World class services for a world class city London Procurement Strategy Ken Cole Commercial and Procurement Advisor 9 th September 2009 Capital Ambition

World class services for a world class city Why a London Strategy? DCLG– need to avoid a central model being imposed (e.g. McClelland in Scotland) Response to OEP / Roots and needs of new CAA Create a smarter commercial environment – London acting as London Cashable savings 2010/11 and beyond

World class services for a world class city Its sizeable expenditure… £9.3 billion influencable third party spend in 2007/8 Average 7,300 suppliers per authority 145,000 suppliers in total 1,583 trade with 10 or more, 4,838 with 5 or more Top 1,000 suppliers nearly 60% of total expenditure

World class services for a world class city has a direct impact on Service Outcomes Cashable Savings Use of Resources Local Economy Sustainability

World class services for a world class city Understanding our Position Commercial Risk / Exposure Bottleneck £2.3 billion (25%) Specialist care, temporary agency (some), interims Strategic £4.2 billion (46%) Outsourcing, capital works, waste collection, elderly care provision Routine £0.5 billion (5%) Cleaning, materials, office supplies, furniture, IT consumables Leverage £2.3 billion (24%) Vehicles, temporary agency staff (some), consultancy, ICT hardware, advertising Value Market Scarcity of supply, limited savings, immature markets Strategy Removing barriers to entry, market stimulation Market Scarcity of supply, significant savings, in large contracts but hard to exploit Strategy Supplier Relationship Development, Contract Management, Partnership Sourcing Market Abundant supply, low margins, high turnover of suppliers, rapidly changing conditions Strategy Automate and let go, Use an existing contract Market Few suppliers but highly competitive, and high margins Strategy E-Auctions, Category Management, Commoditization

World class services for a world class city Seeking Cashable Gains Market Scarcity of supply, limited savings, immature markets Strategy Removing barriers to entry, market stimulation Market Scarcity of supply, significant savings, in large contracts but hard to exploit Strategy Supplier Relationship Development, Contract Management, Partnership Sourcing Market Abundant supply, low margins, high turnover of suppliers, rapidly changing conditions Strategy Automate and let go, Use an existing contract Market Few suppliers but highly competitive, and high margins Strategy E-Auctions, Category Management, Commoditization Already heavily exploited. Savings are now marginal, less than 2% Localised markets, takes time to develop. Cost avoidance is the objective Significant savings to be accrued, often 5%+ but takes time. Need to act as London e.g. through SRD Significant savings, 10%+ but not fully exploited. Often controlled by service departments

World class services for a world class city Collaboration in Action ICT Hardware e-Auction March 2009 (15 London authorities - £1.9M cashable) – Collaboration in action PIP (cashable savings continue to accrue) – Market Influence Postal Services (cashable savings in range of 20-25%) – Smarter Working

World class services for a world class city Potential targets for regional e- Auctions Highways materials / services – up to £250M Construction materials – circa £200M Commercial vehicles – spend nearly £100M per annum

World class services for a world class city Why these three areas? Capable of standardisation of ranges / specifications High expenditure – worth investing effort Significant leverage at London level A 10% improvement would generate nearly £50M

World class services for a world class city Contact Details Ken Cole (M) (DD) or