100322 Procurement for Planning Managers

Getting value for consultants: Practical approaches to working with suppliers

Dr Gordon Murray22 and 23 March 2010

National picture

•Professional services in #5 out of six

•£1.8bn per year on consultants (£2.2bn on temporary staff)

•Belief that £100m can be saved on consultancy by March 2011

•5-6% potential savings on consultancy by March 2010.

Agenda for discussion

• Why is procurement important?• ‘Policy through procurement’• Procurement cycle • Roles, responsibilities, remits, relationships • ABC, category management, collaboration,

frameworks• The legal framework• Your issues?• Night work – developing a brief• The navigating the process• Your procurement improvement plan

Public procurement: Getting value?

Public procurement: Getting value?

Public procurement: Getting value?

Public procurement: Getting value?

Public procurement: Getting value?

Public procurement: Getting value?

Public procurement: Getting value?

Public procurement: Getting value?

Public procurement: Getting value?

Public procurement: Getting value?

Public procurement: Getting value?

What do you mean

• Getting value?• Value?• Practical approaches?• Suppliers?

Getting the jargon right

The commissioning cycle

Strategic needs assessment

Decide priorities and outcomes

Plan and design services

Optional appraisal

Sourcing

Delivery

Monitor and review

The commissioning

cycle

Strategic needs assessment

Decide priorities and outcomes

Plan and design services

Optional appraisal

Sourcing

Delivery

Monitor and review

Determine the need

Supplier selection

Contracting

Ordering

Expediting

Follow-up/evaluation

The commissioning

cycle

The purchasing

cycle

procurement

Eight principles of good commissioning

1. Understand the needs of users etc., by engaging with TSOs as advocates to access their specialist knowledge

2. Consult provider organisations when setting priorities

3. Put outcomes for users are the heart of the process

4. Map the fullest practical range of providers5. Consider investing in the provider base6. Ensure contract processes are transparent and

fair7. Ensure long-term contracts and risk-sharing8. Seek feedback to review effectiveness of the

commissioning process

Policy through procurement

What are the core internal policies which are applicable to

your procurement?

Policy through procurement

• SMEs, incl. TSOs, lowering barriers to their participation

• Supporting skills training, providing apprenticeship opportunities and tackling youth unemployment

• Resource efficiency focusing on carbon reduction.

How can we manage strategic procurement risk?

Kraljic’s Positioning Model

Bottleneck Strategic

Routine Leverage

Supply Market

Complexity/Risk

Expenditure

Procurement Cycle

8. Closure / Review Need

1. Identify Need

2. Develop Business Case

3. Define Procurement Approach

4. Supplier Appraisal5. Tender Evaluation

6. Award Contract

7. ManageImplementation

of Contract

8. Closure / Review Need

1. Identify Need

2. Develop Business Case

3. Define Procurement Approach

4. Supplier Appraisal5. Tender Evaluation

6. Award Contract

7. ManageImplementation

of Contract

Gateway Stages

Challenge

Challenge

Challenge

Challenge

Challenge

Challenge

Procurement Disasters of our time

For each case study1. Analyse the news article and summarise2. Identify the main issues and what went wrong3. Identify the stages in the procurement cycle

when effective scrutiny could have been used to reduce the risk

4. Identify which questions you would have asked at that stage/s

5. Prepare to feedback

Key lessons

• Cross-functional team with appropriate skills & roles

• Understand the trade-offs• The right brief• Robust business case• WLC• Tight project management• Proactive SCM throughout the procurement cycle• Challenge through the procurement process

Roles, responsibilities, remits

and relationships

Roles, responsibilities, remits and relationships

• Who does what in your procurement process?

• Who should to be part of your procurement process?

• Why?• What needs to happen to make

procurement relationships more effective?

Legality

The core framework

• EU• Thresholds:

£156,442• Procedures

• UK Regulations

• Council• Constitution/

Standing orders • Financial

Regulations• Corporate

procurement strategy

• Procurement Codes of Practice

• Procurement KPIs

Principles, regardless of contract value

• Equal treatment• Transparency • Non-discrimination• Proportionality• Mutual recognition

The Public Contracts Regulations 2006

• Open • Restricted• Competitive dialogue for ‘complex

contracts’• Negotiated • Consortia• ‘Stand still’ periods• Remedies

Framework Agreements

What is a framework?

• Standing offers, or• Binding contracts

•Quantities•Prices

Framework Agreements: Project start-up questions (1)

• Is a framework the right approach?• Cost Benefit Analysis of using someone else’s?• Lead-time sufficient to do it right?• Term?• Participants?• Migration strategy?• Quantity?• ‘Lots/bundles’?

Framework Agreements: Project start-up questions (2)

• Pricing strategy: e.g. Fixed price/Rise and Fall?

• Standardisation with existing?• Scope?• Single/many providers?• Procedure: open or restricted?• E-auction?• Selection and award criteria, including

quality/price weighting?

Framework agreements: Award process• Threshold £156,442• Need to ensure process

integrity, i.e. do what you say you’re going to do!

• Tender strategy• OJEU• Make clear Framework is

being used• Detail who can use the

framework• Should be maximum of four

years• Aggregation rules

• Restricted procedure• Supplier appraisal• Specification• Tenders invited• Tender evaluation: MEAT• Standstill period • Award of Contract• Constructive Debriefing

Framework agreements:Post-award• Migration management• Contact management

Cost and quality managementRelationship management: Customers

and providersDispute resolution

• Management of opportunistic losers• Closure and re-letting

What makes services procurement so different?

The problem with services

• Inseparable • the person receiving the service needs

to be part of the delivery/provision • Perishable

• can’t be stored • Intangible

• isn’t something to be looked at and say ‘look what bought’

• Heterogeneous • quality control is difficult because it

depends on the quality of the person delivering

Navigating the procurement cycle

Procurement Cycle

8. Closure / Review Need

1. Identify Need

2. Develop Business Case

3. Define Procurement Approach

4. Supplier Appraisal5. Tender Evaluation

6. Award Contract

7. ManageImplementation

of Contract

Selection & award criteria

Is there a difference?

Developing the Brief

• Can you define the outcomes to be achieved

• Strategic fit• Who, what, where, why, how and

when• What are the KPIs • Selection and Award Criteria

Business case

The procurement approach

Strategic procurement options appraisal

Cost reduction orientation Achieving community benefits orientation

Long-term contracts Short-term contracts

Single-sourcing Multi-sourcing

Consortium purchasing Local purchasing

Functional specification focus Social clauses

E-procurement for cost reduction

Supplier Cash flow

… …

ABC analysis

Category management

Category strategyMap future procurements

Adopt a risk-based approach: Identify the most important categories

Develop a clear plan for effective category management,

exploring options, and with targets

Within each business unit designate someone to target a category for improvement

Discuss with the supply market future plans & how to minimise/maximise your impacts

Specify, by preference, in performance and output standards

Going to market

Short listing

Selection criteria

• Technical capability• Technical capacity• Financial stability

Tender evaluation

Award criteria

• Price• Delivery time• Quality• Technical back-up• Technical merit• Technical ability• …

Award

Contract management

Close and review

Your procurement improvement plan

1. What are you going to do when you go back?

Efficiency Exchange

Imagine a tool for …• collaborative knowledge sharing

what works and doesn’t work, but will in certain circumstances

• collaborative problem solving helping find the one person who’s thinking about the same

challenge or has a suggestion which could help or enabling suggestions which could help someone else

• drawing on local government expertise in Drafting a policy, specification, contract ...

• mass on-line conferences, debates and ability to question experts

• Comparative benchmarking on efficiency• …

Getting value for consultants: Practical approaches to working with suppliers

[email protected]/DrGordonMurray