Progress to Date
6.3	Develop systems for electronic ordering between Portsmouth or Southampton City Councils and County Supplies as a pilot	Andrew Stoddern / Geoff Shard	September-03	May-05	1	underway, SAP business connector installed, XML schemes being discussed with PCC/SCC and two corporate suppliers
8.25	Establish performance management processes for social care contracts	Service Managers	March-04	March-05	1	underway
1.14	Interim version of Procurement Best Practice Guide completed by March 2004	Shaun Le Picq	March-04	March-05	1	first draft being reviewed by CPN
8.16	Develop and establish contracting & procurement training programme for child care staff	Graham Wright	March-04	March-05	1
9.1	Develop a Best Practice Guide for the Management of the Purchase of Consultancy Services by December 2004.	Brian Marsden	December-04	March-05	1	Underway
9.2	Consider wider concepts for term consultancy arrangements to achieve improved value for money and economies of scale, including interdepartmental arrangements where applicable.	Brian Marsden	December-04	March-05	1
3.10	Deliver e-learning procurement overview training for staff & monitor take up	Michelle Stickland / HLC	March-04	May-05	1	underway, being developed with HLC

	Detailed Task	Lead Responsibility	Initial Target Date	Revised Target Date	Priority	Progress to Date
6.4	Undertake a pilot e-tendering project for County Supplies corporate contracts using one or more service provider. Compile evaluation report for CPN.	Andrew Stoddern / Shaun Le Picq	June-04	June-05	1	underway, extended for another six months. Property Services also to take part in pilot.
10.7	Develop a procurement improvement plan as part of the Best Value Review of Procurement. This will be an outcome of external healthcheck of Procurement.	Neil Jones / CPN	December-04	June-05	1	No formal `Best Value' review of procurement because of existing large action plan and emergence of national guidance. Consultants have been appointed for `Healthcheck'.
2.10	Tender documentation to be revised to ensure corporate objectives and policies are covered.	Shaun Le Picq / CPN	April-04	September-05	1	include in final version of Best Practice Guide
2.11	Pre-tender questionnaires to be revised to ensure corporate objectives and policies are covered.	Shaun Le Picq / CPN	April-04	September-05	1	include in final version of Best Practice Guide
2.12	Ensure evaluation processes take account of whole life costings	Shaun Le Picq / CPN	April-04	September-05	1	include in final version of Best Practice Guide
1.15	Final version of Procurement Best Practice Guide issued by September 2004	Shaun Le Picq	September-04	September-05	1	underway
1.18	Include risk assessment in Procurement Best Practice Guide	Shaun Le Picq	September-04	September-05	1	underway

	Detailed Task	Lead Responsibility	Initial Target	Revised Target Date	Priority	Progress to Date
2.2	Include all corporate objectives in Best Practice Guide. Lead contacts and areas are: Economic Development (John Rees-Evans), Sustainability (Peter Brown), Equalities (Jane Goodwin), Race Relations (Mohammed Mosdaq), Health and Safety (Gerry Colverson)	Shaun Le Picq	September-04	September-05	1	underway
10.2	Achieve 25% of purchase orders transmitted electronically by April 2004 and increase this by 20% per annum. This should be achieved through rollout of SAP.	Andrew Stoddern / Geoff Shard	April-04	December-05	1	underway. Business Connector installed and XML schemas being discussed with suppliers. Supplier adoption strategy and plan developed. On average 35,300 purchase orders per annum are sent to supplier by autofax, which represents 8% of orders raised.
10.3	Reduce the number of individual invoices processed by 10% by December 2004. Base data is required. This may require additional work alongside Enterprise project on consolidation of invoices/central processing.	Andrew Stoddern / Geoff Shard	December-04	December-05	1	underway, Business Connector installed and XML schemas being discussed with suppliers. Supplier adoption strategy and plan developed.

	Detailed Task	Lead Responsibility	Initial Target Date	Revised Target Date	Priority	Progress to Date
6.6	Establish baseline measurement of on-contract spend	Elizabeth Cook	October-03	April-06	1	underway - need new configuration in SAP to achieve departmental reporting and need to ensure all departments set up contracts in SAP. Requires full year data in SAP.
1.10	Monitor trends in usage of corporate contracts and undertake an annual review and comparison of corporate contract spend. Increase contracted spend by 5% per annum.	Elizabeth Cook/CPN	November-03	April-06	1	underway - need new configuration in SAP to achieve departmental reporting and need to ensure all departments set up contracts in SAP. Requires full year data in SAP.
1.17	Establish Gateway Process for contracts over	to be agreed		tbd	1
8.8	£500,000 per annum Evaluate harmonisation of social care contracting and payment procedures and joint systems developments via working groups with Health.	Alan Edwards	March-05	December-05	2
10.8	Supplier and customer surveys to be developed, implemented and reported on.	Bob Cuzner / Shaun Le Picq	December-04	December-05	2
3.18	Where appropriate, incorporate elements of procurement good practice guide into existing and future generic training programmes which form part of the Corporate Training Programme	Michelle Stickland / HLC	March-05	December-05	2
	Detailed Task	Lead Responsibility	Initial Target Date	Revised Target Date	Priority	Progress to Date
10.13	Develop a programme of assessing departmental procurement teams against Procurement Excellence Model	Colin Russell / Keith Davies	March-05	December 2005	2
10.5	Rationalise the vendor base for indirect expenditure by 25% by March 2005. Corporate reduction is likely as a result of EBP implementation. Measurement of PI required. Cannot be started until FMS is fully decommissioned.	Elizabeth Cook / Michelle Stickland / County Treasurer's	March-05	March-06	2	Review of progress required
7.4	Establish a list of competent contractors for construction who will respect the County Council's objectives, allocate appropriate resources to Health and Safety and work with the County Council and its Agents to add value to projects.	David Corcoran	July-04	tbd	2	separate lists already in place - consideration being given to maintaining one corporate register for all construction issues
2.13	Establish standard systems and documentation to support the monitoring of equalities	Richard Keil	July-04	tbd	2
2.1	Develop performance indicators and targets to measure how procurement delivers corporate objectives	Professional Services / Elizabeth Cook	January-04	tbd	3	deferred, other KPIs to be developed first. Workshop January 2005
5.5	Explore the possibility of e-mail alerts to suppliers on new opportunities	John Rees-Evans / Shaun Le Picq	March-06	tbd	3
1.21	Develop approved and preferred supplier list policy	tbd		tbd	3	information on approved lists for Property,SSD & Env is now on Hantsweb
1.22	Develop publication and updating strategy for preferred and approved supplier lists	tbd		tbd	3

APPENDIX 3

Progress against the National Procurement Strategy Milestones

1. National Procurement Strategy Milestones 2004

	Action Undertaken	Status
Corporate Strategy developed, owned by chief executives, members and senior officers Strategy's implementation regularly measured	Corporate Procurement Strategy developed and owned by chief executives, members and senior officers. Reviewed at each Corporate Procurement Network meeting and regular reports to Corporate Management Team and Buildings, Land and Procurement Panel. Action Plan regularly monitored, reviewed and updated. Key Performance Indicators also being developed.	Achieved Achieved
Approach to partnering in construction and service delivery set out in the Corporate Procurement Strategy	Many partnership arrangements already in place. E.g. Raynesway, Unisys, waste management, construction and social care. See Cabinet paper on Construction Related Procurement partnerships and list of partnerships in Environment. Partnership Guide produced. Need to include summary of approach in revised Corporate Procurement Strategy. Partnership sub-group established.	Underway
Approach to collaboration and new trading powers set out in the Corporate Procurement Strategy	Approach being developed during January to March 2005 using 4Ps/IPF workshop, to be included in revised Corporate Procurement Strategy.	Underway
Appraisal of service delivery models included in Best Value/strategic reviews	Guidance already in place and currently under review.	Underway
Staff consulted on employment issues in procurement processes and contracts where relevant, including compliance with Local Government 2003 Act and 03/2003 Circular	Where applicable, this is included in procurement processes (e.g. cleaning and catering procurement arrangements). Appropriate contracts clauses already in use. Guidance issued and being addressed and monitored via the Corporate Procurement Network.	Achieved Achieved
Publish a Selling to the Council Guide (website)	Website and guide in place in January 2005.	Achieved
Ensure corporate procurement strategy is addressing sustainability and equality issues, helps to achieve the community plan and encourages a diverse and competitive supply market	Strategy includes key objectives and actions relating to sustainability, equality and local economic development. Some examples of actions already undertaken includes: Green buying guide, waste management, recycled materials in highways, `free trade' goods, ethnic foods, dual fuel vehicles. Community plans are being achieved in a wide variety of ways, including apprentices placed with contractors, over £40m p.a. is spent with the voluntary sector, £134m p.a. spent with small and medium sized enterprises, environmental assessments are included in major projects, wider use of a best value approach to tender evaluation meets community plan objectives, support through purchasing arrangements of local employment and business with over £197m p.a. spent with Hampshire-based businesses. Standard contract clauses in place where appropriate.	Achieved
Conclude a compact with the local voluntary and community sectors	Compact developed and in place	Achieved

2. National Procurement Strategy Milestones 2005

	Action Undertaken	Status
Health Check against National Strategy	Health check planned for March-May 2005	Underway
Centres of Excellence involved	Fully supporting the SE Regional Centre of Procurement Excellence. Two Hampshire County Council representatives on the Board and the County Council is leading the regional Construction Procurement strand.	Achieved
Average time from OJEU notice to award reduced by 10% for major projects of more than one year's duration	To be completed on a sampling basis. Will need to be addressed by the development of a corporate contracts management system.	Underway
All councils co-operating regionally via networks of centres of excellence	Fully supporting the SE Regional Centre of Procurement Excellence. Two Hampshire County Council representatives on the Board and the County Council is leading the regional Construction Procurement strand.	Achieved
Appropriate e-Procurement solution implemented	Underway, being rolled out to staff and suppliers. See: Corporate e-Procurement Strategy and: Electronic Goods and Services catalogue.	Achieved
Using government procurement card or suitable alternative for low value purchases	Review of procurement cards undertaken, benefits not substantial enough to implement at this time. The County Council is focusing its efforts on the EBP/SAP rollout and developing and improving its electronic catalogue of goods and service (internal e-Marketplace) and electronic links with suppliers as providing the greatest benefit to the County Council.	Achieved

Relationship of procurement to community plan addressed	Reflected in Hampshire Strategic Partnership and Local Strategic Partnerships. Workshop in January 2005 to establish procurement contribution to community plan.	Underway
Workforce diversity, equality and sustainability issues addressed	Standard contract clauses in place. Best Value tender evaluation processes and whole life costings approach being implemented, particularly for major contracts. Further guidance being developed for the Procurement Best Practice Guide and we recognise that there needs to be more focus on these issues in contract management.	Underway
Diverse and competitive supply market encouraged	The County Council actively encourages a diverse and competitive supply market as embedded in the Corporate Procurement Strategy, Contract Standing Orders and Best Value. Over £500m p.a. is spent with the private, other public and voluntary sectors, of which over £40m p.a. is with the voluntary sector, £134m p.a. with small and medium sized enterprises and £13m p.a. with `new' businesses. `Procurement - Business Opportunities' website and `How to do Business Guide' published.	Achieved
Sustainability built into procurement strategy, processes and contracts	Standard contract clauses in place. Best value tender evaluation includes sustainability and other quality issues, whole life costings being implemented for major projects. Increased monitoring of contractor and sub-contractor compliance in construction. Further guidance being developed for the Procurement Best Practice Guide.	Achieved
Sign up to National Concordat for SMEs	Draft document received in 2004; further information awaited.	Outstanding

Information Memorandum to prospective bidders included in procurement processes for partnerships	Guidance being developed. Examples of best practice already exist, particularly in construction projects.	Underway
Invitation to bidders to demonstrate effective use of supply chain included in procurement processes for partnership	Guidance being developed. Examples of best practice already exist, particularly in construction projects.	Underway
Give bidders option to specify benefits under community plan in procurement processes for partnerships	Guidance being developed. Examples of best practice already exist, particularly in construction projects.	Underway

3. National Procurement Strategy Milestones 2006

	Action Undertaken	Status
Average time from OJEU notice to award reduced by 25% for major projects of more than one year's duration	To be completed on a sampling basis. Will need to be addressed by the development of a corporate contracts management system.	Underway
Accessing an appropriate e-Marketplace	Internal marketplace established. External marketplaces under consideration.	Underway

APPENDIX 4

Current Savings Agenda

1.	Elements Achieved
1.1	Collaboration (£1 million)
	County Supplies, Libraries, Environment and Social Services all have direct involvement in contracts organised with other members of the Central Buying Consortium. Other local authorities within Hampshire spend at least £4 million annually on joint contracts with the County Council.
1.2	New Contracts (£600,000)
	The rollout of the new agency staff contract is estimated to have delivered savings of £250,000 in 2004/05. Tender exercises for the supply of the furniture, beds and equipment for the NCIS/Enhance produced a reduction of around £350,00 against the initial quotations.
1.3	Warehouse Issue Prices (£385,000)
	The absence of price increases over the last three years has yielded a value-for-money improvement of around £385,000 for internal customers.
2.	Savings Anticipated - Current Activity (£1,280,000)
2.1	The current targets include savings from contracts already concluded: · agency staff-additional savings based on full rollout £250,000 · agency staff-reduction in margin w.e.f. July £45,000 · copying equipment - lower replacement costs £200,000 · IT hardware £60,000 · mobile phones (HPSN contract - review with IT services) £180,000 · mobile phones (T-Mobile contract) £35,000 £770,000 +
2.2	Contracts with an annual value of around £4.5 million will have been concluded by the end of the 2005/06 financial year. These include: · Venues and meeting facilities £1.5 million · Non staff advertising £1.2 million · Library shelving £0.3 million
	It is considered that these contracts could yield total savings of £350,000 over current arrangements £350,000
2.3	E-auction Pilot - the County Council has committed its volumes to a reverse electronic auction for IT consumables in April 2005. Savings of £60,000 are forecast. £60,000
2.4	Warehouse prices are expected to rise next year by less than 10% of the `standard' rate of inflation. This will produce a saving of around £100,000 on internal issues (including schools). £100,000
3.	Potential Savings - Targets for Investigation (£1,500,000)
3.1	Non-contract buying In order to meet the operational requirements placed upon it, the Council's electronic catalogue includes details of a large number of products, services and suppliers that have been selected through informal processes rather than effective competition. The annual value of such expenditure has not been accurately assessed but corporate arrangements currently account for less than half of the total throughput of the catalogue. The value to be reviewed could potentially be around £20 million. The Corporate Procurement Unit encourages budget holders to demonstrate that appropriate alternative quotations have been obtained, but detailed monitoring has not been attempted. Work is also required to improve the culture of compliance in relation to existing corporate contracts. Further attention and more formal arrangements in these areas will produce savings, but the information currently available is not sufficient to provide a reliable estimate. A provisional target of £1.25% has been set. £250,000
3.2	Process improvement Work on streamlining processes is currently underway in the following areas: · electronic order transmission · e-tendering · electronic receipt of invoices
	The County Council already makes a very high proportion of its payments electronically, but work led by the County Treasurer is planned to evaluate the potential benefits of an embedded payment card within the catalogue and electronic remittance advice notes.
	Despite claims about the scale of the savings that can be achieved, electronic commerce has not developed in the UK as rapidly as was being predicted 3-4 years ago and the Council is experiencing little or no `pull' from its suppliers to adopt these techniques. However, the Council does deal with approximately 500,000 invoices and payments each year and the potential gains from the right solution are significant. Leading providers of e-invoicing services suggest that making 40% of these transactions fully electronic would release clerical time equivalent to around twenty full time staff. Potentially this could produce an efficiency gain in the region of £300,000 annually. Further detailed investigations are required to establish the costs and benefits of extending the County Council's current e-procurement activities. £300,000
3.3	Procurement structures, staffing and Business Process Re-engineering Departments report that the number of staff with some involvement in tender processes and contract management is around 500. Members have previously asked whether this arrangement provides an effective balance between the level of functional specialism, professional expertise, service, outcomes and cost. An initial analysis of the effectiveness of these arrangements and advice on how these could be developed have been included in the specification for the work to be undertaken by external consultants. This contract is currently out to tender. The outcome of the review will be reported to Members in July, but the results cannot be pre-judged and no estimate of any organisational, process or performance gains is available. However, a working assumption of £150,000 has been included in the total for this section.
3.4	Regional Centre of Excellence The Centre has received additional funding of more than £1 million per year to facilitate delivery of the NPSLG and implementation of the efficiency review. The promotion of collaborative working will be a key focus and the South East Centre has identified six initial workstreams: · social care · construction · waste · transport · back - office services/systems · supplies
	The County Council is supporting the work of the Centre, but at this stage it is not possible to gauge the level of benefits that this will deliver. However, a working assumption of £0.5 million has been included in the total for this section.
3.5	Future procurement projects - beyond 2005
	The outline of a project to develop corporate arrangements for the procurement of training is being developed. Other suggestions include greater standardisation of furniture and a review of insurance arrangements. Further projects will be identified over time, but it is not currently possible to assess any savings that might be achieved. However, a figure of £300,000 has been included in the total for this section.

APPENDIX 5

Procurement Efficiency - Draft Work Programme

Efficiencies	2005	2006	2007	2008
Corporate Procurement Unit Tasks
1. Procurement efficiencies and Market analysis
2. Cashable and non cashable savings
3. Goods and services expenditure
4. Non contract buying
5. Process Improvement
6. Structure and BPR

Corporate Procurement Unit and Chief Officers (Departments)

Tasks	2005	2006	2007	2008
7. Back office functions and IT	√	√
8. Social Care	√	√
9. Property		√	√
10. Environment		√	√
11. Recreation and Heritage			√	√
12. Education			√	√
13. Central departments				√