Innovating in Public Sector Procurement
Local Government Context
Nigel Kletz
Birmingham City Council
17 November 2010
Agenda
1. Introduction to Birmingham City Council
2. Relationship with Partners
3. Examples of Innovation
• Trading Models
• Susatainable Procurement Consortium
• Finditinbirmingam.com
• TVTTS
• Jobs and Skills Framework
4. Becoming a Commissioning Organisation
The Largest Local Authority in Europe
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One of most deprived areas in UK
12.5% of people are out of work
53,000 staff
£3.4bn budget
1 million customers
20 million+ visitors
132 service areas – 6 Directorates
65,000 Council houses
4 million library visits
14 million school meals
177,000 pupils taught
2,675 acres of parks
2,500km of roads
Understanding our Budget
Gross Income Budget £3,383m
Specific Govt
Grants
£928m
Council Tax
£324m
Sales &
Charges
£362m
Council House
Rents & Other
HRA Income,
£221m
Other £114m
DSG £774m
Formula Grant,
£660m
Understanding our Budget
Gross Expenditure Budget £3,383m
Controllable
Spend £1,744m
Statutory
Accounts £8m
DSG £774m
HRA and
Highways PFI
£181m
Capital
Charges
£228m
Housing
Benefits and
PTA Levy
£448m
Controllable Expenditure Budget
Gross Expenditure Budget by Portfolio £1,744m
by Cabinet Portfolio - £1,744m
Housing General Fund
£73m 4.2%
Leisure, Sport & Culture
£68m 3.9%
Regeneration £67m 3.8%
Protection £26m 1.5%
Children, Young People &
Families £573m 32.8%
Constituencies £84m 4.8%
Local Servs & Comm
Safety £113m 6.5%
Transport & Street
Services £121m 7%
Centre £257m 14.7%
Adults & Communities
£362m 20.8%
Comprehensive Spending Review
• >7% per year in real terms for 4 years – 28%
• Effect equivalent to £330m
• Council taxes ‘frozen’
• Schools budgets increase by 0.1% in real terms
• Local gvt – some of biggest cuts in public sector
• Birmingham one of 16 areas to operate ‘community
budgets’
• Changes in NHS/PCTs impact adult social care
• Expectations on what councils deliver will change
Birmingham City Council Wider Environment –
Relationship with Partners
West Midlands Emergency Services
BeBirmingham Influence
Academic Orgs
Health Trusts
Other West Mids LAs
Counties
Counties
Mets
Mets
Birmingham City Council
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Other West Mids LAs
Health Trusts
Third Sector Orgs
West Midlands Emergency Services
RIEP INFLUENCE
Mets
Counties
Other LA’s
Core Cities
OGC
Buying
Solutions
Sustainable Procurement Consortium
Purpose
• Will be a social enterprise, awarding locality based
purchasing agreements for use by
– Public sector
– Third sector
– Potentially private sector organisations.
• Focus on supply markets to create jobs and training
opportunities in target communities
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Supporting the local economy
Reducing CO2 and the effects of climate change
Minimising environmental impacts
Supporting the Third Sector
Stimulating innovation
• Birmingham Energy Savers – fitting photo-voltaic panels
Sustainable Procurement Consortium
Structure & Benefits
• Founder members from business, public and 3rd sectors
• High quality framework agreements
– Coverage matched to buyer and supply markets
– Innovative products and services
– Scope, process and criteria encourages local and sustainable
solutions
Benefits
• Lower acquisition costs allows procurement to focus on
core activity
• Increased social value through procurement
• Improved local supply chain
• Easier access to markets for suppliers
• Reduced tender costs
• Initiative to assist small local businesses by making
supply opportunities more visible
• Opportunities posted from BCC, our suppliers, other
public bodies, any private organisation
• Web based portal plus free networking and business
support events
• Registered uses alerted when relevant opportunity posted
• Since launch in May 2010 exceeded target of 5000 users
• Developing a supplier accreditation approach
TVTTS
Think Venues Think Third Sector
• On line directory of third sector meeting rooms
facilities across the city
• Council policy to avoid expensive external
meeting venues
• If internal meeting facilities not available use the
directory
• Outcomes
– Better pricing, Better quality, Better choice
– Delivers a social outcome
– Organisation now forming a cooperative
West Midlands Framework for
Jobs & Skills
Strategic Approach
The strategic application of contract clauses to the
end-to-end Procurement System
The specific use of
Contract Clauses
Voluntary
Agreements
Jobs and Skills
Charters
• The strategic approach
• Jobs and Skills outcomes embedded as core consideration throughout the City
Council’s procurement and commissioning processes.
• The specific use of Contract Clauses
• Voluntary Agreements
• Works with their existing contractors to secure commitments to specific jobs and
skills outcomes.
• Charters
• Council shares its strategic priorities and goals around jobs and skills with
current and prospective contractors
•Thresholds
Becoming a Commissioning Organisation
Left Brain - Right Brain
Is this how some
commissioners
see procurement?
Bureaucracy
Systems
Rule compliance
Is this how some
procurement people
see commissioning?
Risk taking
Breaking the rules
Informal
BCC as a Strategic Commissioner of Services
What this means…
• Challenging services we provide and how we provide them
• Re-designing service delivery where not working efficiently
• Working collaboratively with partners to common goals.
• Delivered by the org best able to achieve desired
outcomes
• All service areas to have a commissioning approach
• An independent challenge will be applied to commissioning
strategies and business cases.
BCC as a Strategic Commissioner of Services
Potential Benefits
• Cost of service clearly defined – no additional
overheads, asset or pension costs
• Access to skills that are limited in-house
• Greater flexibility to change terms of contract to
reflect changes in demand
• Price of service is competitively driven
• Equipment utilisation is often greater externally
– Larger client base gives economies of scale in use of
assets
• Access to technology and modern best practices
New Supplier Relationships
• 2006 Joint Venture with Capita for 10 years
– ICT and Transformation support
– Current conditions and learning stimulate renegotiation
• Major PFIs
– Veolia 25 year agreement to 2019
– 25 year Highways PFI valued at £2.7bn – largest PFI in UK
– 3 Schools PFIs
• Procurement published Service Delivery Options
detailing 13 ways opportunities for delivering services
• Co-ordinating with other internal service providers to
provide a joined up offer to others
The Government Spending Challenge
Business Transformation is the biggest change
BCC has ever faced, it created turmoil, uncertainty
and challenge for managers and employees.
We now need to find
THREE times the savings in
HALF the time
There is colossal change ahead – we need to
manage this change as leaders, with members,
with employees and with our customers.
Thank
You