| Abstract | |
|---|---|
| Date published | May 2009 |
| Authorities involved |
|
| Themes |
Planning Procurement |
| Performance indicators |
|
The Supply Framework provides a standard specification, price and contract for the procurement of Dense Bitumen Macadam (DBM) by local councils in the North West region of England. It uses gains from bulk buying and purchasing influence to provide good value for money, efficiency and security of supply. It reduces the costs of procurement incurred by individual councils.
A number of Local Authorities within Greater Manchester (AGMA) used a Local Authority Procurement Partnership (LAPP) to meet their requirements for the supply of DBM materials. The LAPP secured supply from two national firms and was used by several local councils for the supply of all their road surface materials. By 2005 it was apparent that this agreement had been renewed and extended several times and it was not thought possible to extend it beyond November 2007.
The supply framework initiative was developed by the AGMA Collaborative Services Group, as a response to the need for a replacement supply agreement for DBM. The Collaborative Services Group was supported by the North West Centre of Excellence with the aim of securing efficiency savings and value for money through shared service delivery and collaboration over ‘back office’ functions.
The group defined a project entitled “Procurement of Bituminous Road Surface Material” and set a number of objectives:
The initial stage was to get all the Greater Manchester Local Councils to agree to a common specification for DBM and to define the likely quantity of material required in order to understand the potential annual value of the contract. A draft report covering these matters was issued to the District Engineers for four local councils within the Greater Manchester area (Stockport, Manchester, Bury and Bolton) in February 2006. It was approved by a working group of District Engineers from Greater Manchester Authorities (GMADE) in March 2006. Following this approval funds were secured from the North West Centre of Excellence to appoint external advisers and a workshop was held with the four originating AGMA authorities to formulate a procurement strategy.
Following this process a ‘task and finish’ group was created to act as a DBM Project Board.
A procurement process was then undertaken under the Official Journal of the European Union (OJEU) rules. This was led by the North West Centre of Excellence, working with Manchester City Council (acting as contracting council on behalf of the AGMA authorities) and was supported by external consultants. The procurement process included a Pre Qualification Questionnaire and an interim stage where short-listed suppliers were invited to hold mid-tender discussions to address any queries arising from the initial stage. Quality assessment of the bids was provided by representatives from AGMA local authorities. On completion the DBM Project Board recommended that three suppliers be included within a Framework Contract for the supply of bituminous materials.
The Tender Evaluation report was completed in August 2007 and included recommendations that discussions be held with suppliers to consider whether additional materials (such as sand, pipe bedding and sub base) might be included in the Framework Agreement. The report also recommended that lessons learnt and the history of the project and the procurement process should be documented in order to improve the collaborative working programme between local councils in the northwest.
The recommendations set out in the Tender Evaluation report were subsequently adopted by the DBM Project Board. It was then necessary to agree terms for Manchester City Council to manage the contract on behalf of participating councils. These terms were developed by the DBM Project Board and consisted of a levy payable on each order made using the contract. In addition to payment of the levy users also had to agree to share the risk of underwriting the management resource provided by Manchester City Council.
Following completion of the procurement process the Chief Executive of Manchester City Council contacted all the AGMA local authorities in October 2007 to inform them of the new framework agreement. The agreement was outlined and local councils were asked to adopt it enthusiastically and support the new arrangements, both in terms of procurement and by supplying representatives to sit on a board to oversee the framework. The letter promoted the framework as an important step forward in joint procurement and expressed the hope that it may prove to be a model that could be extended to other products and services.
During the 12 months since its launch the framework has been adopted by eight of the ten local councils in the region including Bolton, Bury, Manchester, Stockport, Oldham, Salford, Trafford, and Wigan. Orders for 42,012 tonnes of materials with a total value of £1.95 million were placed during the first year. This is a considerably smaller volume than was anticipated whilst the framework was in development, the Implementation Report (2007) refers to an annual spend by the AGMA authorities of £7 million, yet has still provided cash savings totalling £200,000 to the councils involved.
The management service provided by Manchester City Council has worked well and funds generated by the sales levy have covered the time and costs incurred by the Procurement Team.
The DBM Supply Framework is the first for the built environment sector in the region. The group’s success in agreeing and implementing the framework is to be used as a model by the Regional Construction Hub being developed by the Regional Improvement and Efficiency Partnership (REIP). This project will develop supply frameworks which will be open to all local councils and public sector organisations in the region. The AGMA Built Environment Procurement Group is leading on the development of the Hub.
The key successes of the project have been identified as:
Disappointments included:
In order to function effectively a supply framework of this type needs to offer benefits to suppliers and local councils. For the supplier this essentially means reducing the cost of supply in order to trigger a reduction in price. For the buyer, it means providing a reduction in price and process costs without impinging on the quality or flexibility of the outcome. In this instance the key to providing this mutual benefit was to reduce the number of specifications (mixes) that suppliers had to deal with. This required a positive approach to facilitation and the support of senior figures within the local councils.
Any collaborative procurement process requires individuals to give up a part of their autonomy and control of the relationship with their supplier. Collaborative procurement in the built environment sector requires a positive approach to this change in culture from the service unit and the procurement team. It is unlikely that a new supply framework will be adopted without a shared commitment.
An analysis of barriers and critical success factors completed by the AGMA Project Champion prior to the implementation of the framework concluded that it had proven difficult at that stage to make progress with some councils due to fragmented leadership and lack of internal communication. This highlights the importance of ensuring that appropriate technical and strategic teams are involved in developing a new collaborative supply framework.
The project has shown the value of the networks developed by the AGMA authorities. The existence of groups like GMADE made it a great deal easier to address controversial issues such as common specifications. The success of collaborative working amongst technical groups will support the transfer of knowledge and good practice to strategic and shared service networks.
Joint procurement is a strong driver for efficiency savings through collaboration. It is a means of changing culture and attitudes as well as a process to achieve immediate cash savings.
Continuity of involvement, vision and commitment from a core group is powerful and the key things needed are leadership and direction. If the group had not persisted in reducing the range of specifications they would not have succeeded.
The most valuable lesson has been about how to make a joint procurement process happen, rather than about the way to save money in procurement. The project has demonstrated the need to have the technical element right, but also the need for vision, drive and the focus on operational and strategic objectives.
The work done in preparation of the framework identified the potential to save an average of 5 per cent on the cost of materials and a further sum on the costs of each procurement transaction. The total potential saving identified, based on the estimated £7 million annual value of bituminous materials purchased by Greater Manchester local councils, was in the region of £885,000 per annum.
During the first 12 months of operation (to December 2008) 42,000 tonnes of material was purchased through the framework at a total value of £1.95 million. The savings on this volume of business are estimated to be in the region of £232,000 (5 per cent saving on price and £1,000 administrative saving per transaction for 135 transactions at an average transactional value of £14,500).
Has a target been set for the second year of the agreement (in terms of local authorities involved, volume ordered, contract value or savings?
Comment on likely future savings, other benefits etc.
Is this framework linked to any corporate objectives or Key Performance Indicators (for the councils, for the REIP) or to the LAA?
Which (if any) of the National Indicator Set will it contribute towards?
How and in what areas might it contribute to positive assessment within CPA / CAA? Will be pointing to it when the CAA assessors come.
John Lorimer, Director for Capital Programme Division
Manchester City Council
Ian Brown, Head of Procurement
Manchester City Council