Transcript Public Private Partnerships: an overview

CPP Workshop
November 2007
Introductions
Frank Gallagher
Stephen Roy
PPP Unit
Department of the Environment,
Heritage and Local Government
Pat Leahy
John Kinnane
National Public Procurement Policy Unit
Department of Finance
Agenda
•09.45
Introduction
•10.00
Corporate Procurement Planning
•10.15
SUPREM Expenditure Analysis
•11.10
Coffee Break
•11.30
SUPREM Workshop
•13.00
Lunch
•14.00
Morning Recap
•14.10
Analysis of SUPREM Data
•14.45
Transaction Analysis
•15.05
Supplier Analysis
•15.25
Organisational Analysis
•16.00
Q+As
•16.15
Wrap Up
Procurement Modernisation
• 2001- eProcurement Strategy
• Co-ordinated purchasing, leverage buying
power, reduce transaction costs
• 2003 – Local Government Strategy
• Approved by CCMA
• Potential savings of €60m per annum
• eProcurement tools – LA Quotes, LGCSB
initiatives e.g. EFT
Corporate Procurement Planning
• NPPPU established in Dept. of Finance
• 2005 – National Procurement Policy
Framework
• Corporate Procurement Planning
• VFM – C&AG Act 1993 & PMSA 1997
• Annual Corporate Governance requirement
National Public Procurement
Policy Framework
Public statement by Finance Minister Brian Cowen 2005 Speech to Chambers of Commerce:
“I recently approved a policy framework that
aims to facilitate a smarter and more
professional approach to public procurement by
Departments by requiring them to develop
Corporate Procurement Plans to set targets to
achieve savings, value for money objectives and
the appropriate structural changes in their
organisation.”
VFM Purchasing in the Local
Government Sector
•
•
•
•
•
•
•
•
•
LG VFM Reform Agenda – Indecon & T2016
Not just procurement thresholds
Strategic and co-ordinated purchasing
Reduce transaction costs- less low value invoicing
Streamline existing processes – eProcurement tools
Utilise the buying power of the organisation
Ensure security of supply
CPPs set out steps for achieving greater VFM
Also ‘sustainable’ procurement aims
D/Environment Initiatives
• CPP Guidance Document
• Basic Format for CPP
• www.environ.ie/en/LocalGovernment/
ProcurementModernisation
• Information sessions
• Once-off CPP funding – CPPs to be public
• Procurement co-ordination - future
savings
CPP Format
•
•
•
•
Short Executive Summary – busy managers
Introduction
Expenditure and Risk Analysis – SUPREM
Organisational Analysis incl. legal compliance
- see D/Finance guidelines
• Specific Goals – measurable and timeframe
• Appendices – commercially sensitive info
CPPs - Points to note
• Include all revenue expenditure – current,
contract & direct labour expenditure
• Exclude staffing costs and large capital
projects
• Consultation with purchasing areas vital
• Reform manual process before automation
• VFM and security of supply both critical
• Review progress in next year’s CPP
Supply Positioning
• What is “supply positioning”?
• The supply positioning matrix
• Potential buying strategies
Supply Positioning
• Technique used to assist in the development
of procurement strategies for particular
goods or services
• For categories of goods and services
determine
–Difficulty of securing supply (Risk)
–Relative expenditure
• Spend Profile
–“supply positioning matrix”
–Supplier and transaction analysis
Supply Positioning Chart
Supply Positioning and Risk Evaluation Matrix - SUPREM
Supply Positioning
Supply Positioning and Risk Evaluation Matrix - SUPREM
Expend
a small amount
of procurement
effort
Supply Positioning
Supply Positioning and Risk Evaluation Matrix - SUPREM
Expend
a large amount
of procurement
effort
Potential Buying Strategies
•
Risk Management and Problem
Solving:
•
Managed supplier relationships:
•
Long term contracts offer
security of supply
•
•
Develop sound relationships
with key suppliers
Performance outcomes need to
be defined and outcomes
monitored
•
Supplier quality development
•
Often worthwhile investing
resources in finding alternative
suppliers or goods and services
•
Aggregate demand and
efficient transaction
management
•
Monitor the supply market,
gain an understanding of
suppliers’ cost components and
their strategies for more
empowered negotiations
•
Arrangements that give
flexibility to leverage
demand
•
Efficient transaction
management
•
Aggregation of orders where
appropriate
•
Seek to utilise other agencies’
arrangements
Creating a Spend Profile
Step 1
Step 2
Step 3
Obtain info
from FMS
etc
Define &
Quantify
Spend
Categories
Estimate
Risk
Step 4
Input data
into SUPREM
Create Supply
Positioning
Chart
Step 5
Parallel 1
Parallel 2
Parallel 3
Supplier
Analysis
Transaction
Analysis
Organisation
Analysis
Draw initial
conclusions
from
Spend Profile
INTERPRET
RESULTS
SUPREM
•Information required
•Expenditure – categories of Goods & Services
•Risk Assessment
•Internal
•External
•Procurement Relationship
•How SUPREM works
•Expected Results
SUPREM – Assessing Risk
SUPREM – Assessing Risk
4 Sources of Risk
• The Purchasing Organisation
• e.g. poor specifications
• The Product or Service
• e.g. poor technology
• The Supplier
• e.g. poor performance
• The Market
• e.g. poor competition – monopoly
SUPREM – Assessing Risk
Generally, risk is greater when:
• the procurement is complex
• consequences of failure are severe
• there are few suppliers
• specialist knowledge is needed
• market conditions are changing
• specific quality requirements exist
• supplier performance is poor
• there are safety/environmental
considerations
SUPREM – Assessing Risk
FACTOR
Strategic
Importance
WEIGHTING
Easily
Substituted
Not
Important
Very Low
Low
Moderate
Procurement
Relationship
Complexity
Very Easy
Easy
Supply
Failure
Probability
Very Low
Nature of
Supply
Market
Highly
favours
buyer
Supply
Failure
Impact
LOWER
Low
Moderate
Importance Importance
Important
Critical
High
Very High
Critical
Slightly
Complex
Moderately
Complex
Complex
Highly
Complex
Low
Moderate
High
Very High
Certain
Moderately
favours
buyer
Slightly
Favours
Buyer
Slightly
Favours
Supplier
RISK
Moderately Highly
Favours
Favours
Supplier
Supplier
HIGHER
SUPREM – How it Works
CREATES ‘SUPPLY POSITIONING PROFILE’
Enter name and expenditure for each category of
goods and services
Select most appropriate responses for:
Nature of the supply market
Probability of supply failure
Complexity of procurement relationship
Impact of supply failure
Strategic importance to organisation

Review, print, save or copy chart and report
SUPREM – Log in
SUPREM – Enter Categories
SUPREM – Enter Risk Factors
SUPREM – Report and chart
Opens in New Window
SUPREM – Sample Report
SUPREM – Getting Access
www.suprem.gov.ie


All users must be registered
Complete application form for
username and password
Contact: [email protected]
SUPREM Workshop
• Break into Groups
• Assign Risk Weightings to 10 Categories
• Input Risk and Expenditure Data into SUPREM
• Generate Report & Chart
• Revise Inputs as necessary
• Re-generate Report & Chart
• Discuss Findings & Risk Rationale (after break)
SUPREM Workshop
FACTOR
Strategic
Importance
WEIGHTING
Easily
Substituted
Not
Important
Very Low
Low
Moderate
Procurement
Relationship
Complexity
Very Easy
Easy
Supply
Failure
Probability
Very Low
Nature of
Supply
Market
Highly
favours
buyer
Supply
Failure
Impact
LOWER
Low
Moderate
Importance Importance
Important
Critical
High
Very High
Critical
Slightly
Complex
Moderately
Complex
Complex
Highly
Complex
Low
Moderate
High
Very High
Certain
Moderately
favours
buyer
Slightly
Favours
Buyer
Slightly
Favours
Supplier
RISK
Moderately Highly
Favours
Favours
Supplier
Supplier
HIGHER
Category
SUPREM Workshop
Total
Spend
Strategic
Importance
Supply
Failure
Impact
Procurement
Relationship
Complexity
Supply
Failure
probability
Nature of Supply
Market
Professional Fees
250000
Moderate
Importance
High
Complex
Moderate
Moderately Favours
Supplier
Plant & Equip. Hire
200000
Moderate
Importance
Moderate
Easy
Low
Moderately Favours
Buyer
Furniture &
Fittings
Gen. Maintenance
145000
Low Importance
Low
Easy
Low
Slightly Favours Buyer
132000
Low Importance
Moderate
Easy
Low
Telecoms (Fixed)
110000
Moderate
Importance
High
Slightly Complex
Low
Slightly Favours
Supplier
Slightly Favours
Supplier
Health & Safety
98000
Important
High
Low
Slightly Favours Buyer
Telecoms (circuit
a/cs, inter-links)
82000
Important
High
Moderately
Complex
Slightly Complex
Low
Moderately Favours
Supplier
IT Consumables
63000
Moderate
Importance
Low
Easy
Low
Slightly Favours Buyer
Catering
15000
Low Importance
Low
Easy
Low
Slightly Favours Buyer
Security
35000
Important
High
Slightly Complex
Low
Slightly Favours Buyer
Advertising
30000
Moderate
Importance
Moderate
Slightly Complex
Low
Moderately Favours
Buyer
Vehicle Op. Costs
25000
Low Importance
Moderate
Very Easy
Low
Slightly Favours Buyer
Confidential Waste
25000
Important
Moderate
Easy
Low
Slightly Favours Buyer
Cleaning
20000
Low Importance
Slightly Complex
Low
Slightly Favours Buyer
Landscaping
16000
Not Important
Very
High
Very Low
Very Easy
Very Low
Moderately Favours
Buyer
Morning Recap
Why are we doing this?
CPP Basics
Supply Positioning
SUPREM
Typical SUPREM findings
< 1% total
expenditure
‘Specialist’ goods
& services – e.g.
IT consultants,
legal fees
c 5% total
expenditure
Many low value
purchases e.g
couriers,
newspapers
c 50 – 60% total
expenditure
‘Critical’ goods &
services – e.g.
professional fees,
energy costs
c 20-30% total
expenditure
Group-wide
‘common’ items –
e.g printing,
furniture
Analysis of SUPREM data
Risk
reduction
Long-term
VFM
Clear Specs
Substitutes
Alternatives
Relationships
Planning
Measurement
‘Streamline’
Unit cost
reduction
Transactions
Suppliers
Process
Demand
Contract
Aggregate
Analysis of SUPREM data
Transaction Analysis
Used to understand the:
• organisation’s interaction with its suppliers
• ordering and payment habits.
Need to identify the:
• overall number of transactions
• number of transactions
• per supplier
• per expenditure category
• value and frequency of transactions.
Transaction Analysis
A significant effort is spent managing a very small portion of
the organisation’s spend.
Note that €80 is considered to be the minimum estimate of
the cost of a transaction. This figure reflects both direct
costs (postage, cheque printing, etc) and indirect costs (staff
time, overheads, etc). Some organisations may have a higher
figure (up to €120) representing more complex transactions or
larger overheads.
The organisation should look to reducing the number of
transactions that have a value below the cost of processing.
Transaction Analysis
Number and value of invoices by value band
Example
c80% of invoices equates to c30% of Spend
Invoices
Value Band
Number
% of total
Spend
Trans
< €100
410
5.55%
41.00%
€101 - €250
255
11.54%
25.50%
€251 - €500
126
12.60%
12.30%
€501 - €1000
115
11.50%
19.79%
> €1000
94
9.40%
50.81%
Transaction Analysis
Category
Expenditure Transactions
Average Value
Maintenance
86000
109
€788.99
Heat Light & Power
48000
24
€2,000.00
Catering
30000
96
€312.50
Advertising
27000
84
€321.43
Printing
27000
64
€421.88
Skip Hire
26000
94
€276.60
Insurance
24000
12
€2,000.00
Cleaning
22000
90
€244.44
Stationery
15000
115
€130.43
Postage
12700
24
€529.17
Vehicle Fuel
10000
108
€92.59
IT Consumables
3600
52
€69.23
Couriers
3500
92
€38.04
Safety Materials
3500
36
€97.22
Transaction Analysis
• Number of invoices with a single line
• Number of invoices with more than 10 lines
• List of suppliers who generate more than one
invoice a week with a single line
This is a way, albeit a crude one, to determine if any consolidation
of invoicing is happening. You would expect to see higher
numbers of lines and fewer invoices if consolidation is occurring.
Transaction Analysis
Some ways to reduce transaction numbers
CONSOLIDATED INVOICES
STRATEGIC USE OF PURCHASE CARDS
FRAMEWORK AGREEMENTS
DEMAND MANAGEMENT
SUPPLIER MANAGEMENT
Supplier Analysis
“Micro” Analysis





How many Suppliers are dealing with the
organisation?
How often are they used?
How much is spent with them?
Do multiple Suppliers provide the same goods or
service?
Do different parts of the organisation have
contracts with same Suppliers?
Supplier Analysis
“Macro” Analysis





How many Suppliers in the market?
Which Suppliers are the most powerful?
How are the Suppliers geographically located?
Are multiple suppliers part of the same group?
Is the market stable?
Supplier Analysis
 Do we have too many / too few Suppliers for
particular goods or services?
 How does the market view the organisation as
a customer?
 Have we the ability to influence the market?
Supplier Analysis
• Number of suppliers used this year
• Number of suppliers used this year as a % total suppliers on the
database
• Number and value of suppliers by supplier bands
• Number of suppliers with a single invoice
• Average invoice value of suppliers with a single invoice
The majority of suppliers with a single invoice will be ad-hoc, one-off
suppliers. Each new supplier will be generating administrative effort to
create and maintain which could be saved, as could the effort required by
the purchaser/customer to source the supplier.
• Number of ‘new’ suppliers in the previous financial year who have
been re-used in this financial year
Can be indicative of where insufficient supplier registration procedures
exist, when combined with a review of the existence of duplicate supplier
records.
Supplier Analysis
• List top suppliers (e.g. top 20, 30) by spend and volume of
invoices
Simplistically, the suppliers with whom the most money is spent
generally require some designated supplier relationship management in
order to ensure that the organisation is achieving best value for
money and to negotiate changes in business practices (including eProcurement and other automation).
Suppliers who generate the most invoices are candidates for
increased automation throughout the Procure to Pay cycle.
Supplier Analysis
• Duplicate suppliers (list evidence and show how it would affect
the positioning in the top supplier tables)
Most organisations have significant duplication of suppliers. This can
be identified by telephone number, C2 or VAT registration,
description searches, etc. In some instances this may be for
legitimate reasons (e.g. different supplier locations), but in others it
could be human error.
• Number of ‘new’ suppliers in the previous financial year who have
been re-used in this financial year
Can be indicative of where insufficient supplier registration
procedures exist, when combined with a review of the existence of
duplicate supplier records.
Supplier/Transaction Analysis
Supplier
Category
Spend
Trans.
Ave. Value
% Spend
% Trans.
Image Design
Advertising
15000
49
€306.12
4.54%
4.90%
Central Press
Advertising
7000
6
€1,166.67
2.12%
0.60%
Allied Press
Advertising
3000
5
€600.00
0.91%
0.50%
Buzz Radio
Advertising
1000
12
€83.33
0.30%
1.20%
Planet Radio
Advertising
1000
12
€83.33
0.30%
1.20%
Contract Caterers
Catering
11000
18
€611.11
3.33%
1.80%
City Caterers
Catering
7500
60
€125.00
2.27%
6.00%
Farrelly Foods
Catering
3500
18
€194.44
1.06%
1.80%
Capital Corp
Cleaning
9500
40
€237.50
2.88%
3.00%
Acme Inc
Cleaning
9500
30
€316.67
2.88%
4.00%
Professional Finish
Cleaning
3000
20
€150.00
0.91%
2.00%
Speedy Couriers
Couriers
1700
40
€42.50
0.51%
4.00%
Couriers
Couriers
1000
30
€33.33
0.30%
3.00%
Quick Couriers
Couriers
800
22
€36.36
0.24%
2.20%
Keegan Oil
HL &P
15000
12
€1,250.00
4.54%
1.20%
ESB
HL &P
33000
12
€2,750.00
9.99%
1.20%
FBD
Insurance
24000
12
€2,000.00
7.27%
1.20%
Smart Computers
IT Consumables
1200
12
€100.00
0.36%
1.20%
Healy Hard-drive
IT Consumables
1200
22
€54.55
0.36%
2.20%
Prestige Computing
IT Consumables
700
8
€87.50
0.21%
0.80%
Performance Products
IT Consumables
500
10
€50.00
0.15%
1.00%
Supplier/Transaction Analysis
Supplier
Category
Spend
Trans.
Ave. Value
% Spend
% Trans.
Image Design
Advertising
15000
49
€306.12
4.54%
4.90%
Central Press
Advertising
7000
6
€1,166.67
2.12%
0.60%
Allied Press
Advertising
3000
5
€600.00
0.91%
0.50%
Buzz Radio
Advertising
1000
12
€83.33
0.30%
1.20%
Planet Radio
Advertising
1000
12
€83.33
0.30%
1.20%
Contract Caterers
Catering
11000
18
€611.11
3.33%
1.80%
City Caterers
Catering
7500
60
€125.00
2.27%
6.00%
Farrelly Foods
Catering
3500
18
€194.44
1.06%
1.80%
Capital Corp
Cleaning
9500
40
€237.50
2.88%
3.00%
Acme Inc
Cleaning
9500
30
€316.67
2.88%
4.00%
Professional Finish
Cleaning
3000
20
€150.00
0.91%
2.00%
Speedy Couriers
Couriers
1700
40
€42.50
0.51%
4.00%
Couriers
Couriers
1000
30
€33.33
0.30%
3.00%
Quick Couriers
Couriers
800
22
€36.36
0.24%
2.20%
Keegan Oil
HL &P
15000
12
€1,250.00
4.54%
1.20%
ESB
HL &P
33000
12
€2,750.00
9.99%
1.20%
FBD
Insurance
24000
12
€2,000.00
7.27%
1.20%
Smart Computers
IT Consumables
1200
12
€100.00
0.36%
1.20%
Healy Hard-drive
IT Consumables
1200
22
€54.55
0.36%
2.20%
Prestige Computing
IT Consumables
700
8
€87.50
0.21%
0.80%
Performance Products
IT Consumables
500
10
€50.00
0.15%
1.00%
Supplier/Transaction Analysis
Supplier
Category
Spend
Trans.
Ave. Value
% Spend
% Trans.
Image Design
Advertising
15000
49
€306.12
4.54%
4.90%
Central Press
Advertising
7000
6
€1,166.67
2.12%
0.60%
Allied Press
Advertising
3000
5
€600.00
0.91%
0.50%
Buzz Radio
Advertising
1000
12
€83.33
0.30%
1.20%
Planet Radio
Advertising
1000
12
€83.33
0.30%
1.20%
Contract Caterers
Catering
11000
18
€611.11
3.33%
1.80%
City Caterers
Catering
7500
60
€125.00
2.27%
6.00%
Farrelly Foods
Catering
3500
18
€194.44
1.06%
1.80%
Capital Corp
Cleaning
9500
40
€237.50
2.88%
3.00%
Acme Inc
Cleaning
9500
30
€316.67
2.88%
4.00%
Professional Finish
Cleaning
3000
20
€150.00
0.91%
2.00%
Speedy Couriers
Couriers
1700
40
€42.50
0.51%
4.00%
Couriers
Couriers
1000
30
€33.33
0.30%
3.00%
Quick Couriers
Couriers
800
22
€36.36
0.24%
2.20%
Keegan Oil
HL &P
15000
12
€1,250.00
4.54%
1.20%
ESB
HL &P
33000
12
€2,750.00
9.99%
1.20%
FBD
Insurance
24000
12
€2,000.00
7.27%
1.20%
Smart Computers
IT Consumables
1200
12
€100.00
0.36%
1.20%
Healy Hard-drive
IT Consumables
1200
22
€54.55
0.36%
2.20%
Prestige Computing
IT Consumables
700
8
€87.50
0.21%
0.80%
Performance Products
IT Consumables
500
10
€50.00
0.15%
1.00%
Supplier/Transaction Analysis
Supplier
Category
Spend
Trans.
Ave. Value
% Spend
% Trans.
Image Design
Advertising
15000
49
€306.12
4.54%
4.90%
Central Press
Advertising
7000
6
€1,166.67
2.12%
0.60%
Allied Press
Advertising
3000
5
€600.00
0.91%
0.50%
Buzz Radio
Advertising
1000
12
€83.33
0.30%
1.20%
Planet Radio
Advertising
1000
12
€83.33
0.30%
1.20%
Contract Caterers
Catering
11000
18
€611.11
3.33%
1.80%
City Caterers
Catering
7500
60
€125.00
2.27%
6.00%
Farrelly Foods
Catering
3500
18
€194.44
1.06%
1.80%
Capital Corp
Cleaning
9500
40
€237.50
2.88%
3.00%
Acme Inc
Cleaning
9500
30
€316.67
2.88%
4.00%
Professional Finish
Cleaning
3000
20
€150.00
0.91%
2.00%
Speedy Couriers
Couriers
1700
40
€42.50
0.51%
4.00%
Couriers
Couriers
1000
30
€33.33
0.30%
3.00%
Quick Couriers
Couriers
800
22
€36.36
0.24%
2.20%
Keegan Oil
HL &P
15000
12
€1,250.00
4.54%
1.20%
ESB
HL &P
33000
12
€2,750.00
9.99%
1.20%
FBD
Insurance
24000
12
€2,000.00
7.27%
1.20%
Smart Computers
IT Consumables
1200
12
€100.00
0.36%
1.20%
Healy Hard-drive
IT Consumables
1200
22
€54.55
0.36%
2.20%
Prestige Computing
IT Consumables
700
8
€87.50
0.21%
0.80%
Performance Products
IT Consumables
500
10
€50.00
0.15%
1.00%
Organisational Analysis
The four areas that should be addressed in the context of
assessing the organisation’s procurement capacity are:
• ORGANISATIONAL STRUCTURE
• POLICIES, PROCEDURES & PRACTICES
• ICT and eProcurement
• PROCUREMENT SKILLS
Organisational Structure
• How is procurement viewed by the organisation?
• Where does purchasing occur in the organisation?
• Are purchasing activities planned & co-ordinated?
• Who has responsibility and for what?
• Is there any organisational duplication?
• Is there scope for streamlining processes and
redeploying resources?
Policies, Procedures & Practices
• Are there clear procurement policies in place?
• Is everyone made aware of these policies?
• Do you review these policies regularly?
• Do Procurement Policies comply with the most up to
date legal requirements
•Are procurement/tendering processes clearly
documented
•Are there monitoring systems in place e.g. managerial
sign off to control purchasing processes
ICT and eProcurement
• Does the ICT system support the procurement activity?
• Is it ‘user friendly’ – can you get the data you need?
• Can you use ICT tools to measure procurement savings?
• Do you use available eProcurement tools?
• Is your ‘purchase to pay’ cycle sufficiently streamlined?
Procurement Skills & Knowledge
• Are Managers and staff up to date on procurement
legislation?
• Is procurement knowledge and experience shared
within the organisation?
• Are Training opportunities offered…and availed of?
• Are new approaches to purchasing being explored?
CPP Tools & Assistance
 Financial Management System (FMS)
 Agresso, JD Edwards, Oracle, etc
 Analysis Programmes
 SUPREM, etc
 CPP Template
 Capacity Building Material
 Policy Docs, Organisation Chart, HR Profiles
 DoF’s Consultancy Framework Agreement
Wrap Up
Q U E S T I O N S
&
A N S W E R S