Brian Farrington Ltd   CIPS Merseyside 11 November 2010
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Brian Farrington Ltd CIPS Merseyside 11 November 2010

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HM Treasury Review. Procurement cost reduction

HM Treasury Review. Procurement cost reduction

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Brian Farrington Ltd   CIPS Merseyside 11 November 2010 Brian Farrington Ltd CIPS Merseyside 11 November 2010 Presentation Transcript

  • The HM Treasury Spending Review Framework Procurement initiatives to deliver lower costs! Presented by Stephen Ashcroft BEng MSc MCIPS Procurement Consultant Brian Farrington Ltd 11th November 2010 Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
  • We‟re all in this together! Slide 1 Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
  • We‟re all in this together!As part of its public engagement process, the Government will gathertalented individuals from within the public sector and beyond,harnessing their expertise to think creatively about the big questions itfaces. CM 7872 8 June 2010 HM Treasury “The Spending Review Framework” Slide 1 Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
  • Highlight points – Procurement impact (1) Slide 2 Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
  • Highlight points – Procurement impact (1) - Deficit Reduction will be achieved through reductions in spending - Consider new and radical approaches to public service provision Slide 2 Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
  • Highlight points – Procurement impact (1) - Deficit Reduction will be achieved through reductions in spending - Consider new and radical approaches to public service provision - Reduce spending this year by cutting waste - All Departments will publish business plans Slide 2 Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
  • Highlight points – Procurement impact (1) - Deficit Reduction will be achieved through reductions in spending - Consider new and radical approaches to public service provision - Reduce spending this year by cutting waste - All Departments will publish business plans - Driving down the cost of operational delivery - Renegotiating contracts Slide 2 Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
  • Highlight points – Procurement impact (1) - Deficit Reduction will be achieved through reductions in spending - Consider new and radical approaches to public service provision - Reduce spending this year by cutting waste - All Departments will publish business plans - Driving down the cost of operational delivery - Renegotiating contracts - Maximising collective buying power Slide 2 Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
  • Highlight points – Procurement impact (2) Brian Farrington Ltd Slide 3Procurement, Supply Chain and Negotiation Specialists
  • Highlight points – Procurement impact (2)  Using benchmarking to improve performance  Identifying savings opportunities Brian Farrington Ltd Slide 3Procurement, Supply Chain and Negotiation Specialists
  • Highlight points – Procurement impact (2)  Using benchmarking to improve performance  Identifying savings opportunities  Promote freedom by encouraging a greater range of service providers  Improve Risk Management Brian Farrington Ltd Slide 3Procurement, Supply Chain and Negotiation Specialists
  • Highlight points – Procurement impact (2)  Using benchmarking to improve performance  Identifying savings opportunities  Promote freedom by encouraging a greater range of service providers  Improve Risk Management  Deliver continuous VFM improvements Brian Farrington Ltd Slide 3Procurement, Supply Chain and Negotiation Specialists
  • Renegotiating contracts (1) Brian Farrington Ltd Slide 4Procurement, Supply Chain and Negotiation Specialists
  • Renegotiating contracts (1)  Review Contract performance  Review contract history including price movements Brian Farrington Ltd Slide 4Procurement, Supply Chain and Negotiation Specialists
  • Renegotiating contracts (1)  Review Contract performance  Review contract history including price movements  Benchmark if raw data can be found  Consider unjust enrichment Brian Farrington Ltd Slide 4Procurement, Supply Chain and Negotiation Specialists
  • Renegotiating contracts (1)  Review Contract performance  Review contract history including price movements  Benchmark if raw data can be found  Consider unjust enrichment  Explore continuous improvement proposals  Invoke contract change process Brian Farrington Ltd Slide 4Procurement, Supply Chain and Negotiation Specialists
  • Renegotiating contracts (1)  Review Contract performance  Review contract history including price movements  Benchmark if raw data can be found  Consider unjust enrichment  Explore continuous improvement proposals  Invoke contract change process  Invoke right of audit clause Brian Farrington Ltd Slide 4Procurement, Supply Chain and Negotiation Specialists
  • Renegotiating contracts (2)  Consider termination for convenience Brian Farrington Ltd Slide 5Procurement, Supply Chain and Negotiation Specialists
  • Renegotiating contracts (2)  Consider termination for convenience  Renegotiate in good faith considering Brian Farrington Ltd Slide 5Procurement, Supply Chain and Negotiation Specialists
  • Renegotiating contracts (2)  Consider termination for convenience  Renegotiate in good faith considering • Specifications • GFE • Contract extensions • Aggregation • Relationships • Value Analysis • Use of resources • Total Cost of Ownership Brian Farrington Ltd Slide 5Procurement, Supply Chain and Negotiation Specialists
  • Can Procurement take the lead? Brian Farrington Ltd Slide 6Procurement, Supply Chain and Negotiation Specialists
  • Can Procurement take the lead?  Influence  Authority  Accountability Brian Farrington Ltd Slide 6Procurement, Supply Chain and Negotiation Specialists
  • Can Procurement take the lead?  Influence  Authority  Accountability  Skills – but in what? Brian Farrington Ltd Slide 6Procurement, Supply Chain and Negotiation Specialists
  • Can Procurement take the lead?  Influence  Authority  Accountability  Skills – but in what?  Contractual knowledge  Financial Knowledge Brian Farrington Ltd Slide 6Procurement, Supply Chain and Negotiation Specialists
  • Can Procurement take the lead?  Influence  Authority  Accountability  Skills – but in what?  Contractual knowledge  Financial Knowledge  Resources Brian Farrington Ltd Slide 6Procurement, Supply Chain and Negotiation Specialists
  • Cost drivers and the use of cost models Brian Farrington Ltd Slide 7Procurement, Supply Chain and Negotiation Specialists
  • Cost drivers and the use of cost models Labour Costs Brian Farrington Ltd Slide 7Procurement, Supply Chain and Negotiation Specialists
  • Cost drivers and the use of cost models Labour Costs  Wages  National Insurance  Pension  Clothing/Uniforms  Training  Mobile phones  Bonus payments  Other Brian Farrington Ltd Slide 7Procurement, Supply Chain and Negotiation Specialists
  • Cost drivers and the use of cost models Labour Costs  Wages  National Insurance  Pension  Clothing/Uniforms  Training  Mobile phones  Bonus payments  Other ? Productivity ? Recoverable days/hours per annum ? Travel time ? Working day ? Overtime Brian Farrington Ltd Slide 7Procurement, Supply Chain and Negotiation Specialists
  • So – how radical will Procurement be? Brian Farrington Ltd Slide 8Procurement, Supply Chain and Negotiation Specialists
  • So – how radical will Procurement be?  Probe Costs Brian Farrington Ltd Slide 8Procurement, Supply Chain and Negotiation Specialists
  • So – how radical will Procurement be?  Probe Costs  No contract price escalation RPI/CPI Brian Farrington Ltd Slide 8Procurement, Supply Chain and Negotiation Specialists
  • So – how radical will Procurement be?  Probe Costs  No contract price escalation RPI/CPI  Termination of contracts Brian Farrington Ltd Slide 8Procurement, Supply Chain and Negotiation Specialists
  • So – how radical will Procurement be?  Probe Costs  No contract price escalation RPI/CPI  Termination of contracts  Recover damages Brian Farrington Ltd Slide 8Procurement, Supply Chain and Negotiation Specialists
  • So – how radical will Procurement be?  Probe Costs  No contract price escalation RPI/CPI  Termination of contracts  Recover damages  Long-term contracts Brian Farrington Ltd Slide 8Procurement, Supply Chain and Negotiation Specialists
  • So – how radical will Procurement be?  Probe Costs  No contract price escalation RPI/CPI  Termination of contracts  Recover damages  Long-term contracts  SMEs BMEs Third Sector Brian Farrington Ltd Slide 8Procurement, Supply Chain and Negotiation Specialists
  • So – how radical will Procurement be?  Probe Costs  No contract price escalation RPI/CPI  Termination of contracts  Recover damages  Long-term contracts  SMEs BMEs Third Sector  Renegotiate Brian Farrington Ltd Slide 8Procurement, Supply Chain and Negotiation Specialists
  • What Next? • What are you going to do? • “If not me, who?” • “If not now, when?” Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
  • & Questions Questions Answers Answers Stephen Ashcroft BEng MSc MCIPS http://www.linkedin.com/in/stephenashcroft Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
  • Procurement: The seven steps to stagnation Brian Farrington Ltd Slide 10 Procurement, Supply Chain and Negotiation Specialists
  • Procurement: The seven steps to stagnation 1. Weve never done it that way 2. Were not ready for that, yet 3. Were doing all right without it 4. We tried it once, and it didnt work out 5. It costs too much 6. Thats not our responsibility 7. It wont work Brian Farrington Ltd Slide 10 Procurement, Supply Chain and Negotiation Specialists
  • Supplier Management Nine steps which guarantee success Nine steps which guarantee success... Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
  • Nine steps which guarantee success Brian Farrington Ltd Procurement, Supply Chain and Negotiation Specialists Slide 12
  • Nine steps which guarantee success 1. Clear agreement on the definition of „success‟ Brian Farrington Ltd Procurement, Supply Chain and Negotiation Specialists Slide 12
  • Nine steps which guarantee success 1. Clear agreement on the definition of „success‟ 2. Risk analysis which identifies those things which could go wrong Brian Farrington Ltd Procurement, Supply Chain and Negotiation Specialists Slide 12
  • Nine steps which guarantee success 1. Clear agreement on the definition of „success‟ 2. Risk analysis which identifies those things which could go wrong 3. Contract which recognises and deals with price/cost issues, and contains realistic remedies Brian Farrington Ltd Procurement, Supply Chain and Negotiation Specialists Slide 12
  • Nine steps which guarantee success 1. Clear agreement on the definition of „success‟ 2. Risk analysis which identifies those things which could go wrong 3. Contract which recognises and deals with price/cost issues, and contains realistic remedies 4. Leverage maximised at the enquiry stage including specification Brian Farrington Ltd Procurement, Supply Chain and Negotiation Specialists Slide 12
  • Nine steps which guarantee success 1. Clear agreement on the definition of „success‟ 2. Risk analysis which identifies those things which could go wrong 3. Contract which recognises and deals with price/cost issues, and contains realistic remedies 4. Leverage maximised at the enquiry stage including specification 5. Use of kick off or watershed meetings Brian Farrington Ltd Procurement, Supply Chain and Negotiation Specialists Slide 12
  • Nine steps which guarantee success 1. Clear agreement on the definition of „success‟ 2. Risk analysis which identifies those things which could go wrong 3. Contract which recognises and deals with price/cost issues, and contains realistic remedies 4. Leverage maximised at the enquiry stage including specification 5. Use of kick off or watershed meetings 6. Contract management plan defined and understood by all Brian Farrington Ltd Procurement, Supply Chain and Negotiation Specialists Slide 12
  • Nine steps which guarantee success 1. Clear agreement on the definition of „success‟ 2. Risk analysis which identifies those things which could go wrong 3. Contract which recognises and deals with price/cost issues, and contains realistic remedies 4. Leverage maximised at the enquiry stage including specification 5. Use of kick off or watershed meetings 6. Contract management plan defined and understood by all 7. Performance evaluation and feedback to the supplier and from the supplier Brian Farrington Ltd Procurement, Supply Chain and Negotiation Specialists Slide 12
  • Nine steps which guarantee success 1. Clear agreement on the definition of „success‟ 2. Risk analysis which identifies those things which could go wrong 3. Contract which recognises and deals with price/cost issues, and contains realistic remedies 4. Leverage maximised at the enquiry stage including specification 5. Use of kick off or watershed meetings 6. Contract management plan defined and understood by all 7. Performance evaluation and feedback to the supplier and from the supplier 8. Strategic Business Review meetings with managers and staff at the right level Brian Farrington Ltd Procurement, Supply Chain and Negotiation Specialists Slide 12
  • Nine steps which guarantee success 1. Clear agreement on the definition of „success‟ 2. Risk analysis which identifies those things which could go wrong 3. Contract which recognises and deals with price/cost issues, and contains realistic remedies 4. Leverage maximised at the enquiry stage including specification 5. Use of kick off or watershed meetings 6. Contract management plan defined and understood by all 7. Performance evaluation and feedback to the supplier and from the supplier 8. Strategic Business Review meetings with managers and staff at the right level 9. The use of „teams‟ to deal with problems and realise opportunities Brian Farrington Ltd Procurement, Supply Chain and Negotiation Specialists Slide 12
  • & Questions Questions Answers Answers Stephen Ashcroft BEng MSc MCIPS http://www.linkedin.com/in/stephenashcroft Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
  • Contact details Stephen Ashcroft BEng MSc MCIPS Business Consultant Brian Farrington Ltd Rainford Hall Crank St Helens Merseyside WA11 7RP T: 01744 20698 F: 01744 27897 e:s.ashcroft@brianfarrington.co.uk URL:www.brianfarrington.co.uk Brian Farrington Ltd Procurement, Supply Chain and Negotiation Specialists
  • Who are we? Procurement, supply chain & negotiation expertise, since 1978 Competencies underpinned by academic rigour Client specific procurement consultancy solutions Design, delivery & evaluation of training solutions Expertise in „deep cut‟ cost reduction whilst mitigating risk Key clients: Public sector & supply chain Quality Assured ISO 9001:2008 Delivery partners of CIPS Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
  • What do we do? – see Appendix• Commercial Manuals• Design of Policies & Procedures • Negotiating Major Contracts• Due diligence • Tendering Advice • Partnering Facilitation 20% 30% 20%• Advice on Training Strategy 30%• Delivery of Training Strategy• Metrics & Action Centred • Cost reduction Learning • Strategy: development & implementation • Managing Contractual Risk Brian Farrington Ltd Procurement, Supply Chain and Negotiation Specialists
  • Expert and experienced procurement resource The four key elements of the Brian Farrington Ltd proposition our independence is Integrity your assurance of rigorous analysis, the objectivity of our Solution- outstanding practical service focused expertise and innovative service responses Client our responses are service defined and driven and value by the individual needs of our clients bringing appreciable Proven improvements in Methodologies business performance Brian Farrington Ltd Procurement, Supply Chain and Negotiation Specialists
  • Appendix: Capabilities Matrix Action Centred Learning Organisational Shaping Benchmarking Outsourcing Best Value Reviews Partnering Government Boardroom Briefings Performance Reviews Defence Process Mapping Change Management Utilities Procurement Policies Claims Management Fmcg Procurement Risk Contract Documents Procurement Strategy Food & drink Contract Negotiation Procurement Workload Analysis Education Contract Performance Audits Project Management Health Contractual Risk Purchase Research Construction & Property Cost Reduction Purchasing Manuals Defence Due Diligence Recruitment Red Team Reviews Engineering E-Procurement Expert Witness Strategic Sourcing Brian Farrington Ltd Financial Services Specification Writing Retail Fraud Investigation Supplier Management IT How to Tender Supplier Rationalisation Mining Gateway Reviews Supplier Selection Independent Reports Nuclear Supplier Surveillance Interim Management Supply Chain Management Pharmaceutical International Procurement Technical Commercial Awareness Retail IT Review Tender Documents Telecomms Lead Negotiator Role Tender Management Transport Metrics of Excellence Total Procurement Process Mgt Option Appraisal Training Courses Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists