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

1. Cooperative Public Purchasing
Dr Andrew Larner
Regional Director
South East Improvement & Efficiency Partnership

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. RCE History

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. How the South East Centre (SECE)
Works

6. The South East Region
• 55 Districts
• 12 Unitaries
• 7 Counties
• 5 Police Authorities
• 8 Fire Authorities
• SHA’s and PCT’s

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. 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. Priorities and Prioritisation
Finding the right levers

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. 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. Spend (£ million)
-
Co
ns
2,000
4,000
6,000
8,000
10,000
12,000
14,000
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Master Category
ar Lo
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Ev la
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Master Category Spend Breakdown
le
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ed
ica
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Co
m Fu
m el
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ry
Master
spend by
Category
across all
aggregate
councils in
c£45 billion.
extrapolated
extrapolated
total spend is
England. The
local authority

13. Level 2 Supplier Spend Analysis
Buildings
Social Care
Waste Management
Commodities appear throughout

14. Value from top suppliers

15. Value from top transactions

16. From Thompson to Gershon

17. External Spend – National
Overview
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, Goods
These 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. Benchmarking simple prices

19. £ 1000
Ha
Is
le m
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
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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 children's
Unit Cost
Saving - Upper Quartile

20. Business Review methodology
Candidates for early review…
High
*
*
* *
*
Level *
of *
Spend
* *
* *
*
*
Low
Low Price fluctuation High

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. 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. 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. 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. Starting with Social Care
England
Avg. LA 1 LA 2 LA 3 LA 4
Residential and nursing
care and intensive
home care £515.0 £500.0 £578.0 £583.0 £730.0
Residential 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 £520.0
Residential care for older
people £429.0 £408.0 £456.0 £481.0 £498.0

26. Key Projects

27. Top 30 spend categories for all council spend
Buildings

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. Pulling the levers: Buildings
Construction 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. 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. Corporate Services
Corporate Services

32. Corporate and Transactional
Services
• 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. Commodity Goods and Services
Commodity Goods and Services

34. Category CGS Spend
Extrapolated National Temporary and Agency Staff
Building Construction Materials
£1,995,649,352
£1,016,584,553
Commodity 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 £169,381,986
Extrapolated national spend of £10.6 billion Stationary £155,082,049
Sports and Playground £144,315,463
Advertising £138,626,225

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. 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. 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. Example: Commodity Reverse
Auction
• 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. Social Care
Social Care

40. A complex set of areas
0%
Residential Care Homes
0% 4% 3%
Adoption & Fostering
2% Nursing Homes 10%
14%
Home Care Services Children's Homes
42%
Rest & Retirement Homes Childcare Services
45%
Mental Health Centres
Children's Activity Centres
Home Help Services - 41%
Private other
39%
• A number of services
– Some generic like needs assessment
– Many specific
• A number of age ranges of customers

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. Example: National Roll out of
Learning Difficulty Toolkit

43. National toolkit pilots
6
All regions taking part in pilot
11
6
9
6 Total 71
2
18
6
7

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. Top 30 spend categories for all council spend
Waste Management

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. 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. 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. Joining up with the Improvement
Partnerships
“when two elephants compete
it is the grass that suffers.”

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. 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 Partnership
Sussex (East & West Sussex/Brighton & Hove)
(LSP’s)

52. Developing the SE CSR07 Regional Strategy
June 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 Draft
Develop 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 & Approval
plans 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 analysis
template for proposals • Audit Commission & IDeA views
• Summarise draft NIS etc.

53. Where have we got to and where
next

54. South East Return on Investment
£30,000,000
Analysis carried out by
£25,000,000
external consultants at
Expected 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. 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. Where have we got to and where
next?
• 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. 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. How do we coordinate activity
and 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. 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. 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. 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. Cooperative Public Purchasing
Dr Andrew Larner
Regional Director
South East Improvement & Efficiency Partnership
Andew.larner@sece.gov.uk
www.sece.gov.uk