Colin Sharpe, Interim Chief Finance Officer and Jayesh Joshi, Interim Strategic Head of Procurement, will be in attendance to provide a presentation on the Council’s existing procurement strategy.
The Select Committee are also asked to consider a report that sets out a timetable and programme of work and proposes to set up a working group to take the programme forward.
The Chair of the Overview Select Committee submitted a report outlining the programme of work for the Overview Select Committee’s review of procurement. The Acting Director of Finance and Interim Strategic Head of Procurement were also present to provide a presentation on the strategic review of procurement.
The Chair introduced the report and stated that this would be part of a significant review into procurement procedures. It was noted that the review by the Select Committee would be broken down into different areas. Councillor Porter requested to be included on the working group of Members taking part in the review.
The Interim Strategic Head of Procurement provided the presentation and outlined the current operation with regard to procurement at the City Council. It was explained that there were three main areas of procurement; these were a Central Procurement Team, Approved Purchasing Officer network and Specialist Teams. It was explained that there was quite a disconnected level of procurement currently. The Select Committee were also informed of the authority’s use of frameworks and current spend with different suppliers such as ESPO. It was felt there was also a lot of bureaucracy along with gaps during the process. The Interim Strategic Head of Procurement explained that issues with the framework included precluding smaller local suppliers from bidding and a different level of governance was needed in this area as currently there were limited opportunities for such suppliers to compete for business.
The Select Committee were informed that there were 9,000 suppliers contracted to the City Council with over £300 million being spent on suppliers. There was a target to achieve £43 million budget savings by 2014/15 and there was a procurement savings target of £5 million by the end of 2013/14. It was explained that the City Council had a duty to collaborate with other parts of the public sector and perhaps they were not making the most of this opportunity.
Details were provided on the engagement by Capita. It was explained that initially a savings target of £2m had been set which had then been adjusted to £1.35m due to reductions to the supplies in scope for immediate review. The intention had been to transfer the specialist skills from Capita over to the City Council however this had been a challenge due to there not being a central group of procurement specialists currently at the City Council. However it was noted that some knowledge transfer was taking place and central staff skills were being developed.
With regard to some of the results from the work with Capita, it was stated that the annualised savings target of £4.7m had been met. The scope of the work by Capita had been expanded in October 2011 with an aim of creating a sustainable procurement model. Advice was also being provided to the City Council on managing risks.
The Interim Strategic Head of Procurement informed the Select Committee of the current direction of travel. It was felt that the best way to maximise value would be to centralise the procurement activity at the City Council as much as possible with spend being pushed through this central team. It was also important to get a mix of local and national suppliers. The Select Committee were informed that other authorities were reviewing their arrangements with ESPO and discussions were also taking place between ESPO and the City Council to reflect the City Council’s intention to use ESPO where specific benefits arose but also to use a range of other suppliers including ones that were particularly local. Additionally it was stated that there needed to be a more robust market engagement strategy by the City Council.
The Select Committee were informed that the pre-qualification criteria often discouraged potential suppliers from applying for business. It was acknowledged that the amount of questions contained in the pre-qualification questionnaire needed to be reduced. The Interim Strategic Head of Procurement stated that the City Council’s procurement website was being reviewed while the views of both internal and external stakeholders were also being sought along with those of other authorities.. It was also added that the recruitment process of Head of Procurement would hopefully commence in the near future.
The Select Committee were informed that a Local Procurement Taskforce had been formed with a “relaunch” meeting held on 13 February 2012. The Taskforce contained a diverse range of stakeholders chaired by the City Mayor and would be meeting every six weeks. The next meeting of the Taskforce would discuss the action plan and how the Council communicated with external stakeholders. It was also stated that Small and Medium Enterprises (SMEs) had been encouraged to bid for Council work with workshops also held to assist these organisations.
With regard to moving forward, the Interim Strategic Head of Procurement outlined five key initiatives to be taken forward. These included influencing major partners such as ESPO and maximising commercial opportunity along with simplifying and automating processes.
The Chair welcomed suggestions for whom the Scrutiny Task Group could call as witnesses during their review. The City Mayor suggested the Task Group look at the large strategic issues with contributions from those SMEs involved who were struggling with the current process, however contributions would be welcome from larger organisations as well to offer a different view.
In response to a query regarding monitoring what was spent through ESPO, the Interim Strategic Head of Procurement stated that ESPO were not able to state how much had been spent by the Council on ESPO contracts with other suppliers, and that the Council’s payment records did not identify the contract under which supplies and services were procured. However the Acting Director of Finance stated that from the Council’s perspective, it was able to identify how much it had spent through purchases directly from ESPO and that linking contracts to supplier payments was an area for future systems development.
Concern was raised that the data published by the City Council of payments exceeding £500 had been changed and were no longer searchable by supplier. It was stated that this resulted in not all transactions appearing as they had done previously. The Acting Director of Finance agreed to look into this.
Members of the Committee were of a view that it was important to prepare before contracts come up for renewal with possibilities of getting suppliers to provide more services when discussing contracts. Another key point that had to be considered was innovation with suppliers also taking the initiative to suggest how they could improve processes. The Interim Strategic Head of Procurement stated that this was important and one area that would be looked into would be developing markets where they did not currently exist.
It was queried whether there was enough expertise in the Council and whether best practice in the private sector was being looked into. The Acting Director of Finance stated that one issue was the public sector were required to follow EU and national sector procedures, however this was not a requirement for the private sector. With regard to skills, it was stated that there was a number of people across the organisation that could be brought into the procurement team with a probable mixture of some being trained internally and some recruited externally. It was reiterated however that the team for procurement at the City Council should be permanent.
With regard to the procurement review by the Select Committee, it was stated that the review was expected to last for around six months then it would be seen if more work was necessary. The Chair requested that there be regular liaison with the review that was being done by the Executive. It was agreed the Scrutiny Support officers would liaise with Interim Strategic Head of Procurement regarding both reviews.
The Interim Strategic Head of Procurement stated that it was important to speak to suppliers who had not won business from the Council before as this could offer an alternative view. It was agreed to produce a sample list of potential organisations to contact during the Task Group review.
1) that the arrangements of the working group as set out in the report be approved with the addition of Councillor Porter to the Membership.
2) that the Acting Director of Finance look into the query raised regarding the publication of City Council payments over £500.
3) that the Scrutiny Support officers liaise with the Interim Strategic Head of Procurement regarding the procurement review currently underway by the Executive.
4) that a list of potential organisations to be contacted during the Task Group review be produced.