@London, 3@London, 3rdrd June 2004 June 2004

                                    

Examining shared service innovation

– the “i before e”-procurement project

Chris Keady, London Borough of Brent

Chairman, London Contracts and Supplies Group

@London, 3@London, 3rdrd June 2004 June 2004

                                    

This presentation

• The vision: ‘i before e’- Procurement

• The 2 avenues of research:

– The opportunity: investigate the scope for savings in Construction and Housing

– The technology: look at what tools are available, specify and develop case study demo of what’s required and how it would work

• Progress to date, initial conclusions and next steps

@London, 3@London, 3rdrd June 2004 June 2004

                                    

The Vision

“To collaboratively develop and promote

a low cost, intuitive, multi-benefit, plug and play,

interoperable strategic procurement tool,

providing visibility of existing and planned

procurement activity, associated risks, and market

information/intelligence

for current/prospective suppliers”

NePP PID 12/03

@London, 3@London, 3rdrd June 2004 June 2004

                                    

‘i before e’- Procurement:- information drives the benefits

• e-Procurement means taking a strategic approach to purchasing

• But in order to build a strategy you have to know what is actually going on

• We believe savings of 10-15% are achievable (on an £8bn spend) by:– Collecting forward planning data on a standardised basis for a group of Councils

– Aggregating demand forecasts and sharing this with suppliers

– Creating framework agreements and building stronger relationships with key suppliers

• To test this, we researched 2 large spend areas:– Road Maintenance

– Housing Maintenance

@London, 3@London, 3rdrd June 2004 June 2004

                                    

Progress to date

• We worked with 6 councils in West London:

• We carried out desk research to establish what information was publicly available

• We submitted the questionnaire to managers in road maintenance and council house renovation to establish the likely purchasing patterns

Brent

Ealing

Harrow

Hammersmith

Hillingdon

Hounslow

@London, 3@London, 3rdrd June 2004 June 2004

                                    

Questionnaire Outline - to 6 West London Boroughssubmitted to managers in road maintenance & council house renovation

• What have you spent over the last 3 years?

• What is planned to be spent in the next 3 years?

• Categories:

– Building Materials – New Build – Bricks/Cement/Windows etc

– Building Materials – Maintenance – Paint, Plumbing, Electrics,Pointing, Guttering etc

– Road Materials – Tarmac, Hardcore, Gravel etc

– Drainage Works

– Traffic Works materials – Bollards, signage etc

– Skills required in different areas

@London, 3@London, 3rdrd June 2004 June 2004

                                    

Road Maintenance – the Local Govt Category List provides a standard template to collect data

MaterialsHardcore PaintTarmac Structural Steelwork for BridgeworkSand and Gravel Bus sheltersSlabs and Paviours Street LightingKerbs Traffic LightsStreet Furniture CamerasSoft Landscaping SignageBollards and Barriers Parking Meters

Plant Hire Labour - Site Supervision

Survey and design servicesOther

@London, 3@London, 3rdrd June 2004 June 2004

                                    

And here’s some of the data for 3 Boroughs:

All figures in £m Brent HarrowHilling-

don Total3 Borough Average

London Av (ALG 2004/5)

2004/5 2002/3 2004/5

Road Schemes 1.25 1.24 2.23 4.72 1.57 1.21

Bridges 0 0.6 2.82 3.42 1.14 0.37

Road Safety 0.28 1.06 1.37 2.71 0.90 0.83

Signage 0.21 0.12 0.1 0.43 0.14

Parking Mgement 0.83

Pedestrian/Cycle 3.03 0.21 0.22 3.45 1.15 0.97

Bus Related Works 0 0.1 0.07 0.17 0.06 0.75

TOTAL 4.70 3.32 7.69 15.73 5.24 4.45

3 years average 15.72 13.35

@London, 3@London, 3rdrd June 2004 June 2004

                                    

Housing – again, a standard template is possible(source:Hounslow £35m forecast 2004/5-2006/7)

Category Av p.a.

(3 years)

Aids for disabled £1400k

Rewiring and other electrical £666k

Asbestos – survey and remove £416k

Play areas and equipment £166k

Cavity wall and loft insulation £500k

IT/digital connection £67k

Refurbishment of Sheltered Units £750k

Hostels £100k

Major works to empty properties before external decoration

£400k

General Security Schemes £750k

Category Av p.a. (3 years)

Door entry £305k

Boiler replacements and associated plumbing

£1468k

Lift Refurbishment £575k

Window Replacement £3471k

Kitchen and Bathroom Refurbishment £15205k

Roofs £5709k

Cladding and structural £783k

Drainage £1400l

Unallocated £3528k

@London, 3@London, 3rdrd June 2004 June 2004

                                    

So here’s what the Boroughs are planning to spend

Year Brent Ealing H&F Harrow Hillingdon Hounslow Total

2000/1 20292 27858 22216 6458 24024 17118 117966

2001/2 19370 29831 20002 9054 17136 13110 108503

2002/3 21148 34758 30742 8405 19387 25586 140026

2003/4 31958 24145 34840 8420 21624 54830 175817

2004/5 36800 17343 30000 60991

2005/6 24850 14856 44392 40781

2006/7 18690 47711 13775

@London, 3@London, 3rdrd June 2004 June 2004

                                    

Housing Maintenance spending is going up

• Total value of repairs needed by each Borough is publicly available:

– Brent £65,660– Ealing £313,040– H & F £65,331– Hillingdon £90,167– Hounslow £248,975

• Spend is uneven, year to year – heavy concentration on eg roofs or kitchen and bathrooms

• Spend over next few years will increase as level of homes improved via spending through ALMO’s catches up with back-log.

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In some cases we have detailed spending forecasts:

(source:Hammersmith and Fulham ALMO)

Source: Hammersmith and Fulham ALMOForecast

@London, 3@London, 3rdrd June 2004 June 2004

                                    

The opportunity…• What costs are the suppliers passing on?

– Having to hold large inventories– Having to build in capacity ‘buffers’– Having to employ premium skills at short notice– Having to buy supplies inefficiently at short notice

• What can we do about it?– Improve forward demand planning – we know the data is available PROVIDED THERE

IS SUFFICIENT MOTIVATION– Share forecasts with each other and with suppliers– Standardise products and materials, reduce inventories – Source aggregated requirements direct from materials suppliers; provide call-off

arrangements for contractors… – Enable suppliers to train in-house rather than buying in skills to meet short term

demand

@London, 3@London, 3rdrd June 2004 June 2004

                                    

The opportunity: initial conclusions

• Annual spend on goods & services in London is £8bn

• The areas considered represent £1.7bn, second only to Social Services

• We believe that savings of 10-15% is realistic by better use of forecast data across Boroughs

• This will take a number of years to come into full effect due to the existing range of term, pfi and other framework arrangements already in place. But 2-3% would be as much as the rest of e-procurement is set to achieve and that is readily available

• We are concerned that the way ALMOs are being set up they will not be inclined to (and may not be free to) collaborate. This may block the opportunity to make significant savings

@London, 3@London, 3rdrd June 2004 June 2004

                                    

Okay, back to the Vision – a reminder:

“To collaboratively develop and promote

a low cost, intuitive, multi-benefit, plug and play,

interoperable strategic procurement tool,

providing visibility of existing and planned

procurement activity, associated risks, and market

information/intelligence

for current/prospective suppliers”

So what about the technology?

Is it able to deliver this?

@London, 3@London, 3rdrd June 2004 June 2004

                                    

Technology - current reality

• My vision turns out to be ahead of the marketplace reality– User needs are still evolving

– Most suppliers are 1 to 2 generations behind needs

– But purchaser skills in public sector lag behind even this level of the product’s capability

– Change management “will be critical”

• However we have come across a software tool that could provide us most of what I wanted and is relatively easy to use…

@London, 3@London, 3rdrd June 2004 June 2004

                                    

Some sample outputs

Source: DecisionMAX Software

@London, 3@London, 3rdrd June 2004 June 2004

                                    

Technology – conclusions and next steps

• Technology is now emerging that could achieve the vision, but…

• … it might be too sophisticated for the users

• It is too soon to say how well the prototype will deliver the requirements and if it is sufficiently low-cost and intuitive, but we are excited by what we have seen

• Opportunity for a group of WLA/LCSG councils to become beta-test sites for strategic procurement tool

• Project PID being prepared

• Do you want to participate?