Beyond Procurement Reform: Lessons and
Future Directions
IPWEA Strategic Procurement and Contract
Management Conference
6 October 2011
Paul Roche, Senior Project Manager,
Local Government Victoria
1
Beyond procurement?
2
Why did we start?
• Victorian local governments spend over $4
billion each year
– More than 50% of councils’ overall expenditure
• LG Procurement Strategy (2010)
– Identified between $180 – $350 million in annual savings
potentially available
• Capacity issues for strategic procurement
3
Procurement Excellence Program
(PEP) objectives
• Strengthen individual and organisational procurement
capacity
• Raise awareness of the importance of strategic and
operational procurement
• Support the development of “value add” procurement
approaches by the sector
• Create a framework for sustainable continuous
improvement
• Encourage and enable collaboration
4
PEP
Implementation
• Worked across 8 regions
• Conducted over 20 regional workshops
• Worked individually with 76 councils
• Developed 76 individually tailored two-year
procurement improvement ‘roadmaps’
• Conducted 73 senior management briefings
5
Strategic Procurement model for
Local Government in Victoria
A coordinated approach to strategically influence supply markets to support our
business objectives
6
What did we learn?
Low levels of strategic planning for procurement
7
…what did we learn (cont…)
Need for effective organisational structures
Most decentralised
councils looking to
increase control and
consistency of
procurement processes
‘Centre-led’ model
seems to be the best fit
for LG
8
…what did we learn (cont…)
Lack of measurement and reporting
Spend and invoices for top 20 suppliers
700
Improving quality
of spend
data is a consistent theme in
roadmaps 600
4,500,000.00
Total $ Spend
4,000,000.00
No. of Invoices
3,500,000.00
500
400
2,500,000.00
2,000,000.00
300
Number of invoices
1,500,000.00
200
1,000,000.00
100
500,000.00
SP AusNet
LEND LEASE REI
Kernow
Environmental
Serv.
PRIMAL
SURFACING
Maddocks
Department of
Treasury & Finance
Sita Australia
Woftam Group
Ultimate
Construction
Services
STREETWORKS
Casey Cardinia
Library
DUCON
JR PRYOR
HOLCIM
(AUSTRALIA)
FULTON HOGAN
INDUSTRIES PTY
LTD FULTON…
Urban
Maintenance
Systems
SURE
CONSTRUCTIONS
FULTON HOGAN
CONSTRUCTION
0.00
Thiess Services P/L
Annual spend (AUD)
3,000,000.00
0
‘What gets measured, gets done?’
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…what did we learn (cont…)
Need for training
Need for training at both
a procurement
professional level and
internal user level
Average training days =
5 year/council
10
…what did we learn (cont...)
Gaps in technology and finance systems
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…what did we learn (cont...)
Inconsistent supplier management
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Key opportunities identified…
1. Need to better coordinate procurement
activity across council
2. Opportunity to simplify and standardise
processes for contractors
13
Key opportunities cont…
3. Need to improve transactional
efficiency
– Cutting administration costs/ time through process
efficiency
4. Opportunity to drive better
performance from contracts
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Key opportunities cont…
5. Increased use of category management strategies
for areas of major spend
Supply Positioning
Hi
Major
projects
IT Networks
Reduce risk
Risk or
exposure
Reduce risk &
total cost
Stationery
Simplify
Plant
Reduce total
cost
Lo
Lo
Relative Cost
© PMMS Consulting Group
Hi
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Key opportunities cont…
6. Need to integrate procurement with
planning and budget processes
– Incorporate procurement roadmaps as part of business
planning
– Undertake cross project procurement planning on capital
works approval
7. Utilise collaboration and networking
opportunities
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Key opportunities cont…
8. Improve quality of spend data and
reporting capability
– Move beyond compliance reporting to reporting
procurement generated savings and performance
– Adopt standard set of category codes (UNSPSC)
– Supports regional benchmarking and aggregation
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Complimentary initiatives
From the original PEP a number of other
initiatives have been embraced.
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Social procurement
• Guidelines launched in October 2010
–
–
–
–
–
Benefits of SP
Models
Case studies
Legal guidance
Sample contract clauses
• Expert Support Program
Benalla, Brimbank, Darebin, Glenelg, Hume, Maribyrnong,
Moonee Valley and Whittlesea councils
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Social procurement
• Expert Support Program (ESP) funded and
developed by LGV, Community Development
(DPCD) DHS and Social Traders
• ESP outcomes include:
– overarching framework for integration with council
planning and mainstream procurement
– social procurement implementation toolkit - a web
based product comprising guides, strategies,
templates and support.
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Engineering standards program
Victorian Regional Infrastructure Design Manual
• 36 councils signed up
Growth Areas Engineering Standards Manual
• Partnership with six growth councils, LGV and GAA
• Final Standards now being for adopted by 6 growth area councils
Next Steps
•
•
•
•
Sustainable project governance
Training and capability development
Integration into planning schemes
Green engineering standards project
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Review of Procurement Guidelines
• Many submissions have now been
received
• Staff will continue to collate responses
and identify required changes
• Draft issued to the sector for comment
December 2011.(Closing February 2012)
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DRIVERS OF CHANGE
Regional Procurement Excellence Networks (RPENs)
Special
Interest
Group
Loddon
Mallee
Hume
Barwon
South
West
Gippsland
Grampian
x2
North
West
Metro
East
Metro
South
Metro
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The broader reform agenda
CURRENT PROJECTS DELIVERED BY
MAV:
1. Regional asset management
Program
2. Local Government Sustainability
Program
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The broader reform agenda…
The National Assessment Framework
for Asset Management and Financial
Planning. (NAF)
• Implementation discussion paper due for release in
coming months
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National Assessment Framework (NAF)
• Based on 11 elements of sustainability
Asset Management Maturity Model
Asset Management Capacity
Best Practice
Advanced
Core
Intermediate
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Time
NAF self assessment
Each council must undertake a self
assessment:
• Meets requirements
• Partially meets requirements
• Not substantially progressed
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The broader reform agenda
State commitment to:
Asset Management and Financial
Sustainability
Improving financial and resource
management capabilities and
business processes
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State initiatives:
Theme: Aligning capacity, strategy and
sustainable outcomes
• Procurement in Practice
• Value adding through Internal Audit
• Building Best Value Capacity
• Aligning Business Practices and Performance
Reporting
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Aligning capacity, strategy and
sustainable outcomes
Our approach:
–
–
–
–
‘in collaboration’ with the sector
‘practical application’ of tools
volunteers welcome
non volunteers ‘passively co-opted’
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Take home messages on
procurement:
• A strategic approach to procurement can deliver real
added value
• Procurement needs to move beyond a compliance
function
• Procurement staff need to become respected business
partners
• A whole of organisation approach is important
• Don’t forget the roadmap!
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Take home messages on
procurement:
• Contribute to reform discussions on legislation,
guidelines, best practice
• Have your aggregators work for you
• Promote opportunities with your neighbours
• Support RPENs
• Support your colleagues, it is a long journey
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Further information
Amelia Chapman
Acting Project Manager- Green Light Plan &
Procurement
Amelia.chapman@dpcd.vic.gov.au
Amanda Minniti
Senior Project Officer- Social Procurement
Amanda.minniti@dpcd.vic.gov.au
Paul Roche
Senior Project Manager – Sector Development
Paul.roche@dpcd.vic.gov.au
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