Beyond Procurement Reform: Lessons and Future Directions IPWEA Strategic Procurement and Contract Management Conference

1. Beyond Procurement Reform: Lessons and Future Directions IPWEA Strategic Procurement and Contract Management Conference 6 October 2011 Paul Roche, Senior Project Manager, Local Government Victoria

2. Beyond procurement?

3. Why did we start? • Victorian local governments spend over $4 billion each year • More than 50% of councils’ overall expenditure • LG Procurement Strategy (2010) • Identified between $180 – $350 million in annual savings potentially available • Capacity issues for strategic procurement

4. Procurement Excellence Program (PEP) objectives • Strengthen individual and organisational procurement capacity • Raise awareness of the importance of strategic and operational procurement • Support the development of “value add” procurement approaches by the sector • Create a framework for sustainable continuous improvement • Encourage and enable collaboration

5. PEPImplementation • Worked across 8 regions • Conducted over 20 regional workshops • Worked individually with 76 councils • Developed 76 individually tailored two-year procurement improvement ‘roadmaps’ • Conducted 73 senior management briefings

6. Strategic Procurement model for Local Government in Victoria A coordinatedapproach to strategicallyinfluence supply markets to support our business objectives BENEFITS Business objectives Sourcing & Collaboration STRATEGY Sustainability Supplier management Process & Governance Strategy & Organisation FOUNDATIONS Technology People & skills Leadership & Influence Dimensions of Procurement Excellence

7. What did we learn? • Low levels of strategic planning for procurement

8. Need for effective organisational structures …what did we learn (cont…) • Most decentralised councils looking to increase control and consistency of procurement processes • ‘Centre-led’ model seems to be the best fit for LG

9. Lack of measurement and reporting …what did we learn (cont…) • Improving quality of spend data is a consistent theme in roadmaps ‘What gets measured, gets done?’

10. Need for training …what did we learn (cont…) • Need for training at both a procurement professional level and internal user level • Average training days = 5 year/council

11. Gaps in technology and finance systems …what did we learn (cont...)

12. Inconsistent supplier management …what did we learn (cont...)

13. Key opportunities identified… 1.Need tobetter coordinate procurement activity across council 2. Opportunity to simplify and standardise processes for contractors

14. Key opportunities cont… 3. Need to improve transactional efficiency • Cutting administration costs/ time through process efficiency 4. Opportunity to drive better performance from contracts

15. Key opportunities cont… Supply Positioning 5. Increased use of category management strategies for areas of major spend Hi Major projects IT Networks Reduce risk & total cost Reduce risk Risk or exposure Stationery Plant Reduce total cost Simplify Lo Lo Hi Relative Cost © PMMS Consulting Group

16. Key opportunities cont… 6. Need to integrate procurement with planning and budget processes • Incorporate procurement roadmaps as part of business planning • Undertake cross project procurement planning on capital works approval 7. Utilise collaboration and networking opportunities

17. Key opportunities cont… 8. Improve quality of spend data and reporting capability • Move beyond compliance reporting to reporting procurement generated savings and performance • Adopt standard set of category codes (UNSPSC) • Supports regional benchmarking and aggregation

18. Complimentary initiatives From the original PEP a number of other initiatives have been embraced.

19. Social procurement • Guidelines launched in October 2010 • Benefits of SP • Models • Case studies • Legal guidance • Sample contract clauses • Expert Support Program Benalla, Brimbank, Darebin, Glenelg, Hume, Maribyrnong, Moonee Valley and Whittlesea councils

20. Social procurement • Expert Support Program (ESP) funded and developed by LGV, Community Development (DPCD) DHS and Social Traders • ESP outcomes include: • overarching framework for integration with council planning and mainstream procurement • social procurement implementation toolkit - a web based product comprising guides, strategies, templates and support.

21. Engineering standards program • Victorian Regional Infrastructure Design Manual • 36 councils signed up Growth Areas Engineering Standards Manual • Partnership with six growth councils, LGV and GAA • Final Standards now being for adopted by 6 growth area councils Next Steps • Sustainable project governance • Training and capability development • Integration into planning schemes • Green engineering standards project

22. Review of Procurement Guidelines • Many submissions have now been received • Staff will continue to collate responses and identify required changes • Draft issued to the sector for comment December 2011.(Closing February 2012)

23. DRIVERS OF CHANGERegional Procurement Excellence Networks (RPENs)

24. The broader reform agenda CURRENT PROJECTS DELIVERED BY MAV: 1. Regional asset management Program 2. Local Government Sustainability Program

25. The broader reform agenda… The National Assessment Framework for Asset Management and Financial Planning. (NAF) • Implementation discussion paper due for release in coming months

26. Asset Management Maturity Model Best Practice Advanced Asset Management Capacity Core Intermediate Time National Assessment Framework (NAF) • Based on 11 elements of sustainability

27. NAF self assessment Each council must undertake a self assessment: • Meets requirements • Partially meets requirements • Not substantially progressed

28. The broader reform agenda State commitment to: Asset Management and Financial Sustainability Improving financial and resource management capabilities and business processes

29. State initiatives: Theme: Aligning capacity, strategy and sustainable outcomes • Procurement in Practice • Value adding through Internal Audit • Building Best Value Capacity • Aligning Business Practices and Performance Reporting

30. Aligning capacity, strategy and sustainable outcomes Our approach: • ‘in collaboration’ with the sector • ‘practical application’ of tools • volunteers welcome • non volunteers ‘passively co-opted’

31. Take home messages on procurement: • A strategic approach to procurement can deliver real added value • Procurement needs to move beyond a compliance function • Procurement staff need to become respected business partners • A whole of organisation approach is important • Don’t forget the roadmap!

32. Take home messages on procurement: • Contribute to reform discussions on legislation, guidelines, best practice • Have your aggregators work for you • Promote opportunities with your neighbours • Support RPENs • Support your colleagues, it is a long journey

33. Further information Amelia Chapman Acting Project Manager- Green Light Plan & Procurement Amelia.chapman@dpcd.vic.gov.au Amanda Minniti Senior Project Officer- Social Procurement Amanda.minniti@dpcd.vic.gov.au Paul Roche Senior Project Manager – Sector Development Paul.roche@dpcd.vic.gov.au