24 January 2007
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GROUP MANAGER ENVIRONMENTAL SERVICES
Dacorum Borough Council
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Tendring District Council
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ASSISTANT DIRECTOR HOUSING LANDLORD
Dacorum Borough Council
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ELECTORAL SERVICES MANAGER (DEPUTY RETURNING OFFICER)
Herefordshire Council
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North Yorkshire County Council
£71,252 - £85,341 pa
A radical shake-up of its procurement policies has led to cashable savings of millions of pounds for Edinburgh City Council. Finance director, Donald McGougan, describes how it was done
Three years ago, City of Edinburgh Council was no different from anywhere else. Most of the council’s procedures were on paper, and even when IT had been introduced, different departments used different systems.
Resources were tied up in routine financial administration, recording payments, re-typing information into different spreadsheets, and monitoring expenditure against budgets.
This involved tens of thousands of paper transactions and dealing with thousands of different suppliers. There was even evidence that different parts of the council were paying different prices for the same goods and services from the same supplier. At the highest level, the council recognised the need for change.
Now, some years down the line, we have turned the situation around. All departments are using a new system, the Oracle eProcurement system, and 100% of the council’s payment now go through its accounts payable system.
Around 4,000 staff, including requisitioners, budget managers and administrators, use the system online every day.
And as a result of implementation of the new system, Edinburgh has leapfrogged ahead to become one of the market leaders in Scotland for integration of financial services, procurement and payments in a single technological platform.
This means we can now easily identify how the multiple influences on our spend make efficiencies across the whole financial process.
So what are the benefits? Here are just some:
l the council has saved more than £1m a year in staff costs leading from the integration of financial services, and a further £2.5m from procurement cost savings this year. We also expect at least a further £17m between now and 2011
l the new technology has resulted in quicker payment of invoices. Almost 90% of invoices are now settled within the target date of 30 days compared with 70-75% previously. This makes a powerful incentive for suppliers to use the new system
l our ‘cradle-to-grave’ procurement service now covers the whole life-cycle of an order, and has reduced the need for repeatedly keying in the same data at different stages of the process.
It also led to a culture change in financial management and budget administration. The system we now use provides managers with all the accounting, budget and ordering information they need, without the intervention of our professional finance staff.
Co-operation with the department of health and social care provides an example of this new way of working. Traditionally, the department commissioned agency staff for residential homes at a local operational level, in isolation from both the department’s commissioning team and the central procurement team.
But with the advent of the new i-sourcing and e-procurement technology, a new opportunity occurred to examine procurement spend and bring together a team which crossed departmental boundaries. Legal, financial and contract experts joined the quality and performance health and social care team to establish the project. Some £3m was spent on agency staff by the health and social care department in 2004-05. A readiful supply of labour was not available and recruitment difficulties were becoming severe.
In 2005-06, the project team took action to address these issues. Managing procurement better would bring significant benefits, the team thought. It decided to use e-auction in an entirely new context – to recruit temporary staff in health and social care homes across the city.
It was the first time in the UK the public sector had used this method to award this type of service contract. And the results of this multidisciplinary approach were encouraging. Fox example:
l there was an annual saving of an estimated £500,000 a year
l clearly-defined quality criteria ensured this saving was not at the expense of service standards
l people can now recruit temporary staff electronically, rather than wade through telephone books
l it inspired other departments to change their practices too. There are now 32 planned e-auctions this financial year, with contract values of more than £90m. Other projects not suitable for e-auctions are referred to the corporate procurement team. And this is just the start. We are keen to collaborate with other councils and a wide range of public bodies as we are convinced further savings can be made across local government as a result of procurement initiatives. w
Donald McGougan is director of finance for the City of Edinburgh Council
Resources were tied up in routine financial administration, recording payments, re-typing information into different spreadsheets, and monitoring expenditure against budgets.
This involved tens of thousands of paper transactions and dealing with thousands of different suppliers. There was even evidence that different parts of the council were paying different prices for the same goods and services from the same supplier. At the highest level, the council recognised the need for change.
Now, some years down the line, we have turned the situation around. All departments are using a new system, the Oracle eProcurement system, and 100% of the council’s payment now go through its accounts payable system.
Around 4,000 staff, including requisitioners, budget managers and administrators, use the system online every day.
And as a result of implementation of the new system, Edinburgh has leapfrogged ahead to become one of the market leaders in Scotland for integration of financial services, procurement and payments in a single technological platform.
This means we can now easily identify how the multiple influences on our spend make efficiencies across the whole financial process.
So what are the benefits? Here are just some:
l the council has saved more than £1m a year in staff costs leading from the integration of financial services, and a further £2.5m from procurement cost savings this year. We also expect at least a further £17m between now and 2011
l the new technology has resulted in quicker payment of invoices. Almost 90% of invoices are now settled within the target date of 30 days compared with 70-75% previously. This makes a powerful incentive for suppliers to use the new system
l our ‘cradle-to-grave’ procurement service now covers the whole life-cycle of an order, and has reduced the need for repeatedly keying in the same data at different stages of the process.
It also led to a culture change in financial management and budget administration. The system we now use provides managers with all the accounting, budget and ordering information they need, without the intervention of our professional finance staff.
Co-operation with the department of health and social care provides an example of this new way of working. Traditionally, the department commissioned agency staff for residential homes at a local operational level, in isolation from both the department’s commissioning team and the central procurement team.
But with the advent of the new i-sourcing and e-procurement technology, a new opportunity occurred to examine procurement spend and bring together a team which crossed departmental boundaries. Legal, financial and contract experts joined the quality and performance health and social care team to establish the project. Some £3m was spent on agency staff by the health and social care department in 2004-05. A readiful supply of labour was not available and recruitment difficulties were becoming severe.
In 2005-06, the project team took action to address these issues. Managing procurement better would bring significant benefits, the team thought. It decided to use e-auction in an entirely new context – to recruit temporary staff in health and social care homes across the city.
It was the first time in the UK the public sector had used this method to award this type of service contract. And the results of this multidisciplinary approach were encouraging. Fox example:
l there was an annual saving of an estimated £500,000 a year
l clearly-defined quality criteria ensured this saving was not at the expense of service standards
l people can now recruit temporary staff electronically, rather than wade through telephone books
l it inspired other departments to change their practices too. There are now 32 planned e-auctions this financial year, with contract values of more than £90m. Other projects not suitable for e-auctions are referred to the corporate procurement team. And this is just the start. We are keen to collaborate with other councils and a wide range of public bodies as we are convinced further savings can be made across local government as a result of procurement initiatives. w
Donald McGougan is director of finance for the City of Edinburgh Council
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