Brian Farrington Ltd CIPS Merseyside 11 November 2010

The HM Treasury Spending Review Framework
Procurement initiatives to deliver lower costs!

Presented by
Stephen Ashcroft BEng MSc MCIPS
Procurement Consultant
Brian Farrington Ltd

11th November 2010

Procurement, Supply Chain and Negotiation Specialists

We‟re all in this together!

Slide 1

We‟re all in this together!

As part of its public engagement process, the Government will gather
talented individuals from within the public sector and beyond,
harnessing their expertise to think creatively about the big questions it
faces.

CM 7872 8 June 2010

HM Treasury “The Spending Review Framework”

Slide 1

Highlight points – Procurement impact (1)

Slide 2


- Deficit Reduction will be achieved through reductions in spending

- Consider new and radical approaches to public service provision

Slide 2




- Reduce spending this year by cutting waste

- All Departments will publish business plans

Slide 2






- Driving down the cost of operational delivery

- Renegotiating contracts

Slide 2






- Driving down the cost of operational delivery

- Renegotiating contracts

- Maximising collective buying power

Slide 2


Brian Farrington Ltd Slide 3


 Using benchmarking to improve performance

 Identifying savings opportunities





 Promote freedom by encouraging a greater range of service providers

 Improve Risk Management





 Promote freedom by encouraging a greater range of service providers

 Improve Risk Management

 Deliver continuous VFM improvements


Renegotiating contracts (1)



 Review Contract performance
 Review contract history including price movements



 Benchmark if raw data can be found
 Consider unjust enrichment



 Explore continuous improvement proposals
 Invoke contract change process



 Explore continuous improvement proposals
 Invoke contract change process
 Invoke right of audit clause



 Consider termination for convenience




 Renegotiate in good faith considering




 Renegotiate in good faith considering

• Specifications
• GFE
• Contract extensions
• Aggregation
• Relationships
• Value Analysis
• Use of resources
• Total Cost of Ownership


Can Procurement take the lead?



 Influence
 Authority
 Accountability



 Influence
 Authority
 Accountability
 Skills – but in what?



 Influence
 Authority
 Accountability
 Contractual knowledge
 Financial Knowledge



 Influence
 Authority
 Accountability
 Contractual knowledge
 Financial Knowledge
 Resources


Cost drivers and the use of cost models



Labour Costs



Labour Costs

 Wages
 National Insurance
 Pension
 Clothing/Uniforms
 Training
 Mobile phones
 Bonus payments
 Other



Labour Costs

 Wages
 National Insurance
 Pension
 Clothing/Uniforms
 Training
 Mobile phones
 Bonus payments
 Other

? Productivity
? Recoverable days/hours per annum
? Travel time
? Working day
? Overtime


So – how radical will Procurement be?



 Probe Costs



 Probe Costs
 No contract price escalation RPI/CPI



 Probe Costs
 Termination of contracts



 Probe Costs
 Recover damages



 Probe Costs
 Recover damages
 Long-term contracts



 Probe Costs
 Recover damages
 SMEs BMEs Third Sector



 Probe Costs
 Recover damages
 SMEs BMEs Third Sector
 Renegotiate


What Next?

• What are you going to do?

• “If not me, who?”

• “If not now, when?”


&
Questions
Questions Answers
Answers


http://www.linkedin.com/in/stephenashcroft


Procurement: The seven steps to stagnation


Procurement: The seven steps to stagnation

1. We've never done it that way
2. We're not ready for that, yet
3. We're doing all right without it
4. We tried it once, and it didn't work out
5. It costs too much
6. That's not our responsibility
7. It won't work


Supplier
Management

Nine steps which
guarantee success

Nine steps which guarantee success...

Nine steps which guarantee success

Slide 12

1. Clear agreement on the definition of „success‟

Slide 12


2. Risk analysis which identifies those things which could go wrong

Slide 12



3. Contract which recognises and deals with price/cost issues, and contains
realistic remedies

Slide 12



realistic remedies

4. Leverage maximised at the enquiry stage including specification

Slide 12



realistic remedies


5. Use of kick off or watershed meetings

Slide 12



realistic remedies



6. Contract management plan defined and understood by all

Slide 12



realistic remedies




7. Performance evaluation and feedback to the supplier and from the supplier

Slide 12



realistic remedies





8. Strategic Business Review meetings with managers and staff at the right
level

Slide 12



realistic remedies





8. Strategic Business Review meetings with managers and staff at the right
level

9. The use of „teams‟ to deal with problems and realise opportunities

Slide 12

Contact details

Business Consultant

Rainford Hall
Crank
St Helens
Merseyside
WA11 7RP
T: 01744 20698
F: 01744 27897
e:s.ashcroft@brianfarrington.co.uk
URL:www.brianfarrington.co.uk


Who are we?

Procurement, supply chain & negotiation expertise, since 1978

Competencies underpinned by academic rigour

Client specific procurement consultancy solutions

Design, delivery & evaluation of training solutions

Expertise in „deep cut‟ cost reduction whilst mitigating risk

Key clients: Public sector & supply chain

Quality Assured ISO 9001:2008

Delivery partners of CIPS


What do we do? – see Appendix

• Commercial Manuals
• Design of Policies &
Procedures
• Negotiating Major Contracts
• Due diligence
• Tendering Advice
• Partnering Facilitation

20%
30%
20%
• Advice on Training Strategy 30%
• Delivery of Training Strategy
• Metrics & Action Centred • Cost reduction
Learning
• Strategy: development &
implementation
• Managing Contractual
Risk


Expert and experienced procurement resource

The four key elements of the Brian Farrington Ltd proposition

our independence is
Integrity your assurance of
rigorous analysis,
the objectivity of our Solution- outstanding practical
service focused expertise and innovative
service responses

Client our responses are
service defined and driven
and value by the individual
needs of our clients bringing appreciable
Proven
improvements in
Methodologies
business performance


Appendix: Capabilities Matrix
Action Centred Learning Organisational Shaping
Benchmarking Outsourcing
Best Value Reviews Partnering Government
Boardroom Briefings Performance Reviews Defence
Process Mapping
Change Management Utilities
Procurement Policies
Claims Management Fmcg
Procurement Risk
Contract Documents Procurement Strategy Food & drink
Contract Negotiation Procurement Workload Analysis Education
Contract Performance Audits Project Management Health
Contractual Risk Purchase Research Construction & Property
Cost Reduction Purchasing Manuals Defence
Due Diligence Recruitment
Red Team Reviews
Engineering
E-Procurement
Expert Witness Strategic Sourcing Brian Farrington Ltd Financial Services
Specification Writing Retail
Fraud Investigation
Supplier Management IT
How to Tender
Supplier Rationalisation Mining
Gateway Reviews Supplier Selection
Independent Reports Nuclear
Supplier Surveillance
Interim Management Supply Chain Management
Pharmaceutical
International Procurement Technical Commercial Awareness Retail
IT Review Tender Documents Telecomms
Lead Negotiator Role Tender Management Transport
Metrics of Excellence Total Procurement Process Mgt
Option Appraisal Training Courses


Brian Farrington Ltd CIPS Merseyside 11 November 2010

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