5 Recommendations
5.4 Strategy and Governance
In order to address the potential savings and on-going management of spend a strategy is required for procurement that outlines its role in the planning, execution and monitoring of spend and savings.
Within our findings we have identified pockets of excellence in procurement across the Public Service within specific Departments and agencies. The challenge however is that there are different customer groups for procurement with very different levels of maturity and associated demands. At the centre, procurement is expected to deliver value for money and savings for the taxpayer with the focus on national framework implementation and benefits tracking. Across sectors there are a variety of requirements, from immature Departments who want an end to end purchasing service to the mature sectors who want additional strategic sourcing capacity, supplier performance metrics and spend analytics. Customer expectations and satisfaction with service levels are very different due to a lack of a consistent strategy and approach to managing procurement services.
In order to address these issues we recommend that shared vision for procurement’s role in the management of spend be defined, shared and supported.
The recommended procurement strategy is for the development of a single, integrated procurement function accountable for policy, sourcing and category management of common categories and support operations. This should have senior leadership and we therefore recommend the appointment of a Chief Procurement Officer (CPO) within a new National Procurement Office (NPO).
We recommend the NPO prioritise visibility of spend, creation of the necessary governance and support model and the delivery of strategic savings.
The recommended approach has been developed from both interviews conducted with public sector procurement organisations and Accenture’s Supply Chain global insight and thought leadership. This included interviews with senior procurement leaders, including the CPO of the UK Cabinet Office, and supply chain leaders in the UK, Canada, Sweden, the Netherlands and the US. This provided context and insight on the lessons learnt and key success factors that were adopted in other geographies. Accenture’s global insight and thought leadership in public service procurement was included, specifically “Seven Procurement Initiatives that can stretch Public Sector Budgets”, “Consip Spa spearheads efforts towards high performance in
government procurement” and “High Performance through Procurement in Public Services”
In the UK and Europe we have compared the procurement strategy to understand both the challenges and approaches taken to ensure effective delivery of procurement. The consistent themes across Public Service procurement organisations have been the lack of governance model; organisational alignment and visibility of spend. In each benchmark discussion the approach taken has been to redevelop the procurement strategy into a strategic centre led organisation focused on common categories of goods and services, supported by visibility of spend through investment in technology and the support and engagement of senior civil servants in key Departments to effect sponsorship of initiatives.
Another key learning from other public service organisations is that automation will not solve all issues. In particular, it is limited value to implement fully automated compliance monitoring and
control on day one. What is effective is having accurate spend categorisation in order to inform sourcing priority, coupled with the effective governance to drive implementation and benefits.
Simple reporting measures and accountability from accounting officers are seen to be more effective that trying to automate a compliance monitoring reporting capability initially.
5.4.1 Operating Model Recommendations
To implement the strategy, the procurement function needs an effective operating model. The operating model describes the interactions and responsibilities between the accountable Department, the central procurement function and the sector and Department procurement functions.
We have learnt from our findings that the current operating model is not effective and requires restructuring.
Earlier we discussed the various stages of procurement maturity. This evolution helps us
understand the different procurement operating models and how they support current and future Public Service procurement needs.
This in turn helps to identify the most appropriate one for implementation in the Irish Public Service.
The key criteria to be met for a procurement operating model are:
Accountability – The organisation must be accountable for procurement policy and delivery of sourcing and savings. It must be able to achieve its financial and customer goals.
Alignment – The organisation must be aligned across central support functions with a consistent approach to managing policy and strategy across categories.
Clarity – The organisation must have clearly defined roles and responsibilities for the central, sector and Departmental procurement functions
Enablement – The organisation must have the right people, processes and technology to effect delivery. It must be easy to implement and adopt and efficient in operation.
Visibility – The organisation must have visibility and control of spend.
Four procurement operating models were considered and outlined in Figure 5.4 below:
Figure 5.4: Procurement Operating Model Options
Decentralised – There is no central procurement function and every Department and sector is focused on its own needs. Procurement reports to the local Department.
National policy guidelines exist but local Department policies are put in place to meet local needs. Procurement functions reside in local Departments or sectors and there is limited co-operation across sectors.
Hybrid Decentralised – A central procurement function exists but is limited to policy co-ordination and category strategy advice. Sectors and Departments have their own procurement functions who report within sectors and sourcing and buying is done within the sectors. There is limited co-operation between category buyers across sectors.
Procurement operations are managed within sectors and Departments.
Hybrid Centralised – A central procurement function exists and has accountability and responsibility for policy and sourcing for common categories of goods and services.
Procurement is a centre led model with sectors limited to sourcing proprietary categories against central policy and procedures. Sector procurement reports within the sector but has a dotted line to the central procurement function. The central function manages common categories of goods and services with cross sector category implementation teams. In addition the central procurement function provides an operational shared service for Technology, Reporting, Compliance, Master Data Management, Training and assisted buying centres for local adhoc purchasing.
Centralised – A single centralised procurement function exists for all sectors and is housed in a single location. All strategy, policy and delivery are managed from the centre.
An additional variation of the operation model would be to outsource the procurement function. This model is described below but is not recommended at this point in maturity.
We would recommend reviewing this following the completion of the procurement roadmap. This is described below.
Outsourced – The central procurement function would retain strategy and policy with delivery outsourced to a third party. Procurement is process driven with client
relationship management, demand management, strategic sourcing, assisted buying and operational shared services managed by a third party. Procurement manage the service level and performance against a balanced scorecard.
The central procurement review identified the current operating model at a national and sector level as a Hybrid Decentralised.
Of the operation model options described above, we recommend the Hybrid Centralised model because it provides the ability to drive efficiencies from the central function, leverages buying power and removes duplication of effort across procurement functions.
Sector and Departmental procurement officers retain their responsibility for procurement service delivery within their sectors and the central functions provide service levels to support them.
A fully centralised model is not recommended as it would result in implementing a one size fits all approach. This model is not likely to be effective considering the scale and complexity of the Public Service. It could also lead to a reduction in the local knowledge and engagement on the ground with a single procurement function physically located in the centre.
A decentralised model is also not recommended as it could reduce the ability to develop a common approach to procurement and to provide leadership and direction on strategy, policy and strategic sourcing. Decentralised models focus on local needs and dilute efficiencies in price, service level and create duplication of effort in procurement.
The hybrid decentralised model is currently in operation and lacks ability to deliver against common categories.
5.4.2 Recommended Procurement Operating Model
The recommended procurement operating model is a Hybrid Centralised Model. The model envisages the following elements:
Establishment of a new CPO accountable for national procurement strategy, policy, implementation and compliance
The CPO role should be established as an office under the aegis of the Department of Public Expenditure and Reform.
A Policy and Compliance function responsible for policy, guidelines and compliance for procurement at an EU, National, Sector and Department level.
A Centre Led Strategic Sourcing and Category Management Model with responsibility for common categories of goods and services across all sectors. The model would provide a central procurement function responsible for strategic planning, category expertise & leadership, demand management, framework delivery, savings target and performance management responsibility.
A Procurement Operations function with responsibility for procurement technology, master data management, reporting, communications, training and development, operational helpdesk, assisted buying centres of excellence and compliance monitoring
Sector and Department Procurement responsible for proprietary categories of goods and services
Sector and Department Procurement would continue to report within sectors but have a dotted line responsibility to the CPO for policy, strategy and implementation compliance
5.4.3 National Procurement Office (NPO) Organisation Structure
We recommend the establishment of a new National Procurement Office (NPO) as a separate office under the aegis of the Department of Public Expenditure and Reform. This will provide procurement with the credibility and support required in order to drive strategic cost reduction across sectors.
We recommend that the NPO be responsible for procurement strategy and policy, sourcing and category management and procurement operations support. This will ensure alignment across procurement functions and address the gaps identified in our findings.
In order for procurement to be effective it requires senior stakeholder engagement and involvement in early planning discussions with senior officers across sectors. We have
recommended a governance model that will require significant interaction between procurement leadership, policy and category management functions and senior department officials in D/PER and across sectors. For this to be effective we recommend the NPO is setup as an agency located in Dublin. The location will also facilitate greater sponsorship participation.
Recommended NPO Organisation Structure:
Figure 5.5: Recommended Central Procurement Organisation Structure
5.4.4 Policy and Compliance Function
We recommend the establishment of a central policy and compliance function that combines the existing central Policy Units and is responsible for the development and implementation of national procurement policy, including the incorporation of EU directives, national policies and sector requirements into operational policies, including sourcing guidelines and specific policies on SME participation and sustainability.
The unit would also be responsible for construction policy and the development of specific strategies and policies on SME participation and sustainability.
We recommend the development of SME participation targets, including the indirect supply chain through the targeting of percentage of suppliers supply chain to be with SME’s. We recommend the adoption of open competition as a preferred policy for competitive competition and to allow SME participation.
We recommend that sectors and Departments maintain their ability to develop additional specific policies to complement national policy but that they cannot contradict national policy.
5.4.5 Sourcing and Category Management Organisation
Following our identification of common categories of goods and services we recommend that the sourcing and category management function takes full responsibility for the development and management of sourcing strategy, strategic planning and management of national procurement frameworks within those categories.
Category managers should be appointed for the key categories outlined below and provide leadership and direction within their category.
Figure 5.6: Recommended Central Category Management Structure
Within central government we recommend that ICT category procurement is led and managed within the NPO with the CMOD organisation maintaining the technical specifications and approval from an IT perspective. We further recommend the adoption of the best practice sourcing approaches with CMOD be extended across all categories to achieve maximum value for money.
NPO Category Managers should have deep category expertise and create cross sector category teams working with the sectors procurement teams. They should complete detailed planning and create a project pipeline with target projects, savings and timelines for delivery.
We recommend that sector procurement teams retain responsibility for national framework implementation but that they take direction from the category manager in the NPO and participate in the category team in developing requirements, defining sourcing strategy. They should work as a team in completing tender, evaluation and framework completion.
The adoption of these strategies, and roles and responsibilities will remove the duplication of effort across procurement functions today.
In addition we recommend the consolidation of all procurement groups and resources within sectors to avoid duplication of effort and working at cross purposes.
In parallel to the development of formal category strategy and plans we recommend the implementation of a demand management approach to spend. Category managers and category councils should be tasked with developing and implementing demand side levels for total cost reduction, including demand challenge, specification change, product substitution and internal controls and policies to influence behaviour and reduce cost.
5.4.6 Procurement Operations
Following our review we identified the need to provide standard processes, standards technology and operational supports from the central procurement function.
We recommend the setup of a procurement operations function within the NPO with responsibility for:
Development of procurement technology strategy, including definition of information technology requirements and the development and implementation of systems to support procurement across all sectors
Development of savings definition, measurement and the implementation of tools to track savings
Development and implementation of procurement reporting and compliance, including metrics definition and reporting
Development and implementation of supplier and contract databases across all sectors.
Procurement training and communications, including the development of the curriculum and management of training programmes
Development of business requirements definition, development and implementation of all common procurement processes and systems including e-sourcing, project pipeline, contract administration, e-auctioning, e-procurement, master data management, pcards, savings database, supplier database, categorisation, portal and content management and spend analytics
We recommend the immediate prioritisation of spend analytics, a contract database repository, categorisation definition and a pipeline project plan. These recommendations are prioritised as they are the foundation for a successful procurement organisation.
Without visibility of spend a procurement function is not in a position to define spend management prioritises, monitor contract performance, contract compliance levels and to gathering detail requirements for contract renewals or new spend initiatives
The report has already identified potential savings but in order to start the strategic sourcing projects the procurement organisation needs to have granular spend usage information that is accurate and timely. The prioritisation of spend analytics, contract database creation, categorisation data management and pipeline planning will enable the successful implementation and monitoring of performance against the plan
We recommend the redevelopment of procurement training. This should move from the current approach of raising the overall level of knowledge to specific targeted
professional procurement development to address gaps in capability. We recommend a future capability and capacity detailed analysis is conducted and specific training and professional development programmes are put in place for central, sector and local fulltime procurement resources
Figure 5.7: Recommended Central Procurement Operations Team Structure
As part of our review of current operations we identified a number of sector specific initiatives aimed at improving procurement co-operation and support for tactical and operational needs
Sectors have started to develop geographical approaches to common categories of supply from a procurement support perspective. These initiatives are welcomed but there is a lack of cross sectoral co-ordination to these initiatives. Sectors are looking to the centre for direction and strategy
We recommend a phased approach to procurement shared service operations due to the size and complexity of the challenges
With the development of national frameworks and adoption uplifts there will be a need to start providing additional tactical support for lower level sourcing projects. Initial sectoral procurement initiatives will look to support these initiatives but over time there will be a duplication of effort across sectors in local areas and there is an opportunity to extend common procurement support services across sectors, reducing duplication and allowing additional procurement support to local areas.
To put this into perspective each geographical region in Ireland has either a County Council, Urban District Council or City Council who buy common categories of goods and services.
Administrative offices, local depots, Fire Stations and local libraries have common needs for goods and services such as IT equipment, consumables, maintenance, print and stationery and utility services. These are supported through local authorities procurement who tender and implement supply agreements. Local administrators act as part time buyers in managing the locally appointed suppliers performance and issues.
In parallel to local authority procurement there are HSE community care centres and local hospitals, Education local primary and secondary schools, Justice local Garda Stations, Social Protection welfare offices, Central Government agency offices for the revenue commissioners, port authorities, customs offices and National Roads Authorities all with the same need for goods and services from common suppliers.
At present all these local needs are supported from multiple sectoral or central procurement functions with duplication of effort.
Within sectors there are good initiatives underway to develop cooperation from a tactical and operational buying perspective but there is a need to co-ordinate and co-operate across sectors for common needs.
In the medium term we recommend planning for cross sector geographical assisted buying shared services through a number of regional buying centres. This model would provide
standard purchasing helpdesk support, adhoc spot buying project support and provide on-going contract compliance monitoring. Examples of the types of services would be purchasing card implementation and support for schools, local ICT maintenance and support contracts for garda and local authorities, local hospital IT hardware and consumables.
5.4.7 Sector Procurement Recommendations
Within the Health sector, we recommend as an immediate priority the centralisation of procurement resources across the HSE and HPSG into a single procurement unit within the Department. Health sector central procurement should prioritise the adoption of NPO led common category initiatives and focus their sector specific sourcing on medical specific categories.
Within health there is substantial opportunity to reduce total cost to serve but we recognise the capacity constraints within the current procurement function
We recommend the immediate benchmarking of medical specific spend on large spend areas such as drugs and medical devices and the development of targeted cost
reduction initiatives utilising internal and external capacity. Consideration should be given to alternative commercial models to incentivise the delivery of service and cost reduction
Within local government we recognise the development of a centralised approach to
Within local government we recognise the development of a centralised approach to