PROSPA Programme

Report: 09
Date: 17 July 2008
By: Director of Resources on behalf of the Commissioner

Summary

This report provides information on the PROSPA programme in Procurement Services and summarises the programme contents and achievements at June 2008.

A. Recommendations

Members are invited to

1. Note the work of Procurement Services in the success of PROSPA through the achievement of its £35m cost reduction target ahead of schedule.

2. Note that Procurement Services build on the work of the PROSPA programme through the development of Strategic Procurement Plans with Business Groups.

B. Supporting information

1. As part of the Value for Money strand of the Met Modernisation Programme, Procurement was tasked in early 2006/07 with contributing to the goal of redirecting money to help fund delivery of the widening mission. It had been identified that there was a need to introduce step change in how procurement was conducted in order to achieve those goals. Project PROSPA (Procurement Opportunity Spend Profiling Analysis) was the vehicle through which Procurement delivered the required transformation. Following a detailed analysis of non-pay spend, Procurement was targeted with delivery of significant cost reductions by March 2009. The project was focused on a number of key areas of change:

• The implementation of Category Management in order to improve service and deliver savings through;
  • Improved sourcing;
  • Consolidation of suppliers;
  • Improved compliance to contracts;
  • Reduced consumption;
  • Better management of suppliers.
  • Creation of a robust benefits process unifying procurement and finance activities
  • Implementing a knowledge transfer programme of activity from the support consultants to ensure sustainability within Procurement Services

2. It was anticipated that a significant level of savings / cost reductions would be delivered and a target over the three years 2006/07 to 2008/09 was set at £35m.

3. PROSPA promoted a new strategic sourcing model to the MPS known as Category Management – a proven ‘best practice’ procurement methodology, which has been widely adopted by market leading organisations in both public and private sector. Category Management is a structured approach to the procurement of goods and services where categories of spend are grouped in accordance with their supply market characteristics. It can be applied to all categories of expenditure. It is a way of working with customers, involving challenge and team decision making to source collaboratively and manage suppliers.

4. External support for the programme was provided by Capgemini for ten months and their deliverables were as follows:

• Identify and implement clear category strategies for the supply of key goods and services
• Demonstrate the requirement to provide continuously improving services to front line community policing
• Demonstrate value for money improvements without reducing operational effectiveness
• Develop core competencies in Procurement to ensure a capability to implement and sustain Category Management for future procurement activity
• A schedule of category activity that would enable delivery of targeted savings by March 2009

Benefits Approach

5. A key objective of the PROSPA programme was the design and implementation of a robust approach to benefits recording and tracking. A simple benefits tracking process was created that is sustainable across Procurement and Finance and can record cashable, non-cashable and capital savings. The benefits process is described below:

• Captured. This step is driven by Procurement Services and highlights savings considered “locked-in” once contracts have been put in place. Once savings have been captured, appropriate evidence is provided to Finance;
• Validated. This step is driven by Finance whereby appropriate captured savings / cost reductions evidence and calculations are scrutinised and confirmed to ensure integrity throughout the savings cycle
• Capital. A significant number of savings opportunities were created from the procurement activity in Project areas, particularly working with the Directorate of Information. These savings have been captured and validated by Finance and recorded separately.

6. The key tools in the benefits approach are the Benefits Declaration Form (BDF) and the Benefits Tracking Log (BTL). Every savings opportunity is documented on a BDF and provides ownership, responsibility and traceability of savings using standard Office of Government Commerce savings definitions. Once BDFs have been completed they are recorded in the BTL, which is used to summarise savings for reporting purposes and provide a clear audit trail of all recorded savings.

Achievements

7. The achievements of the programme include the following:

• Category management teams, working pan-MPS, to identify ways of reducing spend through coherent and best practice procurement.
• Procurement specialists trained in a best practice procurement methodology.
• Setting up of a Supply Chain Management structure.
• Leveraging buying capability across the MPS, with other Police Forces and Government Sector bodies, particularly the GLA Functional Bodies.
• Implementation of savings and benefits measurement approach with support from Finance colleagues
• Sustainability through knowledge transfer in specialist tools and techniques including spend analysis, market analysis, customer engagement, business requirements, and category strategy development.
• Category Management is now “Business as Usual” in the Procurement team.
• Exceeded the £35m target 9 months ahead of schedule.
• Identification of future savings opportunities.

8. Examples of some of the key areas in which savings have been achieved through the programme are detailed below:

• Renegotiation of the Vehicle Recovery contracts with Transport Services achieved savings of £1.6m.
• Working with the DPA on savings opportunities in Creative Advertising, Media Planning, Monitoring & Research achieved savings of £0.5m.
• Move from hire to lease vehicles working with Transport Services has achieved actual savings of £4.5m to date.
• A comprehensive category management approach taken with Forensics spend to identify multiple savings opportunities. Savings / cost reductions of over £10m achieved through price reductions, increasing competition and capacity in the market and demand management reductions
• Implementation of category management approach to Post and courier spend – addressing £2m of spend and achieving 15% reduction equating to £250k a year
• Over £1m of capital savings was recorded through working with the IPG team in the Directorate of Information. The savings were achieved through a mini-competition carried out under the Office of Government Commerce G-Cat framework to procure Hardware equipment
• Working closely with the Air Support unit delivered additional capital benefits of over £0.6m as part of the sale of helicopters through extra income from tools, spare parts and maintenance charges.
• Working collaboratively with Pan Government and wider Police Force opportunities in the following areas to achieve significant savings:
  • Participated in the largest ever collaborative e-auction event undertaken with MoD, OGC, Home Office & DWP for stationery, IT consumables, magnetic media and paper. This resulted in greater savings (£3.3m over the life of the contracts and improved product range and quality) than the MPS could have achieved alone or with other forces
  • Pan Police Force. Use of a Devon & Cornwall contract for couriers resulting in a 20% price reduction and the use of a West Yorkshire contract for Body Armour
  • GLA family. Set-up a collaborative procurement forum to review professional services, marketing incentives, temporary labour and recruitment.

Abbreviations

BDF

Benefits Declaration Form

BTL

Benefits Tracking Log

DPA

Directorate of Public Affairs

DRM

Development Resources Management

DWP

Department of Work and Pensions

GLA

Greater London Authority

MoD

Ministry of Defence

OGC

Office of Government Commerce

PROSPA

Procurement Opportunity Spend Profiling Analysis

SPP

Strategic Programme Plans

C. Race and equality impact

There are no specific race, equality or diversity implications arising from this report.

D. Financial implications

1. The programme has achieved its original target of £35m savings / cost reductions over the three years of the programme. However this does not equate to £35m of budget reductions due to the following factors:

• Some savings are reducing overspends against approved budgets, the impact is therefore on potential growth levels rather than reductions on base budgets
• Cash savings over three years can only be counted as a budget saving in the first year of delivery, i.e. an annual saving of £5m is counted as £15m against the PROSPA target but equates to only a £5m budget reduction
• Some savings are cross-cutting, e.g. reducing general supplier category prices. Whilst for scoring against PROSPA the saving from contract price reductions are immediate, there can be a time lag in terms of the impact on Business Groups because of past decisions on stock levels
• Some savings are seen as double counting as Business Groups expect any savings identified to be used to meet general savings targets included in their budgets
• Some savings have been achieved on budgets, which are externally funded and therefore have facilitated growth in other areas of the budget
• Some savings have been achieved against capital rather than revenue expenditure categories.

The Category Management methodology is now “business as usual” within Procurement Services and the PROSPA programme is complete, having achieved its objectives and met its savings targets ahead of schedule.

In December 2007, Management Board endorsed the development of Strategic Procurement Plans (SPP) with the Business Groups, as the best way of progressing with Project PROSPA, given the range of factors contributing to the inability to translate validated savings into equivalent budget savings. In summary, it was agreed that Procurement Services should not own a corporate savings budget but would support and facilitate the delivery of savings / cost reductions by Business Groups. The aim of these SPPs is to agree a prioritised set of requirements between the Business Groups and Procurement Services, which require professional procurement support and will enable Procurement to assist the Business Groups deliver on future efficiency savings targets. This activity will also be one of the seven key workstrands in the Developing Resource Management (DRM) programme. At present SPP’s are expected to make significant contributions to the DRM programme target of annual budget reductions by Business Group of £15m in 2009/10 rising to £20m in 2010/11 and future years.

2. Information on the types of savings / cost reductions achieved through the PROSPA programme are set out in B8. An analysis of the whole programme is set out below:
 

Table 1: PROSPA programme analysis

Budgets have been reduced to reflect permanent cost reductions / savings achieved through the PROSPA programme.

E. Background papers

• none

F. LEGAL IMPLICATIONS

There are no specific legal implications arising from this report

G. Contact details

Report author(s): Anthony Doyle, Director of Procurement Services, MPS

For more information contact:

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

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