April 2003

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NOTTINGHAMSHIRE COUNTY COUNCIL

PROCUREMENT STRATEGY 2002/05

CONTENTS 1. Context and aims of the Strategy 2. Procurement Policy 3. Procurement Framework 4. Key Procurement objectives

Legal Framework Standards Sustainability, Equality and Regeneration Staff Training and Development E-procurement Organisation Performance Management Construction Related Procurement

5. Strategy for E-procurement

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SECTION 1

CONTEXT AND AIMS

OF THE PROCUREMENT STRATEGY

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1. THE CONTEXT AND AIMS OF THE STRATEGY

(a) Context of the Strategy The Council’s vision for the community of Nottinghamshire is contained within the Strategic Plan (building a future 2001-2005). In broad terms this vision is concerned with enabling Nottinghamshire to become a safe, healthy and prosperous County, with equality of opportunity for all citizens. The Council also strives to represent community interests by providing quality services consistent with the stated aim of being one of the top 20 Councils in the UK. As all departments grow more dependent on external suppliers of goods, works and services, it is increasingly important for the Council to develop a clear strategy for how these externally provided resources are selected, acquired and managed. Even where services are currently provided in-house, a range of goods, works and services are procured externally in order to support service provision. In the year 2003/2004 the Council will spend approximately £200 million of its annual £684 million combined capital and revenue budget on goods, works and services sourced externally. The Council’s Strategic Plan sets out the priorities for service delivery. Underpinning these priorities and targets for improvement, are the following corner stones: Sustainability - To safeguard the long term future of our

communities, environment and economy Social cohesion - To help everyone contribute fully to

society and to their own success Citizenship - To encourage and provide opportunities

for local people to take part in the running of their communities

Partnership - To place a high value on working within

effective partnerships at neighbourhood, local and sub-regional level

These are integrated within this Procurement Strategy in explicit and objective terms as appropriate. One of the key drivers behind the Strategic Plan is ‘Best Value’, which is a major element of the Government’s plans for improving local government services. Best Value imposes a legal duty on all local authorities “to continuously improve the services they provide having regard to a combination of economy, efficiency and effectiveness”. The duty of Best Value also imposes obligations on the Council to consult closely with service users and other parties with an interest in Council services.

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Best Value is one of the organisational priorities identified in the Council’s Strategic Plan (Building a Future) and is also one of the Council’s Core Values. Under Best Value the Council is required to review all the services it provides. Details of which services will be reviewed in which years are contained in the Council’s Best Value Performance Plan. The introduction of the Corporate Performance Assessment (CPA) in 2002, will in future direct the range and scale of service reviews undertaken by the Authority. A fundamental performance review of procurement through the Nottinghamshire Improvement Plan (NIP), has enabled the development of the strategy. This document has been produced as one of the outputs of the review. This is also in keeping with statutory guidance on Best Value, which specifically suggest that each Authority should have “a clear procurement strategy” at a corporate level. The principles of sustainable development are consistent with the principle of Best Value. Within procurement, the Government’s definition of ‘Best Value’ is “the optimum combination of whole-life costs and benefits to meet the customer requirement”. This approach enables sustainability and quality to be taken into account. For example, the consideration of whole of life costs allows factors such as fuel efficiency and replacement cycles to be taken into account. Social factors in sustainable development (e.g. benefits to local people, good workforce management, community safety, diversity and fairness) are also key factors in Best Value. To ensure the procurement strategy operates at a corporate level, it has been incorporated into the Council’s Performance Management Framework. Details of the Council’s Performance Management Framework can be found in the Best Value and Performance Management Companion. The strategy will require procurement decisions to be incorporated into the routine Business Planning activity, conducted by all departments of the Council. It is important that any strategy makes clear reference to the Council’s overall vision and values, and that the aims of the strategy have clear links to organisational and service priorities. The Council’s Business Planning Standards will be strengthened to ensure the procurement tests are routinely followed by all departments. Procurement standards, good practice and compliance matters, will form part of the responsibilities of the Corporate Procurement Unit. (b) Aims of the Strategy This strategy is aimed at promoting effective procurement across the whole organisation, and strikes a balance between setting out a detailed “blue print” for procurement reform with specific targets, and setting out a flexible planning framework within which further procurement reform can evolve. This flexibility is required to respond to the rapidly changing environment around public sector procurement and to allow learning from our own

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experiences and from the experience of others. The pace of technological change currently associated with e-procurement, for example, demonstrates the need to build flexibility into this strategy. The purpose and aims of this strategy are: To ensure that procurement planning reflects the Council’s corporate aims

and objectives as set out in the Strategic Plan. To secure commitment to effective procurement from Members and

Officers at all levels throughout the organisation. To provide a corporate focus to procurement, thereby assisting co-

ordination of procurement activity and helping to achieve optimum resource allocation whilst avoiding duplication of effort.

To map out the way forward on reforming and continuously improving the

Council’s procurement function. To facilitate programming and assignment of budgets, tasks and targets

to meet the key procurement objectives identified. To draw together, in one document, all the existing elements of a

procurement strategy developed in response to the Government’s ‘Best Value’ agenda.

To provide a consistent policy guidance for Service Review Managers

when considering options for improvement of services and specifically methods of service delivery.

To encourage long-term thinking and commitment to strategic

procurement issues. To identify and promote the benefits of strategic procurement. The strategy is not intended to be a procurement manual. The Procurement Strategy has been the subject of consultation within the Council, through the Procurement Strategy Consultation Group and Trade Unions. The above mechanisms will be utilised to consult on procurement action plans e.g. establishing a Corporate Procurement Unit, introducing an e-procurement system development and the development of a Good Practice Guide. It is also anticipated the Strategy and its outputs will feature in performance management reporting to the Executive and or scrutiny functions.

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SECTION 2

PROCUREMENT POLICY

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2. NOTTINGHAMSHIRE COUNTY COUNCIL

PROCUREMENT POLICY

(a) General

The Council operates a ‘mixed economy’ in relation to procurement with supplies, works and services provided directly, in partnership with other service providers and contractually through external providers. The fundamental determinants of our procurement policy are the needs of the service user and the community in Nottinghamshire. All procurement options are assessed in relation to the Principles contained within the Best Value and performance management framework. Our business planning standards provide the main driver for continuous improvement on a systematic basis.

(b) Procurement Policy

Nottinghamshire County Council believes that services, supplies and works procured by the Council should be of a high quality, flexible and above all customer/user focused. The Council expects in-house providers to find an appropriate balance between being best on quality, equality, value for money, service and employment practices with the need to promote sustainable development. The Council will support in-house providers where they meet the procurement decision criteria set out in Appendix ‘A’, offer value for money and operate in the best interest of service users. The Council requires all procuring Departments to adhere to, and promote, the following principles of Best Value Procurement. Best Value Procurement will:- be driven by planned outputs and results contained with business

plans generate the most advantageous balance of quality and cost be timely utilise e procurement system(s) to improve efficiency and generate

sustainable cost benefits minimise the burden on administrative and monitoring resources expedite simple or routine transactions allow flexibility in developing alternative procurement and

partnership arrangements encourage competition where appropriate encourage the continuing participation of high quality tenderers

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support the Council’s corporate policy objectives and in terms of contract formulation, meet the Authority’s social, environmental and economic aims and objectives

comply with the Council’s regulatory framework, and all applicable legislation and good practice guidance

above all, be transparent and accountable

The Council requires all services to demonstrate: commitment to users of the services commitment to the vision and strategic priorities of the Council as

published in the Strategic Plan value for money compliance with service aims and objectives and corporate

business planning standards commitment to continuous improvement commitment to quality and equality operational efficiency effective management, systems and procedures flexible working arrangements to meet user requirements

(c) Partnerships The Council acknowledges the importance of partnerships in delivering

Best Value – partnership with the private and voluntary sectors, partnership with other public bodies acting locally, and partnership with central government itself.

The process of carrying out fundamental performance reviews should

foster an open and constructive dialogue with all those involved or who may have something to offer – be it from within the Council itself, or through partnership arrangements with the private and/or voluntary sectors. The Council will encourage the development of new methods or approaches to procurement that will deliver services more efficiently, effectively, economically and take into account whole-life costs to meet the needs of the Nottinghamshire community.

The Best Value and Performance Management Companion contains

guidance on option appraisal and selection of service delivery methods.

(d) The Use of Competition The objective of the Council’s procurement policy is to provide a

means to drive performance by harnessing competition. This policy aims to use competitive forces to achieve Best Value:

through indirect competition (i.e. benchmarking) the Council will

assess the competitiveness of different functions by reference to other bodies including best value authorities and private and

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voluntary sector providers. Services provided in-house will be supported and encouraged to achieve equivalent levels of performance or better.

through direct competition (i.e. alternative means of procurement).

The Council will consider, having regard to current performance and suitability whether an alternative means of procurement is appropriate. Contracts will be awarded to the provider offering the most economically advantageous balance of quality and cost. Procurement decision testing (see Appendix A) will form part of the routine business planning activity by departments each year.

Where direct competition is deemed appropriate and the in-house provider is competing, the in-house provider will be given the opportunity to compete on equal terms with external providers. The following will be considered essential elements of competition irrespective of whether indirect or direct: staff and their representatives will be consulted performance standards and monitoring strategies will be developed cost information will be properly identified and collected innovation will be encouraged social value and the Council’s policy objectives will be protected probity, accountability and competitiveness neutrality will be

ensured the responsibilities and accountabilities of all parties must be explicit good practice guidance in tendering, contract formulation and

compliance with financial regulations

Services already subject to direct competition will be continually reviewed against the requirements of this policy, to ensure that the manner in which the service is provided remains the most appropriate to deliver Best Value. All decisions to seek an alternative provider for any service arising from application of the decision testing matrix contained in Appendix ‘A’, will only be formulated by Chief Officers in consultation with the relevant Cabinet Members(s). In most instances such decisions will be reported routinely to Cabinet for approval. The chart attached at Appendix B provides an overview of the Council’s procurement policy, its use of competition within a Best Value context, and the links to the annual business planning review/development process.

(e) Workforce Matters

Consideration of workforce matters has always formed part of the Council’s procurement decisions. As a result of the Local Government Best Value (Exclusion of Non-Commercial Considerations) Order 2001 which modified the statutory framework, the profile of workforce

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matters has been raised and such considerations will become a more formal part of the procurement process. The Council recognises the connection between service quality and the handling of workforce issues. Good quality services depend on appropriately skilled and motivated workforces. Workforce matters which must be considered during the procurement process include:- an early analysis of the workplace information existing within the

Council early and open staff consultation and information whether TUPE applies to a prospective contract as either:

a transfer of staff from the Council a (secondary) transfer of staff between suppliers a transfer of staff back to the Council

early and full disclosure of workforce information to potential

bidders full disclosure of workforce information from tenderers including

arrangements and practices for training, health and safety etc. clarifying any differentiation between the policies of a bidding

entity and those of an associated or parent company staff pensions implications

The Council recognises the importance of consultation with recognised Trades Unions on all workforce matters.

(f) Staff Implications The Council will adhere to the measures introduced by the Government after consultation on its implementation at a local level to end the ‘two-tier’ workforce in local government. The resultant Code of Practice will be applied where the Council transfers employees to a private or voluntary sector partner as part of a contract to provide any local public services. The Code will ensure that new joiners will be offered terms and conditions which are, overall, no less favourable than those of transferred employees. The Code will also require contractors to confirm their obligations to protect the terms and conditions of transferring local government employees, including the right to ongoing access to the LGPS or to an alternative good quality occupational pension scheme. Application of the Code will be monitored by the Council through the Corporate Procurement Unit in conjunction with County Personnel and Legal Services. It should be noted the Code is applicable to all Best Value authorities and progress upon applying the Code will be confirmed in the Council’s Best Value Performance Plan (BVPP).

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E X A M P L E APPENDIX A

Relevant Factors Governing the Exposure of Services to Alternative Procurement Arrangements

Criteria *Italics indicate an example (for each criteria) that would be

suitable for exposure to direct competition

Suitability for Alternative Procurement Arrangements

Least Suitable Most Suitable Notes/Comments to Support Choice of Suitability

1 2 3 4 5 6 1. Strategic Importance – Is the service of strategic

importance? Does it include core, sensitive, or policy work?

* The service (or its major components) is free or can be

freed of statutory, legal, policy or practical constraints on contracting

2. Degree of Risk1- What level of risk is involved in exposing the service to competition.

* The risk is relatively low risk to all parties including the

public, the Council, the Government and the Contractor – taking account of past experience risks during and beyond the term of the contract.

3. Impact on Other Services – What will be the impact (negative and positive) on other services or issues?

* The service can be specified and subjected to

competition without significant disruption to other Council services, functions or strategies.

4. Core Values – Would direct competition adversely affect the Council’s core values?

* Exposing the service to competition would not

adversely affect the Council’s core values.

5. Replacement Contractors – Will the Council be locked into monopoly service providers? Can failing contractors be penalised or replaced without significant interruption to service provision?

* Contractors who fail to deliver services to specified

standards can be easily penalised or replaced or monopolies can be avoided by repackaging.

1Risk may be financial/business/political etc. See Procurement Unit Guidance PUG 08

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APPENDIX A Criteria

*Italics indicate an example (for each criteria) that would be suitable for exposure to direct competition

Suitability for Alternative Procurement Arrangements

Least Suitable Most Suitable Notes/Comments to Support Choice of Suitability

1 2 3 4 5 6 6. Civil/Emergency Planning Considerations – Do

significant elements of the service impact on civil/emergency planning consideration?

* The service does not significantly impact on

civil/emergency planning consideration.

7. National Issues – Do significant elements of the service impact on sustainability, social inclusion etc?

* The service does not significantly impact on important

national issues.

8. Degree of Competition and Market Maturity – is the market of sufficient maturity with enough contractors to guarantee true competition?

* The market is well established with many competent

competitors..

9. Testing the Market – Can the work be packaged in a different way since the last market test to appeal to existing or emerging markets?

* The work can be packaged in such a way..

10. Future of the Activity – Are significant service developments likely e.g. legislative changes, and amalgamations or decentralisation of services?

* Provision of the service continues to be justified, and it is

very unlikely that it will be subject to review or legislative changes.

11. Investment Opportunities – Are there high investment needs in terms of plant, equipment IT etc? Will competition attract inward investment e.g. regional offices etc?

* High levels of investment are required, and competition

will encourage inward investment.

12. Specification of Service – Is the service difficult to specify or quantify?

* The service can be specified easily in advance.

13. Ability to Measure Performance – How easy is it to measure performance2 in service provision?

* Performance of service provision is easy to measure.

2Measurement of performance can be by way of for example EFQMIBEM; PI’s; customer satisfaction surveys; etc. 13

APPENDIX A

Criteria *Italics indicate an example (for each criteria) that would be

suitable for exposure to direct competition

Suitability for Alternative Procurement Arrangements

Least Suitable Most Suitable Notes/Comments to Support Choice of Suitability

1 2 3 4 5 6 14. Current Performance Level – Is the current performance

good? * Current performance is consistently poor.

15. Period for Performance Improvements – Has an improvement plan been agreed with the current provider?

* Performance has failed to improve despite the

provision of an appropriate time-scale for improvement..

16. Service Capacity – Will competition result in better capacity to meet fluctuating workload?

* Competition will result in better capacity to meet

fluctuations in demand.

17. Competence in Contract Management and Administration – Will contract management be difficult?

* The contract and competitive process will be relatively

easy to manage with limited scope for contractual claims..

18. Impact on Essential Skills and Knowledge – Will contracting the service have an adverse affect on the Council’s ability to maintain intelligent client capabilities and retain key staff?

* Skills and knowledge essential for the department to

undertake its responsibilities would be retained..

19. Direct Control of Services –How important is it to directly control service provision.

* The service can be adequately controlled through

contract management and does not require controlling directly..

20. Costs and Benefits – Is the cost of procurement and post-contract client service disproportionately high? Are the benefits likely to exceed the costs?

* Overall, the benefits will out-weigh the cost.

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APPENDIX B

The essence of the business planning and service review mechanism is the pursuit and realisation of Best Value in terms of cost, quality and performance of the Council’s services. This will require services to:

Where performance is Where performance Where continuing with the equal to or better than and costs are close to existing arrangement offers benchmarks benchmarks no realistic chance of improvement or where improvement has been pursued but failed to materialise

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Challenge and Consult

Clarify the continuing need and/or

performance standards for each activity by means of corporate

review and consultation with service stakeholders. Review current means of delivery and suitability for direct competition (See

Appendix A)

Specify

Define service and standards. Focus

on outputs

Compare

Compare performance and cost with achievable

performance and the best performance

elsewhere

Continuous Improvement

Determine the most effective improvement strategy – driving performance improvement regardless of whether activities are undertaken in-house or by

contractors

Encourage continuous

improvement and maintain performance monitoring. Recognise

the benefits that competition may bring

but also the risks inherent in changing

existing arrangements that are working well.

Determine the most effective strategy for

improvement. Recognise the benefits that

competition may bring and that changing

existing arrangements may be beneficial.

Consider alternative means of provision.

Follow closely the advice and

guidance material

relating to competitive tendering.

Drive performance improvement and

monitor progress against expectations

Communicate performance and targets back to service stakeholders

SECTION 3

PROCUREMENT FRAMEWORK

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3. PROCUREMENT FRAMEWORK (a) MAKING THE LINKS

Making the linkage between the strategic objectives and the procurement outcome explicit highlights the fundamental problem of disconnection between the Authority’s strategic objectives and the purpose of the procurement. The figure shows concentric circles, with the business plan at the centre. For the procurement process to proceed, it is essential that the business case is aligned with the Authority’s or service’s strategic objectives. In effect, the inner circle is the first stage of the procurement process. The next layer of the circle indicates ways in which this need might be met, or procured. These are some of the tools or techniques that are available to an Authority in procuring goods or services. The outer ring of the circle is the provision or delivery of the services – the interface with the customer or public. Thus, everyone involved in procurement needs to understand the linkage between their Authority’s strategic objectives. They need to understand why the procurement is needed, what choices/options are available to meet that need and how best to obtain what is required. The business case lies at the heart of this model.

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Procurement Cycle

What is the procurement cycle? The procurement cycle is the process from identification of a business need, through options appraisal, awarding and managing the contract and preparing for what will happen after the contract expires. (This will be simplified for low-risk procurements). It provides a framework and a series of logical steps which direct procurers towards achieving value for money for their Authority. The procurement cycle

Why is the procurement cycle important? The ‘cycle’ approach to procurement ensures that the early elements of the

process (development of the business case and options appraisal) and the later elements (contract management and exit strategies) are given the same emphasis as tendering and award. Value for money can only be achieved if all the elements of the cycle are carried out robustly. It also highlights the need to learn from earlier experiences to ensure continuous improvement.

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Outline Business Care

Supplier Evaluation

Manage Contract

Post Project Review

Procurement Strategy

Contract Documentation

Advertise

Award Contract

Options Appraisal

Ongoing Assessment of Business Case

Critical success factors The following are five key lessons a procurer should take away from this

document and which will form the basis of a successful procurement. These general principles will apply to procurements of all values:

a procurement is not an end in itself. It must support the strategic

direction of the Authority a successful procurement depends on getting the business case right and

getting the contract management right. It is not just about quotations and tendering

all procurement decisions must be based on value for money which is the

optimum balance of whole-life cost and quality to meet a client’s needs. Awarding contracts on the basis of lowest price alone is unlikely to offer the best deal

ethical procurement pays dividends. It enhances a client’s reputation in

the market and attracts the best suppliers stakeholders must be involved in the process. Not only can they provide

useful input to defining the business need but their buy-in will minimise variations and discontent after contract award. Stakeholders must include Unions and staff if there is a Best Value Review.

(b) Competitive Procurement

There are a number of perceived barriers to effective procurement. those mentioned most often are legal complexity, risk aversion, supply side

weaknesses, lack of client-side capacity, a narrow approach, and organisational culture.

A systematic approach to competitive procurement can overcome these barriers. The steps in this approach are:- laying the foundations – using a strategic approach, having clear

procedures, involving the right people and accessing the right skills design – this stage is fundamental to service improvement. It involves

strategic challenge, understanding the market, scoping the contract and the make or buy decision

tendering and contracting – this is the implementation stage when good

project management and communication are essential continuous improvement – once the service is established it is important to

maintain the momentum of improvement using rewards and motivation for the provider and a strong client-side function.

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The four stages of the competitive procurement process.

A number of procurement tools and approaches which help make the

above process operate effectively, are contained in the Best Practice Guide.

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Laying the foundations Strategic approach Clear procedures Involve the right people Access to skills

Design Strategic challenge Understand the market Scope the contract Make or buy

Tendering and contracting Communication Project Management Legality Workforce issues

Continuous improvement Strong client side Positive relationships Internal controls Rewards and motivation

SECTION 4

KEY PROCUREMENT OBJECTIVES

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(a) Legal Framework

A corporate legal framework is being developed by Legal Services to the following terms of reference. It is anticipated this will have been completed by May 2003.

1. Mechanisms to ensure compliance with (and where necessary rectify non compliance with):

The legislative framework of the EU Procurement Directives and UK

Procurement law (inc wider issues e.g. Public Law and Competition Act); The Procurement Manual and Standing Orders On Contracting; The aims and objectives of the Procurement Strategy; The Risk Management Policy; The Constitution.

2. The framework should provide mechanisms to support the development of

forward planning of the procurement needs of services departments and central procurement needs. The service departments’ procurement needs may be met by a different method to central/corporate needs and therefore may require different monitoring and support from the Corporate Procurement Unit.

3. The forward planning at 2 above will assist in financial planning and budget

provision by being aware of the service delivery procurement requirements across the Council i.e. it will give a snapshot for the future financial requirements. This is in line with EU Law requirement for Prior Information Notices in the Official Journal.

4. Provide the methodology to obtain and collate information of a previous

year’s procurement including financial spend and non financial outcomes of significant projects (e.g. PFI) to assess the effectiveness of and achievement of savings required by the Procurement Strategy and any targets set in the BVPP, Strategic Plan, Community Strategy or other policies/plans.

5. Offer contract management support and collate contract management

information to demonstrate (1) the service provider/contractors contractual compliance, and (2) the Council’s compliance with the aims and objectives of Procurement Strategy and any targets set in the BVPP, Strategic Plan, Community Strategy or other policies/plans.

6. Provide a framework for undertaking options appraisals of the different

procurement options available to achieve the objectives of the Procurement Strategy and/or undertaking options appraisals on “as required basis” with departments or central/corporate procurements. This will link closely with

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7. existing guidance and practice contained within the Council’s Best Value and Performance Management Comparison.

8. Establish the process and generation of audit information and monitor (with

external moderation via a scrutiny select committee?), the Procurement Unit’s performance against objectives and KPI’s established for the Procurement Unit.

In addition the Procurement Best Practice Guide also under development, will also contain guidance on legal/commercial issues e.g. Vires and statutory powers to “contract” Procurement Law Contractual Best Value considerations Preparing for procurement (external and internal consultation and

approvals) Considerations for transfers/use of land/property and assets (inc. ICT) Procurement methodologies (e.g. partnerships including joint ventures

companies, PPP and PFI) Contractual methodologies (standing lists, framework agreements etc) Workforce issues/TUPE/secondments Contract management techniques Change management and control Contractual risk allocation and management Environmental and sustainability issues in procurement Trading and charging Providing goods and services to others

It is a pre-requisite that such Best Practice Guidance is produced in clear, easily understandable language for use by all departments of the Council.

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(b) Control, Standards and Management of Risk

Public Sector Procurement is subject to a number of requirements and constraints. Councils have a fiduciary duty to their tax payers as well as there being a legal requirement to have Contract Standing Orders. Councils can ensure value for money by the application of controls and consistent standards across the Authority. Key Objective: To ensure that risk is appropriately managed and that all procurement remains legal, ethical and transparent whilst embodying the Council’s core values. The Council’s Procurement Policy is an integral part of the Best Value business planning process. Each service is required to complete the procurement option test in Appendix A, as part of the annual round of business planning, to assess the risks and benefits of alternative procurement arrangements. The following aspects underpin the environment surrounding procurement practice within the Council. Financial Regulations

Risk Management Strategy

Contract Standing Orders

Budgetary and capital controls Performance Management

Links to Strategic Plan and Core Values Applying consistent controls and standards ensures probity in all Council expenditure and relationships with providers. This is consistent with the vision for the Council and the cornerstones which underpin the strategic plan priorities and in particular make for an effective County Council.

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See the Best PracticeGuide for

details of how these controls and standards

are determined and relate to all

Procurements

(c) Sustainability, Equality and Regeneration

Key Objective: To promote procurement practices and policies which contribute to the Council’s priorities on sustainability, equality and regeneration.

(i) Sustainability

The over-riding culture in procurement in the public sector is that of lowest price. However there is growing recognition, nationally and internationally, that public sector procurement has a key role to play in delivering sustainable development objectives. For example, at the 2002 World Summit on Sustainable Development in Johannesburg, the agreed Plan of Implementation states that relevant Authorities at all levels should: “…promote public procurement policies that encourage development and diffusion of environmentally sound goods and services”. The UK Government has set out its own approach to sustainable procurement and estate management1 and its Circular on Best Value and Performance Improvement2 reiterates that sustainable development and equity are fundamental to the Best Value regime: “Sustainable development is fundamental to Best Value, and should be reflected in authorities’ programmes of reviews, the review process itself and in improvement planning. Within the context of procurement, the Government’s definition of ‘Best Value’ is “the optimum combination of whole-life costs and benefits to meet the customer’s requirement”. This approach enables sustainability and quality to be taken into account when service delivery options are being considered. For example, the consideration of whole of life costs allows factors such as fuel efficiency and replacement cycles to be taken into account, as well as social. (e.g. benefits to local people, good workforce management, community safety, diversity and fairness). Successful procurement strategies are likely to be based on whole life cost considerations that include subsequent revenue implications, and not simply the lowest tender price.” There are inherent difficulties in procuring in ways that promote equality, sustainability and regeneration, particularly in embracing the local economy by encouraging small/medium enterprises. New guidance3 published by the IDeA aims to overcome these difficulties and demonstrates the benefits of ‘sustainable procurement’. Such procurement also embraces ethical considerations, such as the purchase of fairly traded goods, which supports small farmers and producers in developing countries.

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Environment is a headline priority within the Plan and includes commitments to: “Secure a reduction in carbon dioxide emissions by energy conservation and purchase of ‘greener’ energy;” and “Raise environmental awareness.” The latter commitment embraces the need to raise awareness of the environmental impact of procurement, and further to this the Council has also adopted an Environmental Policy, which includes as one of its aims: “To reduce the environmental impact of our purchasing of goods and services.”

(ii) Equality

In January 2000 the Council adopted the Equality Standard for Local Government4 and has made a commitment to achieve level 5 of this standard by 2007. Levels 2 and 3 both have implications for procurement functions, including all contracted services and partnership arrangements. Nottinghamshire County Council is committed to equality of opportunity in the provision of services and strives to ensure services are equally accessible to everyone and appropriate to the differing needs of all sections of the community it serves. Equality in service delivery concerns the adaptation of service provision to meet the diverse needs of different groups of people, by ensuring the service is accessible, adequate and appropriate to the needs of all users. The Council aims to achieve a consistent approach to equality in the delivery of all its services. An important part of the County Council’s commitment to equality is to ensure all providers of Council services practice equal opportunities and that they are clear about the Council’s position on equality and are aware of the requirements placed upon them to adhere to the same policy. Nottinghamshire County Council takes a proactive approach to its obligations arising from Equal Opportunities Legislation. It is essential that all organisations wishing to provide services on behalf of the Council are able to demonstrate that all reasonably practicable steps are taken to allow equal access and equal treatment in employment and service delivery for all. Failure to comply with this policy could make the Authority, and in some cases, individuals liable to legal action. Adherence to the Council’s Equal Opportunities Policy is a contractual issue. Links to Strategic Plan Striving for equality is part of our Vision contained in the Strategic Plan. The Strategic Plan explains how the Council acts to positively reduce inequalities

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and the adoption of the Equality Standard for Local Government is core to that aim.

(iii) Regeneration

Given the County Council’s role within the local economy and in particular its spending power, care over the means whereby it procures goods and services could bring a significant boost to the Nottinghamshire economy. Conventional procurement approaches suggest that it is the larger, private sector beneficiaries which generally benefit, being located usually but not exclusively outside of the local economy. Council policies geared towards a greater degree of local sourcing and supply can bring significant regeneration rewards in three key areas: through existing local companies who employ a local workforce,

stimulating turnover and trade thus sustaining and creating employment; through new business formation, where new markets are created; through social enterprises which create local jobs and afford training

opportunities within local communities – particularly those most suffering economic disadvantage.

Wider potential exists through the inclusion of local community benefit clauses to such procurement contracts, providing opportunities to reinforce local labour, training and linkages to other local regeneration activity. Public procurement opportunities for social enterprises are most likely to arise in the delivery of public services. Social enterprises are close to their customers and are not concentrated on maximising profits for external shareholders. They are often well placed to be able to deliver good quality, cost-effective public services. In addition, social enterprises can demonstrate the worth of innovative new practices to increase the democratic participation of staff and users in service delivery. Local Authorities are responsible for commissioning and funding public service contracts. The Government at present believes that within the existing regulatory framework, Local Authorities have opportunities to open up the procurement process to social enterprises and there is significant potential for more public services to be delivered through this medium. To ensure that social enterprises are recognised, and able to compete fairly with their mainstream competitors, there is a need to promote greater understanding among those responsible for public procurement at all levels, as well as those who audit and inspect their work. Additional Objectives To develop and implement strategies which provide opportunities for local suppliers to provide goods, works and services to the Council.

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These will include helping local companies utilise the e-procurement tendering system and providing information on forthcoming procurement/supply opportunities in accessible forms.

Links to the Strategic Plan

Regeneration is a headline priority within the plan and includes a commitment to: “Promote ‘social enterprise’, local investment, trading and purchasing and develop an enterprise culture.” Performance Targets More sustainable procurement (embracing equality, sustainability and regeneration) will contribute to a range of targets across the Council, including: The reduction of carbon dioxide emissions from our buildings by 27% based

on 1998 levels by 2006 The achievement of level 5 of the Equality Standard by 2007 Achievement of the Best Value Action Plan for Waste (by ensuring the

purchase of products made from recycled materials is maximised).

Stimulating the local economy will also help deliver the following Regeneration targets, set out in the Strategic Plan;

Help 1,800 unemployed people obtain jobs Help reduce the unemployment rate for the County to the region’s

average Support business innovation that promotes high value added economic

activity Support the creation of 2,000 jobs each year Support the creation of at least 10 knowledge-based businesses.

1. Framework for Sustainable Development on the Government Estate, July 2002 www.sustainable-development.gov.uk/sdig/improving/index.htm 2. Guidance on Implementing Sustainable Procurement in Local Government, IDeA, 2003, (currently in draft) 3. The Equality Standard for Local Government, The Employers’ Organisation for Local Government, October 2001.

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(d) Staff Training and Development

The Council as an Investor in People organisation acknowledges the improvement in service that effective staff training and development can bring. The key to delivery of effective public sector procurement requires people who are suitably trained and qualified to provide the necessary “professional” input. This ranges from a formal procurement qualification and wide experience, to knowledge of basic procurement techniques. The level of expertise required depends on the frequency and complexity of the procurement activity in individual posts. Legal context and advice also features in staff training and development. Key Objective: To ensure a structured approach to education, training and development for all officers across the Council with procurement responsibilities. Training/development agenda The following topics will be addressed in training programmes organised by the Corporate Procurement Unit. Procurement skills The Legal Framework Contract Standing Order

Financial Regulations

Risk Management

E-Procurement

Links to Strategic Plan The training and development of staff is an explicit element of the Council’s Performance Management framework, and is included in the actions attached to the Efficient County Council theme within the Strategic Plan.

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(e) Electronic Procurement (E-Procurement)

E-procurement is the phase commonly applied to ‘doing business’ electronically, and opens up a wide range of possibility for working with suppliers. It is widely acknowledged as a means of reducing procurement costs. Key Objectives To use ICT to reduce the cost, and improve the efficiency and effectiveness of all aspects of the procurement process for the Council, its suppliers and contractors. Choosing an e-procurement system Initial indications suggest that upwards of £2.5 million per annum could be saved in process costs by the adoption of an e-procurement system to replace the myriad paper-based systems in use across Departments, given suitable integration with Departmental and core financial systems and with other projects already launched as part of the MSS (Modernising Support Services) programme. Project Definition Project objectives: Select and implement an e-Procurement System to enable end-user

requisitioners to initiate the routine purchase of supplies, services and works in a paperless manner, integrating with local and corporate authorisation, control and monitoring systems. Steps/processes covered will include:

Requisition Authorisation Selection of preferred supplier Electronic order placement Electronic receipting (“goods-in”) Electronic payment Interface to CFS-GL (Core Financial Systems – General Ledger) Budget monitoring

Appropriately defined expanded system access needs to include all

relevant staff and provide reporting to local and corporate management.

Define and agree input and reporting processes and responsibilities for each department and corporately.

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To deliver the first phase roll-out of the application solution by June 2003

with the appropriate test, training activities and user documentation completed.

Defined method of approach The e-Procurement System (EPS) will be purchased or licensed from an external provider with external hosting (i.e., limited ICT investment). User access will be provided within the boundaries of ICT supported platforms as defined by the IT Standards Group. (Browser/internet). Project Scope: EPS will provide information on procurement expenditure to managers and Members on an organisation wide basis, across departments and services as required. The system is intended to provide the efficiencies and effectiveness required for the evolution of the Council towards a modern, top twenty Council, responsive and outcome driven. It is envisaged that the solution will identify gaps in information within the Council via the process of identifying procurement expenditure both corporately and for individual departments. In conjunction with parallel developments in e-tendering, EPS will also facilitate the collation and provision of statutory data returns. Links to Strategic Plan The target of delivering 100% of relevant services electronically by 2005 within the Strategic Plan, is greatly enhanced through e-procurement.

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(f) Organisation

Purchasing and procurement within the Council is managed in a number of ways across the Authority. Whilst significant improvements have been made in the way the Council procures goods, works and services these have largely been achieved in an unstructured and ad hoc way. Key Objective: To ensure that procurement resources are deployed effectively and that systems are in place to deliver the procurement priorities identified in this strategy. Corporate Procurement Unit The Council has approved the creation of a Corporate Procurement Unit with the following outline terms of reference: “The CPU should have a strategic policy role and some basic procurement practice i.e.; corporate contracts – usually though not exclusively typified as involving more than one department and of significant value. EC Directive Thresholds as a key break point in responsibility levels and contract procedure, are considered “significant” in this context.” The outline scope of activities attached to the CPU includes the following: Develop, implement and monitor the Corporate Procurement Strategy in

consultation with departments. advice and guidance on procurement practices in response to changing

legislation, including maintenance of the Nottinghamshire ‘Procurement Good Practice Guide’;

consultancy advice to departments and training as required on

procurement practice/legal framework etc; innovative approaches to new procurement/contract packages and

models including development of contracting advice; acting as a focal point for e-government and e-procurement in particular,

including management of the Authority’s chosen e-procurement system; monitoring and audit of procurement performance across the Authority,

establishing targets and performance indicators and reporting on performance to the Council;

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management, including tendering/contract letting for corporate

goods/service contracts. In this context corporate means, commonly used items/services which are for general use by the whole Authority and where aggregation of demand has significant cost benefits in terms of price/service negotiations.

overseeing the procurement decision tests required in each Best Value

Service Review and/or Management Reviews. to oversee devolved buying in terms of good practice, value for money

and achievement of performance targets. management of the County Supplies function. The outline organisation structure for the CPU together with its funding arrangements, was approved by the Council on 29 April 2003.

Links to the Strategic Plan Applying Best Value principles to deliver high quality, value for money services forms part of the Council’s Strategic Vision. Excellence in Procurement forms an integral part of the Best Value principles and is a statutory duty place upon the Council through the 1999 Local Government Act.

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(g) Performance Management

Performance management is an important feature of Best Value and is a means of assuring quality; ensuring continuous improvement; demonstrating the benefits achieved, highlighting prior improvement areas, reporting performance to others, and comparing performance with other organisations. Key Objective: To promote the development and use of performance measures, consistent with the Performance Management Framework adopted by the Council. Procurement Management Information It is necessary to have available the relevant information that will enable strategic procurement decisions to be taken, and which in turn will make Council procurement more efficient, effective and economic. Key Objective: To improve the accuracy, availability, appropriateness and accessibility of procurement related management information. Value for Money The whole rationale of the procurement function is to enable the Council to obtain goods, works and services that are value for money, this in turn facilitates the delivery of Best Value services to the citizens of Nottinghamshire. Key Objective: To reduce the cost of the procurement process, and obtain value for money on all procured goods, works and services. The Corporate Procurement Unit will develop a suite of performance indicators and targets to enable the Council’s overall performance on procurement practice, to be tracked over time. Targets for cost savings will also feature in this performance management regime. Reporting of procurement performance will feature in the annual performance report of the Council. Procurement will feature within a Cabinet portfolio and be subject to scrutiny of performance as appropriate. Links to the Strategic Plan Improving performance is a major tenet within the Strategic Plan and goes

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beyond the theme of an Effective County Council. Production of a suite of performance indicators and targets will enable the organisation as a whole to monitor and report on its performance in procurement terms, to the Council and citizens of Nottinghamshire.

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(h) Construction Related Procurement Construction is one of the Council’s largest areas of spend and includes

buildings and highways work. It is now nationally recognised, and accepted by this Authority, that the traditional lowest cost approaches to construction related procurement have resulted in a low innovation, low investment, low performing and low morale industry with an adversarial culture within the supply chain resulting in financial claims, overspends, late project completion and a breakdown in delivery confidence.

Key Objective: “To develop the Government’s ‘Rethinking Construction’ agenda and

apply the appropriate principles to the Council’s construction related procurement activity, namely committed leadership a focus on the customer, integrated processes and teams, a quality driven agenda and a commitment to people.”

principle objective: committed leadership: Management needs to

believe and be totally committed to driving forward an agenda for improvement and communicating the required cultural and operational changes throughout the whole of the organisation.

principle objective: a focus on the customer: In the best

organisations the customer drives everything. These organisations provide precisely what the end customer needs, when the customer needs it and at a price that reflects the product’s value to the customer. Activities which do not add value from the customer’s viewpoint are classified as waste and need to be eliminated.

principle objective: integrate the process and the team around the

product: The most successful enterprises do not fragment their operations – they work back from the customer’s needs and focus on the product and the value it delivers to the customer. The process and the production team are then integrated to deliver value to the customer efficiently and eliminate waste in all its forms.

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principle objective: a quality driven agenda: Quality means not

only zero defects but right first time, delivery on time and to budget, innovating for the benefit of the client and stripping out waste, whether it be in design, materials or construction on site. It also means after-sales care and reduced cost in use. Quality means the total package – exceeding customer expectations and providing real service.

principle objective: commitment to people: This means not only

decent site conditions, fair wages and care for the health and safety of the work force. It means a commitment to training and development of committed and highly capable managers and supervisors. It also means respect for all participants in the process, involving everyone in sustained improvement and learning, and a no-blame culture based on mutual interdependence and trust.

Key enablers: In order to deliver the above objectives the Authority needs to:-

Align its construction services to generate strategic fit with Rethinking Construction principles.

Develop its internal processes and trading arrangements to

mirror the principles.

Develop and implement partnership arrangements for both the design and delivery of its construction services.

6BGGGConstruction.W R7.3.03

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SECTION 5

STRATEGY FOR E-PROCUREMENT

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5. A STRATEGY FOR E-PROCUREMENT Definition of E-Procurement in the Context of this Strategy The definition of procurement can be described as being concerned with the “acquisition by purchase, lease or other legal means, the goods, works and services used by the Council to discharge its functions in an effective, efficient and economic manner”. In the context of this strategy, e-procurement, while operating within the definition above, generally relates to the contractual business relationship between the Council and its suppliers and contractors. This relationship is commonly termed ‘Business to Business’ or ‘Business to Government’. E-Procurement in this context does not include the consumer type relationship between the Council and its citizens. Nor does it relate to payment of fees and charges, by external organisations. Electronic payment mechanisms, other than those between the Council and its suppliers and contractors, are excluded from this e-procurement strategy – although the underlying technologies may be similar. The Council’s Vision for E-Procurement The future of procurement in the Authority will make best use of information and communication technology (ICT) to reduce the cost of the procurement process for both the Council and its suppliers and contractors. E-procurement is not seen as an opportunity to drive down prices at the expense of suppliers and contractors. Savings are anticipated from: greater controls over ‘on-contract’ spending within the Authority; reduced transaction and processing costs; and appropriate discounts with suppliers and contractors who receive high volumes of business from the Council. For staff across the Authority, e-procurement will be easy, secure and user-friendly. Everything an officer needs to do to ensure compliance with best practice procurement will happen automatically – unseen in the background. Procurement will become ‘self-service’. The system will be interfaced with the Council’s accounting systems to enable ‘real-time’ financial management of procurement expenditure. The system will be available to all Council officers with procurement responsibilities, and will be accessed using internet/intranet technology on any suitable PC in their office. Users will have controlled access to the system on the basis of personal passwords. The content of the system will be based on user requirements and will be flexible enough to allow emergency purchasing and ‘spot’ purchases where appropriate. Departmental requirements and corporate contracts will be integrated within a national system and probably IDeA Marketplace.

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The content will appear as one catalogue to users but will inevitably be made up of a variety of contractual arrangements with different contractors and suppliers. These procurement arrangements will happen in the ‘back office’ and will be invisible to users of the system. Users will simply select the items/services they wish to purchase directly from the screen. They will be able to see details of the product/service and any special conditions that apply. Users will be notified of the delivery date and ultimately may even be able to check whether items are in stock. The supplier/contractor will then meet the order directly. The arrangement will be between the user and the supplier/contractor using contractual vehicles set-up by procurement staff. Procurement staff will be at hand to help with any problems users may have. Users will be secure in the knowledge that anything procured through the corporate system will be subject to all of the appropriate checks. All procurement through the system: will comply with EU procurement legislation; will comply with the Council’s contract standing orders and financial regulations; will protect the Council’s interests through use of appropriate terms and conditions; will be sourced, ethically; will be based on arrangements negotiated by professional purchasing and procurement staff; and will represent that best overall value for departments and for the Council as a whole. The system will be much more than an electronic catalogue. Departments will also be able to access the Council’s approved lists to select contractors/suppliers where a separate tendering exercise is required. Departments will be able to put together appropriate tender documents selecting from a suite of electronic ‘standard’ procurement documents with controlled revisions. Advice will be available at every stage. Best practice guidance, procurement bulletins and other important information will be also available online – together with a comprehensive list of contracts with email links. Whilst the above represents a vision for the future, this strategy provides a blueprint for making this vision a reality. The driving force behind procurement reform is the goal of freeing up resources (financial and staff resources) to be used to improve services for the people of Nottinghamshire – whilst at the same time ensuring that procurement remains, ethical, legal and transparent, without exposing the Council to undue risk. E-Procurement in Context Electronic procurement (e-procurement) is an area of procurement that is developing and changing at an extremely rapid rate. Therefore, the e-procurement element of this strategy is included as a separate section within the overall strategy document. The Council’s e-procurement strategy must remain flexible to ensure that it stays responsive to emerging developments, and must include the capacity for improvement based on continuous learning. For this

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reason, the e-procurement strategy will be kept under constant review by the Corporate Procurement Unit. The overall strategy for the development and implementation for e-procurement is incremental and designed to reduce the Council’s exposure to risk. However the strategy recognises that an element of risk is unavoidable if the full benefits of e-procurement are to be realised. E-Procurement Strategy The e-procurement strategy is designed to develop and implement electronic procurement. Information and communication technology will be used to reduce the cost, and improve the efficiency and effectiveness, of all aspects of the procurement process for the Council and its suppliers and contractors. The evaluation and testing of the IDeA Marketplace e-procurement portal, forms an essential part of this strategy. Working in partnership with IDeA will allow us to explore the regulatory issues around electronic procurement and assess the impact that electronic procurement will have on the local economy and on existing business process. Electronic tendering, sourcing, contract management, supplier management, online catalogues, ordering and payment processing all feature in the strategy. chris PROCUREMENT STRATEGY FINAL VERSION APR 03

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