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EFFICIENT GOVERNMENT FUND
STAGE 1 BID - JULY 2005
TAYSIDE PUBLIC SECTOR PROCUREMENT - EGF 1/1/005
LEAD BIDDER | Dundee City Council
David K Dorward
Depute Chief Executive (Finance)
01382 433359
david.dorward@dundeecity.gov.uk |
BRIEF DESCRIPTION OF THE AIMS OF THE PROJECT | The project is to develop and implement a public sector procurement framework within Tayside. The local authorities within Tayside would implement the eProcurement Scotl@nd platform and corporate procurement strategy and processes. The local authorities would engage consultants to develop a collaborative procurement strategy and thereafter appoint professional procurement staff to implement the procurement strategy developed. The local authorities will develop leading procurement practices, skills and knowledge. The major advantage of this project is that the public bodies will achieve economies and efficiencies, which can then be reinvested in improving front-line services. Savings of over £1m per annum are expected to be realised. In addition the project will ensure that the local authorities in Tayside meet the Government's e-procurement targets and deadlines. |
CLEAR DESCRIPTION OF WHAT THE EGF MONEY WOULD BE USED TO BUY | Establish a Tayside Public Sector Procurement project team. This collaboration will ensure an optimum use of the limited number of procurement staff within the Councils and bring a speedier realisation of the benefits Procure consultancy support to develop a procurement strategy collectively and for each partner body. Commission a spend analysis for each participating organisation. Procure and implement e-Procurement Scotl@nd Design, organise and implement procedures for collaborative procurement. Implement professional procurement staffing structure. |
PARTNERS TO THE PROJECT LIKELY TO COMMIT RESOURCES | Angus Council
Dundee City Council
Perth & Kinross Council |
NAME OF OTHER ORGANISATIONS WITH WHOM THE PROJECT HAS BEEN DISCUSSED | Tayside Police
Tayside Fire Brigade
Tayside Valuation Joint Board
Tayside Contracts
NHS Tayside |
| In addition to the above organisations with whom the project has been discussed it is envisaged that the voluntary sector within Tayside will avail itself of the benefits of the improved local authority procurement process |
EVIDENCE THAT THE SUGGESTED APPROACH HAS BEEN DEPLOYED SUCCESFULLY ELSEWHERE | A number of West of Scotland councils most notably Renfrewshire Council have applied the approach set out in this bid, and are now receiving the levels and types of financial and non-financial benefits originally envisaged. |
BENEFITS PROJECTED FROM THE PROJECT (OTHER THAN CASH OR TIME) | Improvement in the quality of front line service delivery through better sourcing of goods and services. Development of local authority professional staff in procurement The elimination of inefficient, uncoordinated and "maverick" purchasing. Considerably accelerate the implementation of e-procurement within the Tayside public sector. Joint Working on procurement will foster other joint working opportunities between the public sector organisations. Ensure consistent compliance with European procurement legislation. Improvement in specifications for goods and services, thus reducing the risk of poor or incorrect goods being purchased. |
BENEFIT PROJECTED FROM THE PROJECT (OTHER THAN CASH OR TIME) CONTINUED | Existing staff presently involved in procurement will experience a saving in time, which can be utilised by the local authorities Due to direct delivery by Consortium suppliers, there will be a reduction in organisations stock/store keeping costs. Improves the opportunities for sustainable purchasing such as Fair Trade. Joint recruitment and sharing of resources and expertise on project, and assisting with move to shared services. Closer working with the local economy and businesses, with the local authorities acting as leaders in e-commerce. |
OVERALL PROJECT COST | The following projected costs are analysed into two discrete types, being those for the initial three partners and those for the potential other organisations who may join the project. |
INITIAL PARTNERS | 2005/06 | 2006/07 | 2007/08 | 2008/09 |
| £000 | £000 | £000 | £000 |
Consultants | 100 | - | - | - |
Procurement Staff | 39 | 155 | 159 | 164 |
Procurement Training | 90 | 21 | 22 | 22 |
E-Procurement Scotl@nd | 246 | 177 | 177 | 156 |
| 475 | 353 | 358 | 342 |
OTHER ORGANISATIONS |
Consultants | - | 72 | - | - |
Procurement Staff | - | 25 | 103 | 106 |
Procurement Training | - | 40 | 10 | 10 |
E-Procurement Scotl@and | - | 165 | 118 | 118 |
| - | 302 | 231 | 234 |
TOTAL PROJECTED COSTS | 475 | 655 | 589 | 576 |
ESTIMATED PROJECTED BENEFITS | The estimated projected benefits are predominately savings in costs due to the combination of e-procurement capability and consortium buying powers. The estimated benefits has been arrived at by projecting the level of supplies and services purchased by each of the 3 partner local authorities and other organisations that are capable of being procured through e-procurement and a buying consortium. The savings are based on the HEDRA consultants report for South Lanarkshire Council and are considered to be a conservative estimate. The annual savings benefit for the 3 partner local authorities is estimated to be £1m, with the potential for at least a further £0.5m per annum for the other public sector organisations by year 4 (i.e. 2007/08). It is anticipated that these levels of benefits will not begin to be fully achieved by the initial partner local authorities until year 3 (i.e. 2007/08). A summary of the initial partners projected costs and savings for the first 10 years are detailed in the enclosed appendices |
PART 2
EFFICIENT GOVERNMENT FUND - STAGE 1 BID
Narrative Bid
1 Background
During the last 12 months, the three Tayside local authorities, namely Angus Council, Dundee City Council and Perth & Kinross Council, and NHS Tayside have been working collaboratively on the identification and development of shared services.
At an early stage it became apparent that the opportunity for significant efficiencies and economies existed through the introduction of a modern and collaborative procurement strategy across and between all three local authorities and potentially with other public bodies in the Tayside.
The procurement service within each of the Tayside local authorities is presently diluted and unstructured and the development of a collaborative procurement project is apparent.
2 Aims and Objectives
The three partner organisations are highly motivated towards achieving a first class procurement process within their organisations. This will be achieved through a collaborative process that includes a "root and branch" review of the procurement process and the development of a consistent procurement strategy for each body. Thereafter the implementation of a common e-procurement platform and the membership of a purchasing consortium will provide the local authorities and other public sector bodies with the tools to deliver real efficiency and economy gains.
The aims and objectives of the project are to thoroughly review and modernise the procurement process with the Tayside public sector, with the objective of achieving significant recurring economies and efficiencies. These cost efficiencies are to be re-invested in the delivery of essential front line public services.
3 Current Procurement Arrangements in Participating Organisations
There is a diverse range of procurement and contracting arrangements to be found in the Tayside local authorities. During discussions between the partners it became evident that, with some notable exceptions, there was room for improvement in managing substantial procurement spend in a comprehensive, systematic and professional manner.
Procurement and contracting are being undertaken in the main in a fragmented and piecemeal fashion, with little evidence of rationalisation, consolidation or aggregation within individual local authorities or across the sector.
Most organisations find it difficult to obtain comprehensive procurement information either by supplier, value or specification for the individual organisations. In response to this lack of information the project has applied to the Scottish Executive for funding for a Scope and Readiness report to be prepared for each local authority. This report is essential for the implementation of the e-procurement system. The Scottish Executive has provisionally agreed to fund this consultancy work.
Compliance with national and EU legislation is considered to be patchy and it was noted that exposure to legal and financial risk through poor or non-compliance by the Tayside local authorities is an on-going area of concern.
Given the significant expenditure associated with a Tayside public sector procurement model, it is critical to have robust standards of practice and professional management arrangements in place, not only for good governance but also the efficient and effective running of day-to-day business.
Most large private and public sector organisations are engaged in transitioning to a higher level of procurement management through the implementation of Strategic Sourcing, Supplier Management and the application of new technology methodologies such as eProcurement; eTendering; eAuctions and automated Management Information.
There is significant potential for collaborative procurement between the project's partners, and by sharing resources to develop a common resource that will provide a higher quality procurement service than could be achieved by the partners acting individually.
There is evidence that most organisations are participating in some Scottish and UK wide specialist joint contracting initiatives. This is in line with the general thrust of Public Sector collaboration. The group considered there would be merit in extending the availability of such contract arrangements to other Tayside organisations under any new Tayside collaboration arrangements.
4 Financial Benefits
In respect of the estimated financial benefits projected as per the Stage 1 bid, these figures are indicative. It is estimated that the three initial partner organisations have supplies and services budgets (both revenue and capital) in excess of £100m. It is conservatively anticipated that 40% of these supplies and services could be procured through a buying consortium, and that average discounts of 2.75% could be achieved on current prices, giving a projected annual financial benefit of circa £1m.
The estimated financial benefits have been arrived at by analysing the supplies and services spend of the three local authorities' partners, and utilising the findings of the HEDRA consultants report on a procurement strategy for South Lanarkshire Council. The findings of the report were applied against the combined level of supplies and services of the three Tayside local authorities and extrapolated to give an equivalent saving for this project. It was felt that this was an efficient manner of assessing the financial benefits, whilst at the same time not overestimating the projected benefits. The savings percentage of 2.75% was arrived at by summarising the outcome of the South Lanarkshire report and by some commodity price comparisons carried out within the three councils as they have recently joined a buying consortium.
In the development stage of this project it has not been possible to carry out an item by item analysis of the procurement needs of the three local authorities. This analysis is seen as an essential prerequisite to advancing the project and would form part of our Stage 2 development funding. It must be stressed that the level of collaborative procurement within the three partners' organisations is relatively low, and therefore the opportunity for achieving the projected levels of financial benefits is perhaps greater than in bodies that have previously deployed collaborative procurement more extensively.
5 Non-Financial Benefits
The non-financial benefits that are predicted to be delivered by this project are extensive: -
- Eliminate inefficient, uncoordinated and "maverick" purchasing
- Facilitates a unified internal corporate approach - including specialist purchasing - ensuring partner organisations are "fit" for consortium benefit realisation
- Capacity/skills building in organisation
- Further builds on local community planning partnerships
- Process improvements and streamlining
- Facilitates an environment of ongoing assessment and continuous improvement
- Improved supplier relations - improve local opportunities
- Self funding opportunities for projects
- Common categorisation of goods and services
- Opportunity to further consider joined up/shared resourcing
- Development of procurement networks - Improve information, best practice and knowledge sharing
- EU legislative compliance
- Green Policy, Equalities, Regeneration progression and compliance
- More effective use of IT
- Commitment accounting
- e-Procurement targets and Scottish Executive ESD progress
It is essential that a full benefit analysis be carried out to identify and classify the benefits for each stakeholder
6 Draft Project Timetable
Two of three local authorities have already joined the ABC consortium as associate members and the third local authority is in discussion with the consortia. The local authorities were of the view that joining ABC would give them some "early wins" in their drive for efficiency savings.
The following is an indicative timetable for the delivery of the Tayside Procurement project, but is dependent on announcements from the Scottish Executive on Efficient Government funding:
Resubmission of EGF Stage1 bid | July 2005 |
Agree with Scottish Executive funding for consultants to carry out scope and readiness review | August 2005 |
Project Board established and agrees Action Plan for development and implementation of project | August 2005 |
Councils appoint dedicated Procurement officers to implement Procurement Strategies across and within the local authorities | October 2005 |
Consultant's carry out scope and readiness review and submit reports | November 2005 |
Consultants appointed to prepare Procurement Strategy reports for each local authority | November 2005 |
Planning meetings with e-procurement Scotland to commence implementation of PECOS across all three local authorities | December 2005 to March 2006 |
Consultants deliver report(s), which set out integrated Tayside wide and Council specific Procurement strategies | March 2006 |
Project Board meets to agree an Implementation Plan and the utilisation of resources | April 2006 |
PECOS implemented in three local authorities | May 2006 to August 2006 |
Procurement Strategies implemented fully throughout the local authorities | May 2006 onwards |
7 Bid for Stage 2 Development
The three partners are highly committed to this project and believe that there are significant economic and efficiency gains to be realised with its implementation. However, it is accepted that more detailed research and analysis is required to construct a robust Business Case for the project. In particular, the following areas require detailed analysis across the partner organisations: -
- Current cost of goods and service
- Projected cost of procuring through purchasing consortium
- Development of corporate governance structure for project.
- Detailed analysis of purchase and implementation of e-procurement Scotl@nd platform
It is therefore felt essential that the Scottish Executive finance the consultancy work necessary to prepare a robust and comprehensive Business Case for the project and a Stage 2 development bid of £100,000 be requested.