1. Examining shared service innovation – the “i before e”-procurement project Chris Keady, London Borough of Brent Chairman, London Contracts and Supplies Group

2. This presentation The vision: ‘i before e’- Procurement The 2 avenues of research: –The opportunity: investigate the scope for savings in Construction and Housing –The technology: look at what tools are available, specify and develop case study demo of what’s required and how it would work Progress to date, initial conclusions and next steps

3. The Vision “To collaboratively develop and promote a low cost, intuitive, multi-benefit, plug and play, interoperable strategic procurement tool, providing visibility of existing and planned procurement activity, associated risks, and market information/intelligence for current/prospective suppliers” NePP PID 12/03

4. ‘i before e’- Procurement: - information drives the benefits e-Procurement means taking a strategic approach to purchasing But in order to build a strategy you have to know what is actually going on We believe savings of 10-15% are achievable (on an £8bn spend) by: –Collecting forward planning data on a standardised basis for a group of Councils –Aggregating demand forecasts and sharing this with suppliers –Creating framework agreements and building stronger relationships with key suppliers To test this, we researched 2 large spend areas: –Road Maintenance –Housing Maintenance

5. Progress to date We worked with 6 councils in West London: We carried out desk research to establish what information was publicly available We submitted the questionnaire to managers in road maintenance and council house renovation to establish the likely purchasing patterns Brent Ealing Harrow Hammersmith Hillingdon Hounslow

6. Questionnaire Outline - to 6 West London Boroughs submitted to managers in road maintenance & council house renovation What have you spent over the last 3 years? What is planned to be spent in the next 3 years? Categories: –Building Materials – New Build – Bricks/Cement/Windows etc –Building Materials – Maintenance – Paint, Plumbing, Electrics,Pointing, Guttering etc –Road Materials – Tarmac, Hardcore, Gravel etc –Drainage Works –Traffic Works materials – Bollards, signage etc –Skills required in different areas

7. Road Maintenance – the Local Govt Category List provides a standard template to collect data Materials HardcorePaint TarmacStructural Steelwork for Bridgework Sand and GravelBus shelters Slabs and PavioursStreet Lighting KerbsTraffic Lights Street FurnitureCameras Soft LandscapingSignage Bollards and BarriersParking Meters Plant Hire Labour -Site Supervision Survey and design services Other

8. And here’s some of the data for 3 Boroughs: All figures in £mBrentHarrow Hilling- donTotal 3 Borough Average London Av (ALG 2004/5) 2004/52002/32004/5 Road Schemes1.251.242.234.721.571.21 Bridges00.62.823.421.140.37 Road Safety0.281.061.372.710.900.83 Signage0.210.120.10.430.14 Parking Mgement0.83 Pedestrian/Cycle3.030.210.223.451.150.97 Bus Related Works00.10.070.170.060.75 TOTAL4.703.327.6915.735.244.45 3 years average 15.7213.35

9. Housing – again, a standard template is possible (source:Hounslow £35m forecast 2004/5-2006/7) CategoryAv p.a. (3 years) Aids for disabled£1400k Rewiring and other electrical£666k Asbestos – survey and remove£416k Play areas and equipment£166k Cavity wall and loft insulation£500k IT/digital connection£67k Refurbishment of Sheltered Units£750k Hostels£100k Major works to empty properties before external decoration £400k General Security Schemes£750k CategoryAv p.a. (3 years) Door entry£305k Boiler replacements and associated plumbing £1468k Lift Refurbishment£575k Window Replacement£3471k Kitchen and Bathroom Refurbishment£15205k Roofs£5709k Cladding and structural£783k Drainage£1400l Unallocated£3528k

10. So here’s what the Boroughs are planning to spend Year BrentEalingH&FHarrowHillingdonHounslowTotal 2000/120292278582221664582402417118117966 2001/219370298312000290541713613110108503 2002/321148347583074284051938725586140026 2003/431958241453484084202162454830175817 2004/536800173433000060991 2005/624850148564439240781 2006/7186904771113775

11. Housing Maintenance spending is going up Total value of repairs needed by each Borough is publicly available: –Brent £65,660 –Ealing£313,040 –H & F £65,331 –Hillingdon £90,167 –Hounslow £248,975 Spend is uneven, year to year – heavy concentration on eg roofs or kitchen and bathrooms Spend over next few years will increase as level of homes improved via spending through ALMO’s catches up with back-log.

12. In some cases we have detailed spending forecasts: (source:Hammersmith and Fulham ALMO) Source: Hammersmith and Fulham ALMO Forecast

13. The opportunity… What costs are the suppliers passing on? –Having to hold large inventories –Having to build in capacity ‘buffers’ –Having to employ premium skills at short notice –Having to buy supplies inefficiently at short notice What can we do about it? –Improve forward demand planning – we know the data is available PROVIDED THERE IS SUFFICIENT MOTIVATION –Share forecasts with each other and with suppliers –Standardise products and materials, reduce inventories –Source aggregated requirements direct from materials suppliers; provide call-off arrangements for contractors… –Enable suppliers to train in-house rather than buying in skills to meet short term demand

14. The opportunity: initial conclusions Annual spend on goods & services in London is £8bn The areas considered represent £1.7bn, second only to Social Services We believe that savings of 10-15% is realistic by better use of forecast data across Boroughs This will take a number of years to come into full effect due to the existing range of term, pfi and other framework arrangements already in place. But 2-3% would be as much as the rest of e-procurement is set to achieve and that is readily available We are concerned that the way ALMOs are being set up they will not be inclined to (and may not be free to) collaborate. This may block the opportunity to make significant savings

15. Okay, back to the Vision – a reminder: “To collaboratively develop and promote a low cost, intuitive, multi-benefit, plug and play, interoperable strategic procurement tool, providing visibility of existing and planned procurement activity, associated risks, and market information/intelligence for current/prospective suppliers” So what about the technology? Is it able to deliver this?

16. Technology - current reality My vision turns out to be ahead of the marketplace reality –User needs are still evolving –Most suppliers are 1 to 2 generations behind needs –But purchaser skills in public sector lag behind even this level of the product’s capability –Change management “will be critical” However we have come across a software tool that could provide us most of what I wanted and is relatively easy to use…

17. Some sample outputs Source: DecisionMAX Software

18. Technology – conclusions and next steps Technology is now emerging that could achieve the vision, but… … it might be too sophisticated for the users It is too soon to say how well the prototype will deliver the requirements and if it is sufficiently low-cost and intuitive, but we are excited by what we have seen Opportunity for a group of WLA/LCSG councils to become beta-test sites for strategic procurement tool Project PID being prepared Do you want to participate?