Procurement Capability Assessment

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Procurement

Capability Assessment

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© Crown copyright 2009

ISBN: 978-0-7559-9024-5 (web only)

The Scottish Government

St Andrew’s House

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Ministerial Foreword

2 Introduction

4 Method

8 Reporting

12 Appendix 1 – Procurement Capability Assessment

Questionnaire

14 Appendix 2 – Suggested Forms of Evidence

50 Acknowledgements

51

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Procurement Capability Assessment

Ministerial Foreword

The Scottish economy is facing its greatest challenge in decades. In the current economic downturn

public spending must help create a more successful country by providing efficient, high quality public

services, supporting sustainable economic growth.

The Procurement Reform Agenda was vital before the economic downturn and is now more vital than

ever - we need to renew and deepen our focus on ensuring that we get the maximum benefit from our

public procurement activities. This means that public procurement must embrace a culture of strategic

and continuous improvement and must be able to demonstrate efficiency and effectiveness at all levels.

Over the course of the reform programme the Scottish Government has worked with cross sectoral

partners to develop a variety of processes, mechanisms and technologies to assist procurement teams.

The reform programme has also promoted collaboration in terms of best practice processes and benefits

by the creation of the Centres of Expertise. I, along with my colleagues on the Public Procurement

Reform Board (PPRB), expect all public bodies to be using this additional support and the unprecedented

management information available to monitor the way they do business at a local level, and track

progress and improvements.

However, as well as monitoring progress throughout the year, it is important that each year we take the

time to take stock, measure how far we’ve come, share best practice and then plan specific action for the

coming year to improve continuously, at a local, sectoral and national level. This document sets out a

mechanism for doing just that: the Procurement Capability Assessment (PCA). The PCA has my full

backing. It has been developed by a working group with representation from key parts of the public

sector including Audit Scotland and will be rolled out across the public sector with the assistance of the

sectoral Centres of Expertise.

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3 Procurement Capability Assessment

The PCA represents a significant further step towards delivering John McClelland's vision of advanced

procurement. It will further allow procurement to be recognised as a key public sector skill, as a vital

conduit between the public and private sectors with a crucial role in helping to create a wealthier, fairer

Scotland. It will allow procurement teams within organisations to plan their path towards delivering

efficient, effective world class advanced procurement. In these challenging times, Scotland requires

nothing less.

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JOHN SWINNEY, MSP

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Introduction

Background

The Public Procurement Reform Programme was initiated in response to a review of public procurement

in Scotland carried out by John F McClelland CBE. In the review, Mr McClelland states that: “Without

sound business practices and processes, it is impossible to operate in a way that is internally efficient and

that also delivers good value in procurement cost. Where practices are particularly weak there is also,

potentially, an impact on accountability and governance needs”.

The Public Procurement Reform Programme is a far-reaching and ambitious undertaking that aims to

improve procurement across the Scottish Public Sector.

The Programme's vision is the implementation of structures, capability and processes to provide

continuous improvement in procurement across the Scottish Public Sector in order to deliver Value for

Money improvements and support increased efficiency.

The objectives of the Programme are to:

• facilitate public bodies in improving their procurement capabilities in order to support delivery

of better public services;

• increase the cost-effectiveness of procurement, thereby releasing cash for use in other priority

areas;

• establish and embed appropriate procurement policy and best practice in order to ensure fair

and efficient procurement practices and reduce commercial risk;

• facilitate cross sector collaboration to avoid duplication of effort, maximise potential gains

from collaboration, enable the sharing of experience and information and to ensure that

common suppliers and markets are managed effectively; and

• encourage suppliers to build effective and mutually beneficial relationships with the Scottish

Public Sector.

It is crucial that there is an understanding at a local, sectoral and national level of procurement capability

and that improvement plans are implemented to ensure the promotion of efficiency and effectiveness

and continuous improvement. The Procurement Reform Delivery Group agreed in January 2009 that a

single Procurement Capability Assessment (PCA) should be developed to promote the sharing of best

practice and continuous improvement across the Scottish public sector.

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Benefits of the Procurement Capability Assessment

The objective of the PCA is to assist organisations to improve their structure, capability, processes and

ultimately performance, by attaining the best standards that are appropriate to the scale and complexity

of their business. The PCA will assess capability in key areas against common criteria and standards which

will allow public bodies, locally, at sector level and nationally, to identify where best practice already

exists, where there are gaps and where continuous improvements and efficiencies can be implemented.

Organisations will have the opportunity, where appropriate, to develop and implement improvement

plans as a result of the PCA with assistance from their relevant Centre of Expertise.

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Working Group

To ensure that the PCA will be useful to all types of organisation in different parts of the public sector,

key stakeholders from across the public sector have been involved in its development.

The PCA working group was formed in March 09, with representatives from each of the Centres of

Expertise and Audit Scotland, led by the Scottish Procurement Directorate.

The PCA draws on the successful work of NHS National Procurement (NP). Its capability assessment

documentation and processes have been tried and tested for several years within the NHS.

Audit Scotland is also developing an audit toolkit for procurement as part of its wider work to help

support the achievement of Best Value in public bodies (BV toolkit). Through the PCA working group the

Scottish Procurement Directorate and Audit Scotland have ensured consistent questions are used in the

PCA and the BV toolkit.

Audit Scotland’s approach to Best Value audits will be proportionate and risk-based. Any audit work it

considers on procurement will take into account the results of public bodies PCAs. This means that

duplication or unnecessary burden for public bodies in the respective work programmes can be avoided.

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Method

Assessing Procurement Capability

The Centres of Expertise will work with public bodies within their respective sectors to assess

procurement capability. This will done by interviews and by reviewing evidence prepared in advance by

the organisation.

Timing

The 2009 PCAs will take place during the second half of 2009. The Centres of Expertise will, in

consultation with their sector develop an action plan, agree a timetable and address any issues that their

sector may have about the process. Each PCA should take a maximum of one day, providing there has

been good preparation in advance (see below).

It is proposed that the PCAs will be take place annually to ensure the ongoing and continuous

improvement of procurement activities right across the public sector.

Assessment Levels

In line with the McClelland Report Recommendations, the PCA has clearly defined descriptions for each

level of performance.

These levels are:

Level 0 – Non Conformance

Level 1 – Conformance

Level 2 – Improved Performance

Level 3 – Superior Performance

NHS NP who developed and implemented this approach successfully with the Health Boards in Scotland

over the past few years have agreed to provide training to the Centres of Expertise. This will ensure that

there is consistency in the approach and that the best practice developed by the Health Sector is

transferred to the other sectors effectively.

How do I Prepare?

Preparation in advance and people availability on the day are critical. The Centres of Expertise will work

with organisations in their sector in advance, providing guidance on what information, tools and people

will be required on the day of the PCA. This will ensure a smooth and efficient PCA process. Suggested

forms of evidence have been added in Appendix 2 and Centres of Expertise will provide further advice

on additional forms of evidence. The PCA does not require participating organisations to produce

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Link between PCA and Best Practice Indicators (BPIs), Competency

Framework and Scottish Sustainable Procurement Action Plan (SSPAP)

The management information generated from the BPIs, Competency Framework and the Scottish

Sustainable Procurement Action Plan will provide some of the evidence for the PCA.

The BPIs are ‘business as usual’ practices to manage performance throughout the year and are indicators

of performance. The PCA will be an annual process and will provide more detailed analysis of

procurement capability.

The Procurement Competency Framework can be used by individuals to assist their personal

development through skills assessment, identification of training and development needs and career

planning. It can also supplement the organisation’s existing staff development programmes, resource and

succession planning initiatives. Through using the Procurement Competency Framework, organisations

will be able to demonstrate their commitment to ensuring, through planned training and development,

they have appropriately competent staff, which is consistent with the PCA and will provide some of the

evidence required for the PCA.

The SSPAP sets out how public bodies can demonstrate they are delivering sustainable procurement. It

advocates a methodical approach for organisations to assess themselves and monitor their progress and

development towards procuring sustainably across a range of organisational issues. The SSPAP is

complementary to, and consistent with, the PCA and consequently a successful PCA will require public

bodies to be able to demonstrate that they are delivering sustainable procurement as set out in the

SSPAP and vice versa.

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Procurement Capability Sections

The PCA is used for a systematic review of purchasing strategy, operations, resources and performance

under eight key areas, cross referenced to the McClelland attributes.

OPERATIONS

Consistency of Mar

1. Procurement leadership

and governance

Is there clear direction from the top with clear support for getting best

value in procurement?

3. Specification of goods and services

Can the organisation demonstrate a prudent and well-planned

approach to defining its supply needs?

4. Sourcing strategies and collaborative procurement

Can the organisation demonstrate a clear understanding of how it

can best satisfy its core supply needs?

6. Key purchasing processes and systems

Does the organisation have efficient and robust processes and systems to support advanced procurement

activity?

7. People

Does the organisation have people with sufficient capability to ensure

effective performance?

5. Contract and supplier management

Does the organisation manage its suppliers and contracts

effectively?

8. Performance measurement

Does the organisation have a sound approach to assessing and demonstrating its procurement

performance?

2. Procurement strategy and objectives

Is there a clear, systematic, holistic and well-researched framework

to guide the organisation’s purchasing decisions?

STRATEGY

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REPORTING

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Consistency of approach PCA results Comparing results Sharing best practice Improvement plan

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As NHS National Procurement has considerable experience in the capability assessment process they will lead the training of the other Centre of Expertise. This will ensure consistency in the approach used throughout the PCA process.

Centres of Expertise will determine the assessment level following consultation with the individual organisations and will report these to the SPD for PPRB consideration in January 2010.

It is recognised that all public body organisations are not the same and cannot be compared as such. Centres of Expertise will use ‘family groupings’ to compare results within each sector. The Centres of Expertise and the Scottish Procurement Directorate will also review the PCA results to identify any common trends or themes to help prioritise the development of tools, processes and techniques to continuously improve Scottish public sector procurement.

The Centres of Expertise and the Scottish Procurement Directorate will review the outputs to identify best practice to allow them to promote and share best practice at both sector and national level.

Improvement plans will be jointly developed by the organisations and their relevant Centre of Expertise. Progress on the development and implementation of the improvement plans will be reported to the Public Procurement Reform Board.

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High-Level Section Headings

1. PROCUREMENT LEADERSHIP & GOVERNANCE –

Is there clear direction from the top with clear support for getting best value in procurement? (12 questions)

14 2. PROCUREMENT STRATEGY AND OBJECTIVES –

Is there a clear, systematic, holistic and well-researched framework to guide the organisation’s purchasing decisions? (9 questions)

18 3. SPECIFICATION OF GOODS AND SERVICES –

Can the organisation demonstrate a prudent and well-planned approach to defining its supply needs? (7 questions)

21 4. SOURCING STRATEGIES AND COLLABORATIVE PROCUREMENT –

Can the organisation demonstrate a clear understanding of how it can best satisfy its core supply needs? (21 questions)

24 5. CONTRACT AND SUPPLIER MANAGEMENT –

Does the organisation manage its suppliers and contracts effectively? (19 questions)

31 6. KEY PURCHASING PROCESSES AND SYSTEMS –

Does the organisation have efficient and robust processes and systems to support advanced procurement activity? (13 questions)

38 7. PEOPLE –

Does the organisation have people with sufficient capability to ensure effective performance? (11 questions)

42 8. PERFORMANCE MEASUREMENT –

Does the organisation have a sound approach to assessing and demonstrating its procurement performance? (9 questions)

47 McClelland Report Assessment Levels

Level 0 – non-conformance Level 1 – conformance

Level 2 – improved performance Level 3 – superior performance

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Section 1 PROCUREMENT LEADERSHIP AND GOVERNANCE

1. Is there clear direction from the top with clear support for getting best value in procurement?

1.1 Does the organisation give sufficient recognition to procurement and its contribution to best value?

A. Are there clearly defined roles, responsibilities and reporting lines for procurement?

Organisational No defined Procurement

role or

A defined procurement role exists but is primarily operational/transactional in focus.

A defined Procurement role exists within another organisational function or portfolio.

Procurement is seen as a distinct function with a Director or head of procurement leading at senior level.

There are clearly defined roles, responsibilities and reporting lines for procurement

The head of procurement is either at board level or is one level below, with a board member taking clear ownership for procurement and commercials matters. (Note: ‘Board’ can be Board/ Council/ corporate

management team or equivalent) The head of procurement can and does access board level meetings.

Leadership of the function is an integral part of the head of procurement’s roles and the impact of this is widely visible. The head of procurement - is considered part of a senior ‘peer group’ with other business leaders; sits on appropriate key Steering Groups, project boards etc.; plays a full role in wider Government, professional and collaborative initiatives; provides active personal leadership of wider networks.

B. How is Procurement structured?

Organisational Procurement responsibility

is fragmented within the organisation. Procurement not recognised as core to the organisation’s operation. Perceived as transactional department. or

Procurement recognised for delivering within a limited mandate, but perceived as adding little value to many of the organisation’s processes. Procurement organised by category or commodity however areas of expenditure excluded or with limited transactional input.

Procurement organised by category or commodity, supported by highly

skilled/trained Procurement staff. Core competency of Procurement recognised throughout the

organisation.

Organisational roles are structured nationally.

Organisation designed to maximise Procurement leverage and remain focused on organisation’s needs. Percentage spend managed by effective procurement processes is high. Integration of Procurement activities for strategic purchases.

Question

McClelland

Attribute

Level 0

Level 1

Level 2

Level 3

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Section 1 continued

1. Is there clear direction from the top with clear support for getting best value in procurement?

1.2 Are there clearly defined roles, responsibilities and reporting lines for procurement?

A. Is there a clear role focused on strategic procurement (by sourcing group) which is embedded across the organisation and aligned with the CoE? (Strategic procurement includes development of procurement strategy, practices, sourcing strategies etc. and

Operational procurement is routine requisitioning, transacting on previously established contracts and agreements and support for procurement activities)

Organisational No formalised role in place

for strategic procurement (by commodity)

or

Strategic Procurement role exists for limited areas of spend, but not across all major spend areas and geographies. Strategic and operational roles within procurement are not fully differentiated.

Strategic Procurement role exists for limited areas of strategic spend, i.e. classified as high value/ high risk (up to 50%) but role not clear, staff are not fully trained and are not aware of or helping to deliver the organisation’s objectives. Roles completely differentiated from

operational buying activities.

Strategic Procurement role exists for most areas of strategic spend (>75%) role is clear across organisation, and staff are trained. Roles completely differentiated from operational buying activities.

Highly skilled and fully trained Strategic

Procurement professionals are in place and are fully integrated within organisation’s decision making process. Delivering significant incremental benefits across majority of bought-out spend.

B. How effective is the organisation at using user intelligence groups for appropriate procurement activity?

Organisational Individual targets creating

conflict within

organisation. Informal team discussions dependent upon individuals involved. or

Regular user intelligence group meetings held however a degree of conflict still remains.

User intelligence groups in place with regular meetings for some areas, appropriate to needs. Some clarity of roles, although inconsistent composition and

attendance.

User intelligence groups in place with clear clarity of roles, appropriate to needs, delivered consistently across the service and linked to key strategy deliverables.

Customer and market facing organisation. Dedicated user intelligence groups in place. Working on new product

development, continuous improvement and strategic sourcing.

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Question

McClelland

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Section 1 continued

1. Is there clear direction from the top with clear support for getting best value in procurement?

1.2 Are there clearly defined roles, responsibilities and reporting lines for procurement?

C. How well integrated are the operational

procurement roles within the overall organisation?

Organisational Procurement, Planning,

Accounts Payable and Receiving managed as separate functions. Little systems integration or

Various functions

recognised by each other as essential to overall supply chain effectiveness. Internal customer/supplier

relationships recognised.

Some level of integration of departments under Supply Chain umbrella.

Supply chain focus. Integrated with local and national service

requirements. Embedded process across budget development, demand, service improvements and market developments

Value chain focus. Linked to indirect Service Planning Systems for all aspects of service provision and demand requirements. Evidence of service improvements. D. How is customer relationship management incorporated into

everything you do? Will include BPI2

Practices and Processes No formal mechanisms in place. Limited customer feedback obtained.

Consistent approach. Documented processes and customer feedback obtained on both routine

procurement and individual project basis.

Consistent approach. Documented processes and two-way feedback is the norm with customer feedback being obtained during the process or at post project review. Formal customer feedback survey is completed at least once a year. Formal action plans are in place to improve outputs of customer feedback.

Consistent approach. Documented processes and two-way feedback is the norm with customer feedback being obtained during the process or at post project review. Formal customer feedback survey is completed at least once a year. Formal action plans are in place to improve customer feedback. There is clear evidence that results from previous customer feedback surveys are actioned and show a consistent improvement in customer excellence.

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McClelland

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Section 1 continued

1. Is there clear direction from the top with clear support for getting best value in procurement?

1.3 Is there a clear system of delegation and authority which is audited?

1.4 Is there an effective and efficient quality assurance framework for the procurement process?

A. How clear is the system of delegation and authority for procurement?

Organisational There is no clear system of

delegation or authority for procurement.

The published scheme of administration sets out high level delegations and authority levels.

Each department or function has a clear system of delegation for

procurement (ordering and budgetary). The

organisation has reviewed all procurement activity and responsibility. It has

formally designated all those with procurement responsibility as

procurement officers with accountability to the Head of Procurement. This system is subject to regular internal audit.

Delegated systems are embedded into IT systems to ensure compliance and appropriate authority for transactions. Separation of duties is regularly reviewed and there is accountability to the Head of Procurement. These systems are subject to regular audit.

A. Does internal audit provide assurance that the organisation’s internal control systems for procurement are adequate and effective?

Practices and Processes There is no quality assurance framework.

There is a quality assurance strategy or framework to provide assurance that basic standards of procurement practice are adequate and effective however there are gaps in assurance or the strategy has not been fully implemented.

The internal audit service regularly assesses procurement risks and performance. It reports assurance that the organisation’s basic standards of governance and financial control for procurement are adequate and effective. McClelland report section 5.7.1.

The organisation’s audit committee has reviewed procurement risks and priorities. The committee has specified the degree of assurance it requires concerning the management of

procurement risk. Internal Audit plans and delivers its work in accordance with this requirement.

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Question

McClelland

Attribute

Level 0

Level 1

Level 2

Level 3

Question

McClelland

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Section 2 PROCUREMENT STRATEGY AND OBJECTIVES

2. Is there a clear, systematic, holistic and well-researched framework to guide the organisation’s purchasing decisions?

2.1 Are procurement strategies, policies, objectives and targets well developed and sufficient?

A. How developed is the Procurement strategy?

Governance No documented strategy

or

Some strategic direction documented, although not complete. Little visibility and only functional.

Documented Procurement strategy but not

communicated across all in Procurement and not signed off.

Fully documented strategy communicated across the organisation. The strategy includes well-defined objectives which

demonstrates its impact on the business. The strategy includes a risk assessment and management plan.

Fully documented, well communicated strategy in place and fully aligned with the sector delivery strategy, and wider Public Sector Strategy. The strategy defines the organisation’s position with regard to: Corporate Social

Responsibility; Equalities; Ethical procurement; Sustainability etc.. B. How well defined are the

objectives and targets for Procurement?

Reporting and KPI No specific Procurement

objectives or

Objectives set but poorly defined.

Objectives defined and understood but staff unclear about their integration and impact to wider sector deliverables.

Objectives defined, understood and

documented. Staff clear as to the impact of their targets on wider

organisation’s deliverables.

Objectives of Procurement clearly documented, communicated across the organisation and well understood. Consistent and non-conflicting with other departments. Procurement is involved in defining all strategic external

procurement relationships.

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Section 2 continued

2. Is there a clear, systematic, holistic and well-researched framework to guide the organisation’s purchasing decisions?

2.2 Do procurement strategies and policies align with and support the core business?

A. How far does procurement strategy support and align with the overall organisation’s strategy and with wider public sector strategies?

Governance There is no link between

Procurement strategy and overall sector or

organisation strategies or

Procurement strategy is developed independently to the overall sector or

organisation strategy, but a sense-check is performed at a high level to ensure some alignment has taken place.

Procurement strategy is developed in support of the sector or organisation strategy with the main focus on maximising service and minimising total costs.

Procurement strategy is based on optimising the ability for sector to deliver and improve service delivery across the entire value chain. The

Procurement strategy is co-developed with the other elements of wider service delivery and development.

Procurement strategy is based on optimising the ability for sector to deliver and improve service delivery across the entire value chain. Procurement strategy is co-developed with the other elements of the business strategy, and wider public sector strategies Sourcing and supply chain improvement projects are fully aligned with Business Strategy. B. Has the organisation a

clear process for making outsourcing decisions?

Governance No formal process or policy

exists, at the strategic and tactical levels

or

Limited outsourcing

decisions and are performed reactively.

High-level outsourcing criteria exist and review is part of sourcing decision for new products/services. Tactical make vs buy is conducted, based on some analysis and some policy guidelines.

Periodic reviews at commodity/category level. Guidelines for tactical outsourcing are in place but not deployed fully across the business.

Coherent strategically focused outsourcing process. User intelligence group input facilitated by Procurement based on understanding cost drivers and strategic issues. Clear policy guidelines to drive tactical make vs. buy decision-making, which are followed.

C. Can the organisation demonstrate clear

leadership and commitment from Senior Management towards sustainable procurement?

Corporate and Social Responsibilities

No evidence of management commitment.

Evidence of management support but this is not reflected through activities, policies and strategies.

Senior management

leadership and commitment being evidenced in larger value projects/contracts only.

Clear leadership and a genuine commitment from Senior Management resulting in sustainability objectives being

incorporated into organisational activities, policies and strategies.

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Section 2 continued

2. Is there a clear, systematic, holistic and well-researched framework to guide the organisation’s purchasing decisions?

2.3 Does the Board and senior management team demonstrate understanding of the Procurement strategy?

A. How well is Procurement strategy documented, communicated and understood by sector or individual organisation?

Governance There is no documented

strategy or

A Procurement strategy exists, but it is not current. Only the senior

Procurement management team have visibility to the plan.

A procurement strategy exists and is updated infrequently. Updates driven by the need (for example Audit

requirements) to complete this. Not all senior

management understand or sign up to the strategy.

Updated on a regular basis. Senior management understanding and agreement to strategy. Procurement personnel familiar with the

implications of the strategy.

A fully documented strategy has been agreed business-wide and cascaded to all key areas. Key messages, actions and measures are highlighted in an executive summary. All areas are clear about the implications of the strategy and the expected changes. B. To what extent does the

overall organisation support the Procurement strategy?

Organisational No wider support for

Procurement in place or

Officially the service supports the Procurement strategy but very little active support exists amongst senior managers.

All senior managers officially commit to the targets of the Procurement strategy but only some managers practically demonstrate support.

All senior managers officially commit to the targets of the Procurement strategy and demonstrate this commitment through active support.

Senior managers help develop and sign off Procurement objectives and targets across the

organisation, even if not directly responsible for Procurement tasks and demonstrate commitment through active support of Procurement tasks. Procurement is involved in the process of instigating change projects across the organisation.

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Section 3 SPECIFICATION OF GOODS AND SERVICES

3. Can the organisation demonstrate a prudent and well-planned approach to defining its supply needs?

3.1 Is there sufficient and timely research and challenge to ensure necessary goods and services are properly specified?

A. To what extent is

supplier market intelligence used to procure products or services? e.g. working with suppliers to see R&D and the current standards and technology roadmaps; post contract to take cost out through value engineering – changing packaging specs, etc.

Supplier Strategy and Policy

No agreed specification standards in place for most products. Many

specifications developed without market

intelligence. Organisation specification for most products

or

Some standards in place but not revised regularly. Many specifications developed without market

intelligence. Organisation specification for most products.

All strategic purchases covered by specification and signed off as acceptable by supplier. Supplier has influence on specification post contract.

All strategic purchases covered by specification. Supplier market

intelligence used in product development at an early stage for many areas of spend. Supplier influence on specification after Invitation To Tender.

Specification standards in place. Complexity reviews undertaken regularly. Suppliers make a positive contribution to the design of the product from initiation, for most spend areas.

B. To what extent does new product or service

requirements New Product Introduction (NPI) involve procurement expertise either nationally or locally?

No sourcing input or

Minimal sourcing, input e.g. supplier capability, tenders using brand names vs. generics. When a new product or service is introduced it is not used by the organisation.

Sourcing input requested on an adhoc basis. Involvement is driven by procurement. When a new product or service is introduced hardly used by the organisation.

Two way process established to integrate sourcing and new product introduction. Sourcing input sought early in the new product introduction process. Sourcing involvement on ongoing basis to shape all third-party relationships. When a new product or service is introduced it is frequently used by the organisation.

Dedicated sourcing resource involved. Full

understanding of current and future sourcing strategies. NPI and sourcing processes fully integrated. There is full compliance with the contracts when a new product or service is introduced.

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Section 3 continued

3. Can the organisation demonstrate a prudent and well-planned approach to defining its supply needs?

3.1 Is there sufficient and timely research and challenge to ensure necessary goods and services are properly specified?

C. How well managed is your product catalogue?

Practices and Processes Large duplicated part number catalogue. Obsolete inventory. Supercession issues. No process for part number rationalisation. Component selection process decoupled from sourcing processes or

Duplicated part numbers identified and rationalised to a degree, on an

infrequent basis. Component selection process linked to sourcing process via broad policy guidelines (e.g. preferred suppliers) and limited measures in place.

Single record for each unique item held on catalogue with continuous, proactive management of full content in respect to quality, usability and accuracy and to safeguard against duplications. Catalogue to clearly differentiate between items subject to specific

contractual terms and those traded out with formal contracting processes. Some work done on a regular basis to identify

opportunities to rationalise catalogue content.

Item selection/specification process linked directly to sourcing activity with clear policies adopted by

"technicians" and with existing specifications used to inform future sourcing activities. End users have access to supplier

catalogues and engage suppliers from early stage in respect to item

specification. Measures to be in place to continuously monitor the utilisation of catalogued items as the basis of transactions.

Goods and services selection and sourcing processes fully integrated. High ‘pick’ availability (>85%) for recurring item

requirements. Evidenced improvement on inventory holding and stock costs.

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Section 3 continued

3. Can the organisation demonstrate a prudent and well planned approach to defining its supply needs?

3.2 Is there effective Demand Management early in the procurement process?

A. How rigorously are consumption and compliance procedures applied? e.g. Cheaper item but using more of them/ cheaper daily rate but more days, etc and how this links to budget?

Practices and Processes There are no consumption policies in place

or

Some application of demand analysis procedures. Primarily measurement of usage/volumes.

Consumption and

compliance procedures are regularly reviewed. Target cost management is applied in key areas.

Consumption and

compliance procedures are regularly reviewed and updated. Key measures are incorporated in business. Improvements/benefits can be demonstrated.

A total cost management approach is applied. Demand management fully integrated in procurement processes. Demand and consumption data available ‘real time’ and linked to service improvements.

B. How proactive is the organisation’s approach to value analysis of current and new specifications for Products and Services?

Overall Value of Results Existing designs/ specifications not challenged. No

Procurement or supplier involvement

or

Design of current products and services is reactively assessed resulting from customer/market pressure.

Design of current products and services is assessed to achieve reduced cost only. Supplier involved on a reactive basis.

User intelligence groups (including Procurement) in place to pro-actively challenge new and existing products and services, on an ongoing basis. Evidence of improved ROI or TCO available.

User intelligence groups (including Procurement) in place to pro-actively challenge new and existing products and services, on an ongoing basis. Suppliers are involved in Value Analysis as experts in their field.

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Section 4 SOURCING STRATEGIES AND COLLABORATIVE PROCUREMENT

4. Can the organisation demonstrate a clear understanding of how it can best satisfy its core supply needs?

4.1 Is there a rigorous, high quality process for developing sourcing strategies?

A. How are local Sourcing Strategies developed and reviewed?

Practices and Processes No formal process for sourcing strategy

development and no regular reviews of sourcing

strategies or

Sourcing options are reviewed reactively by the procurement function, usually when problems occur within the supply base. The SPD toolkit is not used

http://www.scotland.gov.uk/ Publications/2006/11/16102 303/0 nor the Centre of Expertise branded version of the SPD toolkit.

Sourcing options are developed and reviewed but are variable in depth between sourcing groups, and the transition process to new suppliers is managed carefully by the procurement team. Some elements of the SPD toolkit are used

http://www.scotland.gov.uk/ Publications/2006/11/16102 303/0 or the Centre of Expertise branded version of the SPD toolkit.

There are regular, planned and diarised reviews of sourcing options within the immediate procurement team with little interaction with other departments -each review is conducted independently and methods are applied on an individual basis. The SPD toolkit is used as a matter of course http://www.scotland.gov.uk/ Publications/2006/11/16102 303/0 or the Centre of Expertise branded version of the SPD toolkit.

There are regular, planned and diarised reviews of sourcing options using a formal methodology. Cross-functional/ geographical teams are used where appropriate, with a carefully managed transition process to new suppliers. The SPD toolkit is used as a matter of course http://www.scotland.gov.uk/ Publications/2006/11/16102 303/0 or the Centre of Expertise branded version of the SPD toolkit. B. To what extent is sourcing strategy development a multifunctional, service-driven process?

Practices and Processes Where they exist, sourcing strategies are developed in isolation and take little account of service needs or

Strategies are developed with some involvement on an ad-hoc basis. The

strategy takes some account of the service requirements, primarily around

operational factors.

The strategy is developed involving key

multifunctional input, and takes account of many supply chain issues relating to the sourcing group.

Demand management and supply base management drivers are fully

incorporated and

significant specialist input is provided, including key user areas.

Cross-functional/ geographical teams are used on an ongoing basis, with significant input across the organisation. The strategy takes account of significant service drivers, both internal and external.

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4. Can the organisation demonstrate a clear understanding of how it can best satisfy its core supply needs?

4.1 Is there a rigorous, high quality process for developing sourcing strategies?

C. How much of the overall spend (CAT A, B and C) is covered by signed-off sourcing strategies? linked to BPI5

Practices and Processes No areas at all or

Some areas covered by sourcing strategies but normally by exception.

Many sourcing groups have sourcing strategies, but they are not fully signed off. Where available, Category A and B

collaborative contracts are being used.

Over 75% of spend covered by strategy, which is signed-off by appropriate organisation stakeholders. Where available, Category A and B collaborative

contracts are being used.

The entire spend is covered by sourcing strategies which are signed-off by senior management. Where available, Category A and B collaborative contracts are being used.

D. To what extent do sourcing strategies for CAT A, B, C spend exploit the full range of opportunities?

Practices and Processes Mainly price-focused, purchasing savings, delivered through negotiation and supplier rationalisation

or

Opportunities captured through supply base management and some efforts in inbound supply chain management. The SPD toolkit is not used http://www.scotland.gov.uk/ Publications/2006/11/16102 303/0 nor the Centre of Expertise branded version of the SPD toolkit.

Significant impact in price-related supply base

management and supply chain benefit areas. Many broader opportunities understood and scoped but little impact made in terms of delivering benefits. Elements of the SPD toolkit are used

Many opportunity areas captured, but not completely. Variety of benefits captured, but still opportunities exist where implementation has not been as successful. The relevant elements of the SPD toolkit are used as a matter of course

Full range of opportunities exploited, including supply base management, demand management, supply chain improvements, Total Cost Ownership considerations. Innovation and new product development fostered and organisation and sector reputation protected and enhanced. Significant benefits delivered

consistently. The relevant elements of the SPD toolkit are used as a matter of course

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4. Can the organisation demonstrate a clear understanding of how it can best satisfy its core supply needs?

4.1 Is there a rigorous, high quality process for developing sourcing strategies?

E. Are procurement policies integrated into core

organisations?

Practices and Processes Only ad-hoc evidence of procurement policy being integrated is available.

The organisation uses approved standard terms and conditions when awarding contracts. Only elements of the SPD Policy Handbook are being used. EU regulations and constraints are only partially understood.

All areas of the SPD Policy Handbook are understood and integrated into the procurement process. EU regulations and constraints are well-understood and necessary steps taken to implement them. Legal advice is routinely obtained when required.

SPD Procurement personnel are seen as policy experts in relation to the Policy Handbook and EU Regulations.

F. To what extent does the organisation take account of its sustainability in its procurement activity?

Procurement policy and processes take no account of sustainability.

Sustainability is

incorporated into major projects.

An organisation specific Delivery Plan, which addresses how procurement can help the organisation deliver sustainability objectives has been produced.

Sustainability is embedded into all procurement activity.

G. To what extent does the organisation monitor its progress towards

demonstrating sustainable procurement practices and processes?

The organisation has not assessed itself against the Flexible Framework self-assessment tool contained in the Scottish Sustainable Procurement Action Plan.

The organisation has assessed itself against the Flexible Framework self-assessment tool contained in the Scottish Sustainable Procurement Action Plan, but has not yet reached level 3 in all five areas of the Framework.

The organisation has assessed itself against the Flexible Framework self-assessment tool contained in the Scottish Sustainable Procurement Action Plan and is assessed at level 3 in all five areas of the

Framework.

The organisation has assessed itself against the Flexible Framework self-assessment tool contained in the Scottish Sustainable Procurement Action Plan and is assessed at level 3 in all five areas of the

Framework.

H. To what extent does the organisation take account of the current economic

Practices and Processes Procurement policy and processes take no account of the current economic

Suppliers are checked for financial stability at tender stage only.

Incumbent key suppliers are checked for financial stability on an ongoing

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4. Can the organisation demonstrate a clear understanding of how it can best satisfy its core supply needs?

4.2 Are sourcing strategies based on robust and accurate information?

A. To what extent are sourcing strategies for CAT A, B and C spend based on reliable/robust internal information?

Information Systems No relevant internal information exists or

Information at supplier level exists, however the information is inconsistent in terms of content and depth. Little information exists across the Group.

Detailed information is available, however it is not used to develop

recommendations that can be incorporated within the strategy. Only some spend data is available at

commodity group level - by supplier (i.e. from accounts payable). Little line item (detailed commodity) level info available.

Historic spend data is available, at supplier and sourcing group level. Some data is available at line item (detailed commodity) level. Some forecast data is available. Information informs sourcing strategy.

Detailed and accurate information exists on both current and future demand, supplier and market changes, current process and performance. Information is easily formatted and accessed. Procurement regarded as key source of information intelligence for supplier spend.

B. To what extent, and how, is detailed and rigorous supply market information/ benchmarking used to drive strategy development?

Benchmarking Basic information exists on

current suppliers. Limited/ no analysis is completed to support strategy

development or

Analysis conducted on basic supply market information. High level benchmarking completed, based on existing supply base and limited number of other sources. Little investment in supply market research. Collaboration on pricing across other public sectors is not used to drive efficiencies.

Supply market reviews conducted when required. Some understanding of supply markets on an ongoing basis.

Benchmarking conducted periodically, across the market (including

competition). The Scottish Procurement Information Hub (Hub) is used where feasible for benchmarking.

The Hub is used for benchmarking where appropriate.

Sourcing strategies for most sourcing groups based on coherent and deep understanding of supply market. Cost and service drivers fully understood and used to drive strategy decisions. Sourcing professionals demonstrate in-depth understanding of supply markets. The Hub is used for benchmarking where appropriate.

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4. Can the organisation demonstrate a clear understanding of how it can best satisfy its core supply needs?

4.2 Are sourcing strategies based on robust and accurate information?

C. Are mechanisms in place to encourage new suppliers and ensure clear access routes?

Practices and Processes Buyer profiles are not on the Public Contracts Scotland portal. Contracts are not advertised on the Public Contracts Scotland portal. There are restrictive practices with no clear route for suppliers to buyers. New suppliers are not encouraged.

Little variation in supply base. Potential new suppliers are referred to standard documentation or information. Buyer Profile has been set up on Public Contracts Scotland portal.

Buyer Profile has been set up on Public Contracts Scotland portal. Meet the Buyer events are being held. Web information for new suppliers with genuine positive response to queries. Suppliers are sounded out in early discussions or involved in market testing.

Prior Information Notices are used to assess market interest. Positive action compliant with

procurement law is taken to increase opportunities for smaller and medium sized enterprises (SMEs) to provide diversity and responsiveness.

Seeks out VFM and innovation through open supplier events and

attending trade exhibitions. There is a clear process for introduction of new suppliers.

Buyer Profile has been set up on Public Contracts Scotland portal. Contract awards are on Public Contracts Scotland portal. Trade fares are being attended by procurement staff. D. Do contracts/ engagements demonstrate strong management of corporate responsibility in the supply chain where CSR is directly related to the performance of the

contract? Has the risk been analysed on exposure?

Corporate responsibility is not considered nor risk analysed.

Some awareness and basic management. Corporate responsibility clauses are in contracts.

Good awareness of the reputational risk exposure from the supply chain with clauses in contracts. Demonstration of due diligence and risk management.

Strong management of reputational risk exposure. CSR taken into

consideration in tendering process and clauses in contracts. Positive PR achieved on CSR where possible. Key suppliers manage CSR in their own supply chain. Any gaps identified and action plans in place.

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4. Can the organisation demonstrate a clear understanding of how it can best satisfy its core supply needs?

4.3 Are sourcing strategies being implemented successfully and in accordance with plans?

A. Is a comprehensive implementation plan developed for each sourcing group and is it agreed across all impacted areas of the service?

Practices and Processes A sourcing strategy exists but no implementation plan has been developed

or

Basic implementation plans exist covering some major aspects of implementation, but are inconsistent in content and depth.

Implementation plan incorporates all

Procurement requirements, detailing supply base and pricing changes, together with timing implications.

Additionally, the plan includes a risk assessment, benefits case, training and communication plan. The plans are developed and agreed by cross functional teams.

Sourcing strategies are in place for key commodities. Implementation plans include key activities, phased timing plan and addresses all the key processes. Responsibility and programme

management mechanisms are agreed.

B. Is the organisation moving towards advanced procurement performance in accordance with the McClelland report aim (McClelland report paragraph 9.8.1)? Will include BPI1

Overall Value of Results No action plan is in place or measurement conducted. or

Plan in place but benefits and savings achievement is well behind plan.

Action plan is in place though progress may not be well measured. Benefits and savings are being achieved, a number of ongoing organisational changes implemented although not consistently tracked with some slippage.

Action plan and

performance measurement mechanisms are in place. Benefits and savings and organisational changes are being achieved according to the plan.

Detailed action plan and performance measurement mechanisms are in place tracking organisational, benefit and savings changes. A process for handling ‘slippage’ is in place. The changes are reported through-out the organisation. Significant benefits and savings/ changes are being achieved internally and across wider public sector.

C. Do post procurement reviews take place to identify lessons to be learned from the process and to determine whether planned benefits and VFM were achieved?

Overall Value of Results There are no post procurement reviews.

Post project reviews are conducted in only some cases, i.e. above EU threshold. There is some attempt to disseminate lessons learnt but it is not systematic.

Independent post project reviews are normally conducted.

The organisation is seeking to develop further its approach to post-project reviews. There is a clear and systematic process for disseminating lessons learnt. Procurement staff are involved in seeking to learn from earlier projects and promote better practices.

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4. Can the organisation demonstrate a clear understanding of how it can best satisfy its core supply needs?

4.4 Is the organisation working well with other public bodies to maximise the benefits from collaborative procurement?

A. What level of collaboration exists to develop future procurement activity?

Collaboration No representation out with

immediate organisation or

Shared data and

information across some internal organisations.

Input to wider procurement development and reform. Outputs fed into plans, processes and activities.

Key representation and challenge to wider

procurement development and reform across public sector. Lead developments for some areas.

Recognised as a lead organisation in key

procurement activity areas. Development of strategy and policy encompassing wider public sector. Representation in non public sector organisations, e.g. trade associations, etc. B. Is the organisation

increasing its collaborative procurement with other public bodies? Will include BPI4

Collaboration No evidence. Currently

acting independently or

Utilising only a few National framework agreements, e.g. stationery.

Sourcing strategies are defined for all major spend areas, which recognise opportunities for joint procurement work with other public bodies. The organisation has not actively followed up these opportunities.

The organisation is actively pursuing joint procurement with other public bodies, to get procurement

efficiencies. It has analysed its procurement spend and contracts and identified other public sector

organisations with which it can collaborate. There are clear implementation plans with targeted efficiency savings. The organisation is innovatively considering joint commissioning of procurement of services.

The organisation is actively seeking new and innovative partnerships. It can show it is increasing the number, scope and share of spending on collaborative contracts. The organisation is innovatively considering joint commissioning of procurement of services. C. Is the organisation working in partnership with centres of expertise to supporting the development of advanced procurement?

Collaboration No evidence. Currently

acting independently

The organisation is a member of the relevant centre of procurement expertise. The organisation participates in the relevant centre of procurement expertise training and development strategy.

The organisation has a clear written understanding and expectation of the service standards expected of the centre of procurement expertise (e.g. service level agreement established). The organisation has an

The organisation actively participates in any user improvement group or opportunity workshops that the centre of procurement expertise has set up. E.g. it contributes to reviews of proposed contract

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Section 5 CONTRACT AND SUPPLIER MANAGEMENT

5. Does the organisation manage its suppliers and contracts effectively?

5.1 Are there clear roles and accountabilities for contract and supplier management across the organisation, with standardised practices?

A. Are there effective contract management processes in place?

There are no structured contract management processes in place.

There is ad hoc, mainly qualitative measurement of contract KPIs and SLAs and mainly conducted by the business.

There is a structured and formal review of contracts and their KPIs, and SLAs where appropriate. Contracts and their KPIs/ SLAs are quantitative and regularly measured with supplier data and own data with action planning implemented.

Contract management information is obtained, analysed and actioned by the organisation as part of continuous improvement. Mechanisms are in place to motivate suppliers to perform, whilst continually improving service delivery. Risk and change

management are

undertaken systematically and exit strategies are in place which can be implemented. B. Are contracts publicised

to ensure consumers are aware of contractual content and pricing?

Practices and Processes Contracts are not publicised.

High volume collaborative contracts are publicised showing content and pricing.

The majority of contracts are publicised showing content and pricing. The majority of contract awards are on Public Contracts Scotland portal.

All contracts are publicised showing content and pricing. All contracts are on Public Contracts Scotland portal.

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5. Does the organisation manage its suppliers and contracts effectively?

5.1 Are there clear roles and accountabilities for contract and supplier management across the organisation, with standardised practices?

C. How are key suppliers (high spend/high risk) managed across area?

Suppliers managed on a day to day basis. No long-term plans in place or linkage between different departments or

Limited cross functional management of key suppliers only.

Common approach to key supplier management, although not fully deployed to all key suppliers.

Management mainly through user and on a contract basis and not by grouping all commodities delivered by that supplier to the organisation. Supplier Management process and tools is compliant with SPD Toolkit.

or

Centre of Expertise branded toolkit.

Cross functional input provided from both supplier and internally and fully integrated. Supplier

management approach fully documented and deployed to all key suppliers. Key suppliers are managed by grouping all commodities delivered by that supplier together. Supplier

Management processes and tools are compliant with SPD Toolkit.

or

Integration across service including input from all key stakeholders – budget holder, end user, purchaser, requsitioner. Clear supplier management roles within process. Process clear to suppliers. In addition to managing suppliers by grouping all commodities together, parent company level of suppliers is also considered where relevant. Formal key supplier assessments are completed annually. Supplier

Management process and tools is compliant with SPD Toolkit.

or

D. How clearly defined are the Procurement policies and procedures?

Practices and Processes No documented

Procurement procedures or

Some procedures in place but not well understood or adhered to. Not checked for compliance.

Procedures in place but not applied consistently or across all supply areas.

Comprehensive procedures in place and understood. Subject to regular internal audit.(qv1.4A)

Comprehensive, documented, well understood procedures which are implemented consistently throughout the organisation. Practices allow flexibility to suit local/ specific variations. Subject to rigorous

internal/external audit(qv 1.4A). Reviewed regularly.

E. How are Terms and Governance No Terms and Conditions. Standardised T&C’s applied Standardised T’s&C’s Standardised T&C’s available

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5. Does the organisation manage its suppliers and contracts effectively?

5.2 Are key suppliers fully integrated into the organisation’s business processes?

A. How close is the organisation to its key suppliers? i.e. How effective is your management of your key suppliers?

All suppliers are treated the same - the supply base is managed on a purely transactional basis with no partnerships or alliances in place

or

Supply base management is undertaken on a reactive basis - where problem suppliers are managed more closely than others.

Cross-organisation meetings, workshops and feedback sessions are held with few key suppliers. SPD Supplier Charter is in place.

Tailored supplier

performance process linked to supplier and service influence, complexity and market dynamic. SPD Supplier Charter is in place.

The business actively develops and supports joint value added programs with key suppliers. SPD Supplier Charter is in place.

B. Are performance improvement strategies developed in tandem with suppliers or independently?

No joint strategy planning or

Some specific initiatives exist to support low level performance improvement objectives.

Some specific initiatives exist to support low level performance improvement objectives. Key suppliers have limited blind input into elements of business strategy planning process.

Key suppliers have input into elements of business strategy planning but are not part of decision-making process.

Key suppliers are fully integrated with business strategy planning with appropriate risk and reward sharing mechanisms employed.

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5. Does the organisation manage its suppliers and contracts effectively?

5.2 Are key suppliers fully integrated into the organisation’s business processes?

C. To what extent are planning schedules/ forecasts developed with suppliers? (i.e. how in control are you that suppliers will deliver and if not what contingencies have you and how is it linked to supplier measures?)

Suppliers receive schedules infrequently, and there is a low level of accuracy. Schedules out of date. No consideration of supplier’s capacity

or

Longer term forecasts given but subject to considerable change. Regular short term forecasts given to suppliers. Subject to frequent change.

Suppliers receive schedules subject to amendment. Not always on a timely basis. Suppliers acknowledgments checked.

Contingency plans established. Suppliers receive mostly accurate schedules with few amendments.

Suppliers receive accurate and topical schedules. Long-term capacity planning conducted with suppliers.

D. To what extent does the organisation learn from its supply market? Will include BPI3

No two way feedback process

or

Suppliers have opportunity to feedback on the

organisation’s supply management performance but data not collated or acted on consistently.

Suppliers have opportunity to feedback on the

organisation’s supply management performance as part of formal review process. Information gathered is collated and acted upon as key objective. However feedback may be patchy.

Formal feedback process in addition to review of supplier technological capabilities and core competencies which are recognised and utilised where feasible. Feedback information has reasonable coverage of main spending.

The organisation utilises supplier expertise in re-engineering in Procurement processes as well as product development. Joint knowledge sharing objectives are in place with key suppliers. Feedback information is highly systematic with good coverage of spending.

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5. Does the organisation manage its suppliers and contracts effectively?

5.3 Does the organisation manage relationships with suppliers well, to support best value?

A. How appropriate is the framework for managing supplier relationships? E.g. referencing the Strategic Sourcing Tool Kit or

Centre of Expertise branded toolkit

Governance There is no corporate

framework - relationships are managed individually. or

There is no corporate framework - each Procurement team establishes its own

relationship framework and manages individually.

Relationships are managed with broad reference to high level corporate framework.

Relationships are managed with broad reference to high level corporate framework and are

regularly reviewed by wider Procurement and business teams to ensure consistency of approach.

Formalised framework in place to define, establish, and assess value-added relationship: terms of engagement outlines, terms of disengagement spelled out.

B. How reliable is the method for assessing and managing supplier performance?

Reporting and KPI No measures in place

or

Performance is assessed but no action taken.

Performance is assessed and action taken on a reactive basis.

Formal assessment programs are in place and used to drive supplier development program.

A continuous supplier assessment process is used to identify supplier

development opportunities and requirements as well as criteria for advancement. C. How comprehensive is

the process for new supplier introduction? e.g. Are formal Pre Qualification Questionnaire’s used consistently?

Governance No formalised qualification

programs for new suppliers or Supplier qualification is responsibility of individuals. Qualification process is managed by procurement in relation to specific commodity or service requirements. Qualification programme covers sector wide

application and references wider public sector

qualification/supplier portal considerations.

Qualification programme includes frequent

refreshes/audits and value improvement activity.

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