Issue - meetings

A presentation on the Procurement Service by Ross Duguid, Acting Assistant Director, Procurement and Commissioning.

24.1     The Chief Operating Officer introduced the report and the Acting Assistant Director for Procurement & Commissioning. The Procurement Service is an integrated service which adopted a new structure in April 2017 and covers the procurement function for all three Orbis Partners. The restructure will deliver 10% savings on the operating budget, in addition to previous shared service savings.

24.2     The Acting Assistant Director Procurement & Commissioning gave a presentation to the Committee regarding the current Procurement Service activity. The key points of the presentation included:

• East Sussex County Council (ESCC) spends around £500million per annum and around 50% is spent with local suppliers (the bulk being for Adult Social Care). The Procurement Team is actively involved in 70% of contracts and over a third of expenditure is with the top 25 suppliers. The Procurement Team also aim to manage the expenditure with the ‘tail’ of a large number of smaller suppliers/contracts through the Sourcing Solutions team.

• The Orbis integration process has included appointing a joint Head of Service and there is now a joint management team and a single integrated structure. The structure is designed to ensure it is fit to operate across the three different organisations (East Sussex County Council, Surrey County Council and Brighton and Hove City Council). There are dedicated procurement leads in each organisation.

• The move to the revised structure has enabled the Team to deliver better value across the three organisations and to be more strategic. The Service has been able to develop a category management team and to start to routinely deliver longer term strategies for procurement. This is supported by better commercial analysis and information on contract coverage and renewal.

• The Procurement Team aims to be actively involved in each service area to improve contract management and performance monitoring. A dedicated contractor and supplier management team has been introduced to provide better contract management over the life cycle of a contract.

• The Team measure the value that procurement delivers through four types of value:
  • Cashable – reducing the cost of services
  • Financial - mitigating cost increases (i.e. not cost releasing)
  • Quantifiable - Social value (social value measurement charter) and value added
  • Non-quantifiable – where risks have been mitigated.

24.3     The Committee asked about the level of due diligence that is carried out when letting contracts. The Chief Operating Officer responded that the level of due diligence varies with the value of the contract and the risks associated with it. For higher value contracts there is a strategic sourcing plan and tenders are reviewed by a board made up of representatives from Procurement, Legal and Finance. The Sourcing Solutions team has been set up to manage the ‘tail’ of lower value expenditure with smaller suppliers.

24.4     The Committee asked what capacity the Procurement Service has to provide a service to other customers. The Acting Assistant Director Procurement & Commissioning explained that the Team already establish procurements and name other authorities so they can take part in joint procurement. The Team want to prove the service  ...  view the full minutes text for item 24

Report by the Chief Operating Officer

40.1     The Chief Operating Officer introduced report and Ross Duguid, Procurement Category Manager, to the Committee. The restructuring of the Procurement Team, into the new target operating model of four key work areas, has been completed. The report outlines the efficiency savings and cost avoidance achieved through the work of the Procurement Team. The Team have also been working to deliver social value from key contracts.

40.2     The Committee asked for clarification on the achievement of revenue and capital savings targets and whether the savings figures in the report are notional rather than real cash savings.

40.3     The Chief Operating Officer explained that the target for the current year (2016/17) was £6.1m and so far the Team have achieved £3.9m in savings across capital and revenue. The savings figures are mixture of cash and notional savings to try and measure the benefit of having a Procurement Team (i.e. the costs saved and avoided by the intervention of the Procurement Team, compared with not have a procurement function). On projects like Hastings Library the £426,568 savings is the difference between predicted cost (estimated by an external consultant) and what the project was delivered for. The Procurement Category Manager stated that Procurement Team could examine different ways of presenting savings information for future reports, if that would be helpful.

40.4     The Chief Operating Officer outlined that the Procurement Team were working on the savings forecast for 2017/18, which should be completed by Christmas. The Committee asked if it could have sight of the first draft of 2017/18 projected savings at RPPR Board in December. The Procurement Category Manager confirmed that it should be possible to share a first draft of the savings for 2017/18. Some of the procurement savings are hard to forecast and may be more speculative in nature when they are based on procurement exercises.

40.5     The Committee asked how the Council manages inflation in contracts and how this takes into account the market pressures on goods and services. The Procurement Category Manager outlined that the Procurement Team look at inflation projections for the various market sectors, and use market intelligence to try and mitigate inflationary pressures. The combined purchasing power of the Orbis Partners is having an effect and is helping to keep costs down. The Procurement Team is using market intelligence to examine different ways of procuring goods and services, and the Team is also working with contractors to achieve efficiencies in the cost of existing contracts.

40.6     The Committee cited an example of a school where it was paying for electricity on a base load estimate that appeared to be too high. It asked if this was commonplace across schools. The Procurement Category Manager said he would investigate and report back to the Committee.

40.7     The Committee asked why the Cradle Hill School development project did not include the provision of a safe road crossing point. The Chief Operating Officer explained that the Procurement Team is not involved in design of road safety measures, and would not  ...  view the full minutes text for item 40

Report by the Head of Procurement

55.1     The Committee considered a report by the Chief Operating Officer which provided an update on the current savings achieved by the Council through procurement activity as well as progress on other key activities within the Procurement Service, including a snapshot of all live contracts entered into by the County Council. 

55.2     In respect of the savings targets, the Head of Procurement set out that the slippage in some of the capital projects had led to the subsequent slippage in savings.  The Employability and Skills Plan target was acknowledged to be unrealistic, in the light of the nature of many of the contracts entered into by the Council (eg. ICT software licences) and it was confirmed that the target would be reworked. 

55.3     The use of design and build contracts was discussed by the Committee, and in particular the risk of the transfer of ongoing liabilities to the revenue budget in respect of maintenance which could have been addressed at the capital stage and during construction. The value of maintaining control of the design and value engineering aspects of a project were highlighted.

55.4     The development of social value was welcomed by the Committee, and the linkage with targets for increasing employability of Looked After Children and NEETs was explored.  The Head of Procurement set out that a pilot was in development to put a monetary value, as well as a social value, on such matters.  

55.5     The Committee discussed the Broadband contract, worth £25m, in terms of the expectations of the public and the performance of the provider.  The effect on the County’s economy, and in particular people operating businesses at home in rural locations, was discussed, as was the subsequent effect on the County Council’s finances in terms of retention of business rates.   The Head of Procurement undertook to circulate figures on the past and projected spend on the contract.    

55.6     The Committee RESOLVED to (1) note the savings achieved by the Council through procurement activities in 2015/16 and the current forecast for 2016/17;

(2) note progress on other key activities within the Procurement Service;

(3) thank Laura Langstaff and the Procurement team;

(4) welcome the social value indexes and encourage their further development and reporting;

(5) express caution regarding design and build contracts;

(6) express concern regarding the Broadband rollout contract, having noted the upcoming meeting of the Economy, Transport and Environment Scrutiny Committee; and

(7) welcome the detail provided on the Council’s live contracts, and to request further detail on how much had been spent to date on each contract in future reports.  

Report by the Chief Operating Officer

6.1       The Committee considered a report by the Chief Operating Officer which provided an update on the ongoing development of Procurement and Category Management and an update on performance.  Laura Langstaff, Head of Procurement, set out the development of the Orbis project, and its alignment with corporate strategies, with a particular focus on Social Value.   

6.2       The Committee discussed:

·        the desirability of more regular reporting;

·        whether the Performance Indicators were sufficiently quantifiable;

·        the differential in savings identified at Surrey and East Sussex County Councils;

·        the link between Social Value and the Employability and Skills strategy, to encourage the development of apprenticeships and local spend;

·        design and build contracts for capital projects, and the potential for losing a degree of control in a tried and tested procurement approach.  

6.3       RESOLVED (1) to note the report; and

(2) to request an update report with the Performance Indicators completed at a future meeting.