Transcript No Slide Title

Examining
shared service innovation
– the “i before e”-procurement
project
Chris Keady, London Borough of Brent
Chairman, London Contracts and Supplies Group
@London, 3rd 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, 3rd 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, 3rd 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, 3rd June 2004
Progress to date
• We worked with 6 councils in West London:
Brent
Hammersmith
Ealing
Hillingdon
Harrow
Hounslow
• 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
@London, 3rd June 2004
Questionnaire Outline - to 6 West London Boroughs
submitted 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, 3rd June 2004
Road Maintenance – the Local Govt Category List
provides a standard template to collect data
Materials
Hardcore
Tarmac
Sand and Gravel
Slabs and Paviours
Kerbs
Street Furniture
Soft Landscaping
Bollards and Barriers
Plant Hire
-
Paint
Structural Steelwork for Bridgework
Bus shelters
Street Lighting
Traffic Lights
Cameras
Signage
Parking Meters
Labour
Site Supervision
Survey and design services
Other
@London, 3rd June 2004
And here’s some of the data for 3 Boroughs:
Harrow
Hillingdon
2004/5
2002/3
2004/5
1.25
1.24
2.23
4.72
1.57
1.21
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
All figures in £m
Road Schemes
Bridges
Brent
Parking Mgement
Pedestrian/Cycle
Bus Related Works
TOTAL
Total
3 Borough London Av
Average (ALG 2004/5)
0.83
3.03
0.21
0.22
3.45
1.15
0.97
0
0.1
0.07
0.17
0.06
0.75
4.70
3.32
7.69
15.73
5.24
4.45
15.72
13.35
3 years average
@London, 3rd June 2004
Housing – again, a standard template is possible
(source:Hounslow £35m forecast 2004/5-2006/7)
Category
Av p.a.
(3 years)
Category
Av p.a.
(3 years)
Aids for disabled
£1400k
Door entry
£305k
Rewiring and other electrical
£666k
£1468k
Asbestos – survey and remove
£416k
Boiler replacements and associated
plumbing
Play areas and equipment
£166k
Lift Refurbishment
£575k
Cavity wall and loft insulation
£500k
Window Replacement
£3471k
IT/digital connection
£67k
Kitchen and Bathroom Refurbishment
£15205k
Refurbishment of Sheltered Units
£750k
Roofs
£5709k
Hostels
£100k
Cladding and structural
£783k
Major works to empty properties
before external decoration
£400k
Drainage
£1400l
General Security Schemes
£750k
Unallocated
£3528k
@London, 3rd 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
18690
47711
13775
2006/7
@London, 3rd 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.
@London, 3rd June 2004
In some cases we have detailed
spending forecasts:
(source:Hammersmith and Fulham ALMO)
Source:
Hammersmith and
Fulham ALMO
Forecast
@London, 3rd 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, 3rd 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, 3rd 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, 3rd 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, 3rd June 2004
Some sample outputs
Source:
DecisionMAX
Software
@London, 3rd 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?
@London, 3rd June 2004