corporate procurement strategy april 2010

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CORPORATE PROCUREMENT STRATEGY

INTRODUCTION Purpose.

This procurement strategy defines the role of procurement in the delivery of Derbyshire Dales District Council's strategic aims and priorities. The strategy document sets out the key policies and strategies in the District Council's procurement and contract management activities, and lists the key actions necessary to deliver its objectives. Derbyshire Dales District Council adopted its first formal procurement strategy in 2003. This was produced in response to the Government’s National Procurement Strategy (NPS) for Local Government and delivered considerable benefits to the Council. The original Strategy was updated in 2006. This newly revised Strategy sets out the high level strategic direction that the District Council’s procurement provisions will take in order to assist in achieving the Council’s Corporate Aims and Priorities. The Strategy aims to promote effective and consistent procurement practice across the District Council. Compliance with this Strategy is compulsory. The Strategy and associated policies will be reviewed at least annually.

Councillor Lewis Rose Chief Executive Leader

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PROCUREMENT STRATEGY

0. EXECUTIVE SUMMARY 0.1 Procurement is the process of acquiring goods, works or services from third parties and in-

house providers. The process covers the whole cycle from the identification of the need through to the cessation of the service provision or the end of the useful life of an asset. The District Council’s primary focus is to use procurement to deliver high quality and cost effective services that meet the needs of users and the local community. It involves the detailed analysis of the options available to deliver a service or provide an asset.

0.2 This strategy explains the high level strategic direction that the District Council’s

procurement arrangements will take in order to assist in achieving the Corporate Aims, which are enshrined in our Performance Plan. It aims to promote effective procurement practice throughout the whole of the Council in a corporate manner. The strategy focuses upon achieving outcomes both through strategic and routine procurement projects. It is not intended to be a procurement manual.

0.3 Using effective procurement, the District Council will look to deliver improvements in service delivery through increasing capacity in reviewed service areas and developing opportunities for performance improvement. Effective procurement will continue to support our priorities including affordable, decent housing, safe communities, street scene and active, healthy communities.

0.4 The main drivers for the strategy include:

• Procurement legislation and regulation (EU and UK)

• Efficiency, collaboration and shared services

• Equality and diversity

• Workforce issues

• Design and construction

• Sustainability and whole life costing

• Consultation with and understanding the local citizens’ needs 0.5 The Strategy aims to balance efficiency and quality with the desire for socially responsible

procurement and the engagement of local and regional suppliers to promote the local economy and to take account of the social and environmental impact of spending decisions.

0.6 Member and officer commitment will be re-enforced through procurement training which continues to raise the profile of procurement. The Council will encourage long-term thinking

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and commitment to strategic procurement issues including the risks and opportunities of delivering procurement outcomes through the varying routes defined within service delivery options.

0.7 The Strategy has within its appendices documents explaining the general principles and policies under which the Strategy operates, details of training requirements and operational responsibilities of members and officers, the aims of option evaluation and appraisal and post evaluation procedures.

0.8 To it are attached detailed guidance on procurement alternatives, management

arrangements, an option appraisal checklist, a user's guide and a "How to do business with Derbyshire Dales DC", for potential bidders.

0.9 The Strategy is supported by reference to the District Council's relevant policy documents.

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PROCUREMENT STRATEGY PRINCIPLES AND POLICIES The attached document comprises the following modules: - Page 0.0 Executive Summary ii 1.0 Introduction 2 2.0 Procurement Functions 3 3.0 Aims of the Strategy 5 4.0 Training 6 5.0 Assessment Criteria 7 6.0 Operational Responsibilities – Members and Officer 7 7.0 Procurement Option Evaluation and Appraisal 8 8.0 Post Evaluation Procedures 11 9.0 Workforce Matters 11 10.0 Consultation 12

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1.0 INTRODUCTION 1.1 Procurement is the process of acquiring goods, works or services from third parties and in-

house providers. The process covers the whole cycle from identification of need to the cessation of the service provision or the end of the useful life of an asset. The District Council’s primary focus is to use procurement to deliver high quality and cost effective services that meet the needs of users and local community. It involves the detailed analysis of the options available to deliver a service or provide an asset.

1.2 This strategy applies to all procurements, from routine low value acquisitions of

consumables, to high value and complex schemes. The method of approach to delivering high value strategic procurements will need to differ from that applied to low value procurement work. However the guiding procurement principles and concepts will remain consistent.

1.3 Derbyshire Dales District Council is committed to providing excellent services in all its

activities and maintaining continuous improvement in the delivery of the services it provides. This high level strategic document sets out the manner in which it is intended to meet the Council’s legislative obligations and Performance Plan in connection with all matters relating to procurement.

1.4 The operational provisions are described in the Officer’s Procurement Manual. 1.5 This strategy will ensure that the District Council’s aims and priorities relating to

procurement issues, as defined in the Performance Plan, are met. It establishes the corporate framework for the procurement process and defines the links with the Council’s other strategic documents including the Performance Plan, Capital Strategy, Asset Management Plan, Equality and Diversity Policy, Sustainable Community Strategy, Housing Strategy, Small Business Friendly Concordat, Risk Management Policy and Counter Fraud Policy and Strategy, Human Resources Strategy and Whistleblower Policy.

1.6 The District Council’s procurement policies are reflected in Contract Standing Orders and

Financial Regulations and they are continuously reviewed to ensure that legislative and other changes are incorporated.

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2.0 PROCUREMENT FUNCTIONS 2.1 Options appraisal is the consideration of the alternatives for procuring the service

requirements. It will conclude with a recommendation for the preferred option. The options for service delivery have evolved since the advice provided in the circular on

Best Value and comprise the following:

1. Cessation of the service in its entirety; 2. In-house service provision; 3. Invitation to external tenderers to compete with the in-house team; 4. Service outsourcing; 5. Mixed market; 6. Partnering and partnerships; 7. Collaborative working within the public sector; 8. Joint ventures, joint commissioning; 9. Working with the voluntary sector; 10. Social enterprises; 11. PFI Contracts

2.2 Procurement function within a local authority

• Developing a corporate procurement presence and learning from Regional Improvement and Efficiency Partnership’s advice

Principles and Policies Section 3.0. Aims of the Strategy

• Review current practice (Contract Standing Orders, structures, processes, frameworks etc)


• Engaging Members - greater strategic involvement and clear political responsibility for procurement

Principles and Policies Section 6.0. Operational Responsibilities - members and officers

• Improving regulations (Contract Standing Orders and re-educating)


• Building capability - competency frameworks (including members)

Principles and Policies Section 4.0. Training

• Ensure that the principles of sustainability, economic development and equality are promoted, as appropriate in all procurement activities


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• Using e-procurement (including e-tendering, e-documents, e-payments)

Operational Arrangements Section 6.0. Corporate e-procurement 2.3 Making markets work better

• Market testing

Operational Arrangements Section 5.0. Competition 2.4 Tender design, evaluation and contract management

• Designing and planning a project (project management/process/standardised approach created)

Detailed Management Arrangements - Outline Business Case/Output Requirements and Contract Terms/Procurement Plan

• Managing risk (Risk Management Strategy)

Detailed Management Arrangements - Risk Management

• Assessing bids (include whole-life cost principles)

Detailed Management Arrangements - Evaluation Strategy

• Register of contracts

Detailed Management Arrangements - Contract Register

• Contract management (process, relationship, management role)

Detailed Management Arrangements - Contract Management

• Applying and improving legislation (Equalities, EU Regulations, Remedies etc)

Detailed Management Arrangements - EU Purchasing Regulations/TUPE Regulations

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3.0 AIMS OF THE PROCUREMENT STRATEGY 3.1. The aims of the strategy are to: -

• Ensure that all procurement activities are carried out in accordance with the District Council’s Performance Plan and procurement legislation and regulation (EU and UK).

• Ensure that all procurement activities are carried out in a fair, efficient, consistent and transparent way, allowing all qualified and competent suppliers the opportunity to provide goods and services to the Council.

• Secure commitment to effective procurement arrangements from members and officers.

• Provide a corporate focus for increased partnership arrangements between the Council and service providers, and the development of more flexible and effective contracts.

• Develop more collaborative working relationships between the Council and its suppliers, both current and future.

• Ensure that each procurement project addresses sustainability and equality issues and identifies whether there is scope to improve the environmental, economic and social impacts of the proposed contract.

• Engage in joint procurement activity with other public, private and voluntary sectors as appropriate and use consortium arrangements where they are advantageous.

• Encourage a diverse and competitive supply market including small firms, social enterprises, ethnic minorities, businesses and voluntary and community sector suppliers.

• Ensure that potential service providers are provided with adequate, accurate and timely information at all relevant stages of the procurement process.

• Ensure that bidders are fully aware of the basis for bid evaluation (evaluation criteria) and that all stages of the procurement process can be audited satisfactorily with reference to a clear, written policy on evaluating tenders and awarding contracts, which is publicly available to all bidders.

• Develop a longer-term strategy framework for option analysis and appraisal in the consideration of the Council’s procurement function to ensure continuous improvement.

• Ensure that the Council’s Contract Standing Orders and Financial Regulations relating to procurement are up to date.

• Use modern procurement practices, including e-procurement to reduce the burden on administration and monitoring resources.

• Ensure that adequate budgetary and employee resources are provided to meet the Council’s key procurement objectives.

• Encourage a long-term commitment to the consideration of strategic procurement issues.

• Continue to identify and promote the benefits of strategic procurement arrangements.

3.2. The strategy will ensure that procurement is undertaken in an open, fair and efficient manner as identified in Contract Standing Orders and Financial Regulations by meeting the following criteria: -

• Each potential service supplier will be treated equally by the Council;

• The Council will provide supplier-friendly specifications;

• Specifications will, wherever possible, be based on service outputs and outcomes to encourage innovative and flexible methods of service delivery;

• Where appropriate tender specifications may identify a need for equality related award criteria/outcomes to reflect the needs of different service users;

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• Tender evaluation criteria will be available to each bidder in the procurement process;

• The Council will be openly accountable for every tender decision made;

• Potential suppliers/contractors will be expected, whenever possible, to adopt an “open-book” approach in their procurement dealings with the Council;

• Qualitative feedback will be available to bidders whose tenders are unsuccessful;

• The Council will seek to apportion the risks of procurement most effectively for both parties;

• After awarding a contract the Council will work closely with the contractor/supplier to resolve any problems or difficulties encountered in implementation.

3.3. The Council will ensure that the responsibilities of members and officers respectively will be

carried out in accordance with the Procurement Strategy. 3.4. The Council will take social, equalities and environmental factors into consideration

alongside financial factors in decision-making. This involves looking beyond the traditional economic parameters and making decisions based on the whole life costs, the associated risks, measures of success and implications for society and the environment. The business case will address equalities issues and sustainability issues to identify whether there is scope to improve the environmental, economic and social impacts of the proposed contract.

3.5. Procurement decisions may impact on the Sustainable Community Strategy. Partners

recognise that they can realise economic, social and environmental benefits for the community through effective procurement policy and practice. The Council may include in invitations to tender, a requirement for bidders to submit proposals for the delivery of specified community benefits, which are relevant to the contract and add value to the Sustainable Community Strategy.

3.6. The Council will monitor appropriate contractors to ensure equalities requirements are

being met.

3.7. Where the procurement of a specialist service is being undertaken and the Council lacks the necessary procurement skills, it may consider the possibility of using an externally–managed procurement process. Framework Contracts and Purchasing Consortia opportunities will be considered.

3.8. In all cases the Council’s procurement requirements as defined in Contract Standing Orders

and Financial Regulations will be followed. 4.0 TRAINING

4.1 Although the Council acknowledges that there is a substantial pool of skill and experience

in procurement matters within the organisation it also understands that all members and officers responsible for making procurement decisions need the appropriate skills, knowledge and guidance in order to make the right decision and achieve continuous improvement. Accordingly members and employees with procurement responsibilities will be: -

• Given the appropriate training in order to undertake effective procurement and purchasing;

• Made aware of their responsibilities under the corporate procurement framework and related policies;

• Advised on the budgetary implications of procurement decisions; and

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• Consulted on proposed future changes to the corporate procurement framework and this Strategy.

5.0 ASSESSMENT CRITERIA

5.1 Each decision on procurement will be subject to an examination against the following

criteria :-

• Significance - is the service of fundamental strategic significance?

• Specification - can the requirement for procurement be readily specified to comply with legislation?

• Supplier competitiveness - does the present supplier, if any, (including any in-house supplier), deliver the specified goods or services and can it continue to do so at the required level of performance and quality and at a competitive cost when compared with other suppliers?

• Procurement options - have all alternative methods of provision as detailed in the Options Appraisal Checklist been examined?

• Specifications - are specifications based on outputs and outcomes, rather than inputs, in order to encourage innovation by potential suppliers and the transfer of risk for poor or non-performance?

6.0 OPERATIONAL RESPONSIBILITIES

Members

6.1. It is the responsibility of members to assume a strategic role in securing quality outcomes from procurement activity. This includes scrutiny of the process and monitoring the outcomes of procurements.

6.2 The Policy Committees are responsible for the approval and monitoring of procurement

decisions, which fall within their remit. Officers

6.3 Procurement decisions are most important decisions for managers because the money

involved is public money and the Council is concerned to ensure that high quality goods, works and services are provided. Efficient use of resources in order to achieve Value for Money is imperative. The Council’s reputation is equally important and should be safeguarded from any imputation of dishonesty or corruption.

6.4 At the start of each procurement exercise a project management plan will be prepared

setting out clearly, financial considerations, commencement and completion dates together with milestones to be achieved throughout the process.

6.5 It is a disciplinary offence to fail to comply with Contract Standing Orders and Procurement

Practice when letting contracts/placing orders.

6.6 All officers procuring goods or services will adhere to the following principles of effective procurement: –

• Ensure compliance with the District Council’s Performance Plan;

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• Comply with Procurement legislation & regulation (EU and UK) and the Council’s Contract Standing Orders and Financial Regulations;

• Ensure that routine, low value transactions as defined within Contract Standing Orders and Financial Regulations will be subject to appropriate procurement arrangements to ensure timely and expedient action;

• Consider and record the possible implications and effects of any procurement decision on other Council policies and strategic documents including the Performance Plan, Capital Strategy, Asset Management Plan, Sustainable Community Strategy, Housing Strategy, Equality and Diversity Policy, Small Business Friendly Concordat, Risk Management Policy and Counter Fraud Policy and Strategy, Human Resources Strategy and Whistleblower Policy;

• Ensure that the procurement process incorporates the inclusion of sustainable design and environmental issues into technical specifications which are as appropriate;

• Balance cost with quality and deliver services that are sustainable, innovative and structured to achieve Value for Money;

• Examine procurement options to ensure the most suitable service delivery method available is selected;

• Encourage partnership arrangements or competition wherever possible;

• Operate within prescribed guidelines to develop flexible alternative procurement and partnership arrangements;

• Best practice guidance will be issued to minimise administrative requirements and improve efficiency;

• High quality tenderers will be encouraged by continuing the practice of fair and transparent procurement arrangements and by the publication of a written tender evaluation policy to be made available to all bidders;

• Ensure that all procurement activities meet identified outputs, outcomes and objectives;

• Demonstrate a commitment to continuous improvement in procurement practices, the provision of excellent services to all users and the incorporation of quality and equality standards in all procurement activities.

6.7 In order to drive the implementation of the Strategy the Officer Procurement Board has

been created incorporating the appropriate skills required to provide advice and assistance throughout the process. This comprises specialists in finance, legal and democratic issues, internal audit, human resources and technical officers and meets on a regular basis to review progress and respond to changes in legislation and government advice.

7.0 PROCUREMENT OPTION EVALUATION AND APPRAISAL

7.1 The aims of procurement option evaluation and appraisal are to: -

• Provide a list of the procurement options available for consideration by Council services in order for them to meet the requirement of continuous improvement;

• Provide a framework, which allows those services to adopt the option, which delivers value for money.

7.2 In order to do this the following questions will be asked of the present service: -

• What is currently being done and if the service is required in part or whole, or should it cease?

• What are the methods employed to do it?

• What problems, if any, have been encountered?

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• Is there evidence of good practice available elsewhere, such as Codes of Practice, acknowledged professional standards or other precedents?

• What is the estimated lifetime cost and benefit of the service to be provided?

7.3 Reviews of service provision will ensure proportionality in procurement decisions. Actions will be justifiable and be in the best interests of customers/users while demonstrating potential long-term savings in cost or improvements in quality greater than the initial investment.

7.4 The Council will continue to support existing service providers, both internal or external,

where: -

• The service is shown to be competitive on quality and cost and will continue to deliver Value for Money when compared with other potential service suppliers;

• The existing provider can demonstrate an ability to produce continuous improvement using realistic performance measures within an acceptable timescale.

7.5 Effective procurement requires that consideration be given to: -

• The cost and quality of the service against a range of service providers across the public, private and voluntary sectors;

• The views of the service users and the community towards the quality and Value for Money of the service;

• The impact that any changes to the procurement and the delivery of the service will have on the local Community through employment and economic delivery;

• The performance of the service and whether it is achieving its intended purpose and meeting its contractual obligations.

7.6 Options appraisal will be undertaken: -

• Prior to the expiry of an existing contract

• Following a review of service performance

• As a matter or urgency if a service or contract is failing Options appraisal is required irrespective of the service being provided by an external provider or through in-house arrangements. The options appraisal opportunities are detailed in the attached “Operational Arrangements and Options Appraisal” document.

7.7 The Council will consider each option for service procurement, disregarding those which

are inappropriate. In order to determine which is the most likely to deliver value for money an analysis based on the following criteria will be used: -

• Compliance with procurement legislation & regulation (EU and UK)

• Compliance with the Council’s Performance Plan

• Other Council policies and strategies

• Service to the users

• Quality

• Current cost

• Whole-life cost/benefits evaluation

• Environmental, equality and sustainability issues

• Staffing issues

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• Community safety

• Compact with the voluntary sector

• Social enterprise 7.8 Other matters to consider when evaluating the options available include the following: -

• If the service is presently delivered in-house how would contracting out affect this and other Council services?

• Are there any legal issues which need resolving?

• There must be a clear understanding of what the market can offer the service seeking procurement.

• What possible changes or improvements are likely to take place in the market during the period of the contract?

• It is necessary to develop an understanding of the potential sources of supply and the contactor/suppliers’ perspective on packaging work and the optimum contract length.

• Contractors/suppliers should be informed of the Council’s needs so that they approach an Invitation to Tender well informed and can therefore make the most suitable and best possible bid.

• It may be necessary to package work appropriate to the market – larger packages may generate more interest than smaller ones (or vice versa) in certain areas of activity.

• A particular grouping of functions for tender purposes may generate interest from innovative suppliers.

• An estimate of the whole-life cost and benefits of the contract should be determined before tendering.

• Taking into account the statutory options set out above it should be determined if the required service is to be met through existing in-house or external suppliers.

• Prior to commencing the new procurement process long-term contracts should be re-examined, especially if they have been in operation for some time.

• Does the service specified meet both current and known future needs?

• Does the specification provide an incentive for the supplier to be innovative while ensuring continuous service improvement?

• The whole procurement process should be used as a means of eliciting proposals for improvements in the service and the development of an implementation strategy.

7.9. The Council will work with current and potential suppliers in the public, private and voluntary

sector to analyse the size and structure of the supply market. The scale and detail of the analysis of the market will be dependent on the size and strategic importance of the service, the knowledge of the existing market and the performance of existing service providers.

7.10. Market analysis may, where appropriate, involve engaging in discussions with other service

providers or potential providers in the public, private and voluntary sector. These discussions will: -

• Consider the anticipated changes to the service resulting from best practice, new legislation or consultation with service users;

• Assess the existing market’s size, stability, reliability and potential to provide continuous improvement to the service;

• Explore alternative service structures that the market suggests may deliver value for money services;

• Analyse the appropriateness of alternative ways of procuring the service;

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• Where a current market exists, consider how performance improvements can be secured;

• Consider how a poorly developed or weak market can be developed and new suppliers encouraged.

7.11. Other possible market research tools to be employed may include: -

• Consultation with existing customers of products and services, including other local authorities and the local community;

• Discussions with trade associations and chambers of commerce;

• Attendance at trade fairs;

• Consulting on-line databases;

• Internet searches i.e. supplier web pages;

• Consultant advice;

• Trade journals and directories. 7.12. While the Council agrees that the best evidence of the competitiveness of a service is

through fair and open market testing it is not always possible, for example where there proves to be no external market competition.

7.13. In such circumstances the Council will use other methods to test the competitiveness of the

service including discussions with existing or potential service providers about improvements required in service provision and possible changes to delivery methods.

7.14. Other alternatives include a requirement to deliver the service based on outcomes rather

than delivery procedures, thus allowing and encouraging innovative methods of service provision and grouping complementary services to make them more attractive to potential suppliers.

8.0 POST EVALUATION PROCEDURES

8.1. All procurement decisions must be clearly recorded in accordance with Contract Standing

Orders and Financial Regulations in order to provide a clear audit trail for independent inspection both internal and external.

8.2. The chosen supplier/contractor will be expected to meet challenging though realistic

performance targets as part of the requirement to deliver continuous improvement in service delivery. Wherever possible actual performance will be measured at regular intervals throughout the period of the contract, in accordance with the Council’s Performance Management culture.

8.3. Where problems occur with the performance of the service/contract either in terms of cost

or quality, the Council will endeavour to work with the supplier to improve performance levels.

9.0 WORKFORCE MATTERS 9.1 Staff affected by a procurement exercise will be kept informed of procurement

developments throughout the process and their views will be fully considered. Where outsourcing is an option, this will be done with reference to TUPE. In transfer situations even when the TUPE does not apply in strict legal terms, the principles of TUPE will be followed. The staff involved will be treated no less favourably than had the regulations

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applied. New joiners will be offered terms and conditions, which are no less favourable than those of transferred staff and will also be offered a reasonable pension provision.

9.2 Where there is a TUPE transfer, the Council will provide bidders with accurate and timely

information on all relevant matters. Bidders will be expected to demonstrate that they understand and can manage their obligations under TUPE, with no detriment to the terms and conditions of transferred employees in connection with the transfer.

9.3 There will be no transfer unless the Council is satisfied that the prospective employer is

sound. Contracts will not be awarded to organisations with poor records of accomplishment in areas such as employment conditions and extends to equality issues such as gender, race, religion, age, disability, and sexual orientation.

9.4 Contractors selected to provide services to the Council and to take on former staff should

have the policies, which ensure good communications and consultation with the workforce on key issues following a transfer.

9.5 The Council will also seek to provide protection of the pension rights of transferring staff.

The Council will expect employers either to seek admitted body status (where eligible) to the Local Government Pension Scheme or to offer membership of an alternative scheme which is actuarially certified as being broadly comparable. Negotiations to resolve the issue of pensions shall take place at an early stage in the process and shall be open and transparent.

9.6. Throughout the length of the contract the service provider will provide the Council with

information as requested which is necessary to allow the Council to monitor compliance with the Code and in particular measures to prevent the emergence of a two tier workforce. The Council will seek to enforce these obligations on the contractor under the Code.

10.0 CONSULTATION 10.1. This Procurement Strategy document and any future substantial amendments will be the

subject of consultation with all stakeholders including Members of the Council, officers at all levels throughout the organisation, a sample from regular contractors & suppliers, external partners in the public and private sectors, representatives of the Trade Unions and members of the public where appropriate.

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OPERATIONAL ARRANGEMENTS AND OPTIONS APPRAISAL The attached document comprises the following modules :- Page 1.0. Procurement Arrangement Alternatives 2 2.0. Options Appraisal 3 3.0. In-House Service Provision 3 4.0. Commissioning and Procurement 4 5.0. Competition 4 6.0. Corporate e-procurement 6 7.0. Small & Medium Size Enterprises 7

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OPERATIONAL ARRANGEMENTS AND OPTIONS APPRAISAL This document provides information and guidance on the appraisal of alternative procurement options for service delivery and the issues to be taken into consideration before a procurement decision. 1.0 PROCUREMENT ARRANGEMENT ALTERNATIVES

Before examining alternative methods of service delivery the following factors will be taken into consideration to act as a risk assessment in determining the appropriate procurement option.

• Strategic importance - is the service of strategic importance? Does it include work of a confidential, sensitive or policy nature? If not, and the value of the procurement is less than £20,000, a full options appraisal is not required;

• Core Values - it is necessary to ensure that potential suppliers are aware of their obligation to comply with the Council’s Core Values;

• Impact on Other Council Services - what will be the impact (positive or negative) on the delivery of other services if the service provider is changed?

• Level of Risk - is there a degree of risk in changing the supplier, and if so how great is it?

• Level and Quality of Competition and Market Maturity - is there a mature external market with enough suppliers/contractors to bid for the service?

• Packaging - is it possible to package the work differently from previous contracts to increase or develop the market?

• Replacement Suppliers/Contractors - will the Council be able to ensure a continuation of service delivery should a provider fail to perform, and are there adequate financial penalties to provide alternative funding?

• Legislative Changes - are there any known changes in legislation, which could affect future delivery of the service?

• Specification of the Service - is the service difficult to specify or quantify?

• Performance Measurement - is the performance of service delivery easy to measure, and if not what is required to improve it?

• Current Performance Level - is current performance in accordance with the contract and does it deliver the required service?

• Improvement Plan - has an Improvement Plan been agreed with the present service provider?

• Service Capacity - will increased competition result in greater capacity to meet fluctuating workloads?

• Investment Requirements - is there a need for heavy investment in plant and equipment?

• Contract Management - will management of the contract be difficult?

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• Impact on In-house Expertise - if the contract/service is presently delivered by an in-house provider what would be the effect of externalisation on the retention of current staff carrying out duties related to other contracts?

• Costs and Benefits - do the long-term benefits of changing the supplier outweigh the costs of procurement and client management?

2.0 OPTIONS APPRAISAL 2.1 Options appraisal is the consideration of the options for procuring the service requirements.

It will conclude with a recommendation for the preferred option. Options appraisal will be undertaken: -

• Prior to the expiry of an existing contract;

• Following a review of service performance;

• As a matter of urgency if a service or a contract is failing.

2.2 Within the early stages of the option appraisal a decision is required as to whether the service will be provided by external providers or through in-house arrangements (“Make or buy”).

2.3 The Council will consider the following service delivery options together with any others,

which may be identified through research and experience. 3.0 IN-HOUSE SERVICE PROVISION 3.1 The Council believes that in-house services can provide cost effective and high quality

services. However, it appreciates that this is only one approach to service delivery, which must be considered, on an equal basis, with other options.

3.2 In-house services will be exposed to the competitive market unless it can be shown that an

external solution would be inappropriate.

3.3 Consideration will be given to selecting the in-house option where: -

• It can be demonstrated that the service competes with the best service providers in the various sectors. Auditable cost, service and performance evidence will be required to substantiate the competitiveness of the in-house service;

• The market is underdeveloped and there are either no suitable alternative providers or a very limited capacity;

• Market research has shown that there is little or no interest from prospective service providers in delivering the required service;

• Legal reasons require the service to be provided by the Council.

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4.0 COMMISSIONING AND PROCUREMENT 4.1 The Council will entertain commissioning principles when determining its approach to the

delivery of services. 4.2 Commissioning is different from procurement. Procurement is a part of this commissioning

cycle and is responsible for managing any competitive process employed. Commissioning may deliver services provided through non-competitive processes such as grant funding and voluntary work.

4.3 The Council recognises that commissioning is a central component in the transformation

agenda. It has the capacity to facilitate significant changes to the betterment of the wider community. However, there are no specific and pre-determined commissioning models as each process must be developed to meet specific circumstances and given needs, whilst remaining consistent with commissioning principles.

4.4 Strategic commissioning means securing the services that most appropriately address the

needs and wishes of the individual service user, making use of market intelligence and planning accordingly. Commissioning is the realisation of high quality and value for money services for this community. The commissioning process will consider all appropriate options, irrespective of the sector they originate from as well as ensuring legislative compliance and full transparency.

4.5 Essential to successful commissioning is the need to engage all stakeholder groups. The

Council will ensure that all stakeholders including service users, the wider community, suppliers and contractors and Council Officers along with partner organisations are included in the process.

5.0 COMPETITION 5.1 The Council will procure its services by competitive processes which will include the

following methods:- 5.2 Marketing testing will be used where it is not possible to evaluate, due to the quality of the

information available, whether or not an in-house service is competitive. Bids are obtained from external service providers and compared with the in-house service’s costs, quality standards and performance levels. Market testing is only possible where there is an established and competitive market.

5.3 The outcome of the comparison may result in the service being commissioned from an

internal or external provider depending on which represents the Value for Money. 5.4 Outsourcing is the award of contract to an external service provider without there being an

in-house bid. Outsourcing is usually applicable to situations where: -

• The in-house service does not provide a cost effective and quality service;

• There is a viable and well developed external market in which the in-house service will not be able to compete;

• There is no in-house provision.

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5.5 Where a service is exposed to potential outsourcing the Council will always:-

• Consult staff, Trade Unions and other interested parties at an early stage in the procurement process;

• Include employment considerations into the procurement and contracting process;

• Ensure compliance with relevant employment legislation and codes of practice.

5.6 Mixed market is the provision of a service by more than one provider. The mix may be a variety of differing combinations depending on the nature of the required service. It can be a mix between internal and external as well as voluntary service providers. This option is particularly suitable to services of a highly specialist and technical nature or where there are difficulties identifying a suitable single source provider for all aspects of the requirement.

5.7 Particular attention shall be given to the need to balance costs against benefits because

this option has the potential for attracting significant costs due to managing a number of distinct service providers.

5.8 Partnering and partnerships is a contractual arrangement set up between the Council and

its service providers, inside a non-adversarial and adaptable framework, to provide a service or deliver a project. Partnering is particularly applicable to procurement projects involving high risk and high financial values. Partnerships are arrangements, which may involve a number of agencies working towards similar objectives. The Council will be involved but not necessarily as the main participant.

5.9 Partnering is concerned with all parties working together to reach agreed and shared

objectives. The parties will share the risks and the rewards as well as combining in joint investment strategies and mutual training and development programmes. Partnering does not necessarily mean the contracting out in full of a service. The option appraisal process may determine that the Council will retain the provision of a part of the service requirement and the remainder shall be provided by a partner organisation.

5.10 Partnering arrangements and contracts offer the potential to draw the best and most

progressive elements from a mix of providers into the delivery of services through developing long term sustainable and collaborative relationships.

The Council’s approach to partnering will ensure:

• Compliance with the European Procurement Directive and Council Contracts Procedure Rules;

• A detailed examination of partnering models to determine the most suitable option for the required procurement;

• All prospective partners are informed about and are committed to the realisation of the Council’s vision and values as part of their contribution to the partnering arrangements;

• Partnering best practice is followed through reference to established and evolving practical guidance from specialist partnering bodies such as “The Strategic Partnering Taskforce” and the “Public Private Partnership Programme” (4P’s);

• Investigation of existing partnering arrangements used by other organisations to learn from their experiences;

• Contractual incentives are considered when preparing partnering arrangements. Incentives, which are usually financial, have distinct advantages to the parties through serving as a driver to innovation and continuous improvement.

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5.11 Collaborative working within the public sector is a form of public-public partnering which

provides opportunities for the Council to work with public sector organisations to achieve economies of scale and develop networking opportunities. Most consortium procurement activity is currently focused on the procurement of goods and non-strategic services.

The following illustrates some of the principle benefits associated with consortium working:

• Joint contracting initiatives;

• Maximisation of buying power;

• Reduced procurement administration costs;

• Networking opportunities through the exchange of information, especially in relation to market intelligence;

• Access to contracts arranged by other local authorities and purchasing consortia. 5.12 The Council participates in collaborative working through the Derbyshire Procurement

Forum and Purchasing Consortia (ESPO/OGC Frameworks). It will continue to participate in similar forums where suitable opportunities exist including the East Midlands Regional Improvement and Efficiency Partnership.

5.13 Joint ventures, joint commissioning is working together with similar bodies to provide a

jointly procured service (e.g. Legal, IT). 5.14 Working with the voluntary sector – the Council recognises the role that their sector has in

delivering services to the community. The Council will work with and support the voluntary sector through local compacts. The support may range from giving grant funding for projects to providing procurement and other technical support.

5.15 Social Enterprises are key partners in the delivery of excellence in the public sector and are

positioned alongside private and public sector service providers. The Council will encourage their engagement into the competitive procurement process.

5.16 PFI contracts are complex and relate to long-term projects, often for 20 years or more.

They are most likely to be appropriate where capital funding is unavailable from within the Council’s own resources and external funding is the only means of fulfilling the project. As the value of schemes acceptable for the use of PFI continues to increase it becomes more unlikely that Derbyshire Dales will make use of this form of financing.

6.0 CORPORATE E-PROCUREMENT 6.1 E-procurement is the ‘electronic exchange of information between the Council and its

suppliers and contractors from sourcing to payment within the procurement cycle’. However, e-procurement is more than simply automating the purchase order and invoice payment process. It is using the technology available to improve the effectiveness of the whole supply chain and will have a number of building blocks.

6.2 “e-Procurement” describes the use of an electronic system to acquire goods, works and

services from third parties (including payment). The solutions currently available on the market, include;

• Complete “end-to-end” procurement systems, including payment, that are integrated with financial back office systems

• Stand-alone modules used to seek tenders or quotations (known as Sourcing)

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• Web-based systems that enable ordering from approved catalogues (e-Marketplaces)

• Other web-based systems such as e-Auctions

• Procurement cards for ordering and payment

• Payment through BACS and CHAPS

6.3 The main objectives are to: -

1. Deliver financial savings through the wider use of consortia purchasing via the RIEP and by facilitating joint working where appropriate.

2. Implement an e-procurement solution across the Council and in partnership with other Councils where benefits will accrue for this Council.

3. Improve procurement skills throughout the Council and achieve a higher level of business intelligence.

4. Balance the potentially conflicting issues of delivering value for money and community benefits.

E-procurement is a planned development, which introduces modern, improved procurement techniques across the Council. It forms part of the Councils Corporate Procurement Strategy and meets both e-government requirements and fulfils the actions contained in the National Procurement Strategy for Local Government.

6.4 The primary aims of implementing e-procurement in the Council are: -

• To maximise the benefits of bulk buying and cost efficient back office systems by implementing appropriate e-procurement solutions.

• To reduce the direct and indirect costs of the procurement and payment processes using a combination of electronic requisitions/ orders, electronic catalogues, electronic authorisation for orders and invoices, electronic payments and remittance advices, procurement cards, schedules of rates and the implementation of streamline business systems and processes.

• To implement best practice in tendering and contract management processes by the use of electronic business systems.

• To collaborate with the RIEP in respect of e-auctions and reverse auctions in appropriate circumstances when cost efficiencies have been identified.

7.0 SMALL & MEDIUM SIZE ENTERPRISES (Small Business Friendly Concordat) 7.1 The Council seeks to encourage effective trade with small and medium sized businesses

(SME’s). The Councils seeks to encourage a diverse and competitive supply market which includes SME’s, social enterprises, ethnic minority businesses and voluntary and community sector suppliers.

7.2 The Council has signed up to the principles defined in the Small Business Friendly

Concordat.

corporate procurement strategy april 2010

Documents