Guide to procurement

Presented by Tony Wiltshire

Session Overview 

Your view of procurement? Procurement at Leeds Procurement Essentials The Procurement Cycle Supply Positioning Technique Procurement Spend Analysis Role of Politicians in Procurement

What is YOUR view of Procurement?

A modern view?         Responsible for direct and measurable savings Commercial negotiations with suppliers Continuous improvement programs Contract and risk management Cost avoidance programs Market segmentation and supply positioning Part of a multi-disciplinary team Key to successful strategy delivery .

Or something like this«?         Deals in low value orders and commodities No added value ± adds delay Handles the paperwork Controls rather than enables Subset of the finance function An overhead outweighing savings Stand-alone administrative function ³Any one can do procurement´ .

Procurement at Leeds .

000 creditors  Procurement Resources ‡ Corporate Procurement Unit ‡ Public and Private Partnership Unit ‡ Departmental Resources (e.Procurement at Leeds  Procurement Information ‡ ‡ ‡ ‡ ‡ ‡ £800m spent on external goods works and services 600. (450.g.000 < £250) 35.000 invoices p.000 paper invoices (3 telephone directories /mth) 2000 approved contractors 40 corporate framework contracts 40. ADS. Social Services) .a.

. Legal.8m. Services & Supplies £154k ‡ Three Procedures ± Open.g. Equalities.Procurement Regulations  EC Procurement Rules (Legal Requirement) ‡ Thresholds ± Works £3. etc. TUPE (staff transfers). Transparent. Restricted and Negotiated   Contract Procedure Rules (LCC¶s Rules) ‡ Fair. Value for Money Other related legislation ‡ E. Health and Safety.

Procurement Essentials .

a structured approach to project and risk management and legal requirements Contract management. that it is about ensuring benefits (outcomes) are delivered.   .Procurement Essentials  Corporate arrangements that create the capacity and capability necessary for successful procurement. continuous improvement and sound relationships with suppliers as well as controls. planned well in advance. contract management and supplier relationships A procurement process that is built around the procurement cycle.

Procurement Essentials Corporate Arrangements        Leadership Procurement Strategy Procurement policies and procedures Register of contracts Ethics and fraud prevention Procurement skills Centre of expertise          Management information Performance measurement Supplier intelligence Supplier relationships Collaboration Promoting diversity and competition Resourcing projects Business case culture Community benefits .

Procurement Essentials Procurement and Contract Management        Project management Project organisation Risk management Procurement cycle Gateway review process Contract management Supplier relationship management .

The Procurement Cycle .

Receipt 15. Store and Control 17. Acknowledgement 1. Transportation/Timing 14. Terms and Conditions 7. Expediting 12. Tender or Bid 9. RFQ. Determine Need 2. Enquiry. Quality Control 13. Acceptance 16. Quotation. Source the Market 5. Management Information 21. etc 8. Specify Requirement 4. Payment 20. Evaluation 10.The Procurement Cycle 22. Performance Review 19. Procurement Planning 3. Assess Capability 6. Clarification and Negotiation 11. Use by Customer 18. Award of Contract . ITT.

supplier selection ‡ Risk assessment. returns ‡ Transactional elements ‡ Disposal . expediting.Upstream Emphasis  Upstream adds value ‡ Planning. specification. negotiation ‡ Contract features  Downstream adds cost ‡ Measurement. contingencies.

The Supply Positioning Technique .

Temporary staff Value . Care provision Routine Minimum attention e. Vehicles. Cleaning materials Leverage Drive for Savings e.g. outsourcing.g. Courier services. advertising. IT. stationery. Waste management. Utilities.g.g. Specialist care.What do we buy? Risk Bottleneck Ensure supplies e. Specialist component Or services Strategic Contract/Supplier Management e.

Managing Procurement Activity Risk Bottleneck Market development Raising attractiveness Ensuring supply Strategic Contract Management Performance and Benchmarking Negotiation Innovation Cost avoidance Decentralised to Services Routine Corporate contracts (enforced) Automation Exception Management Technology Long-term contracts Aggregation Leverage E-Sourcing Quick wins Short-term contracts Standardisation and Aggregation Market awareness Centralised / Corporate Value .

Making Savings Risk Bottleneck Invest in securing supply NO SAVINGS Cost Avoidance Strategic Value for Money Cost Avoidance Routine Efficiency Savings Aggregation Leverage Aggregation Quick Wins Take Advantage Value .

How Suppliers See Buyers Account importance Development Core Nuisance Exploitable Spend .

Procurement Spend Analysis .

etc How are we buying ‡ Under common contracts? . quantity. frequency.Components of a Spend Analysis       Who are the suppliers Who are the buyers What are we buying Individual items and categories Spending profiles ‡ Value.

policies and systems Baseline measures and key performance indicators .Why the Analysis is Important       Set realistic and achievable savings targets Understand the range of things procured Obtain an overview of our supplier base Understand who is procuring and how Develop procurement strategies.

decision-making and scrutiny .Politicians¶ Role in Procurement Leadership.

Politicians¶ Role in Procurement    Adopting Corporate Procurement Strategy aligned with strategic outcomes Overseeing corporate arrangements for procurement and contract management Promoting the use of gateway reviews    Monitoring Performance of partnerships and other key contracts Learning lessons from major projects and partnerships Leading best value reviews of procurement and contract management .

Politicians¶ Role in Procurement Overview and Scrutiny    Conducting inquiries into new models of service delivery Reviewing areas of high spend to identify opportunities for improved value for money Challenging the progress of major procurement projects   Reviewing the performance of partnerships and other key contracts Ensuring that lessons are learnt from major projects and partnerships .

Best Value Procurement         Policy and Strategy Structure and Organisation Skills and Capabilities Information Systems Tools and Techniques Procurement Arrangements Controls and Standards Performance Monitoring .

ethical and transparent Manage supply chains and develop better relationships Reduce the cost of the procurement process Obtain value for money Continuously improve the procurement process Promote local sourcing and local employment Seek out and evaluate best practice Reduce the occurrence of contractual disputes Promote social policy objectives .Policy and Strategy          Procurement is legal.

Structure and Organisation       Sphere of activity and terms of reference.strategy and operational Staff supplemented by officers with skills currently lacking Independent person to act as a single point of enquiry for suppliers µPartner style¶ relationship with the Chamber of Commerce Nominated officers have departmental responsibility for procurement and meet as a Procurement Best Practice Forum Organisation be funded from central resources . Areas of activity .

Skills and Capabilities        Personal development plans established Training via national vocational qualifications One-day seminars delivered on a µtrain the trainer¶ basis A skills audit be carried out of all those involved in procurement initially for all levels/disciplines Procurement be incorporated into existing management training programmes A training programme be delivered to politicians and suppliers A political procurement champion be nominated .

Information Systems      Strategy for the introduction of e-procurement systems (graduated basis) with a consultation/training programme for suppliers carried out beforehand Introduction of purchasing cards Detailed analysis be carried out on current financial systems to ascertain whether they can provide necessary procurement management information Intranet and Internet be developed into a best practice/standard document resource for all Develop an electronic contract information system so that people can find best deals .

Tools and Techniques       Standard tender evaluation model developed so tenders are evaluated on best value principles Contractor performance monitoring strengthened Rationalisation of Approved Lists System Develop relationships with suppliers Move away from contract guarantee bonds A strategy be developed to counteract false information including IS0 9000 certifications .

outsourcing. market management Establish a series of framework agreements and contracts for all types of procurement . project management. market testing.Procurement Arrangements   E-instruction manual to standardise approaches to procurement projects including options appraisal. partnering.

with controlled revisions ‡ Series of regular training courses be provided on the relevant rules and how they work . national.Controls and Standards ‡ Mechanism to ensure that all officers involved in procurement are aware of the rules affecting them .local. EU ‡ Standard template documents covering all aspects of procurement be produced and made readily available.

set targets to reduce paper invoices and payments A µprocurement savings¶ register Strategic performance indicators are established and systems developed to supply the necessary information .Performance Monitoring ‡ ‡ ‡ ‡ ISO 9001 and ISO 14001 be integrated within the management framework Introduction of e-procurement .

Strategic Performance Indicators ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ EFQM Business Excellence Score Client satisfaction score % expenditure with approved suppliers % expenditure under framework contracts Number of approved suppliers per TL/ euro of total expenditure Staff costs as % of approved expenditure Number of complaints/ challenges in period % total expenditure on procurement cards % total expenditure by e-procurement Number of contracts awarded by e-commerce % of total expenditure via µpartnerships¶ % total expenditure through local sourcing Total estimated savings in period .

Performance Monitoring ctd  That the following operational performance indicators are established. and that systems are developed to collect the necessary supporting information: Average contract management satisfaction score Shopping basket price performance Average price variation against retail price index Average tender response rate Average % difference between lowest and highest tender prices ‡ Number of adverse performance reports in period ‡ ‡ ‡ ‡ ‡ .

Participant Exercise 5 stages of the procurement process: 1 2 3 4 5 Plan Tender Evaluate Award Manage . .Questions

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