Professional Documents
Culture Documents
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Capacity and Capability Review of Central Procurement Function
DRAFT
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Capacity and Capability Review of Central Procurement Function
Table of Contents
1
Introduction .........................................................................................................................13
2.1 Background ..................................................................................................................13
2.2 Objectives ....................................................................................................................13
2.3 Scope ...........................................................................................................................14
2.4 Review Approach .........................................................................................................14
2.5 Structure of Document .................................................................................................16
Recommendations ..............................................................................................................48
5.1 Introduction ..................................................................................................................48
5.2 Spend and Savings ......................................................................................................49
5.3 Opportunity Identification for Non-Addressable Spend .................................................56
5.4 Strategy and Governance.............................................................................................58
5.5 Category Management Approach .................................................................................71
5.6 Supplier Relationship Management ..............................................................................74
5.7 Requisition to Pay ........................................................................................................75
5.8 Master Data Management ............................................................................................75
5.9 Technology ..................................................................................................................76
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Capacity and Capability Review of Central Procurement Function
Appendix ...................................................................................................................................85
1
Categories ...................................................................................................................85
Organisational Data.....................................................................................................95
Acronyms ....................................................................................................................99
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Capacity and Capability Review of Central Procurement Function
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Capacity and Capability Review of Central Procurement Function
1 Executive Summary
A key government priority is to substantially reduce costs and achieve better Value for Money
(VFM) through reforming public procurement with the area of procurement being identified as
one of 14 Public Service reform initiatives announced by the Minister for Public Expenditure and
Reform in November 2011.
The Department of Public Expenditure and Reform (D/PER) engaged Accenture following a
public procurement process to:
Identify the actions required to realise substantial savings in public procurement in the
short to medium term, and to
Identify the actions to build additional on-going procurement sourcing capabilities and
structures for continued procurement practice improvement and greater efficiencies
This review was conducted over a 6 week period between May and July 2012. This report sets
out the key findings and recommendations.
Stakeholder Engagement
Interviewed buyers, suppliers and internal
customers - 73 interviews were conducted
Engaged Ministers, Secretaries General, Agency
CEOs, Procurement Officers, School Teachers,
Doctors, Garda, Local authority engineers, industry
groups including IBEC and IMSTA and supplier key
account managers and CFOs
External Benchmarks
UK, European and global procurement
interviews conducted to provide international
insight and experience
Accenture Benchmarks were used to support
the assessment and provide qualitative and
quantitative benchmarks
Accentures High Performance Procurement
(HPP) Model was used to assess current
procurement capabilities
Surveys
Qualitative structured capability assessment
surveys based on Accentures HPP framework
were used across all sectors
Self-assessment surveys completed by
procurement representatives from across the five
sectors and validated against interviews with key
stakeholders
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Capacity and Capability Review of Central Procurement Function
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Capacity and Capability Review of Central Procurement Function
Savings are calculated on a figure of 6.2b (476m unclassified and 170m school bus
scheme removed from 6.9b total) giving an annualised savings range between 249m
to 637m
180m to 438m of these savings could be realised by greater central aggregation of
common categories, challenging demand/specifications, and driving compliance
A further 69m to 199m savings could be realised by adopting similar category
management principles within sectors to sector-specific categories
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Capacity and Capability Review of Central Procurement Function
Maturity
Rating
(Consolidated
Average)
Summary Findings
Procurement
Strategy
Sourcing and
Category
Management
Contract and
Supplier
Management
Requisition to
Pay Process
Workforce and
Organisation
Procurement
Technology
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Capacity and Capability Review of Central Procurement Function
Whilst there are many examples of good procurement practices within the Irish Public Service,
when compared to industry and Public Services globally, these practices are not applied
consistently across State procurement functions. Examples of best practice across the central
procurement functions include CMODs approach to ICT demand management, the NPS energy
framework pricing, and the CSSO development of standard framework contracts and the HSEs
vendor dashboard.
The key findings impacting the ability of central procurement function to realise sustainable
savings are:
1. Central procurement functions are not organised in a manner to enable delivery to
realise optimal savings for the State:
Central procurement functions are not integrated or aligned to common goals and
targets
NPS lacks the authority to influence senior stakeholders on spend decisions
The Procurement Officer role as currently implemented is focused on financial cost
control but lacks visibility of supplier, price and specification data
Purchasing is devolved in many Departments and operational control is therefore
dispersed resulting in lack of control of demand
2. Central procurement functions lack timely access to accurate spend data that is
required to inform category management decisions:
Today departments and agencies have a focus on financial management but lack
visibility of usage and pricing information to monitor spend from a procurement
perspective
There is no standard definition of a procurement saving or ability to measure and track
benefits
There are no standard procurement metrics to track procurement performance
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Capacity and Capability Review of Central Procurement Function
Achieving the identified level of savings in addressable procurement spend will require
significant investment in the capability and capacity of procurement. The review has identified
pockets of excellence but these need to be replicated and implemented in a consistent manner
across all sectors. A key recommendation is to establish a single integrated procurement
function accountable for policy, sourcing and category management of common categories and
support operations. This function should be led by a Chief Procurement Officer (CPO) within a
National Procurement Office (NPO). The NPO would need as a priority to prioritise visibility of
spend, and the development of an appropriate governance and operating model in order to
deliver strategic savings.
This recommendation is consistent with approaches taken in other European and Global Public
Service organisations including the UK CPO who established the UK Government Procurement
Service. Our benchmarking has underlined the need to prioritise centre-led procurement
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.
Appoint a new Chief Procurement Officer (CPO) accountable for national procurement
strategy, policy, implementation and effective compliance framework
Establish a National Procurement Office (NPO) as an Office under the aegis of D/PER
Transition the current NPS, NPPPU and CMOD procurement processes from their
current reporting lines and locations to the CPO in Dublin
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Capacity and Capability Review of Central Procurement Function
NPO to manage all strategic spend for common categories of goods and services Policy
Unit within the NPO to be responsible for strategic and operational procurement policy
and compliance across sectors
Transition some experienced resources from individual procurement teams within each
sector to the new NPO in Dublin
Establish a fulltime Procurement Officer within each sector to be responsible for
procurement across relevant Departments and Agencies
Establish robust governance model for procurement with senior executive level
involvement and sponsorship across the sectors. In addition, the creation of Category
Councils is a key element of the recommended governance model
The report also makes sector-specific recommendations for managing procurement in Health,
Local Government, Education, Justice and Defence sectors. In addition, it includes detailed
recommendations on:
The review has identified short and medium term savings and recommended steps to achieve
these. The review has also identified that the current procurement functions at a central and
sectoral level are not currently in a position to deliver the identified savings. Changes in how
procurement is governed and managed are required and investment in the people, process and
supporting technology are outlined in the report in order to ensure sustainability of the savings
and procurement organisation.
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Capacity and Capability Review of Central Procurement Function
2 Introduction
2.1 Background
In November 2011, the Minister for Public Expenditure and Reform launched the Governments
Public Service Reform Plan. This plan identified procurement reform as one of the major
projects of key strategic importance.
The procurement recommendations and actions in the plan focused on the following areas:
While work is on-going on the implementation of procurement reform, there is a need to take
stock of the capacity and capability in this area to ensure that the procurement reform
programme is successfully and strategically coordinated, managed and implemented.
Accenture was commissioned to undertake a six week capacity and capability review of the
States central procurement function. This document is the final report from this initiative.
2.2 Objectives
The objectives of the procurement capability and capacity review are to identify the actions
required to realise substantial savings in public procurement in the short to medium term, and to
build additional on-going procurement sourcing capabilities and structures for continued
procurement practice improvement and greater efficiencies1.
In particular, the review was explicitly requested to focus on the following key areas:
An analysis of the total procurement expenditure for the State by category and by sector
The identification of priority categories and sectors for a central procurement function to
deliver savings from procurement
To quantify the savings potential from the priority categories and sectors
To outline the requirements of a central procurement function to deliver and sustain the
savings from a perspective of:
- The required approach to carrying out sourcing and category management
- The approach for managing the top suppliers across Government
- The skills and competencies required to deliver and sustain the savings
- The operating model, governance and organisation structures required to enable
successful and timely delivery of savings
- The technology that will enable visibility of spend and adherence to centrally and
competitively tendered frameworks and contracts
Request for Tender - A capacity and capability review of the central procurement function to identify the actions required to realise
substantial savings in public procurement in the short and medium term, Department of Public Expenditure and Reform, March
2012
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Capacity and Capability Review of Central Procurement Function
2.3 Scope
The primary focus of the review was on central procurement processes, including the NPPPU,
NPS and CMOD.
Central government Departments and bodies under their aegis, local authorities and noncommercial semi-States were also included in the review in order to understand procurement
capability and capacity across the Public Service, and inform recommendations for realising
substantial savings.
Commercial semi-states were deemed to be out of scope as not part of the Public Service.
The review only looked at non-pay current expenditure on goods and services. Capital
expenditure was excluded due to time limitations and differences in stakeholders. However it is
anticipated that many of the findings identified in this report would be equally applicable to
capital expenditure and that capital procurement should be considered as a further source of
savings.
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Capacity and Capability Review of Central Procurement Function
what are the gaps in capability and capacity that will need to be addressed to enable the
realisation of savings and sustainable procurement benefits.
As part of the identification of savings opportunities and capability recommendations, the
findings of the spend analysis were used to identify the following:
The review team then prioritised recommendations and developed a high-level implementation
roadmap to rapidly deliver the recommendations and enable savings.
The evidence-based approach used external and internal data sources to corroborate
recommendations as outlined in Table 2.1 below.
Evidence-Based Approach
Spend Data
Conducted a comprehensive data
gathering and analysis from multiple
sources including vote estimates,
Departmental financial accounts, purchase
order data, contract listings and historical
reports
Over 24 data sources used including
D/PER, NPS and individual sectors ranging
from school accounts to HSE ERP
platforms and Justice Finance Shared
Services
Stakeholder Engagement
Interviewed buyers, suppliers and internal customers
- 73 interviews were conducted
Engaged Ministers, Secretaries General, Agency
CEOs, Procurement Officers, School Teachers,
Doctors, Garda, Local authority engineers, industry
groups including IBEC and IMSTA and supplier key
account managers and CFOs
External Benchmarks
UK, European and global procurement
interviews conducted to provide
international insight and experience
Accenture Benchmarks were used to
support the assessment and provide
qualitative and quantitative benchmarks
Accentures High Performance
Procurement (HPP) Model was used to
assess current procurement capabilities
Surveys
Qualitative structured capability assessment surveys
based on Accentures HPP framework were used
across all sectors
Self-assessment surveys completed by procurement
representatives from across the five sectors and
validated against interviews with key stakeholders
Table 2.1: Data Sources Used to Support Evidence Based Review Approach
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Capacity and Capability Review of Central Procurement Function
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Capacity and Capability Review of Central Procurement Function
Estimates for Public Services (2011) provided by Department of Public Expenditure and
Reform, supplemented with local government report on expenditure (2009) and a more
detailed spend breakdown provided by the HSE (2010/2011), were used as an initial
baseline
As there is no common spend categorisation for the Public Service, a master spend
categorisation to classify spend in a common manner was developed by the review
team using existing categorisations within the National Procurement Service (NPS) and
Health Service Executive (HSE) supplemented where gaps existed with a combination of
international standard categorisations as applicable (i.e. UNSPSC and eClass)
Each non-pay line item within the estimates was mapped to a spend categorisation to
normalise data across sources and to enable analysis
Spend that cannot be addressed by procurement currently was removed from the
data set as this was considered out of scope. For example, spend on blood products
where the price is set by the Blood Transfusion Board cannot be influenced by
procurement
Approximately 1.5 billion of the estimates data that was used as a spend baseline did
not have sufficient information to enable it be classified. This was due to insufficient
quality and consistency of procurement spend data provided resulting in the need for
more detailed spend data to be gathered from individual agencies .
With the support of the NPS and Department of Public Expenditure and Reform, an
initial list of 23 contacts were identified across the Public Service to support the project
team to get access to more granular procurement spend data. Where the point of
contact within an agency could not provide spend data, the review team were required to
identify other individuals themselves who could provide information on procurement
spend
For a number of agencies, a complete data set could not be extracted in the short
project timeframe and a spend breakdown was extrapolated based upon the data
available (full details of what data sources were used and any assumptions used to
extrapolate spend details can be found in the Appendices)
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Capacity and Capability Review of Central Procurement Function
Data is fragmented across multiple systems: It is estimated that there over 4,000
instances of financial systems in operation across the State when consideration is given
to the individual systems operated across all sectors, such as education where primary
and secondary schools have independent systems.
Purchasing and operational control is dispersed: While each Department is required
to appoint a Procurement Officer, it is the observation of the review team that these roles
are not clearly differentiated from that of the Finance Officer. While there is a strong
focus on financial control evident across Departments, purchasing is decentralised in
many Departments and operational control is dispersed
Data is not consistently categorised: While there are examples of standard spend
categorisation used by organisations, there is no standard spend categorisation currently
in existence that is used across the Irish Public Service. For example the National
Procurement Service (NPS) has developed a high-level categorisation for the sub-set of
State spend that it currently manages, while the Department of Agriculture, Food and the
Marine and local authorities are independently in the process of developing their own
standard categorisation; however these categorisations are not applied consistently and
there is no common language to describe what goods and services are purchased by
the State
Financial accounting is insufficient for procurement analysis: The estimates used
to determine the initial spend baseline were produced as part of the Public Service
budgeting process and while they do provide information on where spend was accrued,
they do not always provide a breakdown of how money was spent that is sufficient for
procurement analysis, for example grants to universities are not broken down into how
the grant was spent
The ability to access and analyse spend data is fundamental to enabling procurement to deliver
savings and enables timely and accurate access to State procurement spend data. This is one
of the key recommendations arising out of this review and will be dealt with in more detail in
Section 4.
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Capacity and Capability Review of Central Procurement Function
The non-procurement addressable spend figure includes approximately 1.3 billion of the total
State spend on drugs, where price is negotiated by Minister of Health, and a further 100 million
spend on bloods, where price is set by the Irish Bloods Transfusion Board. While this spend is
considered to be non-addressable by procurement, it could be addressed through other nonprocurement initiatives. It is a recommendation of this report that this spend be considered for
future cost-savings initiatives.
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Capacity and Capability Review of Central Procurement Function
Of the total 6.9 billion procurement addressable spend, the Health sector alone accounts for
3.1 billion, or 45%, of the total 6.9 procurement spend, with Education and Local Government
accounting for approximately 1.1 billion each, Justice and Defence combined accounting for
647 million and other central government agencies accounting for the remaining 887 million.
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Capacity and Capability Review of Central Procurement Function
These figures are estimates based upon data gathered from a sample of 24 data sources.
There are currently over 4,000 sources of spend data across the Public Service, when the
financial accounting systems within schools are taken into account and gathering data from
these systems is a complex and labour intensive exercise. It was not feasible to extract and
collate data from all these sources in the six week timeframe allocated to the review.
It is the opinion of the review team that the majority of this unclassified spend is likely to be
procurement addressable and could be successfully categorised with further work. It is
recommended that a follow-on exercise should be completed to identify and categorise this
unclassified spend.
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Capacity and Capability Review of Central Procurement Function
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Capacity and Capability Review of Central Procurement Function
This lack of a standard contracts management process across the State impacts the ability to
record and manage contract compliance and manage supply chain risk, including understanding
of how State spend is impacting the national economy and how much is being spent with
SMEs, national companies and multi-nationals.
It was also observed that the State has multiple contracts with the same vendors, often for the
same goods and services. While this was not explored in detail as part of this review, it is highly
probable that prices are not harmonised and multiple prices are being paid for the same good or
service at different locations.
The findings of the spend analysis was used by the review team to estimate the total State
spend that could be addressed by central or sector procurement, and to estimate the range of
potential savings that could be delivered by State spend through procurement.
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Capacity and Capability Review of Central Procurement Function
Central procurement functions are not integrated or aligned to common goals and
targets
NPS lacks the authority to influence senior stakeholders on spend decisions
The Procurement Officer role as currently implemented is focused on financial cost
control but lacks visibility of supplier, price and specification data
Purchasing is devolved in many Departments and operational control is therefore
dispersed resulting in lack of control of demand
2. Central procurement functions lack timely access to accurate spend data that is
required to inform category management decisions:
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Capacity and Capability Review of Central Procurement Function
Today departments and agencies have a focus on financial management but lack
visibility of usage and pricing information to monitor spend from a procurement
perspective
There is no standard definition of a procurement saving or ability to measure and track
benefits
There are no standard procurement metrics to track procurement performance
Procurement Strategy
Sourcing and Category Management
Supplier Relationship Management
Purchase to Pay
Workforce and People
Process and Technology
The framework comprises of a clearly defined capability maturity scale (i.e. from basic to leading
practices) for each dimension of procurement. A structured, Excel-based survey consisting of
144 detailed questions covering each of the six dimensions was completed by 14 buying
organisations.
The results of the surveys were then collated for each sector and then compared to a capability
maturity scale to determine how each agencys procurement capability should be rated.
The project team also conducted interviews with 73 senior procurement staff and procurement
customers from agencies across all sectors.
Interviews were also conducted with a sample of State suppliers and industry groups to provide
an external perspective.
Due to the short project timeframe, the project team could not engage all buying groups within
the Public Service. A sub-set of agencies was selected from across sectors which accounted for
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Capacity and Capability Review of Central Procurement Function
the majority of data gathering. Interviews and surveys were prioritised on a sub-set of agencies
from across sectors who are the main buyers in the State.
Recommendations for capability and capacity developments to enable sustainable savings were
informed by qualitative and quantitative public and private sector benchmarks, along with
leading practices based upon Accentures High Performance Procurement research. These
were developed in consultation with the Department of Public Expenditure and Reform to
ensure that they were aligned to government strategy.
The review also took into consideration procurement operating models in use in other countries,
including Sweden, UK, Denmark, Canada and US, to ensure that any lessons learned by these
governments were incorporated into the final recommendations.
A full account of all data sources and assumptions used in the report can be found in the
Appendices.
National Procurement Service (NPS) was established in 2009 to further develop national
framework agreements to allow public bodies to procure commonly used goods with the
primary objective of ensuring optimum efficiency and value for money in the public
procurement; to provide professional procurement advice to central government and State
agencies; to develop targeted and accredited training and education measures and to
further develop E-Procurement tools. It currently sits within the Office of Public Works under
the aegis of the Department of Public Expenditure and Reform and has 47 staff.
National Public Procurement Policy Unit (NPPPU) was established in 2002 to develop a
National Public Procurement Policy Framework designed to drive the development of
analysis based and target driven Corporate Procurement Plans. The NPPPU is currently
responsible for setting a broad strategic direction for procurement implementation. The unit
has responsibility for national public procurement policy, legislation and construction
procurement reform. Prior to 2009 the NPPPU was responsible for the development of a
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Capacity and Capability Review of Central Procurement Function
The NPPUs role is primarily around the issuance of policy guidelines and circulars with the aim
of ensuring that bodies were informed of their requirements under EU law and also best practice
around putting tenders in place; they do not have spend under management. The C& AG for
example report on the level of compliance with these circulars across the public service. The
unit is also tasked with developing and overseeing the implementation of contracts2 for Public
Works and Construction-Related Services. It does not have any spend under its management.
However, the NPS and CMOD are more directly involved in spend management. The
estimated annual central procurement framework spend is 888 million based upon 2011
figures. Between these groups, there are approximately 50 procurement staff, with 47 of these
staffed within the NPS alone.
Recent changes here allow optimal risk transfer from public bodies to contractors and consultants by costing for
risks as a fixed price lump sum thus giving greater cost certainty at tender stage for capital projects.
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Capacity and Capability Review of Central Procurement Function
As of 2011, the NPS had put in place framework agreements that covered an estimated 434
million, or approximately 6%, of the States procurement spend. Of this 434 million, the actual
usage of NPS frameworks was 180 million, or 40%, of the total spend under frameworks. The
NPS has no role in monitoring compliance and up to very recently bodies were not obliged, or
mandated, to comply to frameworks. The NPS has estimated a total saving of 37 million in
2011 alone, or approximately 9% of total procurement addressable spend through more
competitive pricing and efficiency savings through centralised procurement.
As referred to above, CMOD, amongst other things, is responsible for central ICT procurement
frameworks and, while CMOD does not track spend under its framework agreements, based
upon total ICT State spend in 2011, it is estimated that 454 million is currently spent against
ICT framework agreements or sanction of ICT spend.
There has been some coordinated activity between the NPS and CMOD on ICT consumables,
and the NPS and NPPPU on procurement policy; however the fragmented structure of the
central procurement functions is not optimal to enabling collaboration between these groups.
The commercial contracts function lies within the Chief State Solicitors Office, which is a
constituent element of the Office of the Attorney General. The function has a small team of six
resources and is responsible for the provision of standard terms and conditions for procurement
use in sourcing and contracting with the objective of ensuring compliance to legislation in
respect of EU directive and Irish law. The CSSO has worked with the NPS in the development
of Framework Agreement standard contracts and support materials for end users. The
development of standard terms and conditions is welcomed throughout the procurement
community but there is concern both within the CSSO and the procurement community about
the lack of understanding of the compliance implications, level of awareness and capability to
comply with them and the resulting potential impact of the remedies directive in the event of
non-compliance.
During the review a number of suppliers across categories and sectors were interviewed,
including Swords Medical and Codex Office Products. From a supplier perspective the terms
and conditions are seen as too broad and an attempt to cover all risks with heavy risk burden
being levied on suppliers. The suppliers were also conscious of the risks involved in tendering
for business in the public service with traditionally low levels of contract compliance.
Buyers are broadly welcoming of the guidance and standards but are concerned about the lack
of education and training required to ensure compliance to legislation. The NPS and CSSO
conduct training in standards but this is not co-ordinated and the focus is on fulltime
procurement professionals resulting in a risk of part time procurement professionals, e.g.
primary school board members, not being aware or compliant to legislation.
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Capacity and Capability Review of Central Procurement Function
The procurement organisational structures within sectors are synopsised in the Table 4.1 below:
Sector
Procurement Organisations
Spend
(est.)
Procurement
FTE (est.)
Health
3,093m
83
Local
Government
1,142m
108
Education
1,114m
72
Justice and
Defence
sectors
646m
95
Other Central
Government
887m
66
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Capacity and Capability Review of Central Procurement Function
There are pockets of leading procurement practice in evidence across the Public Service and
the NPS, in particular, has been pro-active in promoting awareness of procurement policies and
compliance amongst staff involved in procurement from across sectors. However practices are
not standardised or applied consistently across agencies, and maturity of procurement
capability also varies significantly across and between agencies.
There are estimated to be at least 536 FTEs who are currently working in procurement across
the Public Service. However, as the number of resources who have procurement as part of their
role is not monitored or recorded by the State, the actual number of resources involved in
procurement is likely to be considerably higher.
For example, the estimate accounts for a total of 72 procurement resources in the Education
sector based upon a tally of procurement resources in the Universities, ITs and VECs. While
the review team could not identify any full-time procurement resources across the 4,034 primary
and secondary schools, the estimate does not take into account the time spent on procurement
activities on a part-time, ad-hoc basis as this information is not available.
Based upon these conservative estimates of procurement headcount, the State currently
spends 12.9m per procurement FTE. This contrasts with the cross-industry median is 18.1m
per FTE and leading is 28.6m.
This is based upon Accentures High Performance Procurement Benchmark that includes public
and private sector organisations. Even with consideration for the decentralised organisation
structure within the Irish Public Service, there is a clear opportunity to reduce the number of
resources involved in non-value adding purchasing activity.
As purchasing is devolved in many Departments and operational control is dispersed resulting
in lack of control of demand, the ability of central procurement functions to deliver savings
through coordinated strategies and initiatives have been hampered by the need to engage with
a large, disparate group of stakeholder with different, and sometimes opposing, requirements.
Although there is a requirement for each Department to have a Procurement Officer, in practice,
this is not always a dedicated role. There is strong focus on financial cost control evident across
sectors, however procurement discipline, such as control over contract compliance and what
money is spent on, is not as rigorously enforced or applied.
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Capacity and Capability Review of Central Procurement Function
Maturity Rating
(Consolidated
Average)
Summary Observations
Procurement
Strategy
Sourcing and
Category
Management
Contract and
Supplier
Management
Requisition to
Pay Process
Workforce and
Organisation
Procurement
Technology
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Capacity and Capability Review of Central Procurement Function
While interviews and surveys were conducted with stakeholders from across the central and
sector procurement functions, the assessment of procurement capability has been provided as
a consolidated average for the Public Service. As the purpose of the review was to identify
substantial savings realisable through central procurement, detailed assessment of procurement
capability by sector have not been developed.
One of the core findings of the review is that there is wide variation in capability and practices
across sectors. Examples of good practices or variations in practices have been highlighted
were applicable in an effort to underline the impact of this fragmentation on the ability of central
procurement functions to realise these savings.
Table 4.3 below provides a high-level breakdown of capability assessment summary findings by
sector. However, it is important to note that even within sectors there wide variations in practice
and capability. For example within Education alone, Universities do have mature, central
procurement capabilities while schools have highly decentralised procurement organisation and
limited capability.
Each of the components as outlined in Table 4.3 above are discussed briefly and the findings
outlined as the following sections:
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Capacity and Capability Review of Central Procurement Function
How objectives are set and how procurement plan to deliver them
What policies and procedures are in place to support delivery
How central procurement is aligned and planned with sectors
What metrics procurement is measured on
How procurement measures spend, savings and compliance
Silo mentality within sectors and missed opportunities to benefit from greater crosssector coordination on sourcing initiatives
Duplication of effort between procurement groups, for example there are several
initiatives on-going independently to standardise spend categorisations
Ineffective management of trade-offs between conflicting objectives between sectors,
such as trade-offs between spend aggregation
At a sector level, there are pockets of collaboration between purchasing units within and across
sectors around common areas of spend, however this tends to be ad-hoc and opportunistic.
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Capacity and Capability Review of Central Procurement Function
For example, while not a Policy Unit in itself, the NPS have been proactive in building
awareness of procurement guidelines and EU directives across State purchasing groups and, in
a recent survey of procurement staff conducted by the NPS, over 52% felt that they had good,
or excellent, knowledge of EU Procurement Directives.
However, the survey also identified that 22% also responded to having limited or no knowledge
of directives and over 31% had limited or no knowledge of EU Remedies Directives. The
penetration of EU procurement guidelines training has not been as prevalent in organisations
where accountability of procurement is unclear, such as within primary and secondary schools
under the Department of Education and Skills. Also greater awareness of compliance
requirements has coincided with increased uncertainty amongst some procurement resources,
especially those engaged in procurement on a part-time basis, which is slowing down the
implementation of tendering processes.
The implications of EU procurement directives and compliance to Irish competition law and the
remedies directive have placed a large compliance and administrative burden on procurement
within the Public Service. The NPPPU provide general guidance and instructions to the public
service through circulars that issue to accounting officers. Compliance with these guidelines is
audited both internally by the public body concerned and by the Local Government Audit
Service or by the Comptroller and Auditor General. There is a lack of a single owner across the
NPPPU, CSSO, NPS and CMOD procurement activity and legal support to define and
implement a coherent and comprehensive legal and procurement policy, framework and
guidelines to ensure compliance across Public Service procurement. The risk of noncompliance due to lack of awareness is greater outside the permanent procurement resources.
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Capacity and Capability Review of Central Procurement Function
In recent years, the challenging economic and fiscal environment has forced the State to put
more focus on procurement savings. Whereas procurement savings where not systematically
tracked and reported in the past, purchasing units are starting to report savings. There is a
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requirement for a standard measurement definition to allow confidence in savings reported and
an expectation that central procurement functions should provide guidance on these standards.
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stakeholders that is manually kept up to date and is used for communications purposes. As
sectors and agencies change procurement staff without notifying NPS, the list of NPS
stakeholders can frequently become out of date resulting in communications not reaching the
required recipient.
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On a positive note, the National Procurement Service has been proactive in enabling more
transparent and open communication with suppliers through the procurement.ie web portal
and use of supplier engagement forums. It has also run initiatives to educate suppliers in the
public tendering process and provide SMEs with the skills to compete in public tenders to the
mutual benefit of both the State and SME sector.
Although more than 67% of respondents to a recent NPS survey of State suppliers indicated
that they had limited or no knowledge of EU Procurement Directive and 75% indicated limited
or no knowledge of EU Remedies Directive. This highlights the risk of non compliance across
large numbers of suppliers and contracts in the Public Service.
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Purchase Order
Non Purchase Order
Catalogue Order
Non Catalogue Order
Purchasing Card Order
Cheque Requisition
One Time Vendor Expenditure
The review found that there is no State-wide buying channel strategy for how goods and
services should be bought across the State for all spend. While central procurement functions
are responsible for establishing central framework agreements, it is the local contracting
authorities that are responsible for putting in place the contracts under these frameworks and for
enabling their local end-users to order or call off of these contracts. There are multiple
fragmented, non-standard processes and supporting systems across sectors that enable
ordering of goods and services by end-users, including paper-based purchase orders,
buying portals, p-cards and e-catalogues. This causes additional internal order administration
and external supplier administration in dealing with difference departments and agencies
supplying the same goods or services.
For example p-cards are available to some buyers within local government for low value, ad-hoc
purchases, while schools are exploring the use of a PayPal-enabled solution to manage low
value, spot buys.
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While this does not prevent enforcement of compliance through central reporting and
establishment of clear sector level accountability to deliver compliance, it does mean that the
NPS does not have the ability to control demand within sectors. This is one of the key levers
that the Public Service can use to deliver savings from its third party spend.
CMOD are engaged in the sanction of ICT spend and have a more proactive role currently in
supporting end users in the development of appropriate technical specifications. In this role
CMOD have the opportunity to be involved at an earlier stage in the procurement process and
can positively influence the demand/specification through the sanctioning of spend from existing
framework contracts.
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Are there standard roles and responsibilities across State, sector and department
procurement
Is there a capability assessment and personal development plan in place
Are staff managed by objectives
Is capacity sized and optimised against spend
Are there gaps in the organisations capability
c. Finding: Clear career path for procurement within the Public Service is not
available
In general, procurement is still perceived as an area which offers limited career opportunities
and development prospects. For example anecdotal evidence captured through interviews
referred to resources within the civil service been encouraged to continue their career outside of
procurement having recently finished a Masters qualification in Procurement.
Relatedly only 12% of procurement resources identify themselves as having a full-time role in
procurement, with 43% indicating that procurement formed only a minor part of their role within
the organisation.
If the State is to realise the substantial savings that it hopes to deliver from its spend, then it
will need to invest in skills development, define clear career paths and position procurement as
an attractive place to work.
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What standard tools are in place for RFI, RFT, Supplier Addition, Requisition and P/O,
One Time Vendor
What IT Procurement Strategy is in place to manage the end to end process and provide
visibility and control of spend
What are the delegation of authorities, authority to contract, approval limits
What tools are in place for sourcing, contracting, supplier performance, buying, eprocurement, receipting and payment
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b. Finding: Central eSourcing systems are used and further upgrades are in
progress
The e-Tenders sourcing solution, which is maintained by the NPS, is being used by the State to
manage above threshold tenders in compliance with EU procurement guidelines. Local
authorities have also rolled-out their LA Quotes tool, developed by Kerry County Council, to
support requests for quotations nationally.
The current version of eTenders only supports basic tendering activities, including tender
notification, communication and awarding. The system is being upgraded and future versions
will support tender appraisal, e-auctions and improved communications management. While not
in place at the time of writing, the eTenders upgrade is also expected to include integrated
contract management and supplier relationship management functionality.
However it is also worth noting that there is still a substantial number of tenders that do not go
through eTenders. Over 30% of respondents to a recent NPS survey of procurement staff stated
that 50% or more of the contracts they put out to tender in the last 3 years were not advertised
through eTenders.
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d. Finding: Basic spend analytics tools are only in use within central
procurement functions
The large number of fragmented systems has also been one of the main barriers to central
visibility of accurate, regular and timely State spend data. Significant manual effort is
currently required to extract spend data from across the States financial systems, cleanse and
normalise the data so that it can usefully be analysed.
Access to quality spend data and spend analytical tools, which helps procurement understand
what is being bought, who is buying it and who they are buying from, is critical to informing
procurement strategy and setting realistic targets. The NPS are currently using Microsoft Excel
and Suprem to support basic spend analytics.
Other procurement technology solutions, such as p-cards and Achilles, which is used for vetting
perspective suppliers, are also in use in pockets across the State.
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5 Recommendations
5.1 Introduction
The review of the central procurement function has identified findings that have been
consolidated in to a number of common themes across Public Service procurement that need to
be addressed in order to ensure and effective and sustainable procurement organisation:
The above themes are not new to Public Service procurement and have been identified in
previous reports, including the PWC Strategy for the implementation of e-Procurement in the
Public Service report in 2001. Actions have been taken including the establishment of the
National Procurement Service in 2009 but we have not seen a significant impact on the core
underlying themes. In order to ensure the successful implementation of recommendations, we
need to address the core issue that is Why has the central procurement function not been
successful in implementing procurement policy, frameworks and savings ?
The report has identified annualised potential savings of between 249m to 637m that can be
achieved through a centre led strategic cost reduction programme, but this will require
significant investment in the capability and capacity of procurement to deliver the benefit.
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The review conducted a spend analysis and validation of spend using existing financial estimate
and procurement spend data together with supplementary contract, pricing, invoicing and
supplier data to validate the high level spend categories. UNSPSC, NATO NSC and e-Class
Medical Categorisation standards were combined to develop a single combined categorisation
of spend that was validated with individual departments and agencies for accuracy. The review
identified sixteen (16) high level categories of common goods and services that are purchased
across the public service. Unclassified spend is not deemed to be a standard category.
We recommend a more detailed in depth spend analysis is conducted to provide further
granularity given that this was a rapid six week review with multiple data sources.
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Following the above high level category assessment exercise it has been estimated that
procurement addressable spend of 4.3b is suitable to be led from the centre. The balance of
2.4b is deemed not suitable to be centre led and is recommended to be managed within
sectors.
The categories deemed suitable to be centre led are contained in the Table 5.2 below that
shows the level of spend within each category across the sectors.
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The common categories identified are used by all Departments with many buyers and are
suitable for a centre led procurement approach.
Table 5.3 below describes the categories not deemed suitable to be managed from the centre
and to remain managed within Sectors or Departments.
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order to validate the level of co-operation, potential ease of implementation and adoption of
procurement initiatives.
Following completion of this exercise the project was able to identify saving ranges that are
typically achieved across indirect categories in the Public Service.
In order to estimate savings the 6.9b addressable spend figure was reduced by removing
476m of unclassified spend. The figure was further reduced by removing 170m from Travel
within the Education sector for the school bus scheme that is deemed already contracted with
little opportunity for further cost reduction. The revised figure of 6.2b is then considered to be
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80% addressable, from a savings calculation perspective, due to 20% of spend being
considered highly fragmented spend with small suppliers across all categories and sectors. The
revised figure of 4.98b is used as the basis for savings calculation.
Savings ranges have been recommended based upon Accentures prior experience with public
sector strategic sourcing engagements with similar spend and supplier fragmentation.
Supporting this is our global category and marketplace knowledge that provides insight into how
additional benefits can be derived across common categories.
Our calculations have factored in the geographical spread of spend across the country and the
current maturity level of buying across sectors. In addition we have factored in the current
frameworks, compliance and savings achieved to date.
For each category we have estimated a specific low, medium and high savings range that could
be achieved through a combination action that we have described as of demand and supply
levers. The low range figure is based upon the achievement of 60% contract compliance to the
80% addressable spend figure. The mid range and high range figures are based upon the
addition of demand side levels and increase contract compliance to 80% and 90% of the 80%
addressable spend target. Typically procurement organisations can achieve up to 60%
compliance to frameworks through structured planning and requirements gathering followed by
strategic sourcing and contracting. However, there still remains significant leakage to local
alternative sources. With a focus on contract compliance and proactive demand challenge
internally we typically expect to deliver increased savings ranges up to 80% to 90% compliance.
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needed? By standardising on the specification the Public Service will be able to leverage their
spend by increasing buying power. The other area within specification is to lower the average
specification. Again, using stationery is a leading branded ballpoint pen required or will a
generic pen do the job just as well. Challenging the specification in both these ways will reduce
the cost to serve.
4. Price Finally, the total cost from the other three aspects has been addressed. This is
achieved through consolidation of suppliers and competitive negotiation. Leveraging National
Frameworks and volume through competitive tendering will achieve substantial results for
common categories in this area.
In summary total cost of ownership is addressed by:
Buying Better
Buying Smarter
Buying Less
To summarise the opportunities for savings through supply and demand levers we have
compiled an opportunities list highlighting the levers that can be used in each category.
Table 5.5, Breakdown of Category Savings Levers, highlights the demand and supply levers for
each category of spend identified in the review. The four levers that can be used are Price,
Usage, Risk and Process.
Each category has specific internal and external market place dynamics and depending upon
the category will dictate greater or lesser use of the four levers.
For example, Print & Stationery can be influenced by Price and Usage. Price refers to the
strategic sourcing and price reduction that can be achieved through tendering. Usage refers to
the internal ability to reduce the usage of products through proactive demand challenge and
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The above sourcing wave is a high level view based upon a high level six week spend
assessment. It will require a detail spend assessment at a more granular level with a detailed
integration and alignment plan with sectors and Departments before a final plan is executed.
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Addressable spend but not by procurement is a classification we have developed where the
spend is a negotiable good or service but managed outside of procurements remit at present.
The largest element identified in this category is within the Health Sector where the Department
of Health engages in negotiation directly with the market place or where ministerial/legislative
intervention dictates the market pricing. In these cases we deem the spend to be negotiable but
not by procurement.
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2) Blood Supply The current blood supply in Ireland is managed and controlled by the
Blood Transfusion Service who set the price for blood supply with the Department of
Health. To influence this price we recommend competitive price negotiation against
international sources and the adoption of cost plus model
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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.
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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.
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The hybrid decentralised model is currently in operation and lacks ability to deliver against
common categories.
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Category managers should be appointed for the key categories outlined below and provide
leadership and direction within their category.
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.
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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.
Within health there is substantial opportunity to reduce total cost to serve but we
recognise the capacity constraints within the current procurement function
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We recommend that sector procurement functions retain category ownership for non common
categories and that they are responsible for category strategy, sourcing strategy, sector
sourcing and framework implementation against policy.
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1. Vision and Purpose A clear shared vision for procurement and the objectives of the
governance model within the context of the broader Public Service reform
2. Sponsorship and Mandate Clearly defined executive sponsorship at ministerial and
Secretaries General level which champions and endorses the governance and authority
3. Membership A procurement board representing leadership across the Public Service with
defined roles
4. Process A set of processes that enable the initiation, review and approval of category
specific initiatives across all sectors and measures progress
5. Structure The category councils and relationships with Departmental agencies and board,
roles and responsibilities in order to deliver the objectives and targets agreed at the
procurement council
6. Sustainability The methods followed to embed the councils into the Public Service and
enable the on-going delivery and management of spend
We recommend the NPO is sponsored by the Minister of State with responsibility for
Procurement and the Secretary General of the Department of Public Expenditure and Reform.
We recommend the creation of a procurement board to govern the overall sustainable
procurement programme, chaired by the sponsor with permanent representatives from Assistant
Secretaries General from each sector with responsibility for procurement. The CPO is also a
permanent member.
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Category Councils should be setup for each major category of spend and be responsible for the
planning, target setting and alignment of spend across sectors. Category Councils are led by a
member of the Procurement Board with the NPO Category Manager providing the category
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insight, strategy and savings target. The role of the council is to ensure the planning, alignment
and implementation across the sectors.
The Category Managers role is to lead the cross sector procurement team in the
development and execution of category sourcing strategy. The team consists of the
procurement officers across sectors and are responsible for the category plan, project
requirements gathering, supplier selection, negotiation, contract implementation and
savings recording
The role of the procurement council is to act as the leadership team for procurement in
the Public Service, ensuring strategy, objectives and targets agreed by the Procurement
Board are operationalized and that there is a management operation plan with joint
accountability and responsibility. The procurement council should be responsible for
ensuring policy, procedures, systems, resources and service levels are effective and
deliver against current and future organisational needs
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consisting of procurement officers from each sector procurement team with responsibility for
spend in that category within their sector.
We recommend the development of category managers within the NPO and the
commencement of detailed category strategy plans, industry and market analysis in order to
define the sourcing projects and savings plans.
For sector specific categories we have identified the categories as either being suitable for cooperation or local requirements.
For categories that are suitable to co-operation we recommend the category being led by the
largest buyer with a national framework being implemented by the category team consisting of
the relevant Departmental buyers. The reason for the largest buyer being recommended is that
they will have the greatest leverage either in volume or value and is a more successful model
that is in operation in an informal way today across sectors where co-operative buying is
conducted. We recommend national frameworks be used for this co-operative procurement in
order to allow State wide access to the category if required. An example of this category is
within Medical, where laboratory supplies, testing and chemicals are used within the health
sector, Universities, Garda and Prisons and Agriculture. HSE procurement would lead this
category from a procurement perspective with support and input from procurement in the other
Departments. The technical category lead would be provided by the most knowledgeable area
with input from all other relevant departments following the Category Council model already
described in Figure 5.10.
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We recommend that all suppliers and categories, whether centre or sector led, are segmented
with common categories managed from the NPO and proprietary categories managed within the
sectors.
Typically a segmentation of suppliers will result in a pareto type distribution of spend and
suppliers with 80% of spend being with the top 20% of suppliers. Strategic procurement
resources should be focused on spending most of their time and effort with the largest areas of
spend and the key suppliers within those. This will enable the development of more strategic
supplier relationships, development of good will and deep product and supplier insight that
provides a more competitive framework for tendering. We recommend that Tier 1(Partners) and
2 (Strategic) suppliers, identified through segmentation, are managed from the central category
management team with category managers appointed by supplier. It is not practical for senior
strategic procurement resources to manage the smaller tiers of spend as the volume of
suppliers grows exponentially and will require tactical and operational type support from
procurement within sectors and local departments.
We recommend that the NPO strategic sourcing and category management own the strategic
supplier relationship for common categories across all sectors for Tier 1 and Tier 2 suppliers.
We recommend that a structured strategic supplier management process is developed,
including development of standard supplier performance metrics for contract delivery, project
delivery, quality, innovation and savings. The model should outline the different relationship
levels, activities, meeting format and frequencies.
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no current industry standards for spend categorisation are in use across the Public
Service
no process or standard tools to gather spend data across sectors from the financial,
procurement and inventory systems in operation
no master data management strategy for procurement data resulting in our review
having to gather data manually from Departments and to build a categorisation to enable
accurate visibility and clarity of spend categories
We recommend the adoption of industry standards for spend data across the Public Service.
For health care we recommend the adoption of the UK NHS e-class categorisation or similar
classification that is in operation across Europe for common categories of medical supplies. For
defence we recommend the adoption of the NATO Supply Classification (NSC) that provides an
industry categorisation for common military and defence materials. For the remaining common
categories of goods and services we recommend the adoption of the United Nations Standard
Products and Services Codes (UNSPSC) as it is the global standard for common goods and
services across multiple sectors and industries.
In order to achieve accurate spend visibility we recommend the adoption of the above industry
standards and the creation of a master data management team to setup and maintain the
industry coding and mapping of data sets across the public service.
We recommend the acquisition of a system agnostic master data management tool that will
allow the mass data extraction, mapping and validation across the 4,200+ systems that we
identified during our review.
The first priority is to develop a baseline technical architecture allowing the development of a
technology interface to extract data from all financial and procurement systems on an
automated basis. We recommend the engagement of CMOD technical architecture skills to
baseline the landscape and to develop the requirements for investing in the technology.
The next recommendation is to provide supplier data feeds for framework agreements to enrich
the internal data and provide a holistic picture of spend, showing actual spend and category and
combining this with contract and non -contract data from framework providers. The Initial priority
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should be to focus on Tier 1 and 2 suppliers identified through the segmentation exercise. This
strategy will avoid the required procure to pay detail integration and upgrading to show contract
data and remove the complete supplier dependency for data. The combination of these two data
sets will provide the necessary data sets to build a spend cube for spend analytics.
In the medium term we recommend considering developing standard procure to pay processes
and tools within the shared services environment, building upon the success of the central
government financial shared services. By using this approach procurement can develop
standard sourcing and buying processes, enabling the increase of contract compliance. This
activity should be a second priority to establishing governance, spend visibility and embedding
strategic cost reduction programmes. Developing a common vision and process for managing
these activities will allow a phased adoption of a common platform for purchasing across the
Public Service.
5.9 Technology
Our findings across procurement have identified a need for a strategy and ownership of all
procurement technology across the Public Service.
Our initial recommendation is to appoint a technology procurement owner responsible for base
lining existing procurement systems and for the development of a procurement technology
roadmap across sectors.
We recommend initial prioritisation of accurate data capture and categorisation. This will allow
strategic cost programmes to capture the required spend visibility to make informed decisions
on priority spend projects. This approach will avoid large scale ERP and local financial
accounting system replacements.
Our recommendation supports the best practice approach taken in both private and Public
Service organisations where the return on investment and time to deliver large scale p2p
process reengineering is too high.
We recommend immediate investment in a spend analytics solution to develop a single and
accurate procurement addressable spend picture. The largest single dependency on
procurement is spend visibility and it is imperative that immediate steps are taken to maintain
the manual spend analysis developed from the review and to develop the detailed functionality
and technical specifications for a supplier solution to be acquired.
We recommend a spend analytics project team is created from across sectors, led by a senior
procurement manager from the NPS and supported by a senior manager from each sector and
CMOD. The team should be tasked with developing business requirements within six weeks
and conducting a request for information (RFI) in the marketplace, leading to defined
requirements for a full tender and solution provision within six months.
We recommend that the NPO owns and maintains the spend analytics solution and that it is
implemented across all sectors, providing the necessary detailed information to allow national,
sector and local Departments analyse and inform their procurement decision making. The NPO
should provide the on-going spend analytics service to all sectors.
Our findings have identified a number of independent local spend and contract databases,
ranging from simple spreadsheets to more structured contract listings from SAP and Oracle
ERP systems. We have also identified core usage databases including the SEI database on
energy which is a key database for developing spend and usage data for energy contracting.
We recommend the development and implementation of a single supplier and contract database
across the Public Service. Initial priority should be given to on-boarding Tier 1 and 2 suppliers
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and contracts, including all existing national, sector and Departmental frameworks. The
database should be used to develop the initial sourcing project pipeline and should be owned
and maintained by the NPO procurement operations function who provide a service to sectors
and Departments.
In order to conduct strategic sourcing and the implementation of framework agreements there is
a need to provide a single and consistent process and technology for the execution of sourcing
projects.
Procurement across all sectors needs a standard tool to initiate and deliver sourcing and
contracting projects. We recommend the NPO set up a project team, again consisting of CMOD
and sector procurement managers to develop standard business requirements and to engage
the market in an initial Request for Information (RFI) in order to develop final specifications for a
tender for the provision of a solution.
From our experience the key enablers to tackling these issues are as follows:
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o A continuous update of worked examples across all categories and all savings
types and definitions
Integration of relevant finance processes into the savings methodology e.g. budget
planning process
The ability to report the various stages of savings including:
o Forecast
o Agreed/enabled
o Delivered
The ability to report savings at different levels across the Public Service, including:
o National Frameworks
o Sector Frameworks
o Local Department Contracts
In order to have a clear understanding of the sourcing performance, the saving definition,
measurement and tracking processes need definition and adoption across all sectors.
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Definitions
The following are types or categories of benefits that are included in savings calculation:
1. Price includes benefits from improvements in unit price, market basket price, discounts,
indices or other pricing arrangements based on improvement in negotiated pricing
associated with the award scenario recommended by the Project team. Savings due to price
reduction are calculated by multiplying the anticipated volume for the contract term by the
change in unit price under the approved award scenario
2. Usage includes projected benefits from standardisation, product specification
improvement, demand management, and other operational improvements identified (e.g.
yield improvements, carrying costs, shrinkage, damage, spoilage, reduced inventory levels,
cost of funds, transportation costs)
3. Process includes additional benefits from process improvements directly associated with
a project team effort. This savings result is generally calculated by subtracting the new or
improved process costs identified from the relevant historical process costs. A process
saving will occur where a reduction in FTE and an accompanying implementation plan to
manage that reduction has been put in place. For example, a process saving would not be
counted where 30 minutes of an FTEs time is saved each week, but will be counted where
there is potential to realise a saving
4. Other includes any other measurable benefits that do not fall within the Price, Usage or
Process categories but nevertheless impact Client benefits. Examples might include
preventions, recoveries and working capital improvements (i.e. payment terms (subject to
the Clients prompt payment policy), inventory reductions, etc.)
5. Cost Avoidance includes benefits related to Spot Buys and the rejection of
unsubstantiated price increase requests from suppliers that otherwise would have been
accepted
We recommend that savings are tracked across each stage in the sourcing process to provide a
consistent and accurate benefit tracking. This following diagram describes our recommended
approach:
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We recommend the NPO develops standards and engages the marketplace for the provision of
a savings database.
Our experience in dealing with public and private sector procurement organisations has seen
the initial establishment of savings definitions together with savings targets by category on an
annual basis. Initially organisations implement a manual recoding and reconciliation process
with the gradual automation of the process and potential incorporation of the savings with the
strategic sourcing, contracting and reporting module of a dedicated
We recommend the initial prioritisation of savings definition and initial manual reporting within
the NPO. With the introduction of automated spend visibility and reporting we recommend the
development of savings reporting that combines savings project targets, supplier contract data
and transactional order information.
In addition to the NPO recording savings we recommend the implementation of mandatory
monthly key figure reporting from Secretaries General to the CPO. This should contain key data
including total prior month spend, total prior month framework spend and total prior month
spend with SMEs. This will allow the NPO to provide a simple consolidated monthly spend and
ensure support for Frameworks across sectors.
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6 Implementation Roadmap
The procurement review has identified substantial savings that can be achieved through a
structured approach to cost reduction, including demand management, strategic sourcing and
on-going contract and supplier performance and compliance.
We have detailed our findings and recommendations on the current capability and capacity of
procurement and recommended the short, medium and long term improvements required in
order to deliver and sustain benefits.
It is important to recognise that not all benefits can be delivered in the short term and that
parallel capability development will be required while delivery of sourcing and savings is in
progress.
Our suggested implementation roadmap is built upon the key principles of addressing
immediate opportunities while developing the building blocks of people, process and technology
to ensure sustainable progress.
The findings and recommendations within this report are based upon a rapid review of
procurement and it is important to highlight that a detail planning and design project is required
in order to develop the detail implementation plans and ensure alignment and understanding of
dependencies.
Our suggested implementation roadmap is phased as follows:
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6.1 Phase 1
This phase should focus on establishing the key pre-requisites to enable the start of strategic
savings projects. We recommend the prioritisation of the NPO organisation and governance
model to drive implementation, detailed spend analysis and project planning. The key activities
to be completed during this phase are detailed below:
We recommend the establishment of a project team with separate work streams for NPO
organisational design, governance model and strategic sourcing planning.
The organisational design stream will see the development of the roles and responsibilities
within the NPO organisation, the assessment of current and future capabilities and transition
plans to support the migration from the current to future state.
The governance model stream will see the development of the procurement board, category
councils, procurement council and category team structures, roles and responsibilities and
operational agendas.
The strategic sourcing planning stream will see the completion of detail spend analysis across
sectors and the integration planning and dependency planning for strategic sourcing projects. It
will also see the validation and confirmation of specific projects and savings targets.
6.2 Phase 2
During this phase the programme will commence delivery of the strategic sourcing waves. The
strategic sourcing waves will run over a number of fiscal years, dependent upon the internal
capacity and business change capability.
In parallel to the sourcing waves we would anticipate the development of system based spend
analytics and the development of procurement capability against identified needs in the design
phase. We also recommend the development of the technology roadmap covering e-sourcing,
spend analytics, e-procurement, contract and supplier databases, savings databases and
support systems.
A key activity in this phase is the development and rollout of the procurement category councils
where cross sector leadership and procurement establish the forums for tracking category
policy, sourcing and savings implementation. The typical deliverables from this phase are:
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The initial sourcing wave will take approximately six months to complete the sourcing and
contracting with implementation of the first initiatives commencing towards the end of this
period.
To support the completion of this activity and to manage the implementation and subsequent
sourcing waves we recommend the on-going support of the PMO function and the specific
Strategic Sourcing project support team. We would anticipate this team continuing through the
sourcing waves, supporting the category council establishment, policy creation, governance
execution and implementation tracking across sectors. Our recommendation is that this support
involves dedicated category specialists for each sourcing wave to ensure maximum value
targeting and delivery. The category subject matter expertise would supplement the NPO during
transition where there may be capability gaps. This level of support would be anticipated to
continue during the entire programme lifecycle.
6.3 Phase 3
In parallel to the rollout of sourcing waves, the procurement capability maturity will happen
through the development and implementation of procurement operations, including adhoc
tactical and operational buying support, helpdesk functionality, operational reporting and
compliance and geographical shared services across sectors.
Our recommendation is to focus on delivering the initial strategic sourcing for common
categories and sector specific initiatives with the support of governance model and operating
procedures. Following completion of this we recommend the focus moving to tactical and
operational performance through the establishment of common support services.
We recommend the engagement of experienced implementation resources in the development
and rollout of the model. This activity will require operational purchasing, shared services and
lean process skillsets.
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Appendix
1 Categories
The following Table indicates the categories that addressable spend was mapped to.
Spend Category
Mapped To
Construction
Architect
Civil
Electrical
Materials
Mechanical
Other
Quantity Surveying
Defence
Aircraft
Aircraft Maintenance
Equipment
Equipment Maintenance
Naval Vessels
Ordinance Equipment
Other
Vehicle Maintenance
Vehicles
Vessels Maintenance
Building Maintenance
Catering
Cleaning
Couriers
Document Management
Grows
Health and Safety
Laundry
Other
Papers and Periodicals
Postage
Rental
Security
Waste
Water
Uniforms/Clothing
Sports Equipment
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Farming
Livestock
Consumables
Equipment
Other
Services
Supplies
Food
Veterinary
Fleet
Fuel
General Vehicles
Maintenance
Other
Rental
Specialised Vehicles
HR
EAP
Health and Safety
Other
Pension
Recruitment
Temporary Staff / Contractors
Training
ICT
Hardware
Other
Services
Software
Telecoms - Data
Telecoms - Equipment
Telecoms - Mobile
Telecoms - Voice
Managed Service
Outsource
Marketing
Advertising
Creative Media
Other
Promotional Events
Research
Medical
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Medical Supplies
Other
X Ray / Imaging
Office Equipment
Copiers
Furniture
Multifunctional Devices
Office Equipment
Other
Plant
Equipment
Equipment Hire
Maintenance
Other
Plant
Plant Hire
IT Consumables
IT Peripherals
Marketing Printing
Office Printing
Office Supplies
Other
Production Printing
Professional Service
Advisory
Audit
Financial / Bank
Health and Safety
Insurance
Legal
Other
Subscriptions
Travel
Agents
Air
Car Hire
Hotel
Meetings Incentives Conferences and Events
Other
Taxi/Bus Hire
Train
Training
Unclassified
Unclassified
Utilities
Electricity
Fuels
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Gas
General
Utilities
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2 Data Sources
The following Table indicates the sources of the data used in this report
Sector
Health
Data Sources
Education
Local Government
Justice
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Defence
Central Procurement
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Health
Local
Government
Education
Central
Government
Departments of
Justice and
Defence
Organisation
Stakeholder Type
NPS
Procurement
NPPPU
Customer/Procurement
NPPPU
Procurement
Health
Procurement
HSPG
Procurement
County/City/Town
Councils
VEC
Procurement
Customer
Universities/Institute's
Procurement
Secondary Schools
Customer/Procurement
Primary Schools
Customer/Procurement
Community Schools
Customer/Procurement
Attorney General's
Office
CSSO
Customer
Revenue Commisioners
Customer/Procurement
Dept. of Social
Protection
Dept. of Transport
Customer
Dept. of Agriculture
Procurement
Enterprise Ireland
Customer/Procurement
SEAI
Customer
CMOD
Customer/Procurement
Customer
An Garda Siochana
Procurement
An Garda Siochana
Customer/Procurement
Procurement
Procurement
Procurement
Customer/Procurement
Customer
Customer
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Suppliers/External
Bodies
Dept. of Defence
Procurement
GS1
Supplier
IBEC
Codex
Supplier
IMSTA
Swords Medical
Supplier
Table A.3.1: List of Interviewees
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Areas of focus
1. Procurement
Strategy
What your objectives are and how you plan to deliver them
What policies and procedures you have to support your delivery
How you align and plan with sectors
What metrics you are measured on
How you measure spend, savings and compliance
2. Sourcing and
Category
Management
3. Requisition to Pay
4. Supplier
Relationship
Management
5. Workforce and
Organisation
Are there standard roles and responsibilities across State, sector and dept
procurement
Is there a capability assessment and personal development plan in place
Are staff managed by objectives
Is capacity sized and optimised against spend
Are there gaps in the organisations capability
6. Process and
Technology
What standard processes are in place for RFI, RFT, Supplier Addition,
Requisition and P/O, One Time Vendor
What IT Procurement Strategy is in place to manage the end to end
process and provide visibility and control of spend
What are the delegation of authorities, authority to contract, approval limits
What tools are in place for sourcing, contracting, supplier performance,
buying, e-procurement, receipting and payment
Table A.4.1: Accenture High Performance Procurement Model
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5 Organisational Data
TOTAL
Health
Local
Government
Education
Justice &
Defence
Central
Government
Central
Procurement
TOTAL
148
108
72
94
66
47
535
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6 Supplier Data
Department
Sub Sector
Health
HSE
Education
All
Local Government
Not applicable
9,000
Justice
Defence
4,400
Garda
4,200
Prisons
2,300
Courts
1,100
Central Government
Suppliers
75,000
100,000
National Museum
900
Property Registration
300
2,300
12,500
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Referenced Materials
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Irish Prison Service - List of Contracts For The Supply Of Goods And Service With A
Value Over 100,00
IVEA - "Initiatives January - December 2011: Report and Evaluation"
Key Responsibilities of NPS Staff
List - Stationary Contacts by Department and Associated State Agencies
List - Top 30 Supplier Contacts by Department and Associated State Agencies
Local Government Efficiency Review Implementation Group Report to the Minister for
the Environment, Community and Local Government - March 2012
NPS - Expenditure/Purchasing Lines NPS Lot 1 Office Supplies 2011
NPS - Live Contracts and Frameworks 2012
NPS - Organisational Chart
NPS - List of Supplier and Buyer Education Events Aug 2009 to Nov 2011
Shared Services Invoice extract
The National Public procurement Service - "Cost Savings for Schools" Oct 2011
Top 30 Spend in 2008 - Sectoral Breakdown - Status at 19 January 2010
Top 30 Spend in 2009 - Sectoral Breakdown
Report - Procurement Type subheads and top suppliers 2011
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8 Acronyms
Acronym
Definition
ACCS
CCMA
CMOD
CPO
CPSMA
CSSO
DAFM
D/PER
ERP
FTE
HPP
HPSG
HSE
IBEC
ICT
IMSTA
IVEA
JMB
LGMA
LGER
NLAPG
NPPPU
NPS
OPW
P2P
Procure to Pay
PEPPOL
PMO
RFI
RFP
RFQ
RFT
SEAI
SME
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UNSPSC
VEC
VFM