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BEST PRACTICE - USE THE NET TO CLOSE IN ON SAVINGS

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Buying online isn't just about CDs and last-minute holidays. Seamus Ward investigates how councils are saving milli...
Buying online isn't just about CDs and last-minute holidays. Seamus Ward investigates how councils are saving millions

Councils spend a staggering£40bn each year on goods and services and naturally want to squeeze value from every pound. Just as the internet has taken off as a virtual high street for shoppers, councils are becoming e-procurement converts. Savings can be made and processes streamlined as councils move all aspects of procurement from tendering and bidding to invoicing and contract management online.

Here are examples of how some of the best councils are turning technology to their advantage:

1 SET UP A REGIONAL MARKETPLACE

Essex CC has established one of the biggest e-marketplaces in the country, saving the county around£1m on its stationery bill.

Work started on the marketplace - which provides a virtual shop front for suppliers and allows them to bid for contracts - in 2002. Though the major driver was e-government targets, the county also felt the system would highlight areas where prices could be cut.

Essex chose the Improvement & Development Agency's e-marketplace model, mainly because it can be scaled to councils' needs and suppliers can receive orders in a number of ways from text messages to full electronic processing. The IDeA model also had the scope to deal with 80% of the county's supply spending.

The marketplace is used by 13 authorities and in 2005-2006 handled 43,000 purchase

orders worth£104m.

E-procurement manager Katy Chambers says 99% of orders are now received electronically, while the collaboration needed to set up the marketplace has strengthened the ties between the local authorities in Essex.

'Savings are varied depending on the size of the authority and their procurement expertise but it can be between 30 and 60% on a standard basket of goods,' she says.

2 COLLABORATE WITH LOCAL PARTNERS

If e-procurement is a recent phenomenon, the North East Purchasing Organisation is less so. It was set up in 1996 by five authorities, but now includes 24 as councils have sought to widen their partnerships and share expertise.

The organisation began work in 2002 on a single online portal for all its members and suppliers with funding from the Office of the Deputy Prime Minister. Hosted by Gateshead Council, the portal contains information for suppliers, such as key contacts at each council and future tendering opportunities. There is also a discussion forum for members.

'We estimate a reduction in administration provides savings of around 15%,' says organisation spokeswoman Andrea Tickner.

It is now working with the North East Centre of Excellence to make improvements. Three

e-marketplaces have sprung up in the region and one initiative involves ensuring information can be shared across all three, allowing suppliers to enter their information once.

Working together has produced a better service. 'Different people had different expertise,' adds Ms Tickner. 'Some looked at e-tendering, others contract management. We were able to capture that expertise. The authorities shared the cost and I am sure an individual authority would not have got the funding from the ODPM if it had decided to go it alone.'

3 USE REVERSE AUCTIONS

Reverse auctions - where the price goes down instead of up - sound like something you'd expect on daytime TV but they are actually a great way for councils to save. Birmingham City Council is about to expand its use of reverse auctions after a number of pilots produced significant savings.

The city began holding auctions in 2003 after officers heard they could produce savings of between five and 30%. The idea is simple; over a set time frame (say, two hours) suppliers submit bids electronically and the competition drives the price down.

'Every one has produced savings that have more than paid for the cost of carrying out the auction,' says Pete Watson, council procurement group manager.

The council's first reverse auction, for photo-copying paper and card, achieved savings of 28%, while an auction for an office supplies contract produced a 62% saving, or around£1m a year. However, cleaning materials achieved just 2% savings.

Mr Watson adds that while reverse auctions are limited to bidding by price, there is room for best value as suppliers can submit initial bids based on the quality of their service.

4 USE PUBLIC AND PRIVATE SECTOR EXPERTISE

Staffordshire Moorlands DC is clearly keen to use expertise from both the public and private sectors to make its procurement more effective.

It has brought together its ICT and corporate procurement divisions, combining project and change management, procurement and e-government specialists into one team.

It has also brought in expertise from outside to reduce the environmental impact of its vehicles. In 2005 it contracted consultants 21ctc to help staff review vehicle procurement, and maintenance. This included an evaluation of opportunities for a green fleet.

Staffordshire Moorlands also received 20 days consultancy from the West Midlands Centre of Excellence to help it create more affordable homes. It says this made the first stage of the development a success and included recommendations for the first four sites to be developed, a summary of the legal requirements of such a procurement and identification of potential partners.

5 LEARN FROM OVERSEAS

In 2001, e-procurement was not the buzzword it is now - but that didn't stop Leeds City Council.

Leeds had decided to start e-tendering and came across the work being done in Australia. A phone call to ask whether Leeds could use the Australians' ideas was the beginning of a five-year relationship.

The Australians offered to modify and host their own e-tendering system for Leeds in return for a contribution to development costs (funded as a pathfinder by the government).

The Leeds Electronic Tendering System was launched in January 2002 but was expanded to include 13 councils in the Yorkshire & Humberside region a year later and renamed Council Tenders. By the end of February this year, 25,750 suppliers had registered on the site and 3,500 tenders had been placed, worth around£3bn, over the life of the system.

Wayne Baxter, Leeds' chief procurement officer, says savings in the last year amounted to£226,000, mostly generated by reduced administration, postage and advertising costs.

The southern hemisphere tie-up ended in August as Leeds and its local partners moved onto a supplier and contract management system, which incorporates e-tendering. But Mr Baxter says the council learned a lot.

'The distance posed a bit of a challenge - we only had a short window each morning if we needed to speak to them on the phone. But I don't think geography is a barrier,' he says.

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