PPM Strategic sourcing and proc transformation...
Transcript of PPM Strategic sourcing and proc transformation...
Strategic Sourcing and ProcurementTransformation ProgramRosa MartelliPwC Government Advisory Srevices - Senior Consultant
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AGENDA
PwC and Public Sector
Company profile
PwC services for Pas
The Purchasing Rationalization Plan
Client Description
Pwc’s engagement
The strategic approach
The AS- IS assessment
Centralizing Purchases
Ruling the Purchases
Achieving Prompt Savings
Some results after 3 years
Key success factors
The Project Team
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AGENDA
PwC and Public Sector
Company profile
PwC services for Pas
The Purchasing Rationalization Plan
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COMPANY PROFILE
COMPANY PROFILE
PricewaterhouseCoopers provides industry-focused advisory, tax and assurance services to build public trust andenhance value for its clients and their stakeholders. We have extensive experience providing a broad range ofservices to governmental and non-governmental organizations and we provide services for 415 of the companiesin the Fortune Global 500 and the FT Global 500.
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PwC is structured as a network of member firms, connectedthrough membership of PricewaterhouseCoopers InternationalLimited. Within each territory, the business is structured by lineof service (Assurance, Advisory, Tax & Legal Services).
PwC's member firms operate locally in countries around theworld. But by working together member firms also comprise avigorous global network. This structure provides PwC firms withthe flexibility to operate simultaneously as the most local andthe most global of businesses.
Globally, PwC has presence in:
• 158 countries;
• 776 towns and cities
We are the number one or two service provider in most marketsin which we operate.
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COMPANY PROFILE
PwC’s support to PAs
PwC owns specific knowledge and competences to support PAs in predisposing Expenditure Rationalization Plans
and Strategic Sourcing Programs, by reengineering procurement procedures, by leveraging the quality/quantity
trade off for public purchases, by implementing new budgeting processes.
Advisory services offered
Current expendituresrationalization
• Advisory services on current expenditures for goods and services reduction costs(contracts roll over, centralized tendering etc.)
Desription
Purchasing centralization• Advisory services on organizational structure and process optimization for the
design and implementation of Central Purchasing Bodies
Support in drawing upbalancesheet
• Advisory services to support PaA in defining new budgeting models and processes(i.e. standard costs, standard needs, …)
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AGENDA
PwC and Public Sector
The Purchasing Rationalization Plan Project
Client Description
Pwc’s engagement
The strategic approach
The AS- IS assessment
Centralizing Purchases
Ruling the Purchases
Achieving Prompt Savings
Some results after 3 years
Key success factors
The Project Team
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The Purchasing Rationalization Plan
Client Description
Our client is one of the biggest municipal administration in Italy,
counting more than 25.000 employees, 50 owned companies, and
a $6,5 billion (USD) annual budget.
The city has been affected by the financial crisis that caused its
financial debt growing, valued at $15 billion (USD). In August 2010
Standard & Poor’s lowered the long-term debt rating from A+ to A
level, highlighting the need to enhance the efforts to balance the
budget.
Called to face the shrinking of national financial transfers, the city
administration resolved to undertake a Cost Reduction Program.
The personnel costs rigidity, due to political and social reasons,
pushed the municipal administration to focus the costs reduction
actions on goods and services purchases, valued at $2,9 billion
USD, and showing a growing trend up to 50% in the last five years.
Called to face theovercoming financial
crisis, the City resolvedto undertake a CostReduction Program,
focused on goods andservices purchases.
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The Purchasing Rationalization Plan
PwC’s engagement
Called to face the financial crisis, the client resolved to design and
implement the Strategic Plan for the Rationalization of goods and
services purchases.
PwC has been elected as partner of the project, thanks to its
distinguishing skills and experience in the Public Procurement
field. The assignment for PwC was about the AS-IS assessment and
the designing of the Strategic Plan for the purchases
optimization.
In three months PwC outlined the Goods and Services Purchasing
Rationalization Plan, aimed to centralize the purchases processes,
by setting up the Central Unit for Purchases (CUP), and to launch
saving costs initiatives, achieving $ 400 million USD of savings in
only 10 weeks of work.
Subsequently the client launched a competitive tender to select
the partner called to support the Goods and Services Purchasing
Rationalization Plan implementation process. PwC has been
awarded the competitive tender, a project lasting four years and
valued at $ 5,6 Mln USD.
PwC Advisory Italy hasbeen selected by the
client as the partner forsupporting the
implementation of thePurchases
Rationalization StrategicPlan
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The Purchasing Rationalization Plan
The approach
PwC’s strategicapproach has been
focused on savingachievements and
on the designing ofnew purchases
processes.
PwC’s strategic approach first planned the AS-IS assessment, producing three specific action
streams:
New Purchasing model
Prompt savings
Creating the Central Unit for Purchases(CUP)
Planning and Control Model for goodsand services purchases
Re-negotiating in force contracts
1Centralizing the purchases
2Ruling the purchases
3Achieving prompt savings
AS-ISassessment
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The Purchasing Rationalization Plan
The AS- IS Assessment 1/2
The spending for Goods and Services
showed a growing trend, up to 50% in the
last five years, reaching a $3 billion USD
value in 2010.
The City’s purchaising processes
presented an high level of fragmentation
and lack of a central supervision
(maverick buying).
The analysis higlighted a relevant price disparity paid by different Municipal Units for buying
the same products. These prices, moreover, turned out higher than the market prices (more
than 50% on the MKT average).
A monitoring and controlling model of the spending, nor a demand side ruling system, are
not in force.
Ruling procedures for purchases processes are not planned.
None of the purchases processes is supported by information systems.
1.9542.025
2.278
2.686
2.979
-
500
1.000
1.500
2.000
2006 2007 2008 2009 2010
Value Million/$ + 52%
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The Purchasing Rationalization Plan
The AS- IS Assessment 2/2
Low Public Tendering propension
In 2009, only 17% of the total expenditures realized
through Public Tendering process; about 30% of the
expenditures carried out through non competitive
tenders, direct commitments, in force contracts
extensions.
Prices above market average
Relevant price disparities have been detected for
the same product/service up to 70%.
Prices were above the market average price, up to
+50%.
€
1,041,05
1,60
0,50
0,36
0,60
0,45
0,150,23
0,58
Glue 40 gr ScissorsHighlighter
27%
21%
0,80
0,350,25
1,231,20
0,30
0,48
0,24
Dept 2
Dept 4
Dept 5
Legenda
Dept 3X
Dept 1
Dept 65
Average paid price
Average market price
50%
25%
15% 25%1
Non competitive tender
Other ( social services)
Consip
Contractextension
Service agreements(ex. Public transport)
Public tendering
41% 17%
11%
2%
Directcommitments
15%5%
9%
Stationery and office products
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The Purchasing Rationalization Plan
Centralizing purchases
The purchases centralization process lead to the creation of the Central Unit for Purchases (CUP),
counting about a 50 people staff, called to manage purchases valued at about $1 billion USD.
The Purchases Centralization process required 4 main streams of activities:
1. New Purchases Model designing: re-engineering of the Purchases
Process and Organization, moving from the creation of a Central Unit
for Purchases (CUP), (specifying its roles, responsibilities, staff scaling,
job descriptions, etc.)
2. Rules and Procedures predisposing: providing
detailed rules aimed to wholly regulate the
purchases process.
3. Information systems framing: providing information systems
supporting the purchases processes.
4. Designing of the Addressable Spending Plan : scheduling about 65
saving initiatives in a 2 years period.
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The Purchasing Rationalization Plan
Ruling purchases (1/2)
PwC supported the municipal administration in designing the new Monitoring and ruling of the
spending for goods and services purchases model, structured in 2 main parts :
Planned Spending: supporting the Balance Sheet compilation, by defining spending
allocation through the standard costs method;
Spending management: providing a monitoring system aimed to ensure the well
performing of the spending, in terms of respecting balance caps, following purchases
procedures, types of Goods and Services purchased, etc… (compliance management).
The Model for the Monitoring of theSpending allows a clear, smart andcomprehensive description of the
main issues related to the Goods andServices Purchases.
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The Purchasing Rationalization Plan
Ruling purchases (2/2)
The proposed Monitoring model is based on a reporting system characterised by a customer-
specific level of data aggregation.
REPORTING LEVEL
StrategicReports
ManagerialReports
OperationalReports
• Synthetic layout, group info by Structure/Product Category• Overview on expenditures for goods and services,• Supporting tool for implementation of Purchasing Rationalization Plan
• Overview on global expendituresOffrono una visione d’insiemedell’andamento della spesa globale;
• Supporting tool for detailed analysis on goods and servicesexpenditure evolution;
• Identify possible anomalies in the Purchasing process and allow totake actions accordingly
• Analytical layout, customizable• Detail info about single purchasing items• Investigate cost trend of any single item cost
Indicators
CHARACTERISTICS BENEFICIARY
Strategic Dept(Dept. Expenditure
Rationalization; MayorCabinet; …)
Dept. directors(Dept. Expenditure
Rationalization; LocalStructures; Dept.s)
CUP
+
-
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The Purchasing Rationalization Plan
Achieving prompt savings
The strategic approach followed by PwC aimed at achieving prompt savings by re-negotiating
extremely onerous “in force contracts” for the municipal administration.
Re-trading in force contracts required to use the
following levers:
• Purchases price reduction, and alignment to
market prices;
• Services level and supplying models
revision;
• Standardization of Goods and Services;
• Supervising goods and services demand
(demand management);
• Re-assessment of the internal policies for
goods and services demand (compliance
management);
• Redefining the contracts monitoring model
and improvement of the supplier quality
control model.
Heating
Public Lighting
Power supply (electricity)
Active rents
School catering (school and kindergarten)
Buildings maintenance
Cleaning services (schools, offices)
School transports
Green maintenance
Water supply
….
Addressable spending:
By re-trading somecontracts (concerning
utilities, Public Lighting,etc.) the municipal
administrationand achievedabout $400 million USD of
total savings,in only 10 weeks of work.
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The Purchasing Rationalization Plan
The competitve tender for advisory support
Today we’re working to getestimated results….
Pursuant to the assessment analysis and to the Purchases Optimization Strategic Plan, the
client resolved to launch a competitive tender to implement with the new strategic sourcing
model.
PwC Advisory Italy has been awarded the competitive tender (planned man-days: 6.000).
The project asked for appropriate actions following three main streams:
make effective the new Purchases Model (processes re-assessment, defining of new
procedures, rules, change management, etc…);
achieve savings, by implementing 65 scheduled saving initiatives (re-negotiating in
force contracts, centralizing contracts, in sourcing, etc …);
implementing the “Monitoring and Ruling of the spending for goods and services
model”.
The Purchasing Rationalization Plan
Some data about key results
The addressable spending managed by the CUP has been of €411 Mln. Saving initiatives and the
Expenditure Rationalization Plan generated total savings for € 92 Mln (22%).
2009 2012
411Mln €
92Mln €
Savings22%
319Mln €
Category Savings per year
Heating - 12%
Power Supply - 10%
Public Lighting -52%
Stationery and office products -41%
Printed materials - 50%
Postal services - 23%
Materials Moving services - 52%
Furnitures - 40%
Food vouchers -64%
Automotive renting -43%
Active rents - 1’%
School catering service -26%
Fuels -5%
Database licences -50%
Goods rental services -38%
Addressable spending and savings 2012 Spending items and savings
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The Purchasing Rationalization Plan
Key Success Factors
Following are the Key Success Factors for the described Project:
achievement of a “success history” in only 10 weeks of work, able to become the
driving force of the ensuing project (re-trading of the Public Lighting e Heating contracts
getting saved about $400 million USD);
a project team with relevant skills in Public Procurement acquired in previous projects
with other prestigious italian public administrations (Consip, Regione Lombardia, etc.);
legal experts support, a crucial factor for such a deeply regulated field as the public
administration’s competitive tenders;
technical experts support, an essential input to identify possible savings areas in so
higly technical fields ;
customer intimacy: a deep knowledge of the customer and a strong relationship with
the client.
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The Purchasing Rationalization Plan
The project team
Team PwC Advisory
GiovanniMariani
Staff Grade: Partner
Location: Rome
Phone: 3356327528
Email:[email protected]
MaurizioRistori
Staff Grade: Director
Location: Rome
Phone: 3400974686
Email:[email protected]
Giuseppe Barresi
Staff Grade: Manager
Location: Rome
Phone: 3481505240
Email:[email protected]
Alessandro Gui
Staff Grade: Manager
Location: Rome
Phone: 3488153129
Email:[email protected]
Daniele Ciampi
Staff Grade: Assistant Manager
Location: Rome
Phone: 3400474343
Email:[email protected]
Rosa Martelli
Staff Grade: Senior Consultant
Location: Rome
Phone: 3488514118
Email:[email protected]
The project team is composed of Operations consultants, with relevant skills in Public
Procurement.
19© 2013 PwC. All rights managed.
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