Chris Newman MBA Director ArcBlue Consulting 8 October 2014 Procurement Power: How Local Government Can Drive Reform Through Procurement Transformation’ Chris Newman MBA Director ArcBlue Consulting 8 October 2014

ArcBlue Government Procurement Development Activity across Australia/NZ QLD State Government Contract Management Capability Assessment & Development Program WA Local Government Procurement Training Program Spend Analysis Gold Coast Council – Capability Development and Contract Management Procurement Capability Assessment / Development NSW State Government Accreditation Program – preparation and assessment SA Local Government Roadmap Program Regional Opportunity Analysis NSW Local Government Roadmap Program with LGP Procurement Leadership Program Social Procurement Development Sydney Metro Councils Joint Procurement Development Program VIC State Government CIPSA Certification Federal Government Federal Government Contract Management Development Regional Procurement Development Programs VIC Local Government Procurement Roadmap development Contract Management Guidelines and Training State Government NZ Government Departmental reviews Local Government

Procurement Development Why Procurement? Represents a large component of council activity and expenditure Victorian Councils spend over $4 billion each year (estimate) More than half of most councils’ overall expenditure Has received little focus (administrative – not strategic) Procurement Development Programs National and State Government Procurement Development Programs across Australia and New Zealand Local Government Procurement Roadmap and Spend Analysis Programs Councils now recognising the importance of a structured approach to procurement capability development Supported by Regional Groups and other peak Local Government Procurement Bodies around Australia 180 Councils across 3 States have participated since 2010 2014 Regional Programs – NSW: NOROC, Riverina, WSROC, Centroc SA: Eyre Peninsula, ERA, Barossa Region, Council Solutions

Procurement Local Government State Regional Local

Why the focus on procurement ? The benefits Reduce external supplier costs Increase internal efficiencies Efficiency and financial stability Build confidence Reduce risk Demonstrate professionalism Probity and process Support council objectives Project delivery Environmental sustainability Regional/local economic development Social Objectives Enabler of broader reform 7bn across local gov aus 50% of spend Vital role in supporting communities and delivering council objetives Capital works and budget planning Project management and delivery Regional and Sector Collaboration

Organisational Assessment Strategic Procurement Contract Management Category Results and benefits Strategy People Organisation Economic Development Sustainability Social Framework Policy Systems and Data Compliance External Focus Internal Focus Mission Delivery Enablers EMERGENT BASIC DEVELOPING ADVANCED

Program: Objectives and Process Support Councils and the region in driving savings and improved performance through their procurement practice Identify and explore further opportunities for regional collaboration and the most effective role for regional groups in supporting regional projects and programs Support participating Councils at an individual and regional level in better understanding and managing and identifying opportunities for improved performance Joint Council Kick-off Data and Information Collection Joint Spend Analysis and Assessment Regional Opportunity Analysis Workshop Develop Council Solutions Strategy Develop Regional Roadmap Individual Council Roadmaps On-going Support

Regional Roadmap Example Priorities – Wave 1 Wave 2 Road Reseal Street Sweeping Bulk Cartage Waste Management – including leverage NORMA contract Line Marking EWMS Building Maintenance & Cleaning ICT Services Panel - Including Shared Portal Rubble Raising & Crushing   Heavy Plant & Equipment sharing Materials supply

Procurement Transformation and Collaboration Benefits Sustainable savings in external expenditure, e.g. Blue Mountains $800,000 Murray Bridge $500,000 Burnside $600,000 Riverland Region – Over 20% savings through regional contracts Increased usage of local suppliers, e.g. Gold Coast spend through local suppliers increased from 49% to 63% over 2 years Improved performance, e.g. Increased completion rates for Capital Works Streamlined internal processes Targeted productivity savings Improved probity and reduced risk Social Procurement - Employment generation for local and disadvantaged communities, e.g. G21 GROW Project – cross sector development of job creation strategies through procurement © ArcBlue Consulting 2014

Data Analytics

Data Analytics Transforming Local Government Data analytics is transforming our understanding of local government procurement. Regional Procurement Roadmap Programs across NSW and SA in 2014 have incorporated new technology and data collection and analysis ‘Dashboards’ tailored specifically for local government. The ‘Dashboards’ create a new understanding and capacity for driving cost savings, compliance and regional economic development outcomes. There is much broader application of data analytics in transforming our capacity to understand and drive individual development and regional and sector collaboration across a wide range of council activities © ArcBlue Consulting 2014

Individual Council Procurement ‘Dashboards’ All rights reserved

Local Spend Dashboard All rights reserved

Spend Summary Regional Spend Analysis - example

Regional Categories & Suppliers COUNCIL 1 COUNCIL 2 COUNCIL 3 © ArcBlue Consulting 2014

Regional Category Dashboard © ArcBlue Consulting 2014

Regional Demographics All rights reserved

Why analyse spend? LG Sector generally has a poor understanding of what we spend and who we spend it with Reduces Councils ability to: Analyse spend and transaction patterns, and strategically plan for better procurement (opportunity analysis) Easily track spend and performance by category, supplier or contract Track compliance, cumulative/purchase card spend etc. Quickly and effectively report on procurement and performance Reduces Regional/ sector ability to: Track spend patterns and identify opportunities to improve existing contracts or identify new ones Accurately monitor and measure contracts and suppliers Benchmark performance All rights reserved

Spend analysis challenges Reasons for lack of spend analysis in LG Sector: Range of financial systems used: Civica, Tech One, Oracle etc. makes it difficult to extract and then consolidate data Systems are set up for finance processes, not procurement Data in the systems is often poor quality (not ‘clean’ – not categorised, inconsistent supplier names used, etc.) Spend analytics done in-house is often time consuming and expensive because skills are underdeveloped in the sector All rights reserved

ArcBlue Dashboards overview Tailored application using modern Business Intelligence software → standardised set of interactive, user driven Dashboards designed specifically for Local Government Displays categorised areas of spend with the ability to drill down to enable detailed review Data can be both aggregated at national, state and Regional level or drilled down for use by individual Councils Intuitive and visually attractive Easy to use and understand Online interactive ‘Dashboards’ that allow flexible analysis and reporting All rights reserved

LEAP - Procurement Continuous Improvement Program

MAV LEAP Program - Background Procurement leaders conference May 2014 40 LG procurement professionals Focus on individual and sector wide capability development Identified successful STEP program methodology (Asset Management, Planning) as applicable Need for spend analysis, benchmarking and performance reporting across the board Priority to support structured collaboration and enable local/regional economic development © ArcBlue Consulting 2014

CONTINUOUS IMPROVEMENT Program Design Phase 1 ASSESS Phase 2 DEVELOP Phase 3 IMPLEMENT Detailed LEAP Plan Council workshops Implementation support for delivering LEAP Plan Informing priorities for MAV Central Capability Development support activities eg. Training, Documents, Guidelines, Events etc/. Spend Analysis Maturity assessment Practices & Priorities survey CONTINUOUS IMPROVEMENT PREPARATION All rights reserved

Maturity/Capability Assessment Online maturity/capability assessment based on 12 procurement dimensions Input into sector and regional benchmarking and presented in dashboards Inform the development of priority actions for Phases 2 & 3 Annual update to track movement and achievements Results reported back via dashboards All rights reserved

Practices & Priorities Survey Procurement Practice and Priorities Survey to be deployed online to each Council to capture outline of current practices Survey to capture information regarding each individual councils current focus and priorities including: Social procurement and local economic development objectives Current contracts and renewal schedule Procurement technologies being used Major upcoming procurement projects (procurement plan) Analysis of survey results to inform benchmarking, regional collaboration opportunities and contract priorities Results including benchmarking reported back via dashboards All rights reserved

Workshops and Presentation Workshop with Stakeholder group to review spend analysis results and benchmarking identified through the ASSESS phase activities Training in on-going usage of Council’s individual Procurement ‘Dashboards’ Facilitated Senior Management Presentation to put forward the outcomes of the ASSESS phase, Development of individual Council LEAP Plan developed as part of the workshop All rights reserved

Regional Development The LEAP Program presents an ideal opportunity for Councils to strengthen collaboration across regions in both metropolitan and regional Victoria. For no extra cost, regions with 5 or more LEAP participating Councils will have access to: A fully developed regional spend analysis Online regional ‘Dashboards’ Regional Opportunity Analysis Workshop to support the development of opportunities for a wide range of collaboration. All rights reserved

Example Leap Program Modules Phase 3 - IMPLEMENT Implementation support to ensure that priority action areas are being implemented Example Leap Program Modules Savings & efficiencies program Procurement process and systems review Probity and compliance diagnostic Procurement reporting and KPI development Training program Purchase card strategy Social procurement & Local Economic Development program Collaborative procurement program All rights reserved

Practices/Priorities survey Maturity assessment Update of LEAP Plan LEAP Ongoing Annual Cycle: LEAP progress review Spend analysis update Practices/Priorities survey Maturity assessment Update of LEAP Plan Report back on progress, performance and benchmarking On-going priority continuous improvement plan implementation ASSESS DEVELOP IMPLEMENT All rights reserved

Letter to go to all CEOs in mid October Next Steps Letter to go to all CEOs in mid October Annual cost per participating Council including full spend analysis is $9,000 Information Session at the MAV on October 31st Registration for Stage 1 Councils by November 31 More information will be available on: www.mav.asn.au www.arcblue.com.au Or contact Cameron Spence on cspence@mav.asn.au or chris.newman@arcblue.com.au All rights reserved