PAPER B

Purpose : for Decision

REPORT TO THE EXECUTIVE

Date : 5 MAY 2004

Title : BEST VALUE REVIEW OF PROCUREMENT – IMPROVEMENT PLAN

REPORT OF THE PORTFOLIO HOLDER FOR RESOURCES

IMPLEMENTATION DATE : 17 MAY 2004

SUMMARY/PURPOSE

1. To approve the Action Plan developed as a result of the Best Value Review.

BACKGROUND

2. This report and the Action Plan attached as an Appendix, represents the conclusion of the Best Value Review of Procurement within the Council. Procurement and the need for local authorities to improve the way they do it have become hot topics over recent years - driven originally by the report of the Local Government Procurement Taskforce, which was chaired by Sir Ian Byatt and published in June 2001. This report made 39 recommendations in all to improve the way local authorities procure the goods and services they need. In parallel to that, other reports - most notably the Egan and Latham reports - were making similar recommendations to improve the way in which the Construction industry operated, and many of their recommendations applied to the way local authorities sourced their buildings.

3. In response to those reports, the Government has developed and launched its National Procurement Strategy for Local Government. This sets out the actions and initiatives which the Government believes local authorities should take to improve their performance in procurement. According to the Government, local authorities spend £40 billion ‘externally’ and it clearly believes that improving the way that money is spent will provide significant improvements in public services.

4. Locally this Council has responded by :

§ Developing and adopting its own Procurement Strategy

§ Commissioning a Best Value Review of Procurement (including as part of that review a ‘Fitness Check’ undertaken by the IDeA)

§ Developing and implementing some initiatives (for example an e-procurement project and partnering pilots) which contribute to an overall improvement in the way the Council procures

This report and the attached Action Plan sets out what further actions need to be taken for this Council to match the best practice of any local authority and business.

THE REVIEW’S FINDINGS

5. Although some departments of the Council are only small purchasers of external goods and services, all departments procure to some extent. It is therefore a wide ranging issue. It is estimated that the Council spends over £85 million per annum from its revenue account each and every year and a further £16 million is spent on capital investment. This means that:

§ The way in which the Council spends these sums will have a significant impact on the performance of the Council overall

§ The Council is by far the largest procurer on the Island and its spending has a profound effect on the Island’s economy

6. One of the key outcomes of the review is that whilst generally performance is satisfactory, many of the Council’s procedures and practices are outdated and in need of revision. In particular, rules which govern procurement (like Contract Standing Orders) and the guidance that is available to managers and staff need to be updated to reflect the very latest (and best) practice. On a similar theme, the Council’s processes and methods for procuring (sometimes described as the ‘req to cheque’ process) need to be completely overhauled in order to make them more efficient and effective. As a result of these findings, the Action plan includes recommendations to review and revise the Council’s procurement rules and to issue new and better guidance to staff and managers. It also endorses the Council’s proposal to implement an e-procurement solution, making many of the processes involved electronic, bringing efficiency savings and other benefits.

7. A second key finding of the review is that the Council needs to improve the governance of its procurement activity. Procurements need to be managed in a proportionate way according to their size, strategic significance and risk. Accordingly, the review recommends that after compiling better registers of existing and future procurements, each one is assessed to establish where it fits on a spectrum ranging from ‘routine’ to ‘strategic’. From that analysis, the Council will then be in a position to decide the degree of scrutiny which each procurement should receive, with the most strategic receiving the greatest level. Procurements will therefore be subject to ‘Gateway’ reviews which will, at specific points in the procurement process, rigorously examine its viability before either allowing it to progress or recommend that more work is needed before it can proceed. The aim of this approach is to improve the quality of the procurement process and to avoid the potential pitfalls of a flawed process. To assist in this, the review recommends the compilation of a Procurement Register – a comprehensive database of all the Council’s existing contracts and future procurement. The Action Plan also recommends that the role of elected members in the procurement process, both Executive and Scrutiny, is reviewed.

8. A third key outcome of the review is the acknowledgement that the Council’s position as a major spender in the local economy means that it can, through its procurement activity, have a profound influence on the key objectives of the Council. This includes, for example, encouraging the growth and viability of SMEs, influencing suppliers’ and contractors’ policies on diversity, equality and safety, their practice in respect of developing and training staff and make a contribution to sustainability and environmental issues. Accordingly, the Action Plan recommends that all these issues are considered when the Council is developing its procurement policies and strategies. This might for example mean that, when developing the Council’s e-procurement processes and plans, it will be important to consider the preparedness of the local business community for an (almost) exclusively electronic method of dealing with the Council and for the Council to work to mitigate the worst effects of such proposals on the local economy.

9. Although the Council already uses some joint purchasing arrangements as a way of achieving better deals, the Council needs to explore the benefits of these to a greater extent. This means both joining with other (local) partners and also accessing other ‘consortia’ arrangements regionally and nationally. Using partnerships and a partnering approach to contracting are also examples of an innovative approach, and the Plan recommends that after using the schools’ partnering initiative as a ‘pilot’, the experience and advantages of a more collaborative approach to contracting should be considered in other areas of the Council’s procurement.

10. Finally, whilst individual departments are aware of their own spending, the Council needs to have a better corporate understanding of the totality of its procurement spending. Compiling a procurement register and the capability of e-procurement systems to capture data will contribute significantly to meeting this need. Much of the rest of the Action Plan will depend on having accurate and meaningful information – the ability to apply risk assessment, the ability to use a Gateway process to strategic procurements, and the ability to identify opportunities to procure in partnership or simply opportunities for aggregation are all examples. The review also recommends that the Council needs to improve its ability to measure the success of its procurement activity, using techniques such as benchmarking.

STRATEGIC CONTEXT

11. In strategic terms, Procurement is a wide-ranging and cross-cutting theme, which has direct links to both the Community Plan and the Council’s Corporate Plan. It clearly has direct links with the Council’s commitment to providing excellent services, and to it striving to continuously improve. Better procurement will support all that the Council is trying to achieve. In addition there are indirect links to some other Council objectives, including: economic prosperity (by encouraging local businesses to become suppliers to the Council) and sustainability (by considering how Council procurement impacts on environmental issues).

12. The Corporate Plan also makes reference to :

§ Considering new service delivery models (of which partnerships and partnering are examples)

§ Developing a Procurement Strategy (involving amongst other things, a more rigorous approach to achieving VFM, market testing and contract packaging)

§ Modernising the Council’s procedures and processes

all of which resonate with the direction and emphasis of the Improvement Plan.

13. In a national context, the Council must now have regard to the National Procurement Strategy issued by the ODPM in October 2003. This sets out a number of requirements of local authorities, and the Improvement Plan deliberately seeks to ensure that this Council will strive to achieve (and in some instances exceed) those expectations.

14. The Improvement Plan recommends that the Council’s Procurement Strategy (approved in November 2002) is reviewed and where appropriate, amended in the light of the Best Value Review. The attached Improvement Plan will effectively supersede the Action Plan originally part of the Strategy.

CONSULTATION

15. As well as using the IDeA to provide external challenge to the Review, other consultation included:

§ Participation in the review by representatives from all directorates who have an involvement in procurement

§ Participation in the Review by a procurement professional for the local Healthcare Trust

§ Holding three forums when we invited local businesses to share their perspective on the procurement performance of the Council.

16. The latter exercise proved particularly enlightening as it gave an insight into how suppliers and contractors view the Council as a customer. It also indicated how useful consultation of this sort could be if done on an ongoing basis. Some of the actions in the Action Plan are directly related to this initiative including: the need to develop local SMEs, the idea of holding a ‘Meet the Buyer’ event and developing the Council’s web-site so that it includes useful information to ‘would-be’ suppliers to the Council.

17. The Directors’ Group, a Best Value Appraisal Group, and the Resources Select Committee have been consulted on the Action Plan. In general terms, all of them endorsed the Plan. The Appraisal Group did however request that a recommendation to nominate an elected member to be the ‘Procurement Champion’ was included in the Plan and the Resources Select Committee proposed that this should be Councillor Patrick Joyce. The Action Plan recommends at para 1.2 that this decision should be taken by the Leader in consultation with the Chairman of the Resources Select Committee.

FINANCIAL/BUDGET/RESOURCE IMPLICATIONS

18. The target dates which have been proposed in the Plan assume that it will be achieved using existing resources and any faster implementation would require more resources to be applied. There are also financial resource needs implied by the Plan- the most significant being the need to invest in any e-procurement systems. This, like any other ICT project will be the subject of a business case before any decision to proceed is taken. Early indications are, however, that the financial and economic benefits of implementing an e-procurement solution are significant and are likely to outweigh by some considerable margin, the costs involved. The Plan also highlights the need to invest £20,000 over a three year period in a programme of training in the subject of procurement. The latter needs to feature as a bid in the next budget round.

19. The both the Appraisal Group and the Resources Select Committee expressed their concerns that the apparent lack of resource implications of the Plan, questioning whether the target dates are realistic. It is acknowledged that whilst the plan represents a challenge, the dates are nonetheless achievable.

LEGAL IMPLICATIONS

20. Many of the Plan’s recommendations will enhance the Council’s regime of corporate governance and contribute to better compliance with legal requirements. Since this is a Best Value Review, members should be aware that there is a duty under the Local Government Act 1999 to achieve Best Value in the provision of local authority services. In particular, the Action Plan must deliver continuous improvement over its lifetime and beyond.

OPTIONS

21. The options are:

(1) To endorse the Improvement Plan;

(2) To amend the Plan as considered necessary; or

(3) To request that the Plan is re-considered and re-presented at a later date.

EVALUATION/RISK MANAGEMENT

22. There are some significant risks for the Council of not endorsing the Improvement Plan, including:

§ The Council will not be able to demonstrate that its procurement performance matches best practice. The Council will fall short of meeting the requirements of the National Procurement Strategy and not achieve recognition in the next round of the Comprehensive Performance Assessment;

§ The Council will not achieve better corporate governance of its procurement activity and will continue with a narrow rather than strategic approach to procurement. Some of the risks which have materialised to damage the Council’s reputation in the past, may be repeated.

§ The opportunity to make savings and to significantly improve service delivery in some areas will not be realised. These include for example, the benefits form e-procurement and from using new and innovative delivery models such as partnering.

§ The opportunity to use the Council’s buying power to influence other key aims, including the economic prosperity of the Island, sustainability, and employment opportunities will be lost.

RECOMMENDATIONS

To approve option (1) and endorse the Improvement Plan.

BACKGROUND PAPERS

Delivering Better Services to Citizens (The Byatt Report) 2001.

The National Procurement Strategy for Local Government (ODPM) 2003

IDeA Fitness Check report (IDeA) October 2003

Resources Select Committee – Minutes 5 April 2004

The Council’s Procurement Strategy (November 2002)

ADDITIONAL INFORMATION

The Appendix sets out the Best Value Improvement Plan.

Contact Point: Bob Streets ( 823622, email to [email protected]

P WILKINSON Chief Financial Officer

R BARRY Portfolio Holder for Resources