Review of productivity measures

Report: 5
Date: 3 December 2009
By: Director of Resources on behalf of the Commissioner

Summary

This report provides an overview of the work being undertaken within the MPS as part of the productivity agenda.

A. Recommendations

 That

1. Members note the work being undertaken within the MPS as part of the productivity agenda.

B. Supporting information

1. On his appointment, the Commissioner Sir Paul Stephenson set out his view on how the MPS should be delivering for London, this is articulated in the five Ps: Presence, Performance, Productivity, Professionalism and Pride.

The Productivity agenda is about the effective and efficient use of all of our resources. This is about improving our value for money and delivering on all our priorities in a tightening budgetary situation. We need to use our resources more flexibly; identify cost drivers, enforce compliance and eliminate waste. The MPS in 2009/10 has the lowest change in Council Tax precept for policing in England and Wales with a decrease of 1.1% on the previous year. Also, the MPS had the lowest budget increase of all forces in England and Wales (i.e. 1.75% increase from 2008/09). As part of the 2009-12 Budget Planning process, £160m in reductions were found for 2010/11. A further £110m in reductions have been identified for 2010/11 as part of the 2010-13 Business Planning process. /p>

This report provides an update on a number of key areas that form part of the Productivity Agenda.

Service Improvement Plan

2. The Service Improvement Plan (SIP) is a formal process through which major improvement / efficiency activity is identified and implemented. The SIP is being developed as part of the Service’s medium-term business and budget planning process. The SIP identifies the areas of the Service, which are the focus of investment or efficiency review decisions. The SIP projects and programmes are divided into 4 productivity themes. The themes are shown in the following table, together with examples of SIP Programmes and Projects under each theme.

3. Each SIP Programme/Project has its own governance arrangements, and the ownership and responsibility for delivering projects and programmes remain within the Business Groups. The overall governance of the SIP is undertaken by the MPS Governance Board, formally the Service Improvement Board. This is a meeting chaired by the Director of Resources, with senior representation from DAC’s and police staff equivalents from each of the business groups, the Commissioner’s Chief of Staff, Director of Legal Services, the Director of Strategy and Improvement, and the Head of the Directorate of Professional Standards.

4. There are 4 productivity co-ordinators (one for each theme) who provide high level updates to the Governance Board each month on the progress being made to scope, develop and implement the projects and programmes. The role of the Portfolio Co-ordinators is:

• To be the subject expert for that theme and single point of contact
• To provide high level updates on milestones, deliverables, business cases to the Governance Board on a monthly basis for the areas they have the lead for co-ordinating
• To co-ordinate activity across the themes
• To identify dependencies across themes
• To identify and remove potential blockages
• To escalate issues to the Governance Board
• To provide a full understanding across the theme, ensuring activity is aligned to the Business Planning process and ensuring information is available for Management Board and MPA committees.

5. In addition to the SIP, there are a number of other activities and projects that form part of the wider productivity agenda. Each area has a lead and reports on progress to the MPS 5 P’s oversight board: The activities and projects are aligned to the following objectives:

• Integrating business planning and budgeting within our performance management framework
• Embedding Value for Money into Business As Usual (This includes SIP)
• Delivering Effective Resource Management

Recent examples of Productivity in the MPS

Purchase to Pay (P2P)

6. The effective management and control of the overall Purchase-to-Pay process is a core requirement for any organisation and ensures that the MPS is in line with best practice. Through purchasing compliance, the following financial benefits and service improvements can be brought to the MPS:

• Financial benefits:
  • Reduce costs - drive orders through suppliers offering best value
  • Reduce late payment charges, currently £5M risk per annum
  • Increase number of suppliers paid within terms and meet GLA commitments to pay SMEs within 10 days
  • Leverage MPS-wide spend volume - channel similar requirements to preferred suppliers for greater discounts
• Service improvements:
  • Goods and services easier to obtain
  • Increase visibility and management of supplier performance
  • Less budget overspend - financial approval required before order is placed with the supplier
  • Increase efficiency and productivity by streamlining and standardising our buying process

7. The Purchase to Pay project (P2P) has been making steady progress with the support of all colleagues across the MPS business groups such that purchasing compliance (invoices received with referencing a valid purchase order number) has reached an unprecedented 81% in September 2009. This compares favourably with the level of compliance in February 2009.

MPS Purchasing Compliance:

•  February ‘09: 51%
• September ‘09: 81%

8. In January 2009 the Finance and Resources Committee approved the report entitled “MPA Commitment to GLA Four Year Responsible Procurement Plan. The Committee approved a series of actions with the aim to pay SMEs earlier than the current net 30 day payment terms and ultimately for all SMEs to be paid within a 10 working day payment term.

Invoices Paid Within 10 days (Payment from date of invoice receipt):

• February ‘09: 37%
• September ‘09: 78%

9. In February 2009, the proportion of invoices paid in 10 working days or less by the MPS, was 36.8%. This was the first month of reporting for the MPS and was used as the baseline figure from which progress would be expected. This figure has risen to 78% in September.

Evidential Drug Identification Testing (EDIT)

10. Evidential Drug Identification Testing is the new testing process for Class A drugs possession, whereby officers and designated police staff test for cocaine, crack cocaine, amphetamine and heroin. Giving officers an approved drug-testing kit, together with appropriate training, means they can get results quickly. The kit has been available in all 32 boroughs and at Heathrow and City airports since June 2009.

11. Detective Superintendent Wilson, who led the implementation team, says the cost of a bail-to-return is around £1,000, while the approximate cost for analysis carried out in a laboratory is £100. Under EDIT, officers carry out the same test using a £5 kit and are often able to bring a charge on the day, pre-empting the need to bail. The National Police Improvement Agency (NPIA) estimate potential savings of £1.3m this year.

12. Trainee Detective Constable Bob Boodhram of Ealing said: “This is a quicker, faster way for us to get detections. Also the cost savings in areas such as the forensic budget and bail-to-return increases productivity.”

Paramedics and police ‘dual response’ first of its kind

13. Officers from Camden Borough have teamed up with the London Ambulance Service (LAS) in the same vehicle when attending emergency calls.

14. The pilot is the very first in the whole of the country and provides a unique ‘dual response’ solving many busy (often nightly) emergency calls which require both highly-trained paramedics as well as police officers. This makes better use of resources for the police and LAS.

15. Camden officers are sure that the scheme, which sees paramedics in a police car with officers on Friday and Saturday nights, is saving lives and securing valuable evidence at crime scenes. Inspector Martin Kemp, who pioneered the initiative, said “The huge winner for us is that the public get an absolute first class service. It has proven to be very successful and there has been no cost factor involved”. Initial results have been extremely positive. Camden plan to review the scheme in January 2010, once the busy Christmas and New Year period is over.

Activity Based Costing (ABC) v Police Objective Analysis (POA)

16. Activity Based Costing (ABC) became a mandatory requirement for all police forces from 2003/04 and has since formed the basis of Annual Data Returns (ADR) to the Home Office (HO) for both Activity Analysis (AA) and ABC costed data - a requirement of the National Policing Plan.

17. Although ABC costed data was promoted as a management tool to enable forces to make better use of their resources, very few police forces have been able to successfully use the results to drive improved performance.

18. Activity Based Costing was abolished in February 2009 by the HO following reports by Sir Ronnie Flanagan (The Review of Policing - 2008) and then a further report by Sir David Normington.

19. The HO officially withdrew the requirement for ABC in February 2009, forces were no longer required to complete the Activity Based Costing (ABC) Annual Data Returns. The Final ABC return was for 2007-08.

20. A consultation process was undertaken in December 2008 involving CIPFA, ACPO Cabinet, Treasurers, Heads of Finance and other interested parties. ACPO Cabinet agreed to implement the new reporting format from 2009/10 with ABC ceasing with immediate effect. The proposed timetable for the implementation of POA is as follows:

• Budget 2009-10 due December 2009
• Actuals 2009-10 expected date 31st July 2010
• Budget 2010-11 expected date 31st May 2010

21. The proposed Policing ‘Objective Analysis’ (POA) aims to provide robust financial information to give a clearer understanding of the costs of policing and how resources are used within the service. It is expected that the POA will be a tool to aid performance improvement, resource allocation, use of resources and benchmarking, both internally and externally.

22. The development of POA is being led by West Midlands Police Service, however Strategic Finance are working closely with a number of other forces to ensure any changes to the model fits with the internal needs of the MPS. Additionally, the MPS have been actively involved with West Midlands Police in developing a ‘functional analysis’ of Police Service costs ‘Police Objective Analysis’, with a view to identifying comparable costs at both force and BCU level for generic functions.

23. The MPS uses OPM codes to support the production of the POA and PMF. This allows the MPs to understand the key activity an individual carries out. These are in the process of being reviewed to ensure they reflect the individuals current role. They are also being reviewed to ensure we are consistent with the activities across the MPS to allow the full cost a activities to be understood to maximise use of resources. A benchmarking tool has been developed by CIPFA to allow comparisons to be made across the Police Service. Data to be presented November 2009.

Performance Management Framework

24. The MPS is facing considerable challenges, but needs to focus now on performance analysis and reporting and performance improvement to:

• Deliver excellent front line policing outcomes
• Manage our spend within increasingly constrained funding
• Optimise the use we make of our people and resources, recognising emerging national benchmarking (POA) and internally developed models (6 policing activities/6 support activities)
• Regularly reassess our medium term outlook (performance, headcount, finance, resources)

25. Finance Services are using POA base data (OPM’s and Business Group functional costs) to produce similar data for the new ‘Performance Management Framework’ (PMF). This data will be produced on a monthly basis comparing both actual and budgeted costs. One of the aims of the MPS’s refreshed PMF is to “Ensure performance analysis effectively informs senior level decision-making”. One way of doing so is undertake “Deep-dive” analysis to add value to performance information by using it to understand the underlying factors contributing to a headline performance figure. This information can then be used by senior managers to decide where to place resources to drive an improvement in performance.

The PMF should:

• Provide Better information to help improve performance
  • Tells us what frontline resources we have invested and where
  • Tells us what outcomes we are achieving as a result
  • Informs debate - better resource allocation & policing outcomes
  • Helps manage "support" as per Home Office VFM proposals.
• Better demonstrate performance
  • Enables us to produce trends to show improvement to MPA
  • Aligns with external frameworks such as POA
  • Enables us to deliver internal/external benchmark comparisons (and communicate success and good practice)
• Allow MPS to better develop and manage long-term budget
  • Helps us understand costs and show financial impact of decisions

26. The PMF is still in the early stages of being developed within the MPS and will need to support the new Corporate Decision Making process.

Productivity Inspections

27. The MPS submitted evidence to the Audit Commission as part of the 2008/09 Police Use of Resources Evaluation (PURE). This was based on three themes; sound and strategic financial management, strategic commissioning and good governance, and the management of natural resources, assets and people. These are informed by eight detailed key lines of enquiry (KLOE).

28. Scoring for PURE is for each KLOE on a scale of 1 to 4, with 4 being the highest. The MPS is then awarded an overall score based on the KLOE's. This year the MPS's overall score was 2, however this should be taken into context of increased rigour and a broader based assessment. The following table provides the scored judgements allocated by the Audit Commission:

29. The draft evaluation and recommendations have been submitted to the MPS and are in the process of being considered by MPS Management Board. Work is underway to prepare for the 2009/10 assessment in anticipation of the Audit Commission starting their next inspection in January 2010.

Role of The Quality Assurance Team (QAT) in Finance Services

30. The QAT supports the Corporate Governance Framework and compliance work led by Director Of Resources. The team focus is on strengthening and improving internal controls across the MPS. It aims to achieve this by:

• Working alongside Audit and Inspection services and MPS Business Groups to provide a proactive and co-ordinated approach. For example developing Single Points Of Contact within the business areas with which to liaise on audit activity and working with the MPA Directorate of Audit, Risk and Assurance to identify themes emerging from audit reports. Early indications are that around 50% of audit recommendations relate to control issues (reconciliation, authorisation and management supervision)
• Reviewing internal control procedures and policies, e.g. Scheme Of Delegation, rollout of electronic cashbooks
• Providing support to the business to ensure compliance with control measures, including timely implementation of audit recommendations
• Helping to embed risk management across the Service
• Ensuring financial management policy/procedures are kept updated

Strategic Benchmarking

31. The MPS undertakes a number of benchmarking activities to compare costs with other forces/organisations. Examples include:

• The Finance and Resources (F&R) Review – The MPA/MPS conducted a review of this function, including a comparison of costs with other similar organisations. As a result of this work and the full F&R review the MPA/MPS expects to bring F&R costs below the average costs found for similar forces. The F&R review was delivered through the Developing Resources Management Programme.
• Overtime: monitored per officer, per officer on rest days and per officer on double time. Overtime is benchmarked against other forces through the CIPFA Finance Services Benchmarking Club.
• Estate Management benchmarking using Facilities Management metrics and revenue cost information. This work was the outcome of revisions to Facilities Management outsourced services, where the MPS requested for more detailed data to be provided as part of the new contract. This data has been used to benchmark spend against similar organisations. Accommodation costs are also benchmarked through annual ACPO Inter Force benchmarking.
• National, International and Capital City (NICC) functions cost analysis. The MPS performs a number of functions, which have previously been accounted for and quantified in different ways. Following recent engagement with HMIC concerning the MPS’s allocation of resources to NICC policing activity, the MPS carried out a review of the current levels of MPS NICC activity. The analysis of the 2008/09 actuals identified expenditure of £603m (including an allocation from corporate overheads), against allocated funding of £501m, an in year funding shortfall of £102m. The 2009/10 budgets identified expenditure of £634m against funding of £541m generating a potential in year shortfall of £93m. Work will continue to refine and understand these costs.

32. The MPS Pay and Pensions contract commenced in April 2006. The contract was originally let for seven years with provision to extend for a further three years. It stipulated that a benchmarking exercise would be completed to confirm that the contract continued to provide good value for money.

33. The recently completed Logica Pay & Pensions Contract benchmarking report provides detailed analysis of current market comparators and recommends that the MPS enters into negotiations with Logica to extend the Pay and Pensions contract to 31 March 2016. A detailed report in relation to this benchmarking exercise is being submitted separately to the Finance and Resources Committee meeting in December, and the Resources and Productivity Sub Committee meeting in January.

Zero Based Budgeting

34. In their pure form, neither zero based budgeting (ZBB) nor incremental budgeting (IB) is used by, or would be appropriate for, the MPS budgeting process. Instead the Service has modified and combined these approaches in order to derive many of the benefits afforded by both systems in terms of:

• IB:
  • challenging growth and reductions;
  • identifying and managing cost drivers across the business;
  • recognising the realities of resource constraints.
• ZBB:
  • determining and clearly stating organisational objectives
  • identifying major areas of Service change;
  • reviewing different ways of delivering how these services meet the organisational objectives so that the resources associated with the preferred option can be actively justified.

35. The MPS continues to develop its approach to budgeting as part of an integrated performance management framework. That approach recognises changes in demand and Service priorities and aims to balance:

• targets applied to individual Business Groups;
• additional smart targets for corporate and cross-cutting exercises which will eventually be applied to individual Business Groups.

36. This approach aims to ensure Business Groups’ existing budgets are challenged whilst proper regard is given to how services are delivered at a more strategic level in that work on SIP projects involves questioning accepted beliefs and considering the possibilities for fundamental change, thus borrowing from a ZBB approach.

C. Race and equality impact

There are no race or equality impacts arising directly from this report.

D. Financial implications

The productivity agenda aims to ensure the efficient and economic use of resources in the delivery of an effective policing service. The POA/ABC work is explicitly intended to ensure that the MPS has the clearest understanding of our costs. There are no additional direct financial implications arising as a result of this work, which is being carried out within existing Resources Directorate budgets.

E. Legal implications

1. This is an information report only. Therefore, there are no direct legal implications arising from the recommendations in the report.

2. Many of the elements of the Productivity Agenda will facilitate the delivery of services within a legally compliant framework and secure the continuous improvement in the way services are exercised having regard to a combination of economy, efficiency and effectiveness, thereby achieving best value.

F. Background papers

MPS Update on Activity Based Costing (ABC) and Policing Objective Analysis (POA) - paper for MPA Finance and Resources Committee Meeting - Dec 2009.

G. Contact details

Report authors: Ross Daniels, Strategy & Improvement Department and Adrian Lovegrove, Strategic Finance, MPS

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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