argyll and bute council · the member of the authorities buying consortium to identify...

Argyll and Bute Council eProcurement Business Case

ARGYLL AND BUTE COUNCIL

eProcurement Business Case

Judy Orr/Alan Brough ICT and Financial Services 20 November 2003


Contents Page 1. Overview eProcurement Proposal 1 2. eProcurement Scotland Service 2 3. Collaboration through the authorities buying consortium 4 4. Effect on procurement for Argyll and Bute Council 8 5. Business Case Summary and Funding 10 6. Analysis of Benefits 14 7. Analysis of costs 18 8. Implementation Plans 19 9. Risks 22 10. Alternatives 23


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1. Overview of eProcurement Proposal 1.1 This paper sets out a proposal for addressing eProcurement requirements within

the context of Argyll and Bute Council’s membership of the authorities buying consortium (abc) and the eProcurement Scot@nd (ePS) service offered through the Scottish Executive/CAP Gemini Ernst & Young (CGEY). This follows on from Amey’s assessment that the Council was failing to demonstrate best value through the lack of a proactive procurement strategy.

1.2 abc made a joint approach to the Scottish Executive and has secured £2m of

funding subject to a minimum of 8 councils participating in the ePS service. This funding is being supplemented by £1m from abc’s reserves. The combined £3m funding is to be used to support both abc’s and individual member authorities’ costs of implementing the ePS service. It therefore represents a significant opportunity for Argyll and Bute Council to move forward with eProcurement as the total costs are being subsidised.

1.3 CGEY have carried out a Scope and Readiness Assessment (S&RA) to identify

what we as a Council need to do to implement the system and to provide us with the detailed costs and benefits to allow us to make an informed decision as to whether we wish to sign a contract for the service. The S&RA was carried out during September and October 2003 and this report summarises the findings.

1.4 The Scoping and Readiness Assessment included the following key activities:

• Interviews with key Council officials involved in procurement. • Analysis of the Council’s purchasing for 2002/03 financial year and

categorisation into commodities for comparison with the other West of Scotland Councils in order to identify collaborative buying opportunities.

• Review of the Council’s current purchasing processes and outline. design of new processes for use with the ePS system.

• Participation in opportunities workshops facilitated by abc to identify potential savings by commodity groups through collaboration.

• Review of technical best practice investigation and infrastructure design.

1.5 The eProcurement proposal can be described in summary as follows. The ePS

service will store details of products/services available from Council suppliers. This may range from sophisticated supplier catalogues with pictures and detailed descriptions of products to simple product lists with prices. Someone wishing to place an order with a supplier will log onto this system, select the product they wish to order and send their order electronically to the supplier. We retain details of the order in a purchasing database and use this to record the commitment in the General Ledger. When the goods are received, the receipt is recorded and matched against the order on the system reducing the commitment and creating an accrual record in the budget. Then when the invoice is received, it is entered onto the system and matched against both the purchase order and the receipt, and the matched approved invoice is passed for payment automatically to our payables system, reducing the accrual and recording the


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actual expenditure instead. So it is basically a system for creating, recording and matching orders, receipts and invoices. At present we issue orders manually and only formally record invoices once they have been approved for payment.

1.6 The ePS system is essentially the same as any other eProcurement system

except that it is intended to be the procurement system of choice for the Scottish Public Sector. This removes the necessity to manage catalogues on an individual supplier/purchaser basis reducing cost to suppliers and vastly reducing the effort to ourselves to load supplier details. Use of this system, enforcing commonality of product description and categorisation, will act as a catalyst to the member of the authorities buying consortium to identify collaborative buying opportunities and drive prices down through better buying. As a small Council, any model that strengthens abc and allows us to benefit from the collective buying power of all the West of Scotland authorities is a major benefit to us. We have over £60m of our expenditure not on abc contracts, which is with suppliers also used by other West of Scotland Councils – a great opportunity.

2 eProcurement Scotl@nd Service 2.1 The ePS service is a hosted solution, run by Elcom on their mainframe in Boston

using the Pecos Internet Procurement Manager. CGEY provides consultancy to help organisations through the implementation process. A seven-year principal agreement was concluded between Scottish Ministers and CGEY in November 2001. Elcom are sub-contracted to CGEY. To join, you have to sign a tripartite agreement with Scottish Ministers and CGEY. There is no need to undertake an EU tendering process because of the tendering conducted by the Scottish Executive. There are no charges to suppliers for holding their catalogues and no significant barriers for them in achieving this.

2.2 To date, 8 public sector organisations are live using the ePS system, including 3

local authorities and some health trusts. Approximately 106 suppliers already are or are about to offer their products through catalogues loaded onto the system including some of our larger suppliers such as Lyreco (Office Supplies), Vodafone (Mobile phones) and Glenmore (paper) and Computacenter (IT). Suppliers will only have to join the system once in order to deal with the whole of Scottish Public Sector. This allows suppliers to engage with this type of technology at vastly reduced costs – something of particular advantage to smaller, local suppliers. Following their initial “adoption” onto ePS, a supplier will only have to load a new customers specific price list where they have a specific contract with that customer. Suppliers do not have to have any investment in technology at their end – they can choose to receive orders traditionally on paper, by Fax or by email. However, some suppliers have chosen to receive orders electronically and to interface these directly into their in-house sales order processing systems as this provides them with very considerable processing efficiencies. This is up to each supplier if they wish to make this investment.


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2.3 The ePS Programme Team act as a Co-ordinator to ensure that a single co-ordinated approach is made to suppliers. As each new organisation joins the ePS service, they are responsible for adopting (with guidance from CGEY) 8 of their contracted suppliers onto the system in their initial implementation stage. We have identified that 53 of our suppliers have already been adopted onto the system.

2.4 Highland Council, West Lothian Council and East Lothian Council were the first

Scottish local authorities to join the ePS service. Discussions with these Councils have indicated their satisfaction with the ePS Service and their enthusiasm for the eProcurement Project as a whole. One of the fundamental messages is that this should not be viewed as an IT Project – it is about improving Procurement – the system is only a catalyst and enabler.

Technology 2.5 The PECOS system is provided by Elcom, a leading global provider of Internet

based electronic procurement systems. It resides on Elcom’s server in Boston and is accessed by users over the Internet using a Web browser. It is available 24 hours a day, 7 days a week. The system has been designed to be “slim” for Internet access. Whilst the Council has relatively limited access to the Internet via a 2mb pipe for corporate use in addition to the schools network, these restrictions are not expected to cause any technical problems during the initial implementation phase. Thereafter, there is a requirement to review network capacity for the Council as a whole.

2.6 The technology providers responsibilities for software and hardware integrity are

governed by a Service Level Agreement negotiated by the Scottish Executive. The service is considered secure. The application can be encrypted using SSL (128 bit) and the service supports X-509 Digital Certificates, however, some suppliers have had problems with accepting encrypted data. Security is such that no access to pricing and usage data belonging to any buying organisation is available to any other system user. Ownership of the data remains with each individual buying organisation.

2.7 There is no limit to the number of users who may use the service, and no charge

based on numbers of users – fees are fixed at a flat rate regardless of usage. This suits the geography of Argyll and Bute Council where buying is very dispersed.

System Functionality 2.8 The Pecos system provides the following functionality:

• Electronic processing of purchasing transactions between buyer and supplier from requisition to order, to receipt to invoice matching.

• Configuration of requisition/ordering/receipting/matching workflows to suit our business rules and approval paths.

• Support of payment by embedded purchase cards (these are already in use in Argyll and Bute for certain travel, stationery and roads suppliers).


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• Electronic forms, which can be used for complex product/service specifications.

• Standard flat file output for integration to legacy systems and availability of an integration hub called iESP for more complex integration requirements. Bespoke work is then required to take these output facilities and complete the integration to the Council’s existing systems.

• Electronic tendering (more likely to be used on our behalf by abc than directly by ourselves, as we have no experience with conducting electronic auctions).

• Management information based on all Council purchasing recorded in the Pecos system.

2.9 Pecos does not make payment to suppliers. This is normally achieved through

integration to an in-house Accounts Payable system. Highland Council, and the Scottish Executive also use Oracle Financials for their General Ledger and Accounts Payables and have implemented an interface for payment from Pecos to Oracle Financials.

2.10 The initial technical set up of the system is provided as part of the Core Service,

as is maintenance. Throughout the duration of membership to the service, software upgrades will be provided by Elcom globally and free of charge. The Council will be responsible for its own system administration adding new users – maintaining access rights, business rules, workflows, approval routes, and for testing newly adopted suppliers to ensure they are loaded correctly and the right products are viewable.

3 Collaboration through the authorities buying consortium 3.1 Any eProcurement system can help to achieve the following benefits:

• Better buying through increased visibility of and adherence to agreed contracts.

• Reduced adhoc/”off-contract” purchasing. • Vastly improved management information allowing buyers to negotiate

from a position of strength. • Managed selection of suppliers and optimisation of the supply base. • Better communication to suppliers. • Process efficiencies from a more controlled and stream-lined ordering and

invoicing process. • A start to meeting e-Government targets

3.2 The ePS service increases these benefits through a co-ordinated approach to

supplier adoption and through taking out the technology risk as it is a tried and tested, hosted solution. Implementing the system as part of a consortium through abc increases these benefits dramatically, not only from learning from each other in the process, and sharing out the efforts of supplier adoption, but in particular through using the process to identify the opportunities for better buying in a collaborative way. The diagram overleaf illustrates this.


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- 1 -eProcurement Scotland – Argyll & Bute Council S&RA Report

Considerable Benefits can be achieved from implementingelements of the eProcurement Scotl@nd Service…

eProcurement Scotl@nd

Cost reduction potential (5-10%)

Implementation support

Supplier adoption support

Flexibility from a public sectordesign

Low cost and speed toimplement

Future developments

Low risk and guaranteed by theScottish Executive for continuity

Increasing the profile ofProcurement

Potential to share informationacross the Scottish Public Sector

The ConsortiumApproach

Cost reduction throughcollective used of purchasingpower

Shared learning andbenchmarking potential

Reduced costs eg supplieradoption effort

Speed of implementation

Effective supply basemanagement throughincreased collaboration

Economies of scale in suchas change management andtraining

Consistent benefits tracking

Funding and discounts

Benefits grow progressively as Best Practice and Collaborative activities are embraced

eProcurement

Process efficiency

Compliance management

Management information

Government targets

Best PracticeImplementation

Business Process Re-engineering

Better Buying and QuickWins cost reduction atCouncil level

Integration planning

Increasing

Benefit

Increasing

Cost Efficiency

… and Argyll & Bute will achieve the additional benefit of Commitment Accounting with integration… and Argyll & Bute will achieve the additional benefit of Commitment Accounting with integration

3.3 The benefits change from being mainly processing efficiencies to a reduction in

the supply cost base through better buying using the combined purchasing power and buying expertise available across the consortium members.


The Consortia Approach maximises benefits for Councils…

eProcurement Scotl@nd

IncreasingBenefit & Cost Efficiency

Best Practice Implementation as part of the West of Scotland Consortium will ensure the rapid deliveryof best value benefits and a most economic use of resources

Best Practice Implementation as part of the West of Scotland Consortium will ensure the rapid deliveryof best value benefits and a most economic use of resources

Best PracticeImplementation

The ConsortiumApproach

eProcurement

The Benefits

Largely through processefficiency and the reductionof “off contract” expenditurein the Council. Analysts ofeProcurement quote 3 –

10% of the cost ofprocessing transactions butthis is more likely to be lessthan 3% if implemented ona technology-only basis .

The Benefits

Benefits are as stand aloneeProcurement

implementation, but theimplementation cost to the

Council is significantlyreduced through the

national Supplier Adoptionprogramme. Other longerterm potential benefits canbe driven through sharingof expenditure information.Implementation support will

aid the achievement oftransaction process benefit

The Benefits

On top of the ePS processbenefits, a BPI programme

with “Better Buying” willdeliver best value.

Redesigning processes andinvolving people in the

change process will delivera successful and

sustainable implementation.For prudence, the Business

Case for Argyll & Buteestimates 2% of 3rd party“addressable” expenditure

The Benefits

The most cost effective,rapid implementation tomaximise the benefits.

This delivery provides BPIbenefits at reduced cost tothe Council. Developing a

programme across theWest of Scotland

Consortium where thecosts are shared and

collaboration through BetterBuying and other activities

will deliver the benefits,


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3.4 Only 8.7% of the Council’s third party expenditure is spent with abc contracted

suppliers. This compares with 12% for West of Scotland Councils as a whole. This may be, in part, due to the more remote nature of some of the Council’s facilities, but also demonstrates the significant potential for increased collaboration. The ePS system will help the Council to drive expenditure through these contracts to bring early benefit by increasing the visibility of these contracts.

3.5 56% of expenditure is with companies used by at least one other West of

Scotland Council. By combining our buying power, we are confident that better prices can be obtained. This is further illustrated below:


There is significant un-tapped potential for better buying…

44%

Individual Council

40%

2-8 Councils

£27m (16%)in 9+

Councils

56% of the suppliers analysed are in common with atleast one other council in the consortium. 16% (anexpenditure of £27m to the Council) are trading with

at least 8 other councils

Only 8.7% of the Council’s 3rd party expenditure is coveredby abc contracted suppliers. The un-tapped potential for

better buying initiatives is in excess of £60m p.a.

A Best Practice Implementation will enable the benefits of collaboration to be achieved – lower pricesfor the goods and services purchased, backed by an ePS Service that will deliver rapid implementation

and the ability to lock those savings in

A Best Practice Implementation will enable the benefits of collaboration to be achieved – lower pricesfor the goods and services purchased, backed by an ePS Service that will deliver rapid implementation

and the ability to lock those savings in

Present Non Collaborative (abc) Expenditure

£20,000,000

£21,000,000

£22,000,000

£23,000,000

£24,000,000

£25,000,000

£26,000,000

£27,000,000

Sole Council 2 - 8 councils 9 + councils

3.6 Under the aegis of abc, an Officers Co-ordinating Group has been established,

which has brought together key buyers from all the Councils to discuss the potential savings from increased collaborative buying. These were discussed for each commodity group and marked according to the possible % saving through joint buying and how hard it would be to achieve these savings. The diagram below shows the results of this workshop and has been used to inform the qualification of the benefits case.


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The Coordination Group & Officers from the Consortiumconsidered the size of potential savings…

Easy

Hard

Ease

of I

mpl

emen

tatio

n

Level of Savings 15%10%5%

Discussed at Workshop

Previously considered

Telecoms8%

Telecoms8%

Advertising15%

Advertising15%

BuildingMaterials

15%

BuildingMaterials

15%

Tools/Engineer

15%

Tools/Engineer

15%

Prof Svcs£500K12%

Prof Svcs£500K12%

Print£293K

8%

Print£293K

8%

Vehicles12%

Vehicles12%

Waterdrinking

8%

Waterdrinking

8%

Financial Services9%

Financial Services9%

Office Equip8%

Office Equip8% Void Prot

10%Void Prot

10%

IT7.5%IT

7.5%

Taxis4%

Taxis4%

Road Salt +6%

Road Salt +6%

Vehicle &Plant Hire

2%

Vehicle &Plant Hire

2%

Stationery5%

Stationery5%

Catering4%

Catering4%

Land/Garden

7.5%

Land/Garden

7.5%

Trans/Distn

2%

Trans/Distn

2%

FacilitiesManagement

Specialised Contract7.5%

FacilitiesManagement

Specialised Contract7.5% Floor

12%Floor12%

Street Lighting

15%

Street Lighting

15%

Recruitment& HR7%

Recruitment& HR7%

PPE7.5%PPE7.5%

Subscrp4%

Subscrp4%

Travel5%

Travel5%

Utilities & Fuel1%

Utilities & Fuel1%

Education£258K

2%

Education£258K

2%

These savings targets are inline with CGE&Y’s experience

with other public sector clients

These savings targets are inline with CGE&Y’s experience

with other public sector clients

3.7 Certain “quick wins” have also been identified. These are in the areas where

abc already has existing contracts but where the information newly available for all 12 Councils about their total buying volumes with these suppliers will allow abc to negotiate better prices. Benefits are therefore expected to flow very quickly from these and will be available to all consortium members in full irrespective of when the ePS goes live. Argyll and Bute Council will benefit more quickly from these opportunities through early adoption of the system.

3.8 For commodity groups where abc currently has no buying expertise, the best

way to drive through these benefits from combined buying power is to identify which Councils buy from the same suppliers (this information is all now available) and to identify a lead Council who has the best knowledge of the market to negotiate a common contract on behalf of all the Councils using that supplier. Adopting the supplier onto the ePS system will help to ensure spend is on contract and purchasing data is built up to improve future negotiations.

3.9 Whilst the benefits of collaborative buying power appear obvious, there is a

necessity to ensure that the impetus and enthusiasm to maximise the gains is maintained. This is dependant on the drive for this both within the abc collaborative framework and within individual Councils. CGEY are proposing a 20 month Business Process Improvement programme on a risk/reward basis to the abc steering group with total fees of £2.2m. Whilst no decision has been made on this as yet, there is clear requirement to have some sort of mechanism to ensure the benefits from collaboration materialise.

3.10 It is the collaborative nature of this proposal which clearly distinguishes it from

any other eProcurement system or even an implementation of the ePS service in isolation. Without this collaboration, progress on adopting suppliers would be


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slow as it would be solely dependent on internal resource. Without significant take up, officers simply have two systems to maintain (one manual, one Pecos), enthusiasm is lost, process efficiencies do not happen and better buying becomes a pipe-dream. The expected savings all come from better collaborative buying (not from the system) but the system is the mechanism to ensure that the benefits from improved contracts are driven through the business.

4 Effect on Procurement for Argyll and Bute Council 4.1 Currently, we do not know what we buy as a Council. We can identify only the

total spend with each supplier (through the creditor payments systems), but we have no idea what goods or services we are actually buying except for very loose descriptions from the general ledger chart of account codes. If we don’t know what we buy, we are therefore not in a strong position in negotiating with existing or potential suppliers.

4.2 A procurement system will record what we buy, building up a database of

descriptions of items or services, so that over time, we will know precisely just what we buy. This will mean that someone in department X who occasionally buys an item that department Y has negotiated a contract for (and therefore obtained a keener price) will be able to find out about that contract and buy it from the same supplier at the same price. Next time the contract is negotiated, department Y will be aware of the buying from department X and the combined buying power should result in even keener prices, at least in theory.

4.3 This problem of knowing about contracts is especially difficult for Argyll and Bute

Council as buying is distributed across departments and across locations – there is no central buying department nor formal procurement strategy. However, the fact that buying is distributed is a strength as well as a weakness. As the people placing orders and arranging contracts are not specialist trained buyers, they are very open to proposals that will make buying easier for them, leaving them to concentrate on the specification of the requirement so that it best meets the need of the service. There is no proposal to centralise procurement, as this could dilute this expertise, resulting in the buying of products/services more cheaply but probably less fit for purpose. The intention is for departments to continue to be responsible for contract negotiation and placing of orders and recording of receipts. Departmental staff will be involved in the collaborative teams, and gain buying knowledge and expertise from that involvement.

4.4 The main changes being proposed are in relation to invoicing, and procurement

management and strategy. In future, it is envisaged that all invoices in respect of orders placed through the Pecos system will be sent to the Creditors Section, Financial Services, Campbeltown direct by the supplier. The Creditors Section will immediately key these into Pecos, where they will be matched against the order and receipt recorded by the Departments. Any invoice, which does not quote an official order number will simply be returned to the supplier. The matched invoices will be transferred for payment via overnight interface into the Oracle Accounts Payable system for payment when due. The General Ledger code will be picked up from the code entered against each item at the time of


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placing the order. This will significantly speed up invoice processing and improve the Council’s performance on the key indicator of invoices paid within 30 days of receipt. This process means that, for an approved order, once the receipt has been recorded, there is no further approval required for invoices if the price details and quantity details are as per order and receipt. This matching process will be automatic and handled purely within the Creditors Section without referral to departments. However, if there is a mis-match, this mis-match will be referred to departments. Mis-matches can be resolved in a number of ways – credits/amended invoices from suppliers, update of recorded receipts (invoices could have been received before the goods) and possible amendment of orders.

West Lothian have advised us of their surprise at the level of pricing errors by suppliers thrown up by this formal matching process.

4.5 It is extremely important to ensure that the process for handling mis-matches is clearly defined and does not create a bottleneck. It is intended to scan all incoming invoices so these can be accessed across the Council if necessary for resolving mis-matches. The availability of the scanned image will remove the need for departments to hold copy invoices for reference and replace the microfiche record held for historical purposes in the Creditors Section.

4.6 A small Central Procurement function will be created. This will include a Third

Tier Manager to manage the eProcurement Project who will also have operational responsibility for all Creditor payment and Payroll functions. They will be assisted by a Pecos systems administrator, and a person responsible for supplier adoption on a secondment basis during the implementation period. It is envisaged that these two roles will be full time during the implementation but reduce to part time after full roll-out has been achieved. It is also intended to have one other full time person whose role will be to ensure that we take full advantages of the collaborative buying opportunities, working pro-actively with the people responsible for buying in departments, and co-ordinating the expenditure across departments and across other abc members.

4.7 In essence the central team will be responsible for the following:

• Procurement strategy • Co-ordination of procurement expertise across the Council • Formally tracking the benefits from eProcurement • Driving through the benefits of collaborative buying, ensuring that the

collaboration happens • Managing the Pecos system • Supplier adoption • Ensuring new users on the ePS service are adequately trained.

In addition to the Core Team, there will be a formal Project Structure. This is described at Section 9 of the report.


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4.8 A formal procurement strategy will be developed, which will focus on maximising the benefits from membership of abc, and the collaborative opportunities available with its member bodies. abc will be encouraged to be more pro-active and identify additional areas where it may sensibly negotiate more contracts on behalf of members. In particular, abc will be responsible for the adoption of all its contract suppliers on behalf of its members and for the development of e tendering capabilities. There is also a view that the ePS system will enable them to handle many more contracts on behalf of their members within existing resources.

5 Business Case Summary 5.1 A compelling high level business case has been created for collaboration across

the 12 West of Scotland Councils. This has identified cost reductions of up to £24m p.a. within 5 years across the Councils and £84m cumulatively. This is against a total investment of £15m over the same time period, which is reduced to £12m through funding of £2m from the Scottish Executive and £1m from abc balances. The net benefit therefore equates to £72.5m – a return on investment of 6:1.

5.2 Full details of the combined business case are set out below:


The Collective High Level Business Case for West ofScotland Councils shows a strong incentive to collaborate…

BENEFITS Year 1 Y ear 2 Year 3 Year 4 Year 5 TOTALQuick Wins 2,374,000£ 4,748,000£ 4,748,000£ 4,748,000£ 4,748,000£ 21,366,000£ Bette r Buying 1,018,000£ 7,653,000£ 15,394,000£ 18,849,000£ 19,664,000£ 62,578,000£ Rede ployment & Process Efficiency -£ -£ -£ -£ -£ -£ TOTAL BENEFITS 3,392,000£ 12,401,000£ 20,142,000£ 23,597,000£ 24,412,000£ 83,944,000£

Council Implementations 5 6 1 12

COSTSe Procurement Scotl@ nd - Joining Fees 411,600£ 493,920£ 82,320£ -£ -£ 987,840£ e Procurement Scotl@ nd - Annua l Fe es 294,760£ 648,472£ 673,514£ 632,822£ 626,040£ 2,875,608£ e Procurement Scotl@ nd - Te st Syste ms 67,795£ 81,354£ 13,559£ -£ -£ 162,708£ Integration Costs 76,250£ 330,500£ 552,750£ 176,000£ 108,000£ 1,243,500£ Core Team Costs 409,000£ 225,000£ -£ -£ -£ 634,000£ Council Tea m Costs 1,032,500£ 1,239,000£ 206,500£ -£ -£ 2,478,000£ BPI Programme - Interna l to Councils 275,000£ 875,000£ 875,000£ 875,000£ 875,000£ 3,775,000£ BPI Programme - abc -£ -£ 100,000£ 100,000£ 100,000£ 300,000£ BPI Programme - Ex ternal 1,381,947£ 789,243£ -£ -£ -£ 2,171,190£ TOTAL COSTS 3,948,852£ 4,682,489£ 2,503,643£ 1,783,822£ 1,709,040£ 14,627,846£

NET BENEFIT 556,852-£ 7,718,511£ 17,638,357£ 21,813,178£ 22,702,960£ 69,316,154£ NET BENEFIT (CASH FLOW) 556,852-£ 7,161,659£ 24,800,016£ 46,613,194£ 69,316,154£ 69,316,154£

FUNDINGScottish Executive Funds 833,335£ 1,000,002£ 166,663£ -£ -£ 2,000,000£ a bc Balances 410,000£ 590,000£ -£ -£ 1,000,000£ BPI Programme Discounts -£ 176,000£ 16,000£ 192,000£ TOTAL FUNDING 1,243,335£ 1,766,002£ 182,663£ -£ -£ 3,192,000£

NET BENEFIT AFTER FUNDING 686,483£ 9,484,513£ 17,821,020£ 21,813,178£ 22,702,960£ 72,508,154£ CASH FLOW AFTER FUNDING 686,483£ 10,170,996£ 27,992,016£ 49,805,194£ 72,508,154£ 72,508,154£

NB. Year 1 covers the period July 03 – June 04

5.3 The business case is so compelling that it creates an expectation that other

Councils will sign up to this.


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Benefits 5.4 The business case for Argyll and Bute Council has been drawn up in financial

years assuming an implementation start in January 2004, with the pilot of 20 users and 26 suppliers live by March 2004. No benefits are assumed in this financial year. Benefits are then phased in gradually over the next 3 years. This reflects activity in adopting new suppliers onto the system and in re-negotiating contracts on a collaborative basis, which has to be done on a phased basis dependent on when existing contracts expire.

5.5 The business case shows benefits building to £1m p.a. within 3 years of

implementation. After 5 years of implementation, cumulative cost reductions of £4.2m are anticipated against an investment of just over £1.1m – a net benefit of £3m, which equates to a 3 to 1 return on the initial investment.

5.6 Full details of the business case for Argyll and Bute Council are set out below:


The Business Case for Argyll & Bute shows a Return onInvestment within 2 years…

BENEFITS 03/04 04/05 05/06 06/07 07/08 08/09 TOTALQuick Wins -£ 206,000£ 206,000£ 206,000£ 206,000£ 206,000£ 1,030,000£ Better Buying -£ 141,955£ 471,496£ 777,441£ 887,602£ 895,000£ 3,173,494£ Redeployment & Process Efficiency -£ -£ -£ -£ -£ -£ -£ TOTAL BENEFITS -£ 347,955£ 677,496£ 983,441£ 1,093,602£ 1,101,000£ 4,203,494£ Council Implementations 1 1

COSTSeProcurement Scotl@nd - Joining Fees 82,320£ -£ -£ -£ -£ -£ 82,320£ eProcurement Scotl@nd - Annual Fees -£ 58,962£ 58,952£ 52,170£ 52,170£ 52,170£ 274,424£ eProcurement Scotl@nd - Test Systems 1,130£ 13,560£ 6,780£ 6,780£ 6,780£ 6,780£ 41,810£ Integration Costs 91,250£ 11,250£ 11,250£ 11,250£ 11,250£ 11,250£ 147,500£ Core Team Costs 26,000£ 26,883£ -£ -£ -£ -£ 52,883£ Council Team Costs -£ 45,000£ 45,000£ 22,500£ 22,500£ 22,500£ 157,500£ Continuous Improvement Initiatives -£ 35,000£ 35,000£ 35,000£ 35,000£ 35,000£ 175,000£ BPI Programme - abc -£ -£ 8,333£ 8,333£ 8,333£ 8,333£ 33,333£ BPI Programme - External 56,000£ 98,667£ 28,583£ -£ -£ -£ 183,250£ TOTAL COSTS 256,700£ 289,322£ 193,899£ 136,033£ 136,033£ 136,033£ 1,148,020£

NET BENEFIT 256,700-£ 58,633£ 483,597£ 847,408£ 957,569£ 964,967£ 3,055,474£ NET BENEFIT (CASH FLOW) 256,700-£ 198,067-£ 285,531£ 1,132,938£ 2,090,507£ 3,055,474£ 3,055,474£

FUNDINGScottish Executive Funds 100,000£ 66,667£ -£ -£ -£ -£ 166,667£ abc Balances 19,450£ 19,450£ -£ -£ -£ -£ 38,900£ BPI Programme Discounts -£ -£ 16,000£ -£ -£ -£ 16,000£ TOTAL FUNDING 119,450£ 86,117£ 16,000£ -£ -£ -£ 221,567£

NET BENEFIT AFTER FUNDING 137,250-£ 144,750£ 499,597£ 847,408£ 957,569£ 964,967£ 3,277,041£ CASH FLOW AFTER FUNDING 137,250-£ 7,500£ 507,098£ 1,354,505£ 2,312,074£ 3,277,041£ 3,277,041£

5.7 Section 6 contains full details of the quantification of benefits, showing savings

anticipated by commodity grouping. These benefits can only be achieved if significant resource is spent on bringing our suppliers onto the system, and pro-actively negotiating new contracts and re-negotiating existing contracts either for Argyll and Bute Council alone or jointly with other members of the abc consortium. For this reason, significant costs are included both within the work teams at abc and for the Council and for a continuing Best Practice Implementation effort.


Page 12

Costs

5.8 Costs are included for the following elements:

• Joining fee (one-off) for the eProcurement Scotl@nd Service. • Annual fees for the ePS service. • Charges for a test system for training new users and testing new

suppliers. Charges are per month and it is anticipated that we require this facility for only part of the year from 05/06 onwards.

• Integration from Pecos to Oracle Financials to record commitments and pass approved (matched) invoices for payment – up front cost and annual maintenance.

• The Council’s share of the project team at abc responsible for co-ordinating and adopted abc contract suppliers.

• Council staffing costs for in-house systems administration and supplier adoption resource.

• An additional member of staff to ensure that collaborative better buying opportunities are maximised.

• The Council’s share of abc resource to focus on collaborative potential through abc.

• The Council’s share of a £2.3m Business Process Improvement programme over 18 months to kick start and bring forward collaborative better buying. This programme is still at proposal stage and has yet to be agreed by the Steering Group.

Full details of all these costs are set out at Section 7. Funding

5.9 £2.0m of external funding is available from the Scottish Executive so the whole programme. This is being distributed in equal shares to each Council participating on the following key dates:

• £100,000 on formal contract signature • £66,667 on completion of phase 1 integration with 20 users live and 8

new suppliers adopted by the Council. 5.10 In terms of financial years we have shown the £66,667 receivable in 2004/5

although our project plan suggests that this may be due a little earlier, at the end of March 2004.

5.11 A further £1m is being made available from abc reserves and this is being

distributed to Councils on a pro-rata basis. Argyll and Bute Council’s share is £39,000. There is a possibility that the £1m could be increased to £1.5m but that would be subject to abc Joint Committee approval.

5.12 The £2.0m of funding from the Scottish Executive is predicated on at least 8 of

12 Councils signing up for the ePS service. There is therefore a risk that we do


Page 13

not achieve sign-up from 8 and this funding could possibly be at risk. The current situation on sign-up is as follows:

• Renfrewshire Council has already signed contracts; • West Dunbartonshire, East Dunbartonshire and North Ayrshire Councils

are progressing through their internal approval processes and are also likely to sign up in the near future;

• Argyll and Bute Council is likely to be the third Council to sign up.

5.13 A number of the other Councils have indicated that they do not wish to join early on because they are in the middle or, are shortly to start upgrading their financial systems and do not have the internal resources to commit to both projects at the same time. However, this does not preclude them from contributing to the collaborative better buying efforts and most appear keen to tap into these benefits as early as possible.

5.14 Offsetting the risk of joining early as the third Council, are the significant benefits

which this position brings of being able to influence the programme to tackle particular spend areas key to Argyll and Bute earlier.

Total Funding Required 5.15 Total funding is required as follows:

03/04

04/05 05/06 06/07 07/08 08/09

Costs 256,700 289,322 193,899 136,033 136,033 136,033Funding 119,450 86,117 16,000 - - -Net Costs 137,250 203,205 177,899 136,033 136,033 136,000

5.16 It is proposed to fund the costs for 2003/04 and 2004/05 from General Fund

Reserves on the basis that this is a “Invest to Save” Project and that the savings are subsequently used to replenish Reserves. Costs from 2005/06 onwards will be funded by savings made from better buying. This requires reductions being made to specific budget lines from 2005/06 onwards to reflect the savings achieved, in order to both fund the on-going costs as well as paying back to reserves.

5.17 It is proposed that reductions are made to budgets based on the following

savings achieved: 2005/06 £200,000 Quick wins made on abc contracts in place from April 2004 and tracked This will fund costs in 2005/06 and onwards and start to repay initial investment 2006/07 £320,000 Annualised amount of savings in place for

Q1 2005/06

This will be sufficient to repay General Fund Reserves for the initial investment in 2003/04 and 2004/05.


Page 14

5.18 This proposal represents a cumulative permanent budget reduction from

2006/07 of £520,000, which will fund ongoing costs of £136,000 resulting in a year on year increase in reserves of a further £384,000 p.a.

Reserves Analysis

5.19 It is anticipated that the benefits from better buying will grow from the levels

proposed for budgetary cuts of £520,000 to £1.1m p.a. However, it is not proposed to request departments to make savings equivalent to the full benefits – departments need an incentive to engage in the better buying activity – and this allows them to retain half of all the benefits to improve services whilst allowing for a substantial return of funds to the General Fund which can be used for funding future “Invest to Save” projects of a similar nature.

6 Analysis of Benefits Quick Wins/Better Buying Waves 1, 2 and 3 6.1 The business case is based on the following total anticipated savings of

£1,101,150. This is the total annualised savings anticipated 5 years after implementation i.e. for 2008/09. This is summarised below:

£

Quick Wins 206,372Wave 1 Better Buying 488,148Wave 2 Better Buying 151,731Wave 3 Better Buying 254,900TOTAL £1,101,150

6.2 The following tables show the total Argyll and Bute spend by commodity and the

total saving anticipated for quick wins and each of the 3 better buying waves.

Category

Total

Spend

Saving

Total QW Potential

Advertising £478,933 15% £71,840Travel £943,585 5% £47,179Common abc contract spend Aids & Adaptations £74,305 4% £2,972Common abc contract spend Catering £773,865 4% £30,955Common abc contract spend Clothing/Protective Equip £71,567 4% £2,863Common abc contract spend Education £34,696 4% £1,388Common abc contract spend Electrical £493 4% £20

2003/04

2004/05 2005/06 2006/07 2007/08 2008/09

Investment (137,250) (203,205) (177,899) (136,033) (136,033) (136,033)Budget Cuts - - 200,000 520,000 520,000 520,000Net Effect (137,250) (203,205) 22,101 383,967 383,967 383,967Cumulative Reserves (137,250) (340,455) (318,345) 65,613 449,580 833,543


Page 15

Common abc contract spend Office Equipment £326,504 4% £13,000Common abc contract spend Vehicle & Plant £259,227 4% £10,000Stationery (potential addressable element) £643,155 4% £25,726

£206,372

Category

Total

Spend

50%

Saving

Business Case Saving

Print & Reprographics £137,671 4% £5,507Telecoms £2,054,339 2% £41,000Vehicles £2,200,236 10% £220,024Office Equipment & Supplies (less QW sum) £707,614 4% £28,305IT £2,701,627 3% £72,000Marketing Services £226,925 1% £2,269Facilities Management £2,524,414 1% £25,244Floor Coverings £124,406 6% £7,464Landscaping & Gardening £341,389 1% £3,414Electrical Services & Supplies (less QW sum) £887,938 1% £8,879Grit & Aggregates £2,468,048 3% £74,041

Better B

uying W

ave 1

£488,148

Category

Total

Spend

50%

Saving


Subscriptions & Publications £472,640 1% £4,726Professional Services £2,289,807 1% £22,898Recruitment & HR £2,023,986 1% £20,240Tools & Engineering Supplies £161,256 8% £12,094Transport & Distribution £1,665,566 1% £16,656Vehicle & Plan Hire (less QW sum) £3,922,716 2% £58,841Taxi £397,866 2% £7,957Building Materials £831,877 1% £8,319

Better B

uying W

ave 2

£151,731

Category

Total

Spend

50%

Saving


Security £67,920 5% £3,396Other Contractors £2,847,869 1% £28,479Contractors £8,602,592 1% £86,026Utilities & Fuel £11,920,698 1% £119,207Aids & Adaptations (less QW sum) £208,265 1% £2,083Catering (less QW sum) £660,095 2% £9,901Clothing & Protective Equipment (less QW sum) £51,640 4% £1,807Education £400,059 1% £4,001

Better B

uying W

ave 3

£254,900


Page 16

6.3 The work on Quick Wins will, with the exception of advertising and travel, be

mostly carried out by the core team at the authorities buying consortium and it is anticipated that this will start in earnest in January 2004. Advertising and travel will be reviewed on a collaborative basis and Renfrewshire Council are already taking the lead in investigating the opportunities for advertising.

6.4 Wave 1 streams will also commence in January 2004. Wave 2 Streams will

start in summer 2004 and Wave 3 will commence early 2005. Each stream of work will overlap as it will take time for negotiations with individual suppliers. Both core buyers at abc, and buyers within individual councils will work collaboratively as appropriate on each commodity group. The projected timescale is set out as follows:


The Proposed Implementation Plan for Better Buyingacross the Consortium starts in January…

Nov ‘03 Nov ‘04

Wave 1 StreamsVehicles, Grit & Aggregates, IT,

Telecoms, Office Equipment & Supplies,Facilities Management, Electrical

Services & Supplies, Floor Coverings,Print, Landscaping & Gardening,

Marketing Services

Wave 1 StreamsVehicles, Grit & Aggregates, IT,

Telecoms, Office Equipment & Supplies,Facilities Management, Electrical

Services & Supplies, Floor Coverings,Print, Landscaping & Gardening,

Marketing Services

Quick WinsAdvertising

TravelCommon abc

contractedsuppliers

Quick WinsAdvertising

TravelCommon abc

contractedsuppliers

Wave 2 StreamsVehicle & Plant Hire, Professional Services,Recruitment & HR, Transport & Distn, Tools& Engineering Supplies, Building Materials,

Taxis, Subscriptions & Publications,

Wave 2 StreamsVehicle & Plant Hire, Professional Services,Recruitment & HR, Transport & Distn, Tools& Engineering Supplies, Building Materials,

Taxis, Subscriptions & Publications,

Wave 3 Streams Utilities & Fuel, Contractors, Catering,

Education, Security, Aids & Adaptations,Clothing & Protective Equip

Wave 3 Streams Utilities & Fuel, Contractors, Catering,

Education, Security, Aids & Adaptations,Clothing & Protective Equip

May ‘04 May ‘05

The Consortium plans are not yetdefined or agreed

This opportunity would provide A&Bwith a business case ROI within 2years & build towards savings of£1m p.a.

Jan ‘04

Argyll & Bute officers will be involvedin the procurement process –

defining requirements, consideringstrategy, agreeing “Best Value”,

delivering the benefits and managingthe supplier contracts andrelationships that evolve

Argyll & Bute officers will be involvedin the procurement process –

defining requirements, consideringstrategy, agreeing “Best Value”,

delivering the benefits and managingthe supplier contracts andrelationships that evolve

6.4 CGEY are extremely confident in the predicted level of savings. They have

given us details of some savings they have achieved in procurement for their clients as follows:

• 32% savings in Building supplies for Covisint • 21% savings in Energy costs for Ernst & Young • 10% savings in Food costs for G & J Greenall • 20% savings in Stationery for Tayside Primary Care NHS Trust • 20% savings in IT Maintenance for Ericsson • 26% savings in car hire for DWP

6.5 Given that the savings predicted for Argyll and Bute Council are based on much

lower percentages, and have been agreed with the specialist buyers in each area, there is a high degree of confidence that these are realistic and achievable.


Page 17

Soft Benefits 6.6 Quantified benefits do not include any quantification of efficiency savings from

replacing our current manual processes with an e-Procurement system. Industry analysts advise that savings in transaction costs can be from 3 to 10% of total transaction costs. These savings have not been quantified as buying and receipting is a very distributed process. Any savings realised will be reflected in services being able to spend more efforts on front-line service delivery – not in any particular post savings as these activities are not normally full time responsibilities. These process savings are described further in the example below:

- 1 -eProcurem ent S cotland – A rgyll & B ute Council S &RA R epor t

Vehicle & P lant H ire is an exam ple of a m anual processbeing redesigned and sim plified in ePS…

O LD PR OC ES S N EW PR OC ES SR equisitioning

M anual checks of cata logues Latest cata logues on lineP aper P lant & Vehic le H ire form E lectron ic formFaxed to Supplier w ho returns D eta ils filled in at tim e of availab ility checkFaxed to F leet Inspector E lectron ic a lert sent to F leet Inspector

P urchase O rders3 copy paper form H eld on systemM anually faxed w ith P lant & V ehic le H ire form andposted to supplier

A utofaxed to supplier w ith electron ic copy of P &V H byP EC O S

InvoicingM anually m atched w ith PO & G RN A utom atica lly m atched w ith PO &R eceiptC ost Centre and A ccount codes sp lit w ritten oninvoice C ost Centre and A ccount codes stored against P OM anual invoice batches prepared & authorised P EC O S creates batches autom atica llyP osted to Cam pbeltown Interfaced d irectly in A ccounts Payable system

D ate stam ped and m anual batch num ber appliedB atches approved on line, e lectron ic batch num bersallocated

M anually entered in to A ccounts Payable system

6.7 A spin-off will be much improved management information not only about what

we actually buy – and hence an improved ability to determine if expenditure is appropriately prioritised and directed – but also improved budgetary control. The integration with the general ledger will allow budget holders to see the commitments they have made and then to determine if they have adequate budget before placing further orders. This information will be available but it will be up to budget holders to make us of it. It will however enable the Council’s formal budget monitoring reports to look at committed as well as actual expenditure and this will improve the timeliness of corrective action. It will also enable the Council to present its accounts on an accruals basis each month if required, in an automated, auditable process. At present the creation of accruals is a manual exercise carried out at the end of the year.

Benefits Tracking 6.8 It will be extremely important to track benefits achieved through better buying in

order to ensure that the cuts made in future budgets from 2005/06 onwards can be afforded by departments. Currently we do not hold the base information against which future better buying benefits can be measured. An important


Page 18

activity will be to start collating this information during the remainder of 2003/04 so that benefits can be identified from the start of 2004/05. Benefits will be quantified as the difference in price times the annualised quantity purchased. It will be important that services do not see a price reduction negotiated on their behalf as an opportunity merely to increase quantity purchased. Any increases in quantity would need to be justified as an increase in service provided.

6.9 As each supplier is adopted onto the ePS service part of that process will include

a record of the initial price at the time of adoption for benefits tracking purposes. In some cases, the process will start earlier, where negotiations are made jointly on a collaborative basis, which may actually pre-date adoption onto ePS. In either case, base-line data on quantities and prices will be established – this is essential information for use during negotiation and so the additional effort is merely one of recording these formally.

6.10 It is proposed that reports will be made on a quarterly basis to the Strategic

Management Team and to Senior Members on benefits achieved and overall progress with the project.

7 Analysis of Costs EPS Fees 7.1 There are two main elements to the fees. The first is the joining fee which is due

on signature of the agreement to join the system, at the start of the implementation stage. The cost of joining is £82,320. This is a one-off payment.

7.2 There is also an annual subscription to be paid for use of the system. Under the

terms of the agreement negotiated with the Scottish Executive the fees decline towards the end of the current contract, which lasts for seven years. The first payment is due when the system goes ‘live’ and will amount to £58,962. By the latter years of the contract this will have fallen to £52,170.

7.3 The Council will also from time to time require to purchase the use of a separate

test system, essential during the initial phase, when significant supplier adoption is underway and during upgrades. The test system can be taken on a monthly basis and will cost £1,130 per month. The heaviest use of the test system will be in the earlier phases of the system where supplier adoption and development are underway on a large scale.

Integration

7.4 The level of integration required is at the discretion of individual Councils. In

order to achieve the benefits of commitment and accrual accounting Argyll and Bute Council are opting for a three-point integration; at order, receipt and matched invoice stages. The integration solution proposed by CGEY involves a third party system, which will simplify the relationship between Oracle and PECOS and be easier to maintain and upgrade integration. The cost of this solution will be £75,000 plus £11,250 per annum for support and maintenance.


Page 19

Consultancy and hardware costs will bring the start up costs for integration to £91,250.

7.5 The only integration planned for at present is to the oracle ledgers and it would be the intention that any further interfaces, to SEEMIS, the Roads Costing System, or the Fleet Management System be as far as possible through Oracle. This would give the Council one master ledger for reconciliation purposes. In order to keep costs down, however advantage will be taken of interface packages developed by other Councils or bodies.

Abc Team/Business Process Improvement

7.6 A contribution is required to fund a small and temporary team within the

authorities buying consortium. Their role is primarily to undertake the adoption of suppliers on authorities buying consortium contracts. They will also act to co-ordinate better buying initiatives from the consortium members. The core team will stay in place for one year after implementation. Costs have also been allocated to fund an intensive Business Process Improvement initiative. This in itself is an expensive measure over a short period of time (£183,250 over two years) but will be justified financially by delivering the collaborative savings to Councils early in the e-procurement process.

Council

7.7 The recommendations from the consultants are for a small core team to be put in

place to manage the development of the e-procurement system with the team being managed by an existing third tier post within ICT and Financial Services, and supplemented by specialist help when required. This lighter approach is made possible by the presence of the authorities buying consortium working alongside the core team. Funding has been anticipated for a full time administrative post to carry out Supplier Adoption for the programme. This post will continue for a period of two years after the service goes ‘live’ within the Council, after which period it is anticipated that the bulk of suppliers will have been adopted into the system. A full time system administrator has also been allowed for in the funding. The cost of the core team is £45,000 for the first two years and £22,500 thereafter. A further £35,000 per annum has been allowed for Continuous Improvement Initiatives. This will be used to facilitate change management in the early years of the project as this is recognized as critical to the overall success in the Council adopting the service to its full potential.

7.8 The proposed project structure is shown in more detail at section 9. 8 Implementation Plans 8.1 First Wave – as part of the sign up agreement, the Council are given assistance

to train up to twenty users and to adopt up to eight suppliers prior to going ‘live.’ Careful consideration was given to what users and suppliers to include in the first wave in order to achieve maximum impact and gain critical experience to take the project forward. The criteria for selection were as follows:


Page 20


The “First Wave” of Implementation has been devised toensure the best experience for staff & suppliers…

Wave 1 will involve 20 users from around the Council trading with a total of 26 SuppliersWave 1 will involve 20 users from around the Council trading with a total of 26 Suppliers

Criteria for selection of Council areas:– Willingness to participate– High degree of manual work in existing process– Volume of transactions– No significant loss of functionality– No integration issues– No areas with slow dial up speeds– A cross section of departments

The criteria for Supplier selection were as follows:– Value and volumes of transactions carried out with the supplier for Wave 1 users– e-readiness of the suppliers– Contracts in place (Council and abc)– Mix of connection & content to allow knowledge transfer to Argyll & Bute Council– Inclusion of some suppliers already adopted on the ePS programme

8.2 The proposals for who should be the first users of the service are as follows:


Where Should We Implement First – Services

Education– Tarbert Academy & Primary School– To gain experience and usage alongside the SEEMIS

system

Cleaning & Catering– Large volume of transactions with contracted suppliers– Volunteers for Wave 1– Manual Process – Lack of Management Information currently– Problems experienced with receipting previously– Will be involved through users at Tarbert School

IT– The majority of IT purchases are directed through the IT

department– Volunteers who are already involved with the programme

through the Coordination and Steering Groups– Concentrated Spend for certain suppliers– Significant early opportunity to utilise suppliers adopted

through the abc core team

Hire Desk– Spend concentrated through a single order point – A highly complex manual process currently that will become more

automated through implementation– Volunteers– Additional steps in the procurement process to cover legislative

requirements– Leading from the front with potentially 8 suppliers available for

use in Wave 1– Significant opportunity for early process benefits

Building & Roads– A large expenditure with few order points– Volunteers– Manual process

Proposal is for implementation to commence in January 04 with a “go live” of April 04 Proposal is for implementation to commence in January 04 with a “go live” of April 04

8.3 The first benefit of the collaborative approach to implementation is revealed here by the fact that Argyll and Bute Council, with assistance from the core team within abc will be adopting twelve suppliers of their own choosing rather than the proscribed eight and by building on the experience of others, will go ‘live’ with at least twenty six suppliers already available and more on the way.

Roll out outline 8.4 The Implementation Phase will run from January 2004 to March 2004. During

this phase there will be significant support from the programme consultants, to


Page 21

assist the project team in populating the data base with Council specific information such as financial codes, user names and hierarchies, and workflows. They will also be training the project team in supplier adoption, systems administration, and training the first twenty system users.

8.5 In the First Wave Implementation, the Council will go ‘live’ with the system on 1

April and run with the first wave suppliers and users for the first three months. This will be a familiarisation period for the Council, during which any bugs in the processes can be ironed out, and a body of expertise within the Council can be established.

8.6 In the Second Wave the service will be expanded both in terms of suppliers and

users across the Council. This will be relatively straightforward in terms of items like stationery where we would hope to have all of our suppliers adopted by the end of the first wave and will then roll the e-procurement out to all purchasers of stationery within the Council. In other areas there will be outstanding integration issues such as Education where it is intended to restrict the usage to a single cluster of schools until the issue of SEEMIS is resolved either by integration with the system or by replacing it’s functionality. The forecast date to resolve this is April 2005 and before then the focus in Education would be to review the supplier base currently in use.

8.7 It is intended to achieve adoption of the system across eighty percent of users

and suppliers within the Council within two years. The programme of roll out during the later stages will deliberately remain flexible in order that we can take advantage of opportunities and not be delayed by obstacles.

8.8 The proposed implementation team for the Council is set out below.


Implementation Roles within Councils…

ProcurementExecutiveJudy Orr

SteeringGroup

Gavin Boyd

Finance Training SystemsAdmin

InternalAudit

Comms &Change

SupplierAdoption

ICT

Project SponsorNigel Stewart

The elements of the management of the implementation within councils will be:

• Project Sponsor at CMT level (part-time)

• Procurement Executive (significant input, but part-time)

• Project Manager (part-time)• Programme Steering Group and Co-ordination Group members (part-time)

• Representation from Services and functions across the council (predominantly part-time)

ProjectManager

Alan Brough

CoordinatingGroup

Alan BroughDoug Lockhart

AttendCo-ordination

Group meetings

CouncilSponsor &

ImplementationTeam

ProgrammeGovernance

& Core Team

KEY

The above are the roles required during all or part of implementation within Councils. They do not necessarily represent discrete individuals nor full time resource

The above are the roles required during all or part of implementation within Councils. They do not necessarily represent discrete individuals nor full time resource

Bruce West Ian Nisbet Lynn Finlay Lynsey FordDoug

Lockhart


Page 22

8.9 The Council’s implementation team will be supported by the Consortium programme structure. This is illustrated below:


Consortium Programme Structure…

eProcurementScotl@nd

Team

CoordinationGroup

12 Councils

CommunicationsChange Management

and Training

SupplierManagementTracey Stone

Technology &BusinessProcessesMark Amos

ImplementationTeams

in Councils

ProjectManager

Jim Mulholland

SteeringGroup

12 Councils & abc

CorporateManagement Teams

in Councils

The key elements of the management of theprogramme is recommended as:

• Governance– CMT Sponsorship in Councils– Steering Group– Programme Manager– Co-ordination Group– eProcurement Scotl@nd Team

• Core Team– Project Manager– 3 Workstreams

º Comms, Change & Trainingº Supplier Managementº Technology & Processes

• Implementation Teams in Councils

SteeringGroup

Members

CouncilSponsor &

ImplementationTeam

ProgrammeGovernance

& Core Team

KEY

Alan Brough &Doug Lockhart

Gavin Boyd

9 Risks 9.1 A number of risks have been identified in discussion with other Councils and

organizations who have been through the implementation process and who have been remarkably frank about the problems they encountered and the things they would now do differently.

Technological Issues

9.2 The e-procurement service is not essentially an IT project. There is no development required to bring the system to a stage where it can be used by Argyll and Bute Council. The system already exists and is in use. However Argyll and Bute Council have clearly expressed a desire for a high level of integration with Oracle payables and the financial management system. This does require information technology development. In order to manage any risk of delays which can affect development work the programme and the first wave in particular has been structured so that the live transactions are not dependant on integration. It is intended to have integration to payables for approved invoices shortly after go-live in April 2004, with the remainder of the integration for orders and receipting live from end of June 2004.

Staff Adoption Issues

9.3 This is undoubtedly the most critical area to success of the project. Without the ‘buy in’ of users the service will not deliver the savings the Council expects. It is therefore a priority from the beginning of the ‘scope and readiness’ exercise to engage with potential users, ensure that they are aware of the benefits to them


Page 23

of using the system, and enlist their active support. This will be carried out in a far greater scale in the period through to go live and beyond. Much of the change management role is planned to engage with users in a face to face role and to win hearts and minds for this project. It is also important that senior staff demonstrate commitment through their actions and behaviour in support of the project.

Demonstrating Benefits

9.4 It is important that benefits of the project are clearly documented and provable. This is particularly the case in the early stages as benefits will provide an impetus for further commitment to a project that is delivering a successful outcome for the organization. A comprehensive benefits tracking programme will be in place prior to the programme going live.

Collaborative Issues

9.5 Many of the savings identified through the use of e-procurement are as a result of collaborative buying across the West of Scotland consortium. There is obviously a risk inherent in this approach that the commitment of other authorities will not translate into positive future action. This is a risk that cannot be fully managed by Argyll and Bute Council but it is recognized and accounted for in the business case, as is the need for this Council to take a lead in fostering partnerships in buying specific commodities.

10 Alternatives 10.1 Argyll and Bute Council does not operate a central buying function and does not

employ professional buyers. There has been therefore no pressure for a procurement system from that quarter. There has been a long term aim on the part of Finance staff engaged in budgetary control functions within the Council to have a purchase order system that would give them access to commitment accounting information. The ICT working group within the Council was formed in 2001 and looked at various alternatives on the market that would provide this functionality.

10.2 As other Councils had similar interests, the authorities buying consortium were able to provide demonstrations from some of the major providers in the marketplace. All of the systems proved to have similar functionality to one another, and to that of the e-procurement Scotl@nd system. All were expensive, costing sums substantially into six figures. None was deemed to offer substantial functional advantages over another. Procurement systems by their very nature require a substantial resource in catalogue management if they are to be effective.

10.3 It is the following attributes that make the introduction of the ePS system particularly attractive for Argyll and Bute Council:

• Scottish Executive funding;


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• support in supplier management from Authorities Buying Consortium; • opportunities for collaborative buying which create a positive business

case; • Scotland wide adoption, which is attractive to larger suppliers.

Judy Orr/Alan Brough ICT and Financial Services 20 November 2003

argyll and bute council · the member of the authorities buying consortium to identify...

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