Innovating in Public Sector Procurement

Local Government Context

Nigel Kletz

Birmingham City Council

17 November 2010

Agenda

1. Introduction to Birmingham City Council

2. Relationship with Partners

3. Examples of Innovation • Trading Models• Susatainable Procurement Consortium• Finditinbirmingam.com• TVTTS• Jobs and Skills Framework

4. Becoming a Commissioning Organisation

The Largest Local Authority in Europe

• One of most deprived areas in UK• 12.5% of people are out of work• 53,000 staff• £3.4bn budget• 1 million customers• 20 million+ visitors• 132 service areas – 6 Directorates• 65,000 Council houses• 4 million library visits• 14 million school meals• 177,000 pupils taught• 2,675 acres of parks• 2,500km of roads

Understanding our BudgetGross Income Budget £3,383m

Other £114m

DSG £774mFormula Grant,

£660m

Council House Rents & Other HRA Income,

£221m

Sales & Charges £362m

Council Tax £324m

Specific Govt Grants£928m

Statutory Accounts £8m

Controllable Spend £1,744m

DSG £774m HRA and Highways PFI

£181m

Capital Charges £228m

Housing Benefits and

PTA Levy £448m

Understanding our BudgetGross Expenditure Budget £3,383m

Gross Expenditure Budget by Portfolio £1,744m

Protection £26m 1.5%

Children, Young People & Families £573m 32.8%

Adults & Communities £362m 20.8%Centre £257m 14.7%

Transport & Street Services £121m 7%

Local Servs & Comm Safety £113m 6.5%

Regeneration £67m 3.8%Leisure, Sport & Culture £68m 3.9%Housing General Fund

£73m 4.2%

Constituencies £84m 4.8%

Controllable Expenditure Budget by Cabinet Portfolio - £1,744m

Comprehensive Spending Review

• >7% per year in real terms for 4 years – 28%

• Effect equivalent to £330m

• Council taxes ‘frozen’

• Schools budgets increase by 0.1% in real terms

• Local gvt – some of biggest cuts in public sector

• Birmingham one of 16 areas to operate ‘community budgets’

• Changes in NHS/PCTs impact adult social care

• Expectations on what councils deliver will change

Birmingham City Council Wider Environment – Relationship with Partners

Academic Orgs

Health Trusts

West Midlands Emergency Services

Health Trusts

Third Sector Orgs

West Midlands Emergency Services

RIEP INFLUENCE

Be

Birm

ing

ham

Influ

ence

Counties Mets Counties Mets

Other West Mids LAs

Counties Mets

Other LA’s

Core Cities

OGC

Buying Solutions

Other LA’s

Core Cities

OGC

Buying Solutions

Other West Mids LAs

Mets Counties

Birmingham City Council

A&C

E

&

C

D

V

T

C

X

C

Y

P

F

H

&

C

Sustainable Procurement Consortium Purpose

• Will be a social enterprise, awarding locality based purchasing agreements for use by – Public sector – Third sector– Potentially private sector organisations.

• Focus on supply markets to create jobs and training opportunities in target communities– Supporting the local economy– Reducing CO2 and the effects of climate change– Minimising environmental impacts– Supporting the Third Sector– Stimulating innovation

• Birmingham Energy Savers – fitting photo-voltaic panels

Sustainable Procurement Consortium Structure & Benefits

• Founder members from business, public and 3rd sectors• High quality framework agreements

– Coverage matched to buyer and supply markets– Innovative products and services– Scope, process and criteria encourages local and sustainable

solutions

Benefits • Lower acquisition costs allows procurement to focus on

core activity• Increased social value through procurement• Improved local supply chain• Easier access to markets for suppliers • Reduced tender costs

• Initiative to assist small local businesses by making supply opportunities more visible

• Opportunities posted from BCC, our suppliers, other public bodies, any private organisation

• Web based portal plus free networking and business support events

• Registered uses alerted when relevant opportunity posted

• Since launch in May 2010 exceeded target of 5000 users

• Developing a supplier accreditation approach

TVTTSThink Venues Think Third Sector

• On line directory of third sector meeting rooms facilities across the city

• Council policy to avoid expensive external meeting venues

• If internal meeting facilities not available use the directory

• Outcomes– Better pricing, Better quality, Better choice

– Delivers a social outcome

– Organisation now forming a cooperative

West Midlands Framework for Jobs & Skills

Strategic ApproachThe strategic application of contract clauses to the

end-to-end Procurement System

The specific use of Contract Clauses

Voluntary Agreements

Jobs and Skills Charters

• The strategic approach• Jobs and Skills outcomes embedded as core consideration throughout the City Council’s procurement and commissioning processes.

• The specific use of Contract Clauses

• Voluntary Agreements• Works with their existing contractors to secure commitments to specific jobs and skills outcomes.

• Charters• Council shares its strategic priorities and goals around jobs and skills with current and prospective contractors

•Thresholds

Left Brain - Right Brain

Is this how some

commissioners

see procurement?

Bureaucracy

Systems

Rule compliance

Is this how some

procurement people

see commissioning?

Risk taking

Breaking the rules

Informal

Becoming a Commissioning Organisation

BCC as a Strategic Commissioner of ServicesWhat this means…

• Challenging services we provide and how we provide them

• Re-designing service delivery where not working efficiently

• Working collaboratively with partners to common goals.

• Delivered by the org best able to achieve desired outcomes

• All service areas to have a commissioning approach

• An independent challenge will be applied to commissioning strategies and business cases.

BCC as a Strategic Commissioner of ServicesPotential Benefits

• Cost of service clearly defined – no additional overheads, asset or pension costs

• Access to skills that are limited in-house• Greater flexibility to change terms of contract to

reflect changes in demand• Price of service is competitively driven• Equipment utilisation is often greater externally

– Larger client base gives economies of scale in use of assets

• Access to technology and modern best practices

New Supplier Relationships

• 2006 Joint Venture with Capita for 10 years– ICT and Transformation support

– Current conditions and learning stimulate renegotiation

• Major PFIs– Veolia 25 year agreement to 2019

– 25 year Highways PFI valued at £2.7bn – largest PFI in UK

– 3 Schools PFIs

• Procurement published Service Delivery Options detailing 13 ways opportunities for delivering services

• Co-ordinating with other internal service providers to provide a joined up offer to others

Business Transformation is the biggest change BCC has ever faced, it created turmoil, uncertainty

and challenge for managers and employees.

We now need to findTHREE times the savings in

HALF the time

There is colossal change ahead – we need to manage this change as leaders, with members,

with employees and with our customers.

The Government Spending Challenge

Thank

You