National e-Procurement Project Support for Authorities

E-PROCUREMENT REVIEW

Oxford City Council

0.4 5 May 2005
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Oxford City Council NePP e-procurement review

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Revision History
Version number
0.1 0.2 0.3 0.4

Revision date
27/04/2005 27/04/2005 27/04/2005 5/5/2005

By whom
R Dallas R Dallas R Dallas C Macleod

Summary of changes
First draft of findings and recommendations Comments from Calum Macleod added Changes following comments from OCC Further additions and refinements

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Distribution
NePP Project Manager ..............................................................................................Copy 1 (File) Oxford City Council ............................................................................................................. Copy 2

Contents
Background 4

1.1 1.2 1.3 1.4 1.5

Background to NePP involvement......................................................... 4 Local context ......................................................................................... 4 Procurement context ............................................................................. 5

6

Summary Assessment

Main findings and conclusions .............................................................. 6 Recommendations ................................................................................ 7

8 11 14 15 16

2. Review findings in detail 3. Recommended outcomes and actions APPENDIX A List of participants APPENDIX B Sources of further guidance and support APPENDIX C Sample Vision

Supporting documentation (provided by the consultant)

Document title Questionnaire Scorecard Date of issue March 2005 April 2005 Approved by Calum Macleod Calum Macleod

Supporting documentation (provided by the Authority)

Document title Various Analysis Documents Supplier Newsletter Oxford City Procurement Strategy Date of issue XXXX XXXX Jaunary 2005 Author OCC OCC OCC

Other documentation used

Document title Comprehensive Performance Assessment Date of issue June 2004 Author Audit Commission

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Background
1.1 Background to NePP involvement

The National e-Procurement Project (NePP) has engaged consultants to offer support to a number of councils with e-procurement. This work is funded by the ODPM. The consultants have been made available to undertake a brief on-site review and report back to the Council on its progress with e-procurement, identifying next steps and further support likely to be required. The report is shared with the NePP for national data-gathering purposes. The findings are confidential, and will not be shared with the ODPM other than at non-attributed summary level. The Council has entered into the arrangement voluntarily. The willingness to participate and commitment by the authority to this review is gratefully acknowledged. The review participants are listed in Appendix A.

1.2

Local context1

The city of Oxford is centrally located in Oxfordshire and is the largest urban settlement in the county. Though essentially urban in character, significant areas of the city are of high landscape or heritage value. Green belt covers 27 per cent of the land area, 20 per cent is floodplain, and 17 per cent of the city has conservation area status. It has around 1,500 listed buildings. Oxford has a comprehensive park and ride system and significant numbers of cyclists but traffic congestion is a major issue for the city. Oxford ranks in the middle of English councils in terms of indices of deprivation 176th out of 354 councils. One of its 24 wards falls within the worst 10 per cent in England. It has a higher proportion of single person households than the average for England and Wales, but a lower proportion of family households, and a higher proportion of people living in the rented sector. Overall, the city is prosperous but there are pockets of deprivation. Unemployment is at 1.9 per cent at June 2003 below the national average but parts of the south and east of the city have levels around 4 per cent. With its two universities, it is not surprising that, overall, the city has a well-qualified population, but this masks the fact that it has the lowest rate of successful university applicants in the county. Tourism is highly significant for the local economy the city attracts some 7.6 million visits annually. The district has a population of 134,248 (2001 Census). The proportion of young people (0-15 years), is below the county, regional and national averages. The district has a lower proportion of its population over pension age than the regional and national averages, and also lower than the other districts in the county. It does however, have a larger proportion between 16 and pensionable age almost 70 per cent compared with the regional and national averages of around 61.5 per cent. The council currently has a Labour administration The Councils recent Comprehensive Performance Assessment (June 2004) evaluated the authority as weak. The area is moving towards working together more collaboratively with discussions around both the potential to share office space between the City and the County Council as well as the possibility of shared services throughout the region. The formal group set up to facilitate these discussions is the Strategic Procurement Partnership for Oxford.

Source: June 2004 CPA Report Confidential

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1.3

Procurement context

Oxford City Council (OCC) has made significant progress in improving Procurement Practice over the past four years. This has been achieved through prioritisation of Procurement across the council and significant investment in effort and resources. The current status is outlined in detail later in the report. The health check2 carried out by the IDeA in June 2004 raised a number of issues to consider including: forming a new procurement board mapping procurement processes, in particular the process to pay procedure updating contract procedure rules to take into account whole life costs creating a centre of expertise for procurement These recommendations have been addressed and OCC now have a clear procurement governance structure in place and have recently reviewed the contract procedure rules. The BuyingTeam undertook a Spend analysis for all of the Local Authorities in the Oxfordshire area in Q1 2004. This included an analysis of the major suppliers and categories of spend. The key conclusions from this study were used to identify areas for potential collaboration for strategic sourcing projects. The Council had a non-pay expenditure budget of 107m in 2004. Expenditure is largely devolved to business units with a certain amount of co-ordination and advisory support from an embryonic central Procurement team consisting of Jane Lubbock (Facilities Business Manager), Peter McQuitty (Corporate Projects Manager), and Jimmy Fegan (Admin and Purchasing Manager). To improve the current procurement environment the Council: Is creating a business case for the implementation of the latest P2P module of Agresso. Is actively involved in the Strategic Procurement Partnership for Oxford (SPPO) Has three members actively involved in driving procurement initiatives Has piloted a collaborative eAuction Is actively recruiting for a full time Procurement Officer

The council has also implemented a range of Performance Indicators in Procurement that include: Spend, number of invoices and average invoice value per year Expenditure/ Spend Analysis Supplier metrics Invoice and other Purchasing metrics

The Council has entered into a collaborative procurement group with the other councils in the Oxfordshire area. This group meets regularly and looks to procure collaboratively in common areas. Whilst the SE Regional Centre of Excellence is communicating regularly and growing in role, there is no significant collaboration activity across the whole of the South-East to-date. Overall, OCC have made considerable improvements to Procurement Practice over the past few years and has strong foundations for making further progress.

Source: OCC Procurement Strategy Confidential

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Summary Assessment
1.4 Main findings and conclusions

OCC have taken a pragmatic approach to the implementation of various Procurement initiatives and has had some clear success in delivering Procurement improvement. The Procurement team at OCC are supported by an experienced and knowledgeable Strategic Directors Board and three enthusiastic and involved Members. Through our interviews at the Council, it is apparent that there continues to be enthusiasm to change and embrace both good procurement practice and eProcurement initiatives. Furthermore, most of the interviewees had a broad knowledge of eProcurement and the benefits that it can bring. The procurement team are have a structured and focussed approach to reporting cashable and non-cashable savings for demonstrating Gershon efficiencies. Agresso is used as the main financial management system (FMS), with most purchasing going through this system. SERVITOR is used in stores and has a direct feed into the FMS. The latest P2P module for Agresso has been bought but is not yet implemented. The implementation plan is currently being evaluated and a business case is being written to support implementation, as the predicted costs are comparatively high. The new Agresso module will enable OCC to raise orders and receive invoices from suppliers electronically and have the functionality to fully e-enable the requisition to pay process. The council has collaborated on a number of areas of expenditure, and are in talks to share office space with the County Council as they both have main offices located within the City Centre. The Council is also a member of the Strategic Procurement Partnership for Oxfordshire whose purpose is: to facilitate the development of strategic and collaborative procurement for the benefit of the citizens in Oxfordshire. The initial members of the SPPO are: Cherwell District Council Oxford City Council Oxfordshire County Council South Oxfordshire District Council Vale of White Horse District Council West Oxfordshire District Council. The SPPO is also willing to engage with other Public Sector Procurement organisations locally. The SPPO has already undertaken a joint spend analysis, a stationery eAuction and developed an action plan which enables the members of SPPO to meet certain elements of the National Procurement strategy through collaboration. The spend analysis commissioned by the SPPO was undertaken by The Buying Team. The spend analysis provides useful data across all six councils. The Council processed 30,147 invoices in 2004/5 with over 60% of those invoices having a value of <250. Purchase cards are being trialled to attempt to reduce this figure and produce process savings. BACS is used predominantly to pay suppliers (c.85%). There does not currently appear to be any major issues that are hampering the implementation of eProcurement. Oxford City Council has made progress in both procurement and eprocurement and is delivering against the National Procurement Strategy. The delivery of significant cost benefits through e-procurement remains a challenge, particularly as efficiency gains are now a strategic priority.

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Oxford City Council NePP e-procurement review

The main barriers to achieving change were: Lack of Resources A perception that change management is difficult at OCC The ability of suppliers to take on e-procurement.

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1.5

Recommendations

The Council should continue to build on the existing procurement improvement activity through: Reviewing the action plan, taking into account the suggestions made in the recommendations. Investigate the potential for strategic sourcing and eAuctions within Stores in light of the enhanced refurbishment programme. Further supply chain opportunities may also be available here. Build on the collaborative agenda within the SPPO Investigate the opportunity for further strategic sourcing. This will deliver good levels of saving and contribute to the Gershon targets. Review the Change management techniques used alongside IT improvements. Implement further tactical Procurement-to-Pay improvements, building on the current good practice. Communicate the success achieved in Procurement across the council.

Section 4 provides further details of our recommendations.

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2. Review findings in detail

These findings are based on meetings with the limited number of interviewees seen in the time available (see Appendix A).

Area explored Procurement and eprocurement Strategy Governance arrangements

Findings / Resolution
The Council has a procurement strategy based around the National Procurement strategy targets which includes an action plan and a section on eProcurement.

OCC have a well defined governance structure detailed below: Three Members having responsibility to drive forward procurement within the council. Strategic Management Team that meets regularly which includes director level representation. Corporate Management Team that meets regularly which includes officer level representation. Collaboration OCC are part of the SPPO which has collaboratively sourced stationery in the past. It is currently looking at a range of collaborative possibilities. The South East Regional Centre of Excellence is currently data gathering and is expected to provide benefit through better co-ordination of Procurement improvement opportunities and funding of specific efficiency initiatives. OCC have also attended a number of NePP events. Sourcing & e-Sourcing OCC have a form of centralised procurement in the Facilities function. OCC are currently advertising for a full time procurement person to focus on procurement initiatives. The current role of procurement has been to liaise with the SPPO and Regional Centre and to provide benefits through such activities as reducing invoices and implementing and monitoring council-wide contracts. eAuctions have been trialled with Stationery (collaboratively with the SPPO) and appears to have generated significant benefits. It was also understood that eAuctions were not always appropriate and their use would need to handled in specific circumstances. No further trials are planned at this stage. Single contracts have been sourced on various categories including Stationery, Agency Staff (Live tender at time of writing), Mobile Phones and computer consumables. OCC have also externalised their print requirements and have some joint contracts with the County Council. Ordering & e-Ordering The new Agresso module which has been purchased but not yet implemented will give the full e-enabled functionality for the requisition to pay process (dependent upon supplier enablement). Orders are e-mailed to suppliers within the Stationery and Agency Staff contracts. OCC are not a member of any marketplace and are not yet persuaded of the costs vs the benefits. The next step in the development of the e-procurement system is expected to be the implementation of the Agresso module which is currently at business case stage.

Current procurement and e-procurement practice

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Oxford City Council NePP e-procurement review Area explored Findings / Resolution

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Payment & e-Payments BACS is used with the majority of trade creditors (c85%) and this figure is expected to rise if suppliers are persuaded to move to this method of payment. The remainder of purchases are paid for by cheque or petty cash. There are 12 corporate purchasing cards (supplied by the Co-Op and utilising Deecal) currently being piloted throughout the council. These are being trialled to reduce the number of low value high transactional volume items. Currently about 1.6m of expenditure has an invoice value of <250 (over 19,000 invoices) e-invoicing is a function within the new module. Currently no system exists to scan invoices and produce an electronic workflow system, however this will be investigated once the new module is embedded. Contracts management Some contracts are council wide and there was evidence that they were actively tendered. A contract register has been recently added to the intranet and needs a little more work before it can be published on the website. Supplier enablement A spend analysis was carried out by The Buying Team last year which highlighted areas for collaborative procurement with SPPO. A further OCC initiative has been an information survey of local SMEs who supply OCC. This has provided some useful data including email addresses, and will help to understand how to support business in working with OCC electronically. Management information Apart from the spend analysis, regular data is available on invoice levels within the council (which has driven the desire to pilot Pcards), and there is a very clear understanding of how the reduction of invoices can derive process savings. Regular MI is gained from the Stationery and Agency Staff providers.

Robustness of e-procurement plans Resources available to procurement Regional collaboration, attitudes and opportunities

OCC have a clear action plan held within their Procurement strategy which details out the actions needed to achieve the National Procurement Strategy targets. With the introduction of the new procurement officer there will be increased resource available to OCC to deliver procurement improvement.

The SPPO appears to be working well for OCC with regular meetings taking place and discussions around shared services taking place. This group was formed to work collaboratively on tenders and potential shared services. There was a significant amount of regional collaboration with the Strategic Procurement Partnership for Oxfordshire. Many areas were either being actioned or being discussed including: i. Stationery eAuction (completed) ii. iii. iv. Public Notices Agency Staff Bailiff Contract (in conjunction with West Oxfordshire)

The Regional Centres of Excellence are not currently used as an effective ways of collaborating, and are adding little benefit to OCC at this time. SECE has recently sent out a number of questionnaires to all 74 southeast councils, and the results of these findings are awaited with interest. OCC are in discussions with the County Council to share office space as their main offices are both centred within the city centre.
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Oxford City Council NePP e-procurement review Area explored Barriers Findings / Resolution

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The councils own assessment is that the main barriers to e-procurement progress at Oxford City Council are: 1) Lack of Resources - It was felt that a lack of financial resource as well as staff during important changes in the council affect the success of change efforts. If this could be improved this would enhance buy in to the new processes/ technology from the start and improve the quality of implementation. - More resources would also improve training on the new systems which was felt to be another issue as employees were unaware of the functionalities of certain systems. - Lack of relevant knowledge around procurement council wide 2) A perception amongst interviewees that OCC had a conservative attitude towards change - In discussion, it was felt that this attitude was perhaps a hangover from years gone by, as all respondents interviewed were ready and willing to embrace change - It was also felt that there were reservations around the impact that change would have on peoples job roles and the possibility that the technology would replace the value they added. 3) Supplier Enablement - It was felt that suppliers, especially the SMEs within the building trade would frustrate certain implementations regarding eProcurement. Our assessment is that other barriers are: 1. Capacity Within the Council there is a small team of people who are managing Council wide procurement who also have other responsibilities. It is understood the new appointment will help to reduce this barrier. 2. Over-reliance on the Procurement team. The current Procurement team is skilled and motivated and beginning to deliver a steady stream of benefits to OCC. However there is a risk that, should the individuals move on, the pace of improvement will lose momentum. 3. PC availability Not everybody has access to a PC within the council.

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3. Recommended outcomes and actions

ID 1 Recommendation 1 Review the OCC Action Plan in the Procurement Strategy

1.1 Consider sub-dividing the plan and allocating tasks into the following areas: Project set-up; Programme Management; Communications; Preparing the Procurement Organisation; Implementing e-enabled Procure-to-pay; Implementing Commitment accounting; E-invoicing; Market-places; E-tendering; Stores/ Stock review; Supplier Enablement; Strategic Sourcing; and, Preparing the wider Buying Community. 1.2 Consider specifying the resource required for each action and prioritising the actions in line with resource available. 1.3 Look at getting guidance and best practice from other areas for actions that have been undertaken by other councils already. 1.4 Review opportunities to evaluate the benefits of each action as they occur many of the benefits will count as Efficiency Gains. Efficiency potential
Cashable savings Non-Cashable savings Effort High Medium X X X Low

ID 2

Recommendation 2 Collaboration / Regional Centres / Use of OGC contracts

2.1 Further investigate the collaborative spend analysis to identify largest volume suppliers throughout the region 2.1 Increased use of collaboration to leverage spend through strategic sourcing exercises fully utilise the SPPO Procurement Group. 2.2 Continue to investigate use of OGC contracts 2.3 Continue to build on existing links to South East Regional Centre of Excellence to gain further procurement leverage. 2.4 Investigate procurement of Marketplace and an eTendering solution collaboratively Efficiency potential
Cashable savings Non-cashable savings Effort High Medium X X X Low

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Oxford City Council NePP e-procurement review ID 3 Recommendation 3

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Review the projected spend within Stores for the next two years including the major refurbishing programme 3.1 As there will be increased expenditure within this area which already has a budget of over 4m there is scope to develop a strategic sourcing approach and trial eAuctions on certain goods e.g. Soft Furnishings 3.2 Measure the impact the Pcard pilot has on Stores and investigate the potential to roll out further Pcards to reduce the process costs related to invoice processing. A useful contact is Lynda Glover London Borough of Havering 01708 432668 with reference to using SERVITOR and PCards. Efficiency potential
Cashable savings Non-cashable savings Effort X High X X Medium Low

ID 4

Recommendation 4 Strategic Supplier Development

4.1 Investigate opportunity to use technology to improve business processes between OCC and major suppliers. This could include shared document repositories, version control and overall streamlining of processes. This is especially useful for significant, complex relationships. 4.2 Investigate opportunity to put the contracts register (or a simplified variant) onto the OCC internet site, for access by suppliers. Efficiency potential
Cashable savings Non-cashable savings Effort High Medium X X X Low

ID 5

Recommendation 5 Improve Change Management when introducing new Technology

5.1 This should include one-to-one training and sign-off on new processes 5.2 Clearly communicate the benefits and reasons behind the introduction of the technology at an appropriate early stage. There should also be a forum to voice opinions and gain views on the proposed changes. Efficiency potential
Cashable savings Non-cashable savings Effort High Medium Low X X X

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Oxford City Council NePP e-procurement review ID 6 Recommendation 6

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Communicate the Success that has been had in Procurement across the council 6.1 Create a simplified document for general circulation defining the headline themes from the Procurement Strategy. Use this document to generate both further interest in the current procurement reforms, and discussion and agreement on proposed future procurement initiatives. 6.2 Ensure effective communication of the Stationery and Agency Staff savings. 6.3 Effective communication when any new change effort is embarked upon. General resistance to change (its always been done like that) was cited by most respondents as a barrier to achieving effective change management. Effective communication of the benefits and the reasons will help reduce this barrier. 6.4 Look at increasing skills across the council. Efficiency potential
Cashable savings Non-cashable savings Effort High Medium Low X X X

ID 7

Recommendation 7 Other Tactical Purchase-to-Pay Improvements

7.1 Investigate the use of an eMarketplace within the council, possibly procuring collaboratively 7.2 Progress the business case for implementing the Agresso module with a view to e-enable the requisition to pay process. 7.3 Continue to develop P-cards for areas where their flexibility is of benefit 7.4 Work on the contracts database to enable publication on the website Efficiency potential
Cashable savings Non-cashable savings Effort X X High Medium Low X

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APPENDIX A
Oxford City Council

List of participants
Caroline Bull Jane Lubbock Peter McQuitty Mark Luntley David Walker Jimmy Fegan Sue Green Alison Collier Andy Brook Nicky Atkin Julie Thomlinson Calum Macleod, Roy Dallas, Chief Executive Facilities Business Manager Corporate Projects Manager Director of Finance Stores Manager Admin and Purchasing Manager Web & Admin Support Creditors Manager Technical Accountant Acting Systems and Project Manager Legal Officer

NePP

e-Procurement Consultant e-Procurement Consultant

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APPENDIX B
National Procurement Strategy

Sources of further guidance and support

The National Procurement Strategy for Local Government sets out the national strategy and targets for all Local Authority procurement, including some guidance on the use of e-procurement: http://www.odpm.gov.uk/stellent/groups/odpm_localgov/ documents/page/odpm_locgov_029231.hcsp

e-Government Priority Outcomes

The ODPMs Priority Outcomes paper defines the expectations and timetable for all the e-Government outcomes, including the e-procurement outcomes: http://www.localegov.gov.uk/Nimoi/sites/ODMP/resources/ Priority%20Outcomes%20for%202005.pdf A supplementary guidance paper has been produced by the IDeA. http://www.idea.gov.uk/transformation/Priority_outcomes_notes.rtf Further details on e-procurement outcomes can be found here: http://www.ticon.biz/assets/targets4.pdf

NePP

The National e-Procurement Project (NePP) has published comprehensive guidance on e-procurement. This is disseminated via the IDeA Knowledge web-site www.idea-knowledge.gov.uk/eprocurement The NEPP will also be running regional workshops in early 2005, the content of which will be informed by e-procurement reviews such as this one. Details can be found on the NePP website: www.nepp.org.uk

IDeA

The local government Improvement and Development Agency (IDeA) has set up two ODPM-funded units to support councils with e-government generally (including e-procurement) through to March 2006. The e-government Strategic Support Unit (SSU) is available to support all councils with advice, guidance and best practice examples. The unit may be contacted via e-gov@idea.gov.uk or by telephoning: 020 7296 6194 The e-government Implementation Support Unit (ISU) provides on-site egovernment support to a small number of councils nominated for assistance by the ODPM. If your council is one of these, then the ISU support can assist in taking forward the e-procurement actions identified in this review. http://www.idea.gov.uk/transformation/?id=newunits

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APPENDIX C

Sample Vision

The vision outlined below is a sample vision (taken from another council) of the possible outcomes that could be achieved as a result of Procurement Improvement. It is provided as a suggestion for summarising the direction of Procurement improvement, which will help enrol OCC staff into the overall Procurement Strategy. It is not suggested that this could be the vision for OCC.

Oxford City Council will:

Have reduced its procurement cost base by a minimum of Xm pa Receive 80% of all invoices (by volume) electronically Order 80% of all items (by value) electronically Use commitment accounting for 100% of transactions > 250 Have clear responsibilities for all elements of the Procurement process Be proactively monitoring the procurement practice and the supplier base Have an innovative, agreed approach to local contractors, which includes bringing them into the e-agenda Reduction in effort required to manage procurement by XX 000 person-hours Improved procurement skills throughout the organisation Reduced its supplier base to a core of X 000 suppliers Have 80% of its spend covered by formal contracts

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