Procurement transformation programme update

Report: 14
Date: 16 February 2006
By: Commissioner

Summary

Since 2003 Procurement Services has embarked on an extensive programme to change and improve its service delivery and provide a professional service, valued by all its customers. An update was provided in October 2004. This report details the continued journey that Procurement Services has taken, highlights the progress and key achievements since then and outlining the vision for the future.

A. Recommendations

That the Committee notes the report.

B. Supporting information

Background

1. The Procurement transformation programme formally commenced in Quarter 1 2003, following the MPA sponsored Efficiency and Effectiveness review, which highlighted some weaknesses whilst recognising the importance and value that effective procurement brings in achieving corporate aims. The programme set out the following high-level objectives:

• “Professionalise” the procurement function;
• Improve the organisation and infrastructure within Procurement Services;
• Improve the capacity and capability of procurement;
• Update governance arrangements & associated policies and procedures;
• Implement Category Management to focus effort on value adding, operationally supporting work and to embed a robust sourcing and supply chain management methodology in the team;
• Develop and implement “e” systems strategy;
• Produce a suite of standard Terms and Conditions of contract; and
• Recruitment campaign to attract the best people to the MPS.

2. Implementation of the Strategy comprised three key elements (People, Processes and Technology) based upon a best practice approach to procurement transformation.

People

3. Procurement Services currently comprises three core ‘category’ teams responsible for the strategic sourcing of key categories of expenditure and groups of commodities.

• The Operational Services category team source the requirements for all goods and services (excluding IT) that directly support operational officers in areas such as forensics, uniforms, firearms, equipment, vehicles, etc.
• The Information and Communications Technology (ICT) category team source the requirements for all computer hardware and software, infrastructure, telecommunications and all related major IT projects.
• The Corporate Services category team source the requirements for all goods and services related to general infrastructure (excluding the procurement of the physical building themselves) such as office services, catering, cleaning, legal services, consultants, temporary staff, recruitment services, etc. This team also works closely with Property colleagues to ensure a more consistent and co-ordinated approach to procurement by sharing robust processes and methodologies.

4. Supporting the three teams is the Outsourcing and Infrastructure Development team. This team has several key objectives:

• Management and delivery of MPS Outsourcing Programme to deliver new contracts for the future provision of those services initially outsourced in 1998/99;
• Management, training, data gathering and internal liaison of Procurement Services Diversity and Environmental programmes;
• Responsibility for supplier catalogues on the Systems, Applications and Products (SAP) system;
• Support to operational colleagues with regard to identifying suppliers and placement (using SAP system) of ad-hoc orders.

5. The Procurement Services organisational structure is shown in Appendix 1.

6. This structure reflected the MPS business model and enabled the team to improve focus to operational and support colleagues. It has enabled Procurement Services to:

• Directly support the strategic direction and imperatives of the MPA/MPS;
• Align to all Operational Command Units (OCUs), improving responsiveness and service delivery;
• Align to other major support functions (such as Directorate Of Information and Property Services Directorate) facilitating proactive, collaborative working, especially on major projects and initiatives;
• Deliver ‘category’ teams that focus upon all our key commodities;
• Provide extensive commodity procurement / market expertise to key stakeholders;
• Deliver access to key supplier information and spend data, and promote the use of related performance metrics.

7. The budget for Procurement Services for 2006/07 is £3.3m. and addressable spend is c.£350m. To support delivery to the MPS it is essential that Procurement Services be adequately resourced. Consequently there has been an ongoing recruitment campaign to attract procurement specialists from both the public and private sector. Since the last update report seven external candidates have been appointed (all with private sector expertise). However, in a buoyant procurement recruitment market, Procurement Services has also encountered significant staff retention problems. Consequently we have lost over 40% of the team to predominantly private sector companies in the last 18 months. These resignations have impacted Procurement Services ability to deliver some aspects of the stated objectives. An example of the retention issue is typified by three resignations in December (including the resignation of the Outsourcing and Infrastructure Director), these and previous resignations has left a staff shortfall of approximately 25% (See Appendix 1).

8. In parallel to recruiting staff with professional procurement qualifications (CIPS), encouragement and support was given to existing staff that were not qualified.

9. This support will continue into 2006/2007. In terms of professional qualifications, Procurement Services now has 40% of staff professionally qualified Chartered Institute of Procurement and Supplies (CIPS) and a further 45% are working towards attainment of this qualification.

10. Throughout 2005, specialist support has been provided to staff in order to embed the key principles of Category Management (CM), which is a proven best practice methodology widely used in industry and can be applied to all categories of expenditure. Use and application of CM has yielded significant benefits in terms of significant savings delivery and staff development. Use of the CM methodology yields higher than average savings as it equips the buyers with a greater ability to challenge customer requirements; analyse the market more effectively; understand suppliers costs and tender submittals and most importantly hold more effective negotiations that benefit the MPS.

11. Further specialist training for all staff has also been delivered in 2005. The topics covered are listed below:

• TUPE [Transfer of Undertakings (Protection of Employment)] training.
• EU Regulations - training to explain the “updated” EU regulations.
• Supplier Diversity - training to explain MPS approach and outline why supplier diversity is important in the MPS.
• PROMIS (see paragraph 18) - training on using the system effectively.
• EBP/METFIN - (see paragraph 17) training to explain how system is to be used and what data can be obtained.
• Terms and Conditions (T&C’s) - training to explain what terms are negotiable and non-negotiable.

12. The infrastructure has been improved, namely:

• Induction packs have been updated to reflect feedback from “new starters”. Additionally, a checklist has been produced which identifies all key activities and training which must be delivered within three months of the employee commencing work with Procurement Services.
• Hold bi-annual off-site “away-days” for the entire Procurement Services team. These away days give us the opportunity to discuss the strategic direction of Procurement and how this fits with MPS strategy; review progress against targets; capture feedback; greatly improve team interaction and work in teams to remove elements of procurement process/bureaucracy that add no value.

Processes

13. The processes within Procurement Services continue to be changed and improved. For example:

• The Procurement Services intranet site is regularly updated to ensure that all relevant documents (e.g. T&C’s, SOP’s, reference documents) are centrally stored and version controlled;
• The number of catalogues has increased over the past year by approximately 270%; we now have nearly 70 catalogues in use. This financial year we have spent in excess of £19m and raised over 67,000 orders.

14. Over the past year, all standard agreements for the purchase of:

• Goods
• Services
• Consultancy, and
• Purchase Order T&C’s

have been updated (and stored on the intranet) to reflect changes in statute and to reflect customer and user feedback. Additionally, a standard agreement for ICT contracts has also been added.

15. The impact of the Freedom of Information Act (FOIA) was not as onerous as envisaged. However, the processes that were developed have been effective in dealing with the nine enquiries received to date.

16. The ability to capture and record accurate spend information is key to any professional procurement department. Throughout 2005, progress has been made and we now have data such as total number of MPS suppliers, spend with suppliers, spend by commodity and cost code and even limited data on the number of Small Medium Enterprises (SME’s) that supply the MPS. Further improvements are planned to identify areas of non-compliance to MPS contracts, implement minimum order values (e.g. £10), implement consolidated invoicing and continue to increase the number of catalogues.

Technology

17. The Enterprise Buyer Professional (EBP) software package, which allows internal customers to buy goods and services, such as stationery and office equipment, by “calling off” electronic catalogues, has been a great success. There are now 67 catalogues on the EBP system, which is a 270% increase since the last update. These catalogues cover areas such as personal protection equipment, dog equipment, horse equipment, ammunition, safety equipment, computer equipment, lanyards, first aid equipment, forensic equipment, etc.

18. The Procurement Reporting, Contract Management (CM) and Document Management (DM) systems have been implemented and are actively being used by the Procurement Services team. The system is called PROMIS (Procurement Management Information System) and produces information that is used in the quarterly Rolling Programme updates to the MPA. When fully implemented PROMIS will enable all:

• MPS contracts data to be stored electronically (e- technology);
• All files to be stored in a consistent and auditable format (e- technology);
• Assist with workload monitoring;
• Identify contracts and associated suppliers;
• Automate the MPA Rolling Programme report;
• Support the category management methodology by automatically providing tools /templates at the appropriate phase of procurement.

19. With regard to future developments we are devising an “e” technology approach that will enable the MPS to advise suppliers of OJEU notices and also supply/receive tenders and other documentation electronically. This will considerably reduce our reliance on paper documentation, reduce process times, provide a complete audit trail and will assist file storage and retrieval.

20. This technology will also provide the capability to run e-auctions, which we are currently exploring and a number of our customers are very keen to participate in. However, in the interim any e-auctions will utilise the Office of Government Commerce (OGC) arrangements.

Achievements

21. Whilst Procurement Services has been undergoing this ambitious and radical transformation programme there have been a number of notable successes delivered along the way. Some key achievements include:

• In 2005/2006 (YTD) achieved significant savings on all non OSP contracts;
• Increased use and expenditure via Government Purchasing cards by over 101% compared to 2004;
• Increased EBP catalogues from 25 to 67 (270% increase);
• On the Outsource Services Programme (OSP), successfully managed the programme to deliver major contracts for ICT, Transport, Pay & Pensions and Property Facilities Management Information Centre (FMIC). All four contracts have been signed with a total contract value in excess of £600m. In addition to programme management, Procurement Services provided professional resource to the workstreams to manage the commercial negotiations. The support to OSP clearly demonstrates the strategic and commercial value of Procurement Services and it a credit to the team that this contribution was made whilst encountering severe resource shortages;
• Category Management training completed and implemented effectively;
• Won a regional award at the prestigious National Training Awards in October 2005 for Category Management training and implementation. The entry evidenced how effective our training has been and how the MPS has progressed as an effective procurement organisation;
• Procurement Services Supplier Diversity strategy and subsequent implementation was highly praised by the MPA Equal Opportunities and Diversity Board (EODB);
• Improved relationships and support to internal customers e.g. Directorate of Information (DoI) implant, Forensics, Finance Resource Manager’s (FRM’s), closer links with Property colleagues to share good procurement practice and processes, operational initiatives e.g. Wembley Stadium, airport negotiations, etc;
• Commendations for two staff, from the Commissioner, for their work on the NTL contract and settlement agreements;
• Commendations/letters of thanks for several members of staff in recognition of the quality of work undertaken for a wide range of OCUs and internal customers;
• Presented key papers at external conferences regarding the MPS approach to Outsourcing. Presentation given at National Outsourcing Conference (October 2005);
• Procurement Services won “Most Improved Purchasing Operation” at the CIPS Supply Management awards in October 2004.

Procurement services into the future

22. Procurement Services’ aim is to be acknowledged as the best procurement function in the police forces of England and Wales, providing a customer focussed service and delivering best value to the MPS/MPA. The future vision is to be regarded as a best in class procurement organisation across both the public and private sector.

23. The importance and value that effective procurement brings to the delivery of operational policing has been well established:

• Improved service delivery;
• Greater spend leverage;
• Reduced risk;
• Visibility of spend, etc.

However, in order for Procurement Services to continue to make a significant contribution to the achievements of MPS/MPA strategic corporate objectives, it is vital that over the next 12 months we:

• Embed in the team a Supply Chain Management capability to ensure suppliers deliver on contractual promises; drive continuous improvement, particularly regarding supplier performance and compliance to central contracts; develop strong relationships with suppliers and ensure contracts deliver commercial best value over the life of the contract. The current training on the Category Management methodology is for the Sourcing element i.e. up to contract award. However, post contract award there are key service and cost benefits to be obtained from professional management of the supplier, during the whole life of the agreement;
• Attract, motivate and retain the best talent within our profession. This requires a commitment to consider a range of rewards/incentives and a professional career ladder, which enables staff that have developed particular skills in procurement to be appropriately recognised by technical promotion, as their competence increases. Professional procurement staff constitutes a high value resource, whose contribution to procurement efficiency and effectiveness is crucial for the success of the MPS/MPA’s procurement activity. Their value, as measured by their commercial contribution, increases with experience, while the Met’s ability to replace this resource decreases, as they become more proficient;
• Continue to support the re-skilling of the staff so they are fully competent procurement experts, operating a best in class methodology;
• Conduct an expenditure profile exercise in order to provide a comprehensive analysis of non-pay spend and identify new cost reduction opportunities to release substantial savings to more effectively support the Met Modernisation Programme;
• e-enable the improved processes to deliver e-tendering and e-auction capability. This will allow us to obtain the productivity benefits from quicker and more streamlined processes and exploit the potential from reverse auctions;
• Continue to drive improved customer perception of Procurement Services and the value they bring to the MPS. This will include involving the customers in the management of the supplier and providing feedback on performance reviews, audits, etc. It also includes having regular meetings with the customers and providing a route for them to provide feedback on the contracts put in place;
• Collaboration with other police forces, public sector organisations, the recently formed Centre for Procurement Excellence in the Police Service (PEPS), Home Office, Greater London Authority (GLA), Office of Government Commerce (OGC), etc.
• Ability to monitor and manage on all socially responsible aspects of procurement such as Diversity, Environment, Business Continuity, etc. Whilst we currently comply with the relevant legislation we are not yet in a position to be able to monitor and report on the total breakdown of our supply base into Small Medium Enterprises (SME), Black and Minority Ethnic (BME), London suppliers, etc.

24. Procurement Services fully recognises and acknowledges that for the transformation to be fully effective and sustainable then the continued support of senior MPS colleagues and the MPA is key.

Environmental aspects

25. Procurement Services works with the MPA and Greater London Authority Procurement Officers Network (GLAPON) to ensure that environmental aspects are considered in all procurement decisions. Best practice in Business in the Environment can be defined as:

• Purchasing to environmental specifications;
• Consideration of alternative products and services;
• Monitoring the commitment and performance of suppliers;
• Working in partnership with suppliers and contractors for environmental improvement and cost-effectiveness, and
• Undertaking environmental impact assessments.

26. Where appropriate, the MPS can influence purchasing decisions to ensure we fulfil the requirements set for public bodies to implement sustainable procurement. In 2004/05 the MPS achieved level B1 of the Mayor of London’s Green Procurement Code and aim is to progress to Level B2 in 2006. Signing up to level B1 required the MPS to submit data on the procurement of products containing materials made of from recycled wastes. In 2004/05 the MPS procured £1,131,244 of recycled products including animal bedding, paper and washroom products. This data was included in London Remade’s Annual Purchase Report and associated environmental savings have been calculated.

C. Race and equality impact

1. The MPA has adopted and published an equal opportunity statement which states the Authority’s values to treat everyone fairly, be open and honest, to work in partnership and change to improve. The statement specifies the Authority’s commitment that it will not seek to discriminate on the grounds of race, gender, disability, sexual orientation, religion or belief. In addition to its own objectives, the Authority supports the objectives set out in Metropolitan Police Service’s Diversity Strategy and the MPS’ work towards these. The Authority also has to comply with legislative duties, national and European, to act in a non-discriminatory way, and to promote equal opportunities and good community relations.

2. Procurement Services, in supporting the MPA strategy, aims to ensure its contract strategies, regulations, policy statements and processes:

• Promote open and fair competition;
• Ensure service delivery is accessible and responsive to the diversity of people living and working in or visiting London;
• Encourages the provision of work, service and goods by businesses that support equal opportunity policies and help ensure the Authority complies with its statutory duties; and
• Enable London to become the safest capital city, through taking account of the social, economic and environmental impacts of tenders, where relevant.

3. Significant progress has been made since the last update, to the extent that the Procurement Services approach and implementation of its Diversity Strategy is considered as one of the foremost examples of current best practice within the policing sector.

4. An Equal Opportunities Monitoring Form (EOMF) has been devised. The form requests information on gender, ethnicity, disability and diversity of their organisation.

5. A draft database of diverse suppliers has been compiled which will assist with monitoring how much business the MPS has with SME’s and our aim is to use this database as a source of information to advise these suppliers of any upcoming contracts and give them contact details for further information. All the information received will be updated on SAP.

6. Working in collaboration with the Race and Diversity Unit at the MPA, we advertised in both the African Caribbean Business Directory 2005 and the Voice Newspaper, which is Britain’s best selling ethnic newspaper, to actively promote the MPS to diverse suppliers. Unfortunately, the response was disappointing so we are evaluating this approach.

7. We have also been networking with other public sector bodies i.e. Brent Council, London Borough of Haringey, London Borough of Barnet and Westminster Council in promoting best practice on diversity, looking at ways of encouraging SME’s to work with us and attending events such as Westminster Minority Business council and “Meet the Buyer”.

8. Going forward we have asked the MPA (via EODB) to support us in lobbying the GLA (through their Diversity Works for London programme) to set up a database of diverse suppliers, so we can actively market the MPS to them and routinely invite them to tender for our contracts.

D. Financial implications

There are no separate financial issues arising from this report over and above the normal budget process.

E. Background papers

None provided

F. Contact details

Report author: Anthony Doyle, Director of Procurement Services

For more information contact:

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

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