As part of our transformational plans we wanted to ensure that we developed a corporate approach to procurement, contract management and rationalisation of ICT systems. The funding from the LGA helped us develop and shape this work strand and prioritise our efforts on areas that would provide the Council with the largest savings and biggest impact.
The challenge was to have visibility of third party contract expenditure, detail on the Contracts register and ensure that correct procurement regulations are being applied. Our recent audit report had also flagged duplication of spend for the same item with different suppliers, which indicated that there was a missed opportunity to drive down spend through greater buying power. In addition there were also major concerns around silo purchasing of ICT equipment in service teams and the need to ensure the process was reviewed, and provided the correct check and challenge at corporate level before purchases were made.
The LGA funding helped us pay for an external professional procurement consultant who worked with us to help us understand our spend better and align our contract register with our creditor spend for 2016/17. This exercise proved to be really valuable as it immediately identified a £1.5m gap between our contract register and creditor spend, that we immediately worked to get updated.
This provided us with a complete picture of our spend which we then worked to get categorised under the industry standard pro-class specification, to help with benchmarking and targeted approach to reducing expenditure accordingly.
In addition to the above, the consultant analysed our contract register and shared with us the following key findings:
- Our contract register featured 967 suppliers generating 5,561 invoices per year, which for an authority of this size feels too many
- 6 suppliers accounted for 50% of total third party Council spend, which all related to environmental services and outsourced contracts
- Nearly 30% of invoices processed have a face value of £100 or less, which indicated inefficiencies in the process
- 40 suppliers are responsible for generating 33% of invoices, which is historic and has never been challenged
- Opportunity for better partnership work with local authorities and utilisation of procurement frameworks
The analysis was alarming and really helped us engage staff and senior management to want to change things and develop a new approach to procurement, effective contract management and system harmonisation.
This followed a series of roadshows with staff across the Council to share our findings and we also launched a survey to assess satisfaction levels with our current Contract Register with key staff to help inform next steps, as clearly this would be instrumental to our plans. The results demonstrated that there was a need for better contract/client management training and support on procurement to help drive down spend and utilise frameworks better to ensure compliance and value for money purchasing.
The impact (including cost savings/income generated if applicable):
We have set ourselves a savings target of £200k to be achieved by March 2022 through more visibility of contract spend and corporate approach to procurement. This will involve working to update the Councils Procurement policy and development of the contracts register to provide regular alerts to contract managers and better reporting. In addition we are also looking to work with our neighbouring authorities to help support large procurement awards and development of tender documentation. This will also include development of FAQs and templates on our website and intranet site.
How is the new approach being sustained?
System Harmonisation & Effective Contract Monitoring is now featured as a key work strand on the Council’s Business Transformation programme, where work is underway to partner up with neighbouring authorities for procurement support and replacement/update of the Contracts Register.
- Alignment of the contract register to finance spend and introduction of a ‘No PO No Pay policy’
- The need to have specialist support for procurement and effective contract management, which has resulted in reaching out to neighboring authorities to offer this support
- Better use of crown commercial’s frameworks to drive down spend and ensure better value for money contracts
- Better use of partnership working to obtain economies of scale pricing and better contract terms and conditions. A recent example includes purchasing of ‘IDOX Uniform training’ with Stratford upon Avon. Staff from both Councils were able to attend a training programme for 3 days, which was procured jointly between the two Authorities and cost shared equally.
- Corporate approach to contract spend and breakdown of silo purchasing, especially for ICT related equipment
- Consolidated invoicing with suppliers, to drive down spend on processing times and costs. We know who they were from our data analysis by the consultant and so addressed this accordingly with some of the suppliers e.g. one supplier now sends the Council monthly invoices as opposed to fortnightly. This will also be picked up as part of the Council’s Creditor/Debtor review project.
Contact: Jas Bhogal, Assistant Director Business Transformation, email@example.com
LGA contact: Grace Abel, Productivity Advisor, firstname.lastname@example.org
Links to relevant documents:
The following pie chart shows the spend and we were intrigued to learn that over 40% of our spend related to Environment Services and 14% to Works, Construction, Repair and Maintenance. In addition, 10% of our annual spend related to ICT costs which really focused our minds.
Spend Breakdown 2017/18