London Heads of Procurement Network30 March 2010

Analysis of the WLA Controllable Expenditure

Proposed Category Management Reviews

Background• Detailed analysis of spend data across the WLA has been completed using the Capital Ambitions Online

Expenditure Analysis (OEA) tool

• Analysis offers a range of opportunities for securing efficiency savings through improved collaboration

• Strategic use of category management reviews will provide the greatest opportunity for securing

efficiency savings

• WLA procurement spend in excess of £1.4 billion

• More than 26,000 suppliers generate 500,000 invoices

• Number of suppliers used by each Council ranges from 2,501 to 10,936

• Amount spent by each Council with top 50 suppliers ranges from 47-71% of total controllable expenditure

• Between 93-97% of expenditure is paid to the top 20% of suppliers

• Small amount of expenditure (3–7%) spent with a disproportionately large number of suppliers (80%)

Analysis

Description Brent Ealing Harrow Hillngdn LBHF RBKC Totals %

£m £m £m £m £m £m £m

Total Expenditure 330.4 228.5 208.5 186.9 267.7 173.1 1,395.1 100

Top 50 No Suppliers 163.3 121.4 148.2 89.0 161.4 87.7 771 55

Top 20% Suppliers 321.4 211.9 197.8 175.3 256.5 163.2 1,326.1 95

Bottom 80% Suppliers 8.9 16.6 10.7 11.6 11.2 9.9 69 5

Table 1: Supplier / Expenditure ratios

Analysis cont…Table 2: Supplier / Invoice ratio *includes duplicated suppliers

Description Brent Ealing Harrow Hillngdn LBHF RBKC Totals %

No No No No No No No

Total Paid Suppliers 10,933 3,956 2,502 4,269 5,115 5,539 *32,314 100

Total Invoices 122,184 61,281 53,015 57,799 106,342 94,309 494,930 100

Invoice Av - £’s £2,704 £3,728 £3,933 £3,233 £2,518 £1,835 £2,819 100

Supp/Inv Ratio 11:1 16:1 21:1 14:1 21:1 17:1 15:1

Analysis cont…Table 3: Spend categories – Category management opportunities

Description Spend £m

Repairs and maintenance – Buildings 171

HR Temporary Agency Staff 67

Financial Services 57

Facilities Management 54

Professional Services – Consultancy 34

Healthcare 22

HR – Other 22

Street and Traffic management 20

Vehicle Management 18

Travel, training and conference expenses 11

Education (Miscellaneous) 9

Horticultural Services 4

Environmental Services – testing & inspection 1

Potential Opportunities

• WLA Forward Plan of Procurement

• Shared Suppliers

• Category Management

• ‘The Tail’

Category Management Review

• Approach will drive the collective WLA procurement agenda

• More likely to deliver cashable savings than a reactive approach to opportunities

• Category management likely to drive, or be driven from, service reviews and include

some level of ‘business process re-engineering’

• Buy-in from services therefore crucial to success

• Must be adequately resourced

Recommendations

Short Term (April 2010)

• Include a 3-year forward plan of procurement in annual business plan for each borough

• Consolidate into a sub-regional forward plan - inform decisions on collaboration and packaging of contracts

• Begin process of planning and analysis for category management reviews

• Identify and start supplier review process

Short/Medium Term (April 2011 +)

• reviews the top 100+ organisations being paid >£1,000,000 per annum across the WLA; to

negotiate additional savings under their respective contracts with emphasis being placed on

aggregation of WLA volume

Medium/Longer Term (April 2011+)

Implement the category management review programme on an ongoing basis