Cabinet Member Report
Decision Maker:
Cabinet Member for Customer Services and
Transformation
Date:
18th January 2012
Classification:
Not for publication
Title:
eSourcing
Wards Affected:
None
Policy Context:
Service Delivery
Financial Summary:
The purpose of the contract is to deliver an “end
to end “ eSourcing Platform encompasses spend
analysis, strategic sourcing, procurement
(including RFQ), evaluation, contract
management, compliance, supplier performance
management, and programme management
solutions in an integrated suite. The total cost of
the solution over 2 years is £311,000 including
software, professional services to support
implementation and training.
Report of:
Chief Operating Officer
1.
Executive Summary
1.1
The purpose of the contract is to deliver an “end to end “ eSourcing Platform.
eSourcing encompasses spend analysis, strategic sourcing, procurement (including
RFQ), evaluation, contract management, compliance, supplier performance
management, and programme management solutions in an integrated suite.
1.2
The introduction of eSourcing was a critical tool for procurement as identified as part of
David Loseby’s reform programme. eSourcing was not progressed at the time.
1.3
eSourcing remains an important way of improving visibility and control of spend and as
a means to improve overall procurement processes.
1.4
The Athena Managed Services requires Westminster City Council to transition towards
eSourcing which will ultimately be delivered as part of the Athena Programme.
1.5
In addition to the strategic reasons for introducing eSourcing there are some short term
requirements including:-
1.5.1
eTendering and eEvaluation which is a subset of eSourcing is required to
deliver Athena Managed Services.
1.5.2 Westminster City Council need to create improved visibility of contracts let
through procurement and the purchasing activity against those contracts in the
Ariba P2P Platform that Westminster already uses via its relationship with
Vertex Data Science Ltd.
1.6
The market has been assessed and pricing obtained from similar organisation
providing eSourcing. Ariba has been identified as being able to provide the best value
and also leverages our current relationship with them for the P2P Platform.
1.7
The technology has some limitations. However Ariba have agreed that WCC will
collaborate with Essex County Council and become an Ariba “beta site” or partner
customer for development of additional functionality to meet wider requirements of the
public sector. This will be sponsored by Barbara Moorhouse, Chief Operating Officer,
and will enable the Council to influence the next release of software.
1.8
The total cost of the solution is £311,000 including software, professional services to
support implementation and training. Money has been allocated in previous budgets
and some will come from the Athena Managed Services Programme therefore is
provided within existing budgets. No new funding is required.
1.9
The contract will be for the period of 2 years to commence 1st December 2011.
1.10 eSourcing requires Cabinet Member endorsement given the scale although will be
procured through the Vertex Data Services contract, therefore a formal Contract Notice
will not need to be published or tenders invited. No Waiver of the Procurement Code
will be required. A change request will be required to be raised to amend the Vertex
contract.
2.
Recommendations
2.1
That this report be exempt from disclosure by virtue of the Local Government Act 1972
Schedule 12A, Part 1, paragraph 3 (as amended), in that it contains information
relating to the financial or business affairs of any particular person (including the
authority holding that information).
2.2
That the Cabinet Member approve the variation of the existing contract with Vertex
Data Services to allow for the provision of an “end to end” eSourcing Platform in the
sum of £311,090 for the period of two (2) years to commence in December 2011.
3.
Reasons for Decision
3.1. The Customer Services Initiative (CSi) contract delivered by Vertex Data Science
Limited (in part subcontracted to Enterprise and CapGemini) includes the provision of a
number of services including the Procurement Team (part of which is subcontracted to
Enterprise) and the delivery of the current ARIBA P2P system.
3.1.1 The CSi contract was awarded in November 2002 for a period of 10 years with
an option to extend for a further 5 years. A variation of the CSi contract was
recently agreed to extend ICT, Customer Services and Banking and Control
services beyond November 2012. Human Resources delivery and services
delivered by the subcontractor Enterprise were also due to expire in November
2012 but are also likely to be extended.
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3.1.2 Westminster City Council is proposing to amend the contract to include the
provision of an eSourcing Platform.
3.2
eSourcing as an “end to end” solution encompasses spend analysis, strategic sourcing,
procurement (including RFQ), evaluation, contract management, compliance, supplier
performance management, and programme management solutions in an integrated
suite.
3.3
The cost of the solution over two years is £311,090.
3.4
The contract will be for the period of two years to commence December 2011.
3.5
eSourcing will be delivered during the contract period as a proof of concept in order to
demonstrate to Westminster City Council and TriBorough the benefits of technology.
3.6
Westminster will agree to be a beta site in conjunction with Essex County Council in
order to input into the development of the existing solution. This will be sponsored by
Barbara Moorhouse, COO.
3.7
eSourcing has been defined as a separate lot under the Athena Managed Services
Project but would not be delivered until 2013.
3.8
An eSourcing solution is required to manage the tender and evaluation elements of the
procurement process.
3.9
The project drivers are as detailed below:3.9.1
eSourcing technology as an enabler will support WCC transformation to a fully
commissioning-based organisation.
3.9.2
eSourcing enables the automation of the sourcing process, driving savings
through effective procurement, encompassing spend analysis, strategic
sourcing, evaluation, contract management, compliance and supplier
performance management. The alternative is to revert to a paper based manual
system that is resource intensive and prone to errors and delays.
3.9.3
eSourcing drives ongoing total cost reductions, typically capturing savings of
14% year on year, brings 80% or more of spend under management control
and optimises the supply base to balance cost, performance and risk.
3.9.4
Westminster City Council does not have reputable spend visibility at a category
or supplier level that can provide the analysis and spend granularity to drive
increased savings through strategic sourcing.
3.9.5
Westminster City Council does not have a complete view of all key procurement
activity across the council or a fully populated and actively managed contracts
register which supports compliance, governance and transparency.
3.9.6
Strategic collaboration with TriBorough will significantly benefit from the right
technology solution.
3.9.7
Costs of £27,000 have been identified to purchase technology to support the
tendering and evaluation of the Athena Managed Services project. These
services will be now be provided by the Ariba eSourcing Platform and the costs
will now be absorbed by the proposed contract.
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4.
Background
4.1
The Pan London Procurement Portal (P4L) does not meet the Council’s needs for
eSourcing. WCC does not use the portal for eTendering. London Councils may
suspend the services of P4L due to supplier performance issues impacting the wider
programme.
4.2
At a TriBorough Heads of Finance and Heads of Procurement Meeting on 9th
November 2011 it was confirmed that the Ariba eSourcing Platform would enable
Westminster City Council to transform its approach to sourcing and implement best
practice prior to the outcome of the Athena Managed Services Programme.. It was
agreed that Westminster City Council would not implement Due North currently utilised
by the London Borough of Hammersmith and Fulham. It was noted that the Royal
Borough of Kensington and Chelsea currently does not utilise eSourcing.
4.3
Pricing has been provided by BravoSolution; they have quoted an annual subscription
of £133,000 and estimated professional services costs of £69,900.
4.4
Pricing has been provided by Emptoris; they have quoted an annual subscription of
£150,000 and estimated professional services costs of £100,000
4.5
Ariba Inc has proposed a “proof of concept” for eSourcing with an annual subscription
of £121,000 and professional services costs of £35,000.
4.6
Westminster City Council has an indirect relationship with Ariba Inc via Vertex Data
Science for the provision of technology to support P2P activity including the following
modules; Ariba Buyer, Ariba Invoice; Ariba Contract Compliance and Ariba eForms.
4.7
Ariba Inc are a leading provider of eSourcing technology as confirmed by major
technology research organisations including The Forrester Wave eSourcing and
Gartner Magic Quadrant: see attached research reports in Appendix 1, dated 2009 and
2008 respectively.
4.8
The eSourcing services will be procured through Vertex Data Services therefore a
formal Contract Notice was not published and tenders were not invited. Therefore a
Waiver of the Procurement Code will not be required.
4.9
BravoSolution had quoted £27,000 to provide an eSourcing capability including
tendering and evaluation only in order to support the Athena Managed Service
Programme. These services will now be delivered utilising Ariba Inc via Vertex Data
Services as opposed to contracting with Bravo Solution and the budget will be
transferred to this project.
4.10 Ariba have agreed that WCC will collaborate with Essex County Council and become
an Ariba “beta site” or partner customer for development of additional functionality to
meet wider requirements of the public sector. This will be sponsored by Barbara
Moorhouse, Chief Operating Officer, and will enable the Council to influence the next
release of software..
4.11 The Ariba agreement includes access for both LBHF and RBKC who will be able to use
the solution for TriBorough events. Mark Cottis, eProcurement lead for LBHF has
agreed to participate in some of the Ariba workshops when WCC commence
implementation of the platform.
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4.12 Barbara Moorhouse, COO, has also agreed with her counterparts that Ariba could be
used for some TriBorough sourcing analysis and opportunity assessments.
5.
Financial Implications
5.1
This work has been planned for some time, although the correct delivery methodology
has only been developed recently. Finance foundations, Project Athena and
procurement all have earmarked budget amounts that could be attributed to this project
as it is a requirement on the path to the Athena integration requirement. As such, at the
moment, the total budget is located in three places.
5.2
£284,090 has been identified by the Chief Operating Officer from the above budgets to
fund the eSourcing.
5.3
Athena Managed Services have agreed to contribute the shortfall of £27,000 to the
costs of the contract based on the costs of procuring eSourcing services to support the
programme. See 4.9
5.4
The budget will be allocated to Information Systems.
5.4.1
IS will be accountable for the funding of the eSourcing Platform subject to
funding being made available in full to meet the financial implications of this
programme.
5.4.2
The technology is being delivered as a managed service and therefore
includes all set up costs for the following:




Data Migration
Training core team
Based on “train the trainer” program for 3 – 5 key users
Program Set Up
Link to Procure4London Procurement Portal for Adverts
5.4.3
A Contingency of £10,000 has been allowed for in the event of additional
professional service/training requirements.
5.4.4
An allocation has been made for integration from WIMS to the Ariba Spend
Visibility module.
5.4.5
The project has been fully costed and accounts for all transition costs
including data migration.
5.4.6
Ariba have proposed an approach that allows WCC to roll out all functionality
but in the initial six months there will be no fees for eSourcing and eTendering
(Option A). Only if WCC decide to utilise and roll out eSourcing and
eTendering after the initial 6 months will fees be payable (Option B). WCC are
currently proposing that eTendering would be rolled out and therefore option B
would apply.
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5.4.7
Budget Requirements:
Option A: Assumes WCC rolls out eSourcing after 6 months
Service Description
Subscription - inc Sourcing professional for
Athena (5 Users)
Subscription - Sourcing professional only
additional 45 users opt in*
Professional Services
Contingency
Sub Total
Vertex
Start-Up
Total
2011/12
£000s
2012/13
£000s
2013/14
£000s
Totals
£000s
50.0
100.0
50.0
200.0
0.0
17.5
10.0
77.5
5.4
4.0
86.9
31.5
17.5
0.0
149.0
10.4
0.0
159.4
10.5
0.0
0.0
60.5
4.2
0.0
64.7
42.0
35.0
10.0
287.0
20.1
4.0
311.1
Option B: Assumes WCC does not roll out eSourcing after 6 months
Service Description
Subscription - inc Sourcing professional for
Athena (5 Users)
Subscription - Sourcing professional only
additional 45 users opt in*
Professional Services
Contingency
Sub Total
Vertex
Start-Up
Total
2011/12
£000s
2012/13
£000s
2013/14
£000s
Totals
£000s
50.0
100.0
50.0
200.0
0.0
17.5
10.0
77.5
5.4
4.0
86.9
0.0
17.5
0.0
117.5
8.2
0.0
125.7
0.0
0.0
0.0
50.0
3.5
0.0
53.5
0.0
35.0
10.0
245.0
17.2
4.0
266.2
5.4.8 Subscription fees could potentially be recovered from service departments on an
annual or quarterly basis based upon the number of procurements processed through
the tool. For example, for Subscription Fees of £117,500 and 300 projects per
annum, the cost per procurement for each service department is £391. This
methodology is appropriate as there will be significant savings made by service areas
in their procurement processes by using the managed service. This is just staff time
saved and does not include benefits from more efficient procurement.
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6.
Legal Implications
6.1
eSourcing as a managed service will be delivered via the Council’s existing contract
with Vertex Data Science. A Change Request has been raised with Vertex.
6.2
Sharpe Pritchard has confirmed that there are no legal implications but have provided
commentary on the proposed terms and conditions with Ariba which will be reviewed
with Vertex Data Science.
6.3
Sharpe Pritchard have confirmed that risks of challenge would increase if this system is
procured through the CSi Contract as part of the Procurement Services and then
shortly afterwards the Procurement Services are removed from the CSi Contract. This
would look like an attempt to avoid the application of the Regulations.
6.4
As things currently stand the Procurement Services are due to remain in the CSi
Contract for another year and could, in theory at least, be extended past this through
use of the Change Control Procedure given that the CSi Contract is not due to expire
until October 2014.
6.5
The Council’s Chief Procurement Officer confirms that the Procurement Services will
not be removed from the CSI Contract although the Council reserves the right to make
minor changes in staffing levels.
6.6
Due to difficult negotiations relating to updated licensing arrangements for the Ariba
P2P System Vertex Data Science will be required to refer any commercial
arrangements with Ariba to their Board for approval. The recommendations in this
report are therefore subject to that approval being given.
6.7
The Terms and Conditions are as per the Vertex Terms of Purchase (2006) governing
the Ariba Order Forms for the P2P Platform.
6.8
The Ariba Order Form has been reviewed by WCC in conjunction with Sharpe
Pritchard and minor changes made.
6.9
A revised Ariba Order Form including commercial terms agreed by WCC has been
forwarded to Vertex for approval as part of Change Control.
6.10 The Council’s , Corporate Information Manager responsible for data has confirmed that
she is “satisfied that there are no real data protection issues”.
7.
Consultation
7.1
Not Applicable.
8.
Other Implications
8.1
None.
If you have any queries about this Report or wish to inspect any of the Background
Papers please contact: Anthony Oliver, Chief Procurement Officer
BACKGROUND PAPERS

Gate Review Panel Contract Award Report dated 17 November 2011
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For completion by the Cabinet Member for Customer Services and Transformation
Declaration of Interest
I have <no interest to declare / to declare an interest> in respect of this report
Signed:
Date:
NAME:
State nature of interest if any …………………………………………………………..……
…………………………………………………………………………………………………..
(N.B: If you have an interest you should seek advice as to whether it is appropriate to make
a decision in relation to this matter)
For the reasons set out above, I agree the recommendation(s) in the report entitled
‘eSourcing’ and reject any alternative options which are referred to but not recommended.
Signed ………………………………………………
Cabinet Member for Customer Services and Transformation
Date …………………………………………………
If you have any additional comment which you would want actioned in connection with your
decision you should discuss this with the report author and then set out your comment below
before the report and this pro-forma is returned to the Secretariat for processing.
Additional comment: …………………………………….……………………………………
……………………………………………………………………..……………………………
…………………………………………………………………….…………………………….
If you do not wish to approve the recommendations, or wish to make an alternative decision,
it is important that you consult the report author, the Head of Legal & Democratic Services,
Chief Operating Officer and, if there are resources implications, the Director of Human
Resources (or their representatives) so that (1) you can be made aware of any further
relevant considerations that you should take into account before making the decision and (2)
your reasons for the decision can be properly identified and recorded, as required by law.
Note to Cabinet Member: Your decision will now be published and copied to the Members of
the relevant Policy & Scrutiny Committee. If the decision falls within the criteria for call-in, it
will not be implemented until five working days have elapsed from publication to allow the
Policy and Scrutiny Committee to decide whether it wishes to call the matter in.
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