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Brian Farrington Ltd Procurement, 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 11 th November 2010

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HM Treasury Review. Procurement cost reduction

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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

e:[email protected]

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