Bham Uni M Sc V2 Larner January 2008

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A data driven approach to finding key areas of public expenditure and delivering efficiency

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  • The toolkit is about defining a ‘ fair ’ price for care, reducing ‘ superprofits ’ , accepting reasonable costs & profit levels. Currently developed for Learning Disability user group, also piloting with Mental Health, Physical Disabilities, Primary Care Trusts. Use of the toolkit in London has shown reduction of up to 60% of current cost of placement. The toolkit will include a version for use by service users and their carers under individualised budgets.
  • Bham Uni M Sc V2 Larner January 2008

    1. 1. Cooperative Public PurchasingDr Andrew LarnerRegional DirectorSouth East Improvement & Efficiency Partnership
    2. 2. Overview• RCE History• How South East Centre (SECE) works• Priorities and prioritisation• Key projects• Joining up with the Improvement Partnerships• Where have we got to and where next• National Leads
    3. 3. RCE History
    4. 4. RCE History• Formation – National Procurement Strategy – Regional Centre’s of Procurement Excellence – Formation July 2004 to March 2005• Coordination – Regional Directors Group – Assistant Directors Group – Programme Management Team – National Leads
    5. 5. How the South East Centre (SECE)Works
    6. 6. The South East Region • 55 Districts • 12 Unitaries • 7 Counties • 5 Police Authorities • 8 Fire Authorities • SHA’s and PCT’s
    7. 7. How SECE Works• Formed Late 2004, Programme Started April 2005• Efficiency and Procurement from the start• Governance – Host authority Kent County Council – Board made up of Senior officer from around the region • Mix of authority types • Representation from the 8 County areas• Ways of working – Leadership of Workstreams spread around the region – Small core team seconded from Kent CC – Secondments from around the region – Virtual working – Admin support from one District in the regions centre• Strong emphasis on business management – Project Management – Monitoring and Reporting
    8. 8. SECE Spend 2005/06 £37,000 £1,600,000 £50,000 Buildings £1,400,000 £116,089 £286,000 Equipment & Supplies £1,200,000 Waste Back Office £1,000,000 £151,657 Social Care £800,000 Transport £285,628 £600,000 £400,000 £32,637 Staff £200,000 £37,056 Marketing £0 £57,611 SECE Spend Office Costs Workstreams Travel & £348,394 Subsistence Core Team + Overheads
    9. 9. Priorities and PrioritisationFinding the right levers
    10. 10. Prioritisation• South East Context – Grant floor – Net contribution of tax – Net decrease in government funding – Unable to raise local taxation• Financial impact – For all authorities – Maximising return on investment – Threats (Opportunities) – Legislative drivers• Used a Number of Methods – Evolving these – Give value in their own right as well as identifying priorities for improvement
    11. 11. Supplier Spend Analysis• 167 of 388 Sample Data by Regional Centre of Excellence 80 councils in 70 60 50 Number England (43%) 40 30 20 10• Relative amount 0 ECE EMCE LCE NECE NWCE SECE Regional Centre of Excellence SWCE WMCE Y&HCE of data gathered Total number of local authorities No. of local authorities with spend data by supplier No. of local authorities with aggregate spend data by Regional 250 Sample Data by Authority Type Centre of 200 150 Excellence and Number 100 by Authority 50 0 CC DC LBC MDC UA Type Total number of local authorities Authority Type No. of local authorities with aggregate spend data No. of local authorities with spend data by supplier
    12. 12. Spend (£ million) - Co ns 2,000 4,000 6,000 8,000 10,000 12,000 14,000 tru ct io So n c ia lc ar Pr e of Fa es cil En s io itie vir na ls s on er m vic en es ta ls er v ic es Pu bl IT Fi ic na bo nc di ia es ls er vic es O Tr av ffi el ce En se er rv gy ic e an s d ut ilie M sMaster Category ar Lo ke gi tin st g ics an d m M ed is c ia el Ev la en ne ts ou an s d Master Category Spend Breakdown le isu M re ed ica lc ar e Co m Fu m el on s ca te go ry Master spend by Category across all aggregate councils in c£45 billion. extrapolated extrapolated total spend is England. The local authority
    13. 13. Level 2 Supplier Spend Analysis Buildings Social Care Waste Management Commodities appear throughout
    14. 14. Value from top suppliers
    15. 15. Value from top transactions
    16. 16. From Thompson to Gershon
    17. 17. External Spend – NationalOverview Construction Spend: £14.3 Billion 35% of total external spend Corporate Services Spend: £14.2 Billion 35% of total spend Social Care Spend: £7.8 Billion 19% of total spend Spend: £2.9 Billion Waste 7% of total spend Commodity, GoodsThese four areas cover £96% billion of the total and Services.external spend Spend in top 4 areas £11.3 billion, 30% of total spend
    18. 18. Benchmarking simple prices
    19. 19. £ 1000 Ha Is le m 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 ps of hi W r ig e ht M U ed A w ay Ke So Tow nt ut ha ns U m A pt W Ea on U e s st AW t B Su ss in er ex ds ks or hi an re d Sl U M ou A ai gh de nh U A P e Br orts ad ac m U kn ou A el t lF hU W or A o k est in UA gh am M Re U ilto ad A n in g Ke U yn A es O xf UA or Br ds ig hi ht re on an Su r Bu d H r ey Benchmarking Complex prices ck ov in e gh U am A W e s shi t S re us se x home (incl respite and short term placements and placed for adoption) Average gross weekly expenditure per looked after child in foster care or in a childrens Unit Cost Saving - Upper Quartile
    20. 20. Business Review methodology Candidates for early review…High * * * * *Level *of *Spend * * * * * *Low Low Price fluctuation High
    21. 21. Comprehensive Gap Analysis• What we do / buy?• From whom do we buy?• What we pay / cost?• What contractual arrangements exist?• Rate pay / outcome?
    22. 22. Business Review methodology Candidates for early review…High Level of Spend (Cost) * * •Actual*Calculation * *Level •Internal Costs (of service delivery) *of * •External Spend(of service delivery)Spend •On-Cost •Service Management Costs * * * * •Corporate * *Low Result = Total/Unit cost Low Price fluctuation High
    23. 23. Business Review methodology Candidates for early review…High Level of Spend (rate) * * •Total Spend (now) * * *Level •No of Units of service delivery *of •Rate per Unit *Spend •Ratio of Management Costs:Service Costs * * * * Result = Total/Unit cost Take 5 yr projected position where service demands * *Low are dynamic Low Price fluctuation High
    24. 24. Business Review methodology Candidates for early review…High Benchmark Information * (Price Fluctuation) * * * *Level * •Returns (PSS EX1, E51,of * BVPI’s CCPR etc etc)Spend •Contracts Portal •* * External Spend Analysis * * * *Low Low Price fluctuation High
    25. 25. Starting with Social Care England Avg. LA 1 LA 2 LA 3 LA 4Residential and nursing care and intensive home care £515.0 £500.0 £578.0 £583.0 £730.0Residential and nursing care for older people £432.0 £421.0 £477.0 £482.0 £509.0 Nursing care for older people £439.0 £458.0 £508.0 £484.0 £520.0Residential care for older people £429.0 £408.0 £456.0 £481.0 £498.0
    26. 26. Key Projects
    27. 27. Top 30 spend categories for all council spend Buildings
    28. 28. Buildings Based on responses from 5 County Councils and 10 Unitary Councils in 2005 Partnership / Non Framework £43,000,000 Strategic Frameworks £71,000,000 Traditional procurement £393,000,000
    29. 29. Pulling the levers: BuildingsConstruction Frameworks• South East Regional Framework – No limit on the number of members – Savings 5% spot, 12% groups of blgs, 20% programmes?• Regional framework is well established and projects with commitment approaching £1.3 Billion in the first year – Cost overruns are being reduced from an average of 10% to less than 1% – Each project is saving more that £150K in procurement costs and savings on construction costs look likely to exceed 10% – Participation now includes Police, Fire, NHS, Further Education (LSC) – The first Hospital is being procured through the framework and the construction of the first project, Alfred Sutton School, is completed
    30. 30. Sub regional activity• Sub Regional Frameworks – Intermediate projects, more local firms – Surrey, Berkshire, Hampshire• Commodities - later• Client capacity – Sharing professional resource – Supporting improvement – Consultancy framework
    31. 31. Corporate Services Corporate Services
    32. 32. Corporate and TransactionalServices• South East Market – Individual business cases but no global business case – High expectations from government – No critical mass• Significant local authority collaboration – Adur and Worthing merged officer structure – Adur, Mid Sussex and Horsham partnership – South Oxfordshire / Vale of White Horse – Berkshire Procurement and Shared Service Unit• Service specific collaborations – Pan regional joint library management system contract signed with £1m savings• Cross sector collaboration – Police, Fire, Health, Local Authority • Isle of White • Brighton and Hove• Corporate procurement – Legal services – Banking services
    33. 33. Commodity Goods and Services Commodity Goods and Services
    34. 34. Category CGS SpendExtrapolated National Temporary and Agency Staff Building Construction Materials £1,995,649,352 £1,016,584,553Commodity Spend Telecoms - Fixed £810,416,180 Insurance £675,133,872 Legal Services £558,092,496 Software £480,843,065 Electricity £475,761,198 Catering Food and Beverages £369,354,629 Hardware £319,213,999 Leasing £271,598,118 Commercial £236,517,481 Water £227,565,571 Mail Services £225,737,404 Furniture £212,980,958 Travel £208,160,545 ICT Other (NEC) £206,009,684 Accountancy £193,425,692 Print £190,622,913 Catering Services £184,057,186 Heavy Construction Equipment £183,413,585 Training and conferences £179,801,085 Gas £169,381,986Extrapolated national spend of £10.6 billion Stationary £155,082,049 Sports and Playground £144,315,463 Advertising £138,626,225
    35. 35. Commodity Goods and Services• 30% of external spend is commodity spend (Directly identifiable)• From stationary to agency staff• Top 20 commodities account for 81% of the commodity spend• A saving of 10% would be 1.5% of an authorities total spend• Authorities can have off contract spend of 40% to 60%, although it may be as low as 5%• Overpayment on 40% off contract spend equates to 0.6% of total budget• 3 levels of procurement – Market knowledge and management – Aggregating buying power – Ensuring take up• Tried to do all in every local authority – NPS wrong direction?• Initial views of consortia – Little take up – Variation in performance for buy and sell price – Lack of transparency and trust
    36. 36. Commodity activities• Market intelligence• Business Portal – Sharing contract information – One stop shop for suppliers – Identify opportunities to collaborate and save• Best Deals – more later• Commodity reverse auctions• Procurement Hubs – Sharing procurement resource across local authorities
    37. 37. Example: Best deals service• Compare over 3000 commodities – Over 2000% variation between price of a single commodity is relatively common• Market study to supplement the commodity comparison• OJEU watch of local authority notices• Portal of local authority contract information, register of contracts• Bring together in pro-active and re-active service – Working with clusters of authorities to migrate to lowest price – Advising authorities going to procurement of existing opportunities – Creating procurement hubs to aggregate local authority spend
    38. 38. Example: Commodity ReverseAuction• Procurements in Y&H, NE.• Savings of 25% to 40%• SME friendly – Increasing efficiency of SME usage – Reducing costs of the SME supply chain – Allowing SME’s to compete fairly
    39. 39. Social Care Social Care
    40. 40. A complex set of areas 0% Residential Care Homes 0% 4% 3% Adoption & Fostering 2% Nursing Homes 10% 14% Home Care Services Childrens Homes 42% Rest & Retirement Homes Childcare Services 45% Mental Health Centres Childrens Activity Centres Home Help Services - 41% Private other39%• A number of services – Some generic like needs assessment – Many specific• A number of age ranges of customers
    41. 41. Social Care• South East Market – Regional adult social care spend c. £673 – Big area of cost overrun – Big variation in unit costs• Low hanging fruit – e.g. Taxi services – C. £10 m per County area – Saving 40% with quality improvement• Learning Difficulty Placements – high cost specialist residential care average 12% saving – Cost model• Frameworks for specialist services – live-in domiciliary care and nursing dementia care up to 10%• Centralised buying of temporary worker time 10% to 20%• Roll out of the Kent Purchase Card – Savings and transparency of costs
    42. 42. Example: National Roll out ofLearning Difficulty Toolkit
    43. 43. National toolkit pilots 6 All regions taking part in pilot 11 6 9 6 Total 71 2 18 6 7
    44. 44. Timeline Phase Completion Date• Establish team including recruitment of necessary resources Completed• Property expert to develop a formula for property prices to be Completed included in the tool• Develop toolkit Completed• Develop guidelines for use of model Completed• Train pilot authorities Completed• Pilot authorities use on at least 20 cases each Ongoing• Pilot authorities feed back results of pilots End January 2008• Model and guidelines updated End February 2008• Estimate of savings achieved in pilot sites• Agree plan for ensuring continuing updates of national cost assumptions• Launch in Regions End March 2008• Regional training programmes established
    45. 45. Top 30 spend categories for all council spend Waste Management
    46. 46. seperation The Municipal Waste Flow Diagram Home Home Food Re-Use Composting Digestion Collection Kerbside Collection Civic Ameninty Bring Banks Treatment Material Recycling/Recovery Mechanical Biological Treatment Composting Facility (MRF) (MBT)Disposal and Marketing Final Reprocessing and Market Dispoal to Land Energy Recovery
    47. 47. Big legislative change• Landfill penalties – penalty per tonne land filled in excess of the authorities allowance – £150 per tonne• Landfill tax – Tax per tonne of rubbish land filled – £24 per tonne – Rising to £48 per tonne– Cost of landfill – “Gate Fee” – £25 per tonne
    48. 48. Waste Management• South East Market – Regional waste management services spend c. £427 million – England • Potential LATS fines of £2 billion to £3 billion - England • >60%% of collection contracts coming to market within 3 yr period• Reduce disposal costs – WDA collaboration: Northants / MK, Bucks / RBWM – Use of new technology to reduce disposal required – Standardisation of collection methods• Reduce the costs of collection – Collaborative procurement of commodities / reverse auctions – Use of e-tendering – Collaborative collection contracts• Reduce the costs of procurement – Use of e-tendering
    49. 49. Joining up with the ImprovementPartnerships“when two elephants compete it is the grass that suffers.”
    50. 50. RIP and RCE Governance• Regional Improvement • Regional Centre of Partnership Excellence• 8 Improvement • 5 Efficiency Partnerships Partnerships • Each partnership has• Each Partnership has – A lead authority – Board – Sponsor Chief Executive – Member Involvement – Sponsor Elected• Regional Board of Member Member & Officer – Steering Group of representatives to the regional representatives Regional Partnership • Regional Board of Chief Executives
    51. 51. SEIEP Partnership Structure SOUTH EAST IMPROVEMENT AND EFFICIENCY PARTNERSHIP Berkshire G T Corporate & Transactional Services E H (Led by Aylesbury) O E G M R E Commodity Goods & Services Hampshire/Isle of Wight A D (Led by Wealden) P HI P C A Buildings Construction Kent & Medway A R (Led by Hampshire) L T N P E Social Care A R (Led by West Sussex) Milton Keynes, Oxfordshire & Bucks R S T H Waste N I (Led by East Sussex) E P R S Surrey S Fire Improvement Partnership H I P S Progress Through PartnershipSussex (East & West Sussex/Brighton & Hove) (LSP’s)
    52. 52. Developing the SE CSR07 Regional StrategyJune July Aug Sept Oct Nov Dec Jan Feb 19th 31st 19th 30th 10th? 30th 24th SEIEP 8th Member RIP SEIEP Board RIP Panel NIS SEIEP SEIEP Board Network Approval by Network Published Conference sign-off email SEIEP Member/Of ficer Board Draft High Level Final DraftDevelop PID Business Plan Business (compile Plan• Timescales component bids)• Resources Subregional Strategies & Draft Detailed• Roles Phase 1 Bids Business Plan• Approval route• Dependencies on CLG SECE Workstream• Formats and detailed Strategies & Phase 1 Bids Bid Review & Approvalplans for consultation (to include RIP Boards and SECE• Acceptance criteria for Board approval of local plans)plan Rebuild of Evidence Base• Evidence based • SECE spend analysistemplate for proposals • Audit Commission & IDeA views • Summarise draft NIS etc.
    53. 53. Where have we got to and wherenext
    54. 54. South East Return on Investment £30,000,000 Analysis carried out by £25,000,000 external consultants atExpected Savings £20,000,000 end 2006 £15,000,000 Reasonable £10,000,000 £5,000,000 £0 East East of London North North South South West Yorkshire Midlands England East West East West Midlands & the Hum ber RCE SECE Figures – Jan 07 Return on £1 Social Care Corp Proc Buildings Waste CTS SECE £32 £42 £58 £40 £11 Total £26 £42 £58 £32 £3
    55. 55. SECE Budget Position£3,000,000 • Budget includes variances to original budget agreed in July • Spend running behind the curve due to£2,500,000 Core Team resources only recently coming on board Comms • All workstreams forecasting to spend Buildings budgets£2,000,000 Waste • £700k surplus predicted from original 3 yr Social Care funding of £6.8m – required to cover CTS 08/09 contract commitments£1,500,000 CGS • £10.7m evidenced savings to date • Expected savings over 5 years – High confidence £38 million£1,000,000 – Medium confidence £120 million £500,000 £0 Budget 07/08 Spend at end August
    56. 56. Where have we got to and wherenext?• Collaboration – Some key examples • Pan regional • Local • More to do to make this the norm …. • … Within and between regions• Proven Financial Impact – But the challenge is getting bigger – More to do • DCLG – “Challenging” • Easy things done?
    57. 57. How do we reduce lead time?• 2 year lead time common – for complex projects this can be longer• Engagement with local authorities• Development and negotiation of – contracts and – shared services arrangements• Some big wins already identified – Some are scaleable or repeatable – We need to work together on these• Quick wins largely identified – Effort must continue in getting them implemented
    58. 58. How do we coordinate activityand share knowledge?• National leads – Sponsor Chief Executive – National steering group • All regions represented • Roll out across regions – Links to government departments• Regional Directors Group• Monitoring and reporting projects – Consistent approach across regions – Clear and convincing information on benefits – Expanded to include improvement benefits• Subject specialist information – Waste Information Network – Business Improvement Package – Lawshare – Spend analysis• Events: conferences seminars and workshops
    59. 59. How do we coordinate with Government?• Nationally, DEFRA has identified six key priorities to support delivery of efficiency targets for waste management: Priority Best Placed Lead 1.Effective and efficient procurement of goods and RCE’s services that provide value for money by WCA’s 2. Effective Regional Procurement of large scale waste DEFRA recycling, treatment and disposal infrastructure projects 3.Promoting and supporting Local Authorities in recycling WRAP infrastructure projects and initiatives 4.Improving skills, knowledge and awareness RCE’s/ CIWM/ WRAP 5. Streamlined efficient systems and processes RCE’s 6. Service improvement programmes delivering “best in RCE’s / WRAP class” performance
    60. 60. How do we ensure we transplant success?• Framework procurement process in parallel with the first procurements across South East – Kent, Oxfordshire, Buckinghamshire• What variation would be possible? – A number of standard options under the framework – Some variables would be settled when the authorities contract is let e.g. cost of back door collection. But against a standard pricing calculator – Costs of what we are asking for would be transparent• How would a partnership of collection authorities work? – A contract is let which has a variable start date – For each authority the new contract would start as their existing contract ended – The contract as a whole would come into effect as the first authority entered into it
    61. 61. How do we capitalise on big wins?• Where are the big wins? – Large Buildings Framework – Insurance Municipal – Care Placements Pricing Tool – Regional shared procurement – LawShare Project – Business Process Improvement ….• What sort of expertise do we need? – Procurement and project management – Process improvement and service redesign – Market understanding and domain expertise• Can we also impact improvement? – Expertise used to manage collective arrangements – Add to this capacity to support activity in struggling authorities – Essential to ensure a minimum standard
    62. 62. Cooperative Public PurchasingDr Andrew LarnerRegional DirectorSouth East Improvement & Efficiency PartnershipAndew.larner@sece.gov.ukwww.sece.gov.uk

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