brian farrington ltd cips merseyside 11 november 2010
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HM Treasury Review. Procurement cost reductionTRANSCRIPT
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
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
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
We‟re all in this together!
Slide 1
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
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
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Highlight points – Procurement impact (1)
Slide 2
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Highlight points – Procurement impact (1)
- Deficit Reduction will be achieved through reductions in spending
- Consider new and radical approaches to public service provision
Slide 2
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Highlight points – Procurement impact (1)
- Deficit Reduction will be achieved through reductions in spending
- Consider new and radical approaches to public service provision
- Reduce spending this year by cutting waste
- All Departments will publish business plans
Slide 2
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Highlight points – Procurement impact (1)
- Deficit Reduction will be achieved through reductions in spending
- Consider new and radical approaches to public service provision
- Reduce spending this year by cutting waste
- All Departments will publish business plans
- Driving down the cost of operational delivery
- Renegotiating contracts
Slide 2
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Highlight points – Procurement impact (1)
- Deficit Reduction will be achieved through reductions in spending
- Consider new and radical approaches to public service provision
- Reduce spending this year by cutting waste
- All Departments will publish business plans
- Driving down the cost of operational delivery
- Renegotiating contracts
- Maximising collective buying power
Slide 2
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Highlight points – Procurement impact (2)
Slide 3
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Highlight points – Procurement impact (2)
Using benchmarking to improve performance
Identifying savings opportunities
Slide 3
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Highlight points – Procurement impact (2)
Using benchmarking to improve performance
Identifying savings opportunities
Promote freedom by encouraging a greater range of service providers
Improve Risk Management
Slide 3
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Highlight points – Procurement impact (2)
Using benchmarking to improve performance
Identifying savings opportunities
Promote freedom by encouraging a greater range of service providers
Improve Risk Management
Deliver continuous VFM improvements
Slide 3
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Renegotiating contracts (1)
Slide 4
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Renegotiating contracts (1)
Review Contract performance
Review contract history including price movements
Slide 4
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Renegotiating contracts (1)
Review Contract performance
Review contract history including price movements
Benchmark if raw data can be found
Consider unjust enrichment
Slide 4
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
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
Slide 4
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
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
Invoke right of audit clause
Slide 4
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Renegotiating contracts (2)
Consider termination for convenience
Slide 5
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Renegotiating contracts (2)
Consider termination for convenience
Renegotiate in good faith considering
Slide 5
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Renegotiating contracts (2)
Consider termination for convenience
Renegotiate in good faith considering
• Specifications
• GFE
• Contract extensions
• Aggregation
• Relationships
• Value Analysis
• Use of resources
• Total Cost of Ownership
Slide 5
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Can Procurement take the lead?
Slide 6
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Can Procurement take the lead?
Influence
Authority
Accountability
Slide 6
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Can Procurement take the lead?
Influence
Authority
Accountability
Skills – but in what?
Slide 6
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Can Procurement take the lead?
Influence
Authority
Accountability
Skills – but in what?
Contractual knowledge
Financial Knowledge
Slide 6
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Can Procurement take the lead?
Influence
Authority
Accountability
Skills – but in what?
Contractual knowledge
Financial Knowledge
Resources
Slide 6
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Cost drivers and the use of cost models
Slide 7
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Cost drivers and the use of cost models
Labour Costs
Slide 7
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Cost drivers and the use of cost models
Labour Costs
Wages
National Insurance
Pension
Clothing/Uniforms
Training
Mobile phones
Bonus payments
Other
Slide 7
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Cost drivers and the use of cost models
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
Slide 7
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
So – how radical will Procurement be?
Slide 8
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
So – how radical will Procurement be?
Probe Costs
Slide 8
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
So – how radical will Procurement be?
Probe Costs
No contract price escalation RPI/CPI
Slide 8
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
So – how radical will Procurement be?
Probe Costs
No contract price escalation RPI/CPI
Termination of contracts
Slide 8
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
So – how radical will Procurement be?
Probe Costs
No contract price escalation RPI/CPI
Termination of contracts
Recover damages
Slide 8
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
So – how radical will Procurement be?
Probe Costs
No contract price escalation RPI/CPI
Termination of contracts
Recover damages
Long-term contracts
Slide 8
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
So – how radical will Procurement be?
Probe Costs
No contract price escalation RPI/CPI
Termination of contracts
Recover damages
Long-term contracts
SMEs BMEs Third Sector
Slide 8
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
So – how radical will Procurement be?
Probe Costs
No contract price escalation RPI/CPI
Termination of contracts
Recover damages
Long-term contracts
SMEs BMEs Third Sector
Renegotiate
Slide 8
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
What Next?
• What are you going to do?
• “If not me, who?”
• “If not now, when?”
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
&QuestionsAnswers
Questions
Answers
Stephen Ashcroft BEng MSc MCIPS
http://www.linkedin.com/in/stephenashcroft
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Procurement: The seven steps to stagnation
Slide 10
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
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
Procurement: The seven steps to stagnation
Slide 10
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Supplier
Management
Nine steps which
guarantee success
Nine steps which guarantee success...
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Nine steps which guarantee success
Slide 12
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Nine steps which guarantee success
1. Clear agreement on the definition of „success‟
Slide 12
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Nine steps which guarantee success
1. Clear agreement on the definition of „success‟
2. Risk analysis which identifies those things which could go wrong
Slide 12
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Nine steps which guarantee success
1. Clear agreement on the definition of „success‟
2. Risk analysis which identifies those things which could go wrong
3. Contract which recognises and deals with price/cost issues, and contains realistic remedies
Slide 12
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Nine steps which guarantee success
1. Clear agreement on the definition of „success‟
2. Risk analysis which identifies those things which could go wrong
3. Contract which recognises and deals with price/cost issues, and contains realistic remedies
4. Leverage maximised at the enquiry stage including specification
Slide 12
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Nine steps which guarantee success
1. Clear agreement on the definition of „success‟
2. Risk analysis which identifies those things which could go wrong
3. Contract which recognises and deals with price/cost issues, and contains realistic remedies
4. Leverage maximised at the enquiry stage including specification
5. Use of kick off or watershed meetings
Slide 12
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Nine steps which guarantee success
1. Clear agreement on the definition of „success‟
2. Risk analysis which identifies those things which could go wrong
3. Contract which recognises and deals with price/cost issues, and contains realistic remedies
4. Leverage maximised at the enquiry stage including specification
5. Use of kick off or watershed meetings
6. Contract management plan defined and understood by all
Slide 12
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Nine steps which guarantee success
1. Clear agreement on the definition of „success‟
2. Risk analysis which identifies those things which could go wrong
3. Contract which recognises and deals with price/cost issues, and contains realistic remedies
4. Leverage maximised at the enquiry stage including specification
5. Use of kick off or watershed meetings
6. Contract management plan defined and understood by all
7. Performance evaluation and feedback to the supplier and from the supplier
Slide 12
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Nine steps which guarantee success
1. Clear agreement on the definition of „success‟
2. Risk analysis which identifies those things which could go wrong
3. Contract which recognises and deals with price/cost issues, and contains realistic remedies
4. Leverage maximised at the enquiry stage including specification
5. Use of kick off or watershed meetings
6. Contract management plan defined and understood by all
7. Performance evaluation and feedback to the supplier and from the supplier
8. Strategic Business Review meetings with managers and staff at the right level
Slide 12
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Nine steps which guarantee success
1. Clear agreement on the definition of „success‟
2. Risk analysis which identifies those things which could go wrong
3. Contract which recognises and deals with price/cost issues, and contains realistic remedies
4. Leverage maximised at the enquiry stage including specification
5. Use of kick off or watershed meetings
6. Contract management plan defined and understood by all
7. Performance evaluation and feedback to the supplier and from the supplier
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
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
&QuestionsAnswers
Questions
Answers
Stephen Ashcroft BEng MSc MCIPS
http://www.linkedin.com/in/stephenashcroft
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Contact details
Stephen Ashcroft BEng MSc MCIPS
Business Consultant
Brian Farrington Ltd
Rainford Hall
Crank
St Helens
Merseyside
WA11 7RP
T: 01744 20698
F: 01744 27897
URL:www.brianfarrington.co.uk
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
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
Quality Assured ISO 9001:2008
Delivery partners of CIPS
Key clients: Public sector & supply chain
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
• Negotiating Major Contracts
• Tendering Advice
• Partnering Facilitation
What do we do? – see Appendix
• Cost reduction
• Strategy: development &
implementation
• Managing Contractual
Risk
• Advice on Training Strategy
• Delivery of Training Strategy
• Metrics & Action Centred
Learning
• Commercial Manuals
• Design of Policies &
Procedures
• Due diligence
30%
30%20%
20%
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Expert and experienced procurement resource
The four key elements of the Brian Farrington Ltd proposition
Proven
Methodologies
Solution-
focused
service
Integrity
Client
service
and value
our independence is
your assurance of
the objectivity of our
service
our responses are
defined and driven
by the individual
needs of our clients
rigorous analysis,
outstanding practical
expertise and innovative
responses
bringing appreciable
improvements in
business performance
Brian Farrington LtdProcurement, Supply Chain and Negotiation Specialists
Action Centred Learning
Benchmarking
Best Value Reviews
Boardroom Briefings
Change Management
Claims Management
Contract Documents
Contract Negotiation
Contract Performance Audits
Contractual Risk
Cost Reduction
Due Diligence
E-Procurement
Expert Witness
Fraud Investigation
How to Tender
Gateway Reviews
Independent Reports
Interim Management
International Procurement
IT Review
Lead Negotiator Role
Metrics of Excellence
Option Appraisal
Organisational Shaping
Outsourcing
Partnering
Performance Reviews
Process Mapping
Procurement Policies
Procurement Risk
Procurement Strategy
Procurement Workload Analysis
Project Management
Purchase Research
Purchasing Manuals
Recruitment
Red Team Reviews
Strategic Sourcing
Specification Writing
Supplier Management
Supplier Rationalisation
Supplier Selection
Supplier Surveillance
Supply Chain Management
Technical Commercial Awareness
Tender Documents
Tender Management
Total Procurement Process Mgt
Training Courses
Government
Defence
Utilities
Fmcg
Food & drink
Education
Health
Construction & Property
Defence
Engineering
Financial Services
Retail
IT
Mining
Nuclear
Pharmaceutical
Retail
Telecomms
Transport
Brian Farrington Ltd
Appendix: Capabilities Matrix