capability and capacity review of central procurement function

7/25/2019 Capability and Capacity Review of Central Procurement Function

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Capacity and Capability Review of Central Procurement Function



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DRAFT



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Table of Contents

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Executive Summary .............................................................................................................. 6

1.1 Approach to the Review ................................................................................................. 6

1.2 Spend Analysis Findings ................................................................................................ 7

1.3 Capability and Capacity Assessment Findings ............................................................... 9

1.4 Recommended Strategy ............................................................................................... 11

1.5 Recommended Procurement Operating Model ............................................................. 11

2 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

3 Procurement Spend Analysis Findings ................................................................................... 18

3.1 Spend Analysis Approach ............................................................................................ 18

3.2 Spend Analysis Challenges .......................................................................................... 19

3.3 State Spend Profile ...................................................................................................... 20

4 Capability and Capacity Assessment Findings .................................................................... 25

4.1 Overview ...................................................................................................................... 25

4.2 Capability Assessment Approach ................................................................................. 26

4.3 Procurement Organisation ............................................................................................ 27

4.4 Detailed Capability Assessment Findings ..................................................................... 32

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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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5.10 Savings Definition and Measurement ......................................................................... 77

5.11 Savings Calculation Methodology ............................................................................... 78

5.12 People and Workforce ................................................................................................ 80

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Implementation Roadmap ................................................................................................... 82

6.1 Phase 1 ........................................................................................................................ 83

6.2 Phase 2 ........................................................................................................................ 83

6.3 Phase 3 ........................................................................................................................ 84

Appendix ................................................................................................................................... 85

1 Categories ................................................................................................................... 85

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Data Sources .............................................................................................................. 89

3 List of Interviewed/Surveyed Stakeholders .................................................................. 92

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Capability Assessment – Framework for Analysis ....................................................... 94

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Organisational Data ..................................................................................................... 95

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Supplier Data .............................................................................................................. 96

7 Referenced Materials .................................................................................................. 97

8 Acronyms .................................................................................................................... 99



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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 asone of 14 Public Service reform initiatives announced by the Minister for Public Expenditure andReform in November 2011.

The Department of Public Expenditure and Reform (D/PER) engaged Accenture following apublic procurement process to:

Identify the actions required to realise substantial savings in public procurement in theshort 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 setsout the key findings and recommendations.

1.1 Approach to the Review

Accenture used a structured approach which had four key elements as illustrated in Fig 1.0below: these compose a rigorous analysis of procurement spend data; an extensive programmeof engagement with buyers, suppliers and procurement staff; structured surveys to benchmarkcurrent capability; and comparison with external benchmarks. This approach means that thefindings and recommendations are grounded in a strong evidence base. The approach was

underpinned by Accenture’s High Performance Procurement Model (HPP).

Evidence-Based Approach

Spend Data

Conducted a comprehensive data gatheringand analysis from multiple sources includingvote estimates, Departmental financialaccounts, purchase order data, contractlistings and historical reports

Over 24 data sources used including D/PER,NPS and individual sectors ranging fromschool accounts to HSE ERP platforms and

Justice Finance Shared Services

Stakeholder Engagement

Interviewed buyers, suppliers and internalcustomers - 73 interviews were conducted

Engaged Ministers, Secretaries General, AgencyCEOs, Procurement Officers, School Teachers,Doctors, Garda, Local authority engineers, industrygroups including IBEC and IMSTA and supplier keyaccount managers and CFOs

External Benchmarks

UK, European and global procurementinterviews conducted to provide internationalinsight and experience

Accenture Benchmarks were used to supportthe assessment and provide qualitative andquantitative benchmarks

Accenture’s High Performance Procurement(HPP) Model was used to assess currentprocurement capabilities

Surveys

Qualitative structured capability assessmentsurveys based on Accenture’s HPP frameworkwere used across all sectors

Self-assessment surveys completed byprocurement representatives from across the fivesectors and validated against interviews with keystakeholders

Figure 1.0: Data Sources Used to Support Evidence-Based Approach



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1.2 Spend Analysis Findings

The analysis of available spend data indicated that the State currently spends €9b on supplier

goods and services. A breakdown of this spend is presented below in Figure 1.1.

Figure 1.1: State Spend Breakdown (2011)

Analysis of this spend shows that: €6.9b is currently sourced through State purchasing processes and therefore can be

classified as being “Addressable by Procurement”. Most of this spend is at sector level.The Health sector accounts for €3.1b (45%), with Education and Local Governmentaccounting for approximately €1.1b each. Justice and Defence combined account for €647m and other central agencies account for the remaining €890m

€2.1b is not addressable through procurement as it is not currently managed throughState purchasing processes, e.g. the General Medical Scheme, and supply of bloodthrough the Blood Transfusion Service. This was therefore out of scope for identifyingprocurement savings. However, savings could be delivered through other means

€4.3b is deemed suitable to be managed by a central procurement function

€2.1b is deemed not suitable to be centre managed and should be managed withinsectors

€888m annual spend is currently managed by the central procurement functions (NPSand CMOD) with €187m actively contracted delivering €37m annual savings

Based on analysis and information provided, the review estimated that annual savings between €249m to €637m can be achieved through a structured cost reduction programme. However,this will require investment in the capability to ensure sustainable benefits. Figure 1.2 overleafsummarises central-managed and sector-managed spend and the potential savings to beachieved. It is worth noting that there is currently no standard categorisation for spend dataacross the Public Service . The categorisation used in Fig 1.2 below is based on the categoryanalysis conducted as part of the review.



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Figure 1.2: Breakdown of Estimated Savings (Annual)

Savings are calculated on a figure of €6.2b (€476m unclassified and €170m school busscheme removed from €6.9b total) giving an annualised savings range between €249mto €637m

€180m to €438m of these savings could be realised by greater central aggregation ofcommon categories, challenging demand/specifications, and driving compliance

A further €69m to €199m savings could be realised by adopting similar categorymanagement principles within sectors to sector-specific categories



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1.3 Capability and Capacity Assessment Findings

A key question considered by the review is the current capability and capacity of the centralprocurement service to deliver identified savings. For the purpose of this review, the centralprocurement function refers to the National Procurement Service (NPS), the National PublicProcurement Policy Unit (NPPPU), and the procurement processes of the Centre forManagement and Organisation Development (CMOD). The review assessed the centralprocurement functions capability against the High Performance Procurement (HPP) model thatmeasures procurement capability across six key dimensions. The summary assessmentfindings are presented below in Table 1.2:

ProcurementDimension

MaturityRating

(Consolidated

Average)

Summary Findings

ProcurementStrategy

Lack of integrated procurement strategy and structured planning

Incomplete procurement policy coverage and fragmented policymanagement

No agreed standard procurement performance targets or metrics

No standard methodology to baseline, measure and reportprocurement benefits

Sourcing andCategoryManagement

Lack of visibility and categorisation of spend, inconsistentmethodology, demand management and category expertise

No central access to accurate and timely spend data

Lack of consolidated, accurate demand forecasts and demand

challenge

Lack of engagement with stakeholders on central frameworktenders

Contract andSupplierManagement

Supplier led model, fragmented contract management and lack ofconsistent supplier performance scorecard

No central visibility or management of contract data

No accurate data on total State suppliers

Requisition toPay Process

Lack of compliance management process to monitor contractcompliance and leakage

No buying channel strategy

Contracts are not integrated into ordering processes

No central management or control of spend and vendor master

Workforce andOrganisation

Accountability is fragmented across central procurement - singlepoint of contact not always available due to decentralisation ofpurchasing operations and control

No central list of procurement professionals across the State

NPS lacks authority to deliver savings optimally

Lack of consistent roles and responsibilities, structure andoperational performance management

Structured skills training and supplier education

Limited cross-sector communities of practice

ProcurementTechnology

e-Tenders platform in place but lack of integration to analyticsand operational and financial management systems

Table 1.2: Summary of Capability Assessment Findings



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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 appliedconsistently across State procurement functions. Examples of best practice across the centralprocurement functions include CMOD’s approach to ICT demand management, the NPS energyframework pricing, and the CSSO development of standard framework contracts and the HSE’svendor dashboard.

The key findings impacting the ability of central procurement function to realise sustainablesavings are:

1. Central procurement functions are not organised in a manner to enable delivery torealise optimal savings for the State:

Central procurement functions are not integrated or aligned to common goals andtargets

NPS lacks the authority to influence senior stakeholders on spend decisions

The Procurement Officer role as currently implemented is focused on financial costcontrol but lacks visibility of supplier, price and specification data

Purchasing is devolved in many Departments and operational control is thereforedispersed resulting in lack of control of demand

2. Central procurement functions lack timely access to accurate spend data that isrequired to inform category management decisions:

Procurement information is fragmented across multiple financial accounting systemsacross sectors and departments

No single consistent classification for spend and supplier data. The review identifiedover 200,000 suppliers but this is likely to be inflated as many are likely to be supplyingmultiple agencies

No automated mechanism to consolidate or manage spend data nationally

Central procurement functions lack analytical skills and tools to interpret spend data,identify opportunities and prioritise execution.

3. Procurement lacks a holistic approach to managing categories of spend, suppliersand compliance

There are inconsistent approaches to spend portfolio and category managementapproach in use across central procurement functions

Limited centralised visibility of spend has made it difficult to identify categoryopportunities, prioritise planning and to track implementation and benefits measurement

There is no single source for information on supplier performance, nor a state-widesupplier management strategy

Fragmented sourcing, ordering and payment processes and systems have restrictedcentral procurement’s ability to drive framework implementation and monitor compliance

4. The State lacks monitoring or reporting arrangements that focus on procurementmetrics:

Today departments and agencies have a focus on financial management but lackvisibility of usage and pricing information to monitor spend from a procurementperspective

There is no standard definition of a procurement saving or ability to measure and trackbenefits

There are no standard procurement metrics to track procurement performance



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1.4 Recommended Strategy

The r eview has identified annualised potential savings between €249m to €637m inaddressable spend that can be achieved through a centre-led strategic cost reductionprogramme (see Section 5.2.2 for how this was calculated). We are recommending a total costof ownership approach to procurement rather than the traditional focus on third party supplierprice and cost reduction which will typically only deliver one-third of potential total cost savings.Our recommendations to achieve the total cost of ownership include the following levers:

1. Strategy and policy

2. Demand3. Specification4. Price

Achieving the identified level of savings in addressable procurement spend will requiresignificant investment in the capability and capacity of procurement. The review has identifiedpockets of excellence but these need to be replicated and implemented in a consistent manneracross all sectors. A key recommendation is to establish a single integrated procurementfunction accountable for policy, sourcing and category management of common categories andsupport operations. This function should be led by a Chief Procurement Officer (CPO) within aNational 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 todeliver strategic savings.

This recommendation is consistent with approaches taken in other European and Global PublicService organisations including the UK CPO who established the UK Government ProcurementService. Our benchmarking has underlined the need to prioritise centre-led procurementorganisation focused on common categories of goods and services, supported by visibility ofspend through investment in technology and the support and engagement of senior civilservants in key Departments to effect sponsorship of initiatives.

1.5 Recommended Procurement Operating Model

The review considered a number of options for strengthening how procurement is managed. Itrecommends a Hybrid Centralised Model (as described in sections 5.4.2 of this document) as itprovides the capability to drive efficiencies from the centre, leverage buying power, and removeduplication of effort. We recommend that the proposed organisation be centralised in a singlelocation in Dublin. The organisation will require significant engagement with senior procurementofficers across sectors. The recommendations with respect to the proposed model key featuresare as follows:

1 Establish Chief Procurement Officer Role and National Procurement Office

Appoint a new Chief Procurement Officer (CPO) accountable for national procurementstrategy, 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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2 Establish Organisational Alignment

NPO to manage all strategic spend for common categories of goods and services PolicyUnit within the NPO to be responsible for strategic and operational procurement policyand compliance across sectors

Transition some experienced resources from individual procurement teams within eachsector to the new NPO in Dublin

Establish a fulltime Procurement Officer within each sector to be responsible forprocurement across relevant Departments and Agencies

Establish robust governance model for procurement with senior executive levelinvolvement and sponsorship across the sectors. In addition, the creation of CategoryCouncils is a key element of the recommended governance model

3 Enable Savings Delivery & Compliance

Implement centralised Spend Analytics technology and capability to capture, cleanseand accurately categorise all state spend by type, location and vendor

Develop detailed spend and savings targets across sectors with detailed integratedplans for delivery by NPO and sector procurement

It is recommended that Secretaries General be made accountable to provide monthlyreports to the CPO

4 Manage Transition of Project

We recommend that Five major work streams to be established under a commonprogram to deliver the new organisation and capability:

1) Establish Governance and Operating Model2) Create and transition NPO from current organisations

3) Plan and implement Strategic Sourcing

4) Design and implement Spend Analytics

5) Plan and implement Procurement Operational Shared Services

The report also makes sector-specific recommendations for managing procurement in Health,Local Government, Education, Justice and Defence sectors. In addition, it includes detailedrecommendations on:

Category management approach

Strategic sourcing approach Supplier relationship management

Requisition to pay

Master data management

Technology

Savings definition and measurement

People and workforce.

The review has identified short and medium term savings and recommended steps to achievethese. The review has also identified that the current procurement functions at a central andsectoral 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 andsupporting technology are outlined in the report in order to ensure sustainability of the savingsand procurement organisation.



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2 Introduction2.1 Background

In November 2011, the Minister for Public Expenditure and Reform launched the Government’sPublic Service Reform Plan. This plan identified procurement reform as one of the majorprojects of key strategic importance.

The procurement recommendations and actions in the plan focused on the following areas:

Policy Framework and Procurement Reform Plan

Aggregation

Enforcement Performance Measurement and Expenditure Analysis

Capability

E-Procurement

Logistics and Inventory Management

While work is on-going on the implementation of procurement reform, there is a need to takestock of the capacity and capability in this area to ensure that the procurement reformprogramme is successfully and strategically coordinated, managed and implemented.

Accenture was commissioned to undertake a six week capacity and capability review of theState’s 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 actionsrequired to realise substantial savings in public procurement in the short to medium term, and tobuild 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 todeliver 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 thesavings 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 enablesuccessful and timely delivery of savings

- The technology that will enable visibility of spend and adherence to centrally and

competitively tendered frameworks and contracts1 “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, March2012



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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 non-commercial semi-States were also included in the review in order to understand procurementcapability 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. Capitalexpenditure was excluded due to time limitations and differences in stakeholders. However it isanticipated that many of the findings identified in this report would be equally applicable tocapital expenditure and that capital procurement should be considered as a further source ofsavings.

2.4 Review Approach

The review was conducted over six weeks between May and July 2012 using a holisticassessment framework based upon Accenture’s research into high performance procurement inboth public and private sectors.

Figure 2.1: Capability Assessment Approach

The review was carried out in the following three phases:

1. Understand and assess the current Public Service Third Party Spend2. Identify savings opportunities and capability recommendations3. Develop implementation roadmap

The understand and assess the current Public Service Third Party Spend phase focused onbaselining the current state of State spend and central procurement practices. Work was splitover two workstreams:

a. Analysis of State Spend Portfolio: What is the total State spend on goods and services, whatare the categories of spend, and what can be addressed by central or sector procurement todeliver savings and/or other non-financial benefits?

b. Assessment of Current Procurement Capability: How does procurement operate currentlywithin central procurement and across State bodies when compared to leading public andprivate sector practices (i.e. organisation, process, technology, skills and competence), and



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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, thefindings of the spend analysis were used to identify the following:

Total State spend that should be managed centrally or within sectors

Optimal savings that might be realised through procurement, based upon externalbenchmarks

Using the findings of the capability assessment, recommendations for procurementorganisation, governance, process, technology and skills that are required to enable therealisation of these savings

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 corroboraterecommendations as outlined in Table 2.1 below.

Evidence-Based Approach

Spend Data

Conducted a comprehensive datagathering and analysis from multiplesources including vote estimates,Departmental financial accounts, purchaseorder data, contract listings and historicalreports

Over 24 data sources used includingD/PER, NPS and individual sectors rangingfrom school accounts to HSE ERPplatforms and Justice Finance SharedServices

Stakeholder Engagement

Interviewed buyers, suppliers and internal customers- 73 interviews were conducted

Engaged Ministers, Secretaries General, AgencyCEOs, Procurement Officers, School Teachers,Doctors, Garda, Local authority engineers, industrygroups including IBEC and IMSTA and supplier keyaccount managers and CFOs

External Benchmarks

UK, European and global procurementinterviews conducted to provideinternational insight and experience

Accenture Benchmarks were used tosupport the assessment and providequalitative and quantitative benchmarks

Accenture’s High PerformanceProcurement (HPP) Model was used toassess current procurement capabilities

Surveys

Qualitative structured capability assessment surveysbased on Accenture’s HPP framework were usedacross all sectors

Self-assessment surveys completed by procurementrepresentatives from across the five sectors andvalidated against interviews with key stakeholders

Table 2.1: Data Sources Used to Support Evidence Based Review Approach



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2.5 Structure of Document

The structure of this report, which represents the findings and recommendations arising fromthe procurement capacity and capability review, is as follows:

Chapter 1 summarise the context and approach taken by the review, identifies the key findingsand outlines the recommendations.

Chapter 2 introduces the background to the review project. It describes the scope of work andapproach that was taken by the review team.

Chapter 3 presents the key findings of the analysis of current State spend. It identifies the totalState current spend on goods and services and categories of goods and services the State isbuying. It also describes what each of the State organisation is buying and where this spend isbeing managed (i.e. central, sector or local).

Chapter 4 presents the findings of the assessment of current procurement capability. Itdescribes the current central and sector procurement functions in terms of organisation,governance, process, technology, skills and competence, and how these compare to leadingpractices in industry and other government organisations.

Chapter 5 presents the potential savings available to the Public Service through centre-ledprocurement initiatives and describes the recommended developments in procurementcapability and capacity required to realise these savings.

Chapter 6 presents a proposed implementation roadmap to deliver and to sustain the identifiedprocurement savings.



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3 Procurement Spend Analysis FindingsThis chapter describes the findings of the spend analysis, including:

The approach taken to gather and analyse spend data

The key challenges faced by the review team in accessing and analysing Stateprocurement data, and the impact of these on overall central procurement performance

The findings of the spend analysis, including how much of State spend is currentlyaddressable by procurement

3.1 Spend Analysis Approach

There is no central database or reporting of procurement spend within the Irish PublicService. Therefore, in order to complete this review the project team were required to gatherand collate the required spend data manually from across more than 24 disparate systems, anumber of financial accounts and historic reports to enable a comprehensive analysis of Statespend on goods and services.

The approach taken to gathering and collating spend data was as follows:

Estimates for Public Services (2011) provided by Department of Public Expenditure andReform, supplemented with local government report on expenditure (2009) and a moredetailed spend breakdown provided by the HSE (2010/2011), were used as an initialbaseline

As there is no common spend categorisation for the Public Service, a master spendcategorisation to classify spend in a common manner was developed by the reviewteam using existing categorisations within the National Procurement Service (NPS) andHealth Service Executive (HSE) supplemented where gaps existed with a combination ofinternational standard categorisations as applicable (i.e. UNSPSC and eClass)

Each non-pay line item within the estimates was mapped to a spend categorisation tonormalise data across sources and to enable analysis

Spend that cannot be addressed by procurement currently was removed from thedata set as this was considered out of scope. For example, spend on blood productswhere the price is set by the Blood Transfusion Board cannot be influenced byprocurement

Approximately €1.5 billion of the estimates data that was used as a spend baseline didnot have sufficient information to enable it be classified. This was due to insufficientquality and consistency of procurement spend data provided resulting in the need formore detailed spend data to be gathered from individual agencies .

With the support of the NPS and Department of Public Expenditure and Reform, aninitial list of 23 contacts were identified across the Public Service to support the projectteam to get access to more granular procurement spend data. Where the point ofcontact within an agency could not provide spend data, the review team were required toidentify other individuals themselves who could provide information on procurementspend

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 dataavailable (full details of what data sources were used and any assumptions used toextrapolate spend details can be found in the Appendices)



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A total of 73 stakeholders and 24 systems were examined in an effort to gather

sufficient spend data to complete the analysis

3.2 Spend Analysis Challenges

Procurement spend data is available within the multiple individual department systems andcould be extracted; however, as illustrated by the work undertaken by the review team,gathering and collating this data is complex and labour intensive:

Data is fragmented across multiple systems: It is estimated that there over 4,000instances of financial systems in operation across the State when consideration is givento the individual systems operated across all sectors, such as education where primaryand secondary schools have independent systems.

Purchasing and operational control is dispersed: While each Department is requiredto appoint a Procurement Officer, it is the observation of the review team that these rolesare not clearly differentiated from that of the Finance Officer. While there is a strongfocus on financial control evident across Departments, purchasing is decentralised inmany Departments and operational control is dispersed

Data is not consistently categorised: While there are examples of standard spendcategorisation used by organisations, there is no standard spend categorisation currentlyin existence that is used across the Irish Public Service. For example the NationalProcurement Service (NPS) has developed a high-level categorisation for the sub-set ofState spend that it currently manages, while the Department of Agriculture, Food and theMarine and local authorities are independently in the process of developing their ownstandard categorisation; however these categorisations are not applied consistently andthere is no common language to describe what goods and services are purchased bythe State

Financial accounting is insufficient for procurement analysis: The estimates usedto determine the initial spend baseline were produced as part of the Public Servicebudgeting 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 forprocurement analysis, for example grants to universities are not broken down into howthe grant was spent

The ability to access and analyse spend data is fundamental to enabling procurement to deliversavings and enables timely and accurate access to State procurement spend data. This is oneof the key recommendations arising out of this review and will be dealt with in more detail inSection 4.



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3.3 State Spend Profile

The total State non-pay expenditure on goods and services, excluding capital expenditure andcommercial semi-States, was approximately €9 billion based upon the vote estimates in 2011. Abreakdown of this spend is provided in Figure 3.1.

The analysis carried out as part of this review estimated that €6.9 billion of this spend is addressable by procurement to deliver savings as it is currently sourced through Statepurchasing processes and, as a result, can be influenced by procurement. The remaining €2.1billion, of the total €9 billion goods and services, was considered to be non-procurementaddressable as it not currently managed through State purchasing processes, and thereforeout of scope for this review.

Figure 3.1: Breakdown of State Spend (2011)

The non-procurement addressable spend figure includes approximately €1.3 billion of the totalState spend on drugs, where price is negotiated by Minister of Health, and a further €100 millionspend on bloods, where price is set by the Irish Bloods Transfusion Board. While this spend isconsidered to be non-addressable by procurement, it could be addressed through other non-

procurement initiatives. It is a recommendation of this report that this spend be considered forfuture cost-savings initiatives.



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3.3.1 Procurement Spend by Sector

The breakdown of spend by sector is as follows:

Figure 3.2: Breakdown of Procurement Addressable Spend by Sector ( € million)

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 Governmentaccounting 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.

3.3.2 Spend by Category

As highlighted above, there is no standard categorisation for spend data currently inexistence across the Public Service, although there are multiple instances of spendcategorisation currently in use throughout the State, including those used by the NPS, HSE,Garda, Irish Prison Service and local authorities, which are not integrated or aligned.

All State spend was mapped to a common categorisation, developed by the review team, to

provide a single, integrated understanding of State procurement spend.

Spend data from each sector was mapped to seventeen categories that grouped spendaccording to comparable characteristics, such as similarities in supply market profile, end users,product type, etc. (see Table 3.1 below).

Of these categories, medical products and professional services accounts for €2.6 billion,or 37%, while the top six categories accounted for 82% of the total procurement addressablespend.



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Table 3.1: Breakdown of 2011 State Spend (in €million)

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 thefinancial accounting systems within schools are taken into account and gathering data fromthese systems is a complex and labour intensive exercise. It was not feasible to extract andcollate data from all these sources in the six week timeframe allocated to the review.

3.3.3 Unclassified Spend

There was approximately €1.5 billion of estimates data that could not initially be categorised dueto insufficient data. This included grants to schools and universities where the allocation ofspend is not discernible from the data. This unclassified spend figure was reduced to €476million once estimates had been reconciled with other sources of spend data provided bysectors.

Figure 3.3: Classified/Unclassified Procurement Spend (€ billion)

It is the opinion of the review team that the majority of this unclassified spend is likely to beprocurement addressable and could be successfully categorised with further work. It isrecommended that a follow-on exercise should be completed to identify and categorise this

unclassified spend.



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3.3.4 Spend by Supplier

Vendor data is not standardised or maintained consistently across the Public Service resultingin a lack of clarity on supplier numbers, spend by supplier and category both within and acrosssectors, departments and agencies.

During the review we identified some good examples of vendor data management, including theHSE and Enterprise Ireland.

It is estimated, based upon the data provided, that there are up to 212,000 vendors supplyingto the State. However this figure does not take into account that many vendors may besupplying to multiple agencies and are counted multiple times in this figure.

Figure 3.4: Total # of Suppliers by Sector

As there is no central management of supplier data or vendor classification it is notpossible to easily identify multiple instances of common suppliers across systems and sectorsand, as a result, the actual number of vendors supplying to the State is likely to be significantlylower.

3.3.5 State Contracts

Related to the above, there is also no central database for State contracts or standardcontract management processes. There are several organisations, such as An Garda Siochana,that have put in place contract repositories and good contract management practices. Examples

of where contracts and contract management is decentralised and highly fragmented acrossorganisations, to such an extent that no information on the total number of contracts could beprovided, was also in evidence.



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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 understandingof how State spend is impacting the national economy and how much is being spent withSME’s, national companies and multi-nationals.

It was also observed that the State has multiple contracts with the same vendors, often for thesame goods and services. While this was not explored in detail as part of this review, it is highlyprobable that prices are not harmonised and multiple prices are being paid for the same good orservice at different locations.

The findings of the spend analysis was used by the review team to estimate the total Statespend that could be addressed by central or sector procurement, and to estimate the range ofpotential savings that could be delivered by State spend through procurement.



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4 Capability and Capacity Assessment Findings4.1 Overview

This section describes the approach taken to assess the capability and capacity of centralprocurement functions to realise substantial, and sustainable, savings. It describes howprocurement is currently organised within the State, both in the central procurement functionand across sectors, and then assesses current capability against leading public and privatesector practices using Accenture’s High Performance Procurement framework.

While the review team interviewed and surveyed a broad sample of customers and procurementresources from across sectors, along with a sample of cross-sector suppliers, the outcomes ofthe assessment are presented as consolidated findings for the State as a whole. The focus ofthe review is on identifying “substantial savings” and the means to deliver these savings throughthe central procurement functions. Correspondingly, the review has presented capability andcapacity gaps in evidence across the Public Service that will present a potential barrier todeliver these savings, and did not set out to compare and contrast the procurement capability ofone organisation against another.

A common theme that emerged from the assessment is that while there are many examples ofgood procurement practices within the Irish Public Service when compared to industry andPublic Services globally, these practices are not applied consistently across State procurementfunctions.

The key findings impacting the ability of central procurement functions to realise sustainable

savings, which are described in more detailed within this section, were as follows.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 andtargets

NPS lacks the authority to influence senior stakeholders on spend decisions

The Procurement Officer role as currently implemented is focused on financial costcontrol but lacks visibility of supplier, price and specification data

Purchasing is devolved in many Departments and operational control is thereforedispersed resulting in lack of control of demand

2. Central procurement functions lack timely access to accurate spend data that isrequired to inform category management decisions:

Procurement information is fragmented across multiple financial accounting systemsacross sectors and departments

No single consistent classification for spend and supplier data. The review identifiedover 200,000 suppliers but this is likely to be inflated as many are likely to be supplyingmultiple agencies

No automated mechanism to consolidate or manage spend data nationally

Central procurement functions lack analytical skills and tools to interpret spend data,identify opportunities and prioritise execution



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3. Procurement lacks a holistic approach to managing categories of spend, suppliers

and compliance There are inconsistent approaches to spend portfolio and category management

approach in use across central procurement functions

Limited centralised visibility of spend has made it difficult to identify categoryopportunities, prioritise planning and to track implementation and benefits measurement

There is no single source for information on supplier performance, nor a state-widesupplier management strategy

Fragmented sourcing, ordering and payment processes and systems have restrictedcentral procurement’s ability to drive framework implementation and monitor compliance

4. The State lacks monitoring or reporting arrangements that focus on procurement

metrics: Today departments and agencies have a focus on financial management but lack

visibility of usage and pricing information to monitor spend from a procurementperspective

There is no standard definition of a procurement saving or ability to measure and trackbenefits

There are no standard procurement metrics to track procurement performance

4.2 Capability Assessment Approach

The review used a holistic assessment framework, based upon Accenture’s research into highperformance procurement, to assess central procurement capability against the followingdimensions:

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 leadingpractices) for each dimension of procurement. A structured, Excel-based survey consisting of144 detailed questions covering each of the six dimensions was completed by 14 buyingorganisations.

The results of the surveys were then collated for each sector and then compared to a capabilitymaturity scale to determine how each agency’s procurement capability should be rated.

The project team also conducted interviews with 73 senior procurement staff and procurementcustomers from agencies across all sectors.

Interviews were also conducted with a sample of State suppliers and industry groups to providean external perspective.

Due to the short project timeframe, the project team could not engage all buying groups withinthe Public Service. A sub-set of agencies was selected from across sectors which accounted for



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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 wereinformed by qualitative and quantitative public and private sector benchmarks, along withleading practices based upon Accenture’s High Performance Procurement research. Thesewere developed in consultation with the Department of Public Expenditure and Reform toensure 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 thesegovernments 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.

4.3 Procurement Organisation

4.3.1 Central Procurement Function

For the purposes of this review, the Central Procurement Function is taken to refer to theNational Public Procurement Policy Unit (NPPPU); the National Procurement Service (NPS), theProcurement processes of the Centre for Management and Organisation Development (CMOD)and the Commercial Contracts Section of the Chief State Solicitors Office (CSSO).

Figure 4.1: Central Procurement Functions

National Procurement Service (NPS) was established in 2009 to further develop nationalframework agreements to allow public bodies to procure commonly used goods with theprimary objective of ensuring “optimum eff iciency and value for money in the publicprocurement”; to provide professional procurement advice to central government and Stateagencies; to develop targeted and accredited training and education measures and tofurther develop E-Procurement tools. It currently sits within the Office of Public Works underthe 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 aNational Public Procurement Policy Framework designed to drive the development of

analysis based and target driven Corporate Procurement Plans. The NPPPU is currentlyresponsible for setting a broad strategic direction for procurement implementation. The unithas responsibility for national public procurement policy, legislation and constructionprocurement reform. Prior to 2009 the NPPPU was responsible for the development of a



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national eProcurement portal (e-tenders.ie) and the piloting of framework projects to

demonstrate the benefits of aggregated arrangements. The NPPPU currently resides withinthe Department of Public Expenditure and Reform and has 4 staff .

Centre for Management and Organisation Development (CMOD) is responsible for“monitoring and approving ICT spend in civil and public service bodies, telecommunicationspolicy and infrastructures, eGovernment policy and infrastructures, technology research andpolicy, central ICT procurements and frameworks, and common IT systems including payrolland HR Management”. It is a Division of the Department of Public Expenditure and Reform.The centre has 2 staff dedicated to its procurement function.

Commercial Contracts Support, Chief State Solicitor’s Office (CSSO) is responsible forthe provision of legal advice and support to procurement users in contracting goods andservices across all sectors. The unit is also responsible for the development and provision of

legal templates for use in sourcing and contracting goods and services. The commercialcontracts function lies within the Chief State Solicitor’s Office, which is a constituent elementof the Office of the Attorney General. The unit is responsible for the provision of standardterms and conditions for procurement use in sourcing and contracting with the objective ofensuring compliance to legislation in respect of EU directive and Irish law. The CSSO workswith the NPS in the development of Framework Agreements, standard contracts andsupport materials for end users. The Unit is comprised of six staff.

Figure 4.2: Central Procurement Function Spend Breakdown (Not to Scale)

The NPPU’s role is primarily around the issuance of policy guidelines and circulars with the aimof ensuring that bodies were informed of their requirements under EU law and also best practicearound putting tenders in place; they do not have ‘spend’ under management. The C& AG forexample report on the level of compliance with these circulars across the public service. Theunit is also tasked with developing and overseeing the implementation of contracts2 for PublicWorks 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. Theestimated annual central procurement framework spend is €888 million based upon 2011figures. Between these groups, there are approximately 50 procurement staff, with 47 of thesestaffed within the NPS alone.

2 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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As of 2011, the NPS had put in place framework agreements that covered an estimated €434

million, or approximately 6%, of the State’s procurement spend. Of this €434 million, the actualusage of NPS frameworks was €180 million, or 40%, of the total spend under frameworks. TheNPS has no role in monitoring compliance and up to very recently bodies were not obliged, ormandated, to comply to frameworks. The NPS has estimated a total saving of €37 million in2011 alone, or approximately 9% of total procurement addressable spend through morecompetitive pricing and efficiency savings through centralised procurement.

As referred to above, CMOD, amongst other things, is responsible for central ICT procurementframeworks and, while CMOD does not track spend under its framework agreements, basedupon total ICT State spend in 2011, it is estimated that €454 million is currently spent againstICT 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 thecentral procurement functions is not optimal to enabling collaboration between these groups.

The commercial contracts function lies within the Chief State Solicitor’s Office, which is aconstituent element of the Office of the Attorney General. The function has a small team of sixresources and is responsible for the provision of standard terms and conditions for procurementuse in sourcing and contracting with the objective of ensuring compliance to legislation inrespect of EU directive and Irish law. The CSSO has worked with the NPS in the developmentof Framework Agreement standard contracts and support materials for end users. Thedevelopment of standard terms and conditions is welcomed throughout the procurementcommunity but there is concern both within the CSSO and the procurement community aboutthe 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 ofnon-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 termsand conditions are seen as too broad and an attempt to cover all risks with heavy risk burdenbeing levied on suppliers. The suppliers were also conscious of the risks involved in tenderingfor 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 lackof education and training required to ensure compliance to legislation. The NPS and CSSOconduct training in standards but this is not co-ordinated and the focus is on fulltimeprocurement professionals resulting in a risk of part time procurement professionals, e.g.

primary school board members, not being aware or compliant to legislation.

4.3.2 Sector Procurement Organisation

Out of an estimated annual addressable spend of €6.9b across the State the centralprocurement functions are involved in approximately €888m (13%). However the organisationand operation of procurement varies significantly between and within sectors. The HSE andPrison Service, for example, operate their own central procurement functions, while primary andsecondary schools have highly decentralised purchasing operations and decision making.



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The procurement organisational structures within sectors are synopsised in the Table 4.1 below:

Sector Procurement Organisations Spend(est.)

ProcurementFTE (est.)

Health The HSE operates a central procurement function thatis supported by 70 resources, out of its total 573resources who work in procurement and logistics, andhas €1.2bn spend under management.

Voluntary hospitals, which account for €600m of thetotal Health spend, have a central Hospital ProcurementServices Group (HPSG), that is independent to the HSEprocurement function and is supported by 13 resourceswho currently manage €72m of voluntary hospitalspend.

€3,093m 83

LocalGovernment

While procurement is predominantly managed locallywithin each of the 34 local authorities, there is somecollaboration amongst authorities. The LocalGovernment Management Agency has recognised thepotential benefits of improved collaboration and hasproposed recommendations for formal structures toenable regional collaboration. Local authorities havebegun to collaborate on cross-authority initiatives toimprove procurement efficiency, including the nationalroll-out of LA Quotes e-procurement tool and an on-going project to harmonise how spend is categorised.

€1,142m 108

Education Procurement is highly decentralised within the

Education sector. Universities have mature centralprocurement functions in place and actively collaborateon procurement opportunities, while Institutes ofTechnology operate a central procurement hub. VEC’shave a central resource in place to provide support andguidance on compliance with each VEC, and whilethere is some opportunistic collaboration, procurementoperations are pre-dominantly managed at a VEC level.Of the 4,034 primary and secondary schools, there iscurrently no central procurement oversight or support .

€1,114m 72

Justice andDefencesectors

Procurement within the Department of Defence isdecentralised across military cells, however there isoversight of compliance by a central procurementfunction and initiatives in place to centrally consolidateall contracts, and dedicated purchasing units withineach cell.

Under the Department of Justice and Equality, AnGarda Siochana and the Irish Prison Service operatemature central procurement functions and goodcontract usage and control over compliance. TheDepartment also process all invoices out of a sharedservice in Killarney providing a central source ofprocurement spend data.

€646m 95

Other CentralGovernment

Purchasing operations are decentralised across centralgovernment with developing central procurement units

in key spend areas, such as Department of Agriculture,Food and Marine.

€887m 66

Table 4.1: Summary of Procurement Organisation by Sector



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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 andcompliance amongst staff involved in procurement from across sectors. However practices arenot standardised or applied consistently across agencies, and maturity of procurementcapability also varies significantly across and between agencies.

There are estimated to be at least 536 FTE’s who are currently working in procurement acrossthe Public Service. However, as the number of resources who have procurement as part of theirrole is not monitored or recorded by the State, the actual number of resources involved inprocurement is likely to be considerably higher.

For example, the estimate accounts for a total of 72 procurement resources in the Educationsector based upon a tally of procurement resources in the Universities, IT’s and VEC’s. Whilethe 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 procurementactivities on a part-time, ad-hoc basis as this information is not available.

Figure 4.3: Spend per Procurement FTE (€m)

Based upon these conservative estimates of procurement headcount, the State currentlyspends €12.9m per procurement FTE. This contrast’s with the cross-industry median is €18.1mper FTE and leading is €28.6m.

This is based upon Accenture’s High Performance Procurement Benchmark that includes publicand private sector organisations. Even with consideration for the decentralised organisationstructure within the Irish Public Service, there is a clear opportunity to reduce the number ofresources involved in non-value adding purchasing activity.

As purchasing is devolved in many Departments and operational control is dispersed resultingin lack of control of demand, the ability of central procurement functions to deliver savingsthrough coordinated strategies and initiatives have been hampered by the need to engage witha 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 acrosssectors, however procurement discipline, such as control over contract compliance and whatmoney is spent on, is not as rigorously enforced or applied.



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4.4 Detailed Capability Assessment Findings

Overview

The summary findings of the central procurement function capability assessment aresummarised in the Table below.

ProcurementDimension

Maturity Rating

(ConsolidatedAverage)

Summary Observations

ProcurementStrategy

Lack of integrated procurement strategy and structured planning

Incomplete procurement policy coverage and fragmented policymanagement

No agreed standard procurement performance targets ormetrics

No standard methodology to baseline, measure and reportprocurement benefits

Sourcing andCategoryManagement

Lack of visibility and categorisation of spend, inconsistentmethodology, demand management and category expertise

No central access to accurate and timely spend data

Lack of consolidated, accurate demand forecasts and demandchallenge

Lack of engagement with stakeholders on central frameworktenders

Contract andSupplierManagement

Supplier led model, fragmented contract management and lackof consistent supplier performance scorecard

No central visibility or management or contract data

No accurate data on total State suppliers

Requisition toPay Process

Lack of compliance management process to monitor contractcompliance and leakage

No buying channel strategy

Contracts are not integrated into ordering processes

No central management or control of spend and vendor master

Workforce andOrganisation

Accountability is fragmented across central procurement - singlepoint of contact not always available due to decentralisation of

purchasing operations and control

No central list of procurement professionals across the State

NPS lacks authority to deliver savings optimally

Lack of consistent roles and responsibilities, structure andoperational performance management

Structured skills training and supplier education

Limited cross-sector communities of practice

ProcurementTechnology

e-Tenders platform in place but lack of integration to analyticsand operational and financial management systems

Table 4.2: Consolidated Public Service Procurement Capability Maturity Rating



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While interviews and surveys were conducted with stakeholders from across the central and

sector procurement functions, the assessment of procurement capability has been provided asa consolidated average for the Public Service. As the purpose of the review was to identifysubstantial savings realisable through central procurement, detailed assessment of procurementcapability by sector have not been developed.

One of the core findings of the review is that there is wide variation in capability and practicesacross sectors. Examples of good practices or variations in practices have been highlightedwere applicable in an effort to underline the impact of this fragmentation on the ability of centralprocurement functions to realise these savings.

Table 4.3 below provides a high-level breakdown of capability assessment summary findings bysector. However, it is important to note that even within sectors there wide variations in practiceand capability. For example within Education alone, Universities do have mature, central

procurement capabilities while schools have highly decentralised procurement organisation andlimited capability.

Table 4.3: Summary Capability Maturity Assessment by Sector

Each of the components as outlined in Table 4.3 above are discussed briefly and the findingsoutlined as the following sections:



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4.4.1 Procurement Strategy

Procurement Strategy is concerned with understanding the following:

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

a. Finding: No integrated procurement strategy and structured planning

The NPS has a multi-year strategy that sets out its strategic goals and targets for theforthcoming three years, however this is internal to the OPW and has been developed in theabsence of formally engaging other central procurement functions and customers. There is nointegrated strategy for Public Service procurement that sets out how the State will managethe total spend portfolio on goods and services to deliver optimal benefits, and ensures thatprocurement goals and targets of the NPS and CMOD are aligned with customer requirementsand Government strategy.

The NPS has established a cross-sector steering committee that is tasked with ensuring thatNPS strategies and plans are fully informed. However, from our interviews and discussionsthere is evidence of a lack of clarity amongst end users as to how opportunities are prioritised orsourcing strategies for framework agreements developed.

This lack of strategic alignment has led to, but is not limited to, challenges in the following areas:

Silo mentality within sectors and missed opportunities to benefit from greater cross-sector coordination on sourcing initiatives

Duplication of effort between procurement groups, for example there are severalinitiatives 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 acrosssectors around common areas of spend, however this tends to be ad-hoc and opportunistic.

b. Finding: Incomplete procurement policy coverage and fragmented policymanagement

There are a number of groups across the State that make decisions that directly, or indirectly,impact upon procurement policy, including a number of SME advisory panels and SEAI onenergy efficiency. The NPPPU is responsible for managing national procurement policy, inparticular policy related to EU Directives and EU Treaty Principles; the NPPPU publish guidanceto assist public bodies with their interpretation of procurement rules; however definition ofoperational procurement policy, that describes how national procurement policies translate today-to-day procurement operation for the end-users and procurement staff, is decentralised tolocal purchasing functions.

With the roll-out of mandated compliance to NPS frameworks, there is a requirement on centralprocurement functions to provide guidance and support on operational procurement policy as itrelates to categories under central frameworks, along with policy on areas such as savingsmeasurement and reporting which are covered in more detail below.



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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, ina 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 knowledgeof directives and over 31% had limited or no knowledge of EU Remedies Directives. Thepenetration of EU procurement guidelines training has not been as prevalent in organisationswhere accountability of procurement is unclear, such as within primary and secondary schoolsunder the Department of Education and Skills. Also greater awareness of compliancerequirements has coincided with increased uncertainty amongst some procurement resources,especially those engaged in procurement on a part-time basis, which is slowing down theimplementation of tendering processes.

The implications of EU procurement directives and compliance to Irish competition law and theremedies directive have placed a large compliance and administrative burden on procurementwithin the Public Service. The NPPPU provide general guidance and instructions to the publicservice through circulars that issue to accounting officers. Compliance with these guidelines isaudited both internally by the public body concerned and by the Local Government AuditService or by the Comptroller and Auditor General. There is a lack of a single owner across theNPPPU, CSSO, NPS and CMOD procurement activity and legal support to define andimplement a coherent and comprehensive legal and procurement policy, framework andguidelines to ensure compliance across Public Service procurement. The risk of non-compliance due to lack of awareness is greater outside the permanent procurement resources.

c. Finding: Single point of contact not always available due to decentralisation

of purchasing operations and control

The perception of procurement as being important to delivering value has improved in recentyears amongst senior Public Service leadership as a challenging economic backdrop hasfocused attention on cost reduction. In response, a number of sectors and agencies have beenpro-active in developing procurement capability to respond to the current challengingenvironment, and there are notable examples, such as the Department of Agriculture, Food andMarine, who are building capability to enable improved central coordination and control ofpurchasing activities.

One of the key challenges for a central procurement function, and the NPS in particular, is thelack of a single point of contact within organisations that can support stakeholder engagement,

champion procurement strategies and ensure benefits are delivered. Departments are requiredto have a Procurement Officer, however purchasing operations are still decentralised in manysectors and good procurement discipline, such as contract coverage and control of maverickbuying, is not applied with the same rigour as financial cost controls.

This has meant that the NPS has had to expend more effort on engaging fragmented customerswhen developing tender requirement and building buy-in for central frameworks. For exampleover 250 buyers were engaged in preparation for the National Stationery Framework alone.

Recent developments within Local Government, which will simplify the interface with the NPSand drive benefits delivery, are commendable, including the establishment of the National Local Authority Procurement Group (NLAPG) and regional procurement specialists.



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d. Finding: There are no standard procurement performance targets or

metrics

There is limited or no accurate information on how procurement is performing across theState. Reporting is currently a manual, labour intensive and inaccurate exercise partially due tofragmented systems, lack of data standards and unclear accountability for monitoring.

There is no central systematic tracking or reporting of procurement performance against astandard suite of procurement metrics. While the NPS does track coverage, usage and savingsunder central frameworks, these metrics only cover 6% of State spend and are gathered on anad-hoc basis. Organisations within the Public Service do track savings and compliance levelslocally, however these are not reported centrally, are also typically measured on an ad-hocbasis, do not allow for double counting and are not measured using standard methodologies

(e.g. there is no standard savings measurement approach).Reported performance metrics, in general, are focused on compliance, framework coverage andsavings. These should be broadened to align procurement with desired behaviours acrosssectors and drive national procurement strategy. Performance indicators for non-financialbenefit, such as including sustainability, SME coverage, supplier performance and employeedevelopment, are not systematically tracked or reported centrally making it difficult to effectivelytarget and take action to improve performance.

There are notable exceptions, such as NPS and SEAI who are currently working on establishingcentral monitoring and reporting of energy consumption and savings across the State.

e. Finding: No standard methodology to baseline, measure and report

procurement benefits

While there is focus on cutting costs across the Public Service, there is currently no standard,agreed methodology for calculating and reporting savings realised through deliberateprocurement action across sectors. Procurement savings are reported by several agencies,including NPS, HSE and Local Government, however the approach taken to calculating savingsvaries by agency, resulting in different savings being reported for identical initiatives andpotential double counting.

For example the NPS have reported savings of €850,000 on State advertising contracts,whereas local government alone has reported a €2.7 million reduction in Advertising spendthrough the NPS framework.

The typical issues we identified in our review are:

There is an inconsistent understanding as to the different types of savings

There are inconsistent terms and definitions used to describe the different types ofsavings

Savings methodologies that have been established are often based on forecast levels offuture expenditure rather than actual

Procurement savings are often delivered at the point of sale or purchase which negatesthe ability for the saving to be captured or realised fully

The measurement of savings at the point of invoicing can be costly and time consuming

In recent years, the challenging economic and fiscal environment has forced the State to putmore focus on procurement savings. Whereas procurement savings where not systematicallytracked 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.

4.4.2 Sourcing and Category Management

Sourcing and Category Management is concerned with understanding the following:

Visibility of accurate and timely spend data

How opportunities are identified and prioritised

How category strategies are developed and managed

What industry and category expertise is available

The methodology used for sourcing and implementing strategies

How demand and project delivery are measured and managed

a. Finding: No central access to accurate and timely spend data

The central procurement functions do not have access to reliable, accurate and timely spenddata which is critical to identification and prioritisation of category opportunities, anddevelopment of sourcing strategies.

For example, the most up-to-date spend available to the NPS was gathered through a 2010survey of State buying organisations requesting a breakdown of the top thirty categories ofspend. This data covers only €2.4 billion of the total State procurement spend and does notinclude information on suppliers, contract coverage or transaction volumes.

b. Finding: Lack of consolidated, accurate demand forecasts and demandchallenge

A symptom of the Public Service top-down annual budgeting process, is that detailedinformation identifying how budgets will be spend are not systematically produced. The result ofthis is that procurement does not always have visibility of demand until after key decisions havebeen made and, as a result, their ability to influence purchasing decisions is reduced.

This has meant that central procurement functions do not have access to accurate forecasts ofwhat goods and services will be purchased in the coming year, and are reliant upon incompletehistoric spend data to prioritise category opportunities and developing sourcing strategies

Limited availability of accurate forecast data, along with decentralised purchasing, has alsomeant that procurement is not positioned to challenge demand, which is one of the main leversthat procurement can use to deliver savings. Mandated compliance to central frameworks, forexample, will allow the State to leverage aggregate spend but will not control volumes of spendor purchase of over-specified goods.

c. Finding: No central list of procurement professionals across the State

Within the central procurement function, the NPS, in particular, has been proactive in engagingstakeholders from across sectors on broader procurement issues or matters, for example theyhave used bi-annual procurement seminars and the procurement.ie web portal, which is used toprovide both buyers and suppliers with information on planned framework tenders, best

practice, and upcoming events

The State does not maintain a record of resources currently working in the procurementarea or on procurement activities. The NPS maintains a repository of procurement



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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 NPSstakeholders can frequently become out of date resulting in communications not reaching therequired recipient.

d. Finding: Stakeholder engagement in central framework tenders

While communication under the NPS has improved, information on framework tender timelinesare not up-to-date or of sufficient accuracy to allow sector purchasing units to be aligned to theirown purchasing plans. Actual dates for key tendering milestones, such as tender publicationand forecast award date, are either not communicated or can change without sufficientnotification. Local end users maintain their contracts and milestones without updatingprocurement.

System solutions, such as the National Tender Tracker within Local Government, have beendeployed within sectors that allow procurement resources to track progress of tenders onlineand similar solutions should be considered by central procurement functions to facilitatecommunication and alignment with stakeholders.

While the NPS have invested heavily in relation to engaging with sectors, interviews indicatedthat cross-sector stakeholders are still not routinely consulted on key sourcing and categorymanagement decisions impacting customers, including user requirements, award criteria andoverall satisfaction with framework and supplier performance.

e. Finding: No standard category management methodology, tools andtemplates

The Public Service has dedicated procurement category managers who manage categories ofspend within the NPS and HSE, and there is evidence of good category management principlesin practice within these functions. However processes and practices are not consistently definedand implemented across category management teams and there is no standard, documentedmethodology for strategic sourcing or category management currently in place.

As a result of varying levels of category management there are lost opportunities to leverageefficiencies in cost, quality and value added services from suppliers due to a focus on local shortterm needs instead of strategic long term partnering.

4.4.3 Contract and Supplier Management

Contract and Supplier Management is concerned with understanding the following:

How is supplier and contract data managed

How are suppliers tiered, segmented and categorised

How supplier and contract performance is rated, measured and managed

How supply chain risk is evaluated and managed

How supplier education is managed



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a. Finding: No central visibility or management of contract data

The State has no central tools for managing contracts over their lifecycle or tracking usageagainst contracts. While not in place at the time of writing, the planned upgrade of the eTenderssystem is due to include a contracts management module which will go some way towardsresolving this issue.

There is no central monitoring and reporting of contract coverage (i.e. the volume of spend thatis covered by a contract) and contract usage (i.e. the volume of spend that goes through acontract) for all spend, although there are notable exceptions, including Irish Prison Services,HSE and Garda.

The NPS does track the volumes of spend under its own frameworks, currently estimated at40% contract compliance, on an ad-hoc basis using data provided by suppliers and spend

estimates based upon a 2010 survey. As highlighted above, this information does not accuratelyreflect the overall usage as accurate and timely spend data is not currently available. At the timeof writing, the NPS was putting in place a process and tools to track framework compliance andsavings more efficiently though issues with data quality still remain unresolved. CMOD also donot currently monitor or report on framework usage and compliance despite recent attempts torequest supplier information in order to track compliance. Both the NPS and CMODprocurement activity is supplier dependent for information and as a result there are gaps in thevisibility and quality of the information currently available.

At the time of writing usage of central frameworks were not mandatory and this has contributedto the low level of compliance, currently 40%. The government has recently decided tomandated the usage of NPS frameworks, except in exceptional circumstances, which will see

the Comptroller and Auditor General and individual public bodies becoming accountable foractioning non-compliance. This should help improve visibility of the usage of centralframeworks.

b. Finding: No accurate, up-to-date data on total State suppliers

The central procurement functions frequently and systematically engage national frameworksuppliers to review and manage framework contract performance, raise any performance issuesand, if required, agree corrective actions. There are examples of sectors and buying groupswithin sectors actively managing suppliers, such as the HSE’s use of a metrics dashboard tomonitor top supplier performance.

The NPS has also conducted surveys with sectors to determine the top suppliers across theState, albeit almost two years ago, and this information has been used to enable cost savingstrategies to be targeted at top suppliers.

The State does not have accurate data on the total number of suppliers and there is no singlecentral repository for recording, maintaining and reporting supplier master data. Supplierinformation is dispersed and duplicated throughout Public Service systems. Based upon thesample data gathered as part of this review, it is estimated that there are upwards of 212,000State suppliers, however due to the limited control over vendor master data across procurementand financial systems it is not possible to deduce the number of duplicate vendors within thisdata over the short timeframe of the review.

Over 61% of respondents to the recent NPS survey stated that they would like to see the

creation of an ‘electronic public procurement passport’ holding supplier details that would notonly reduce effort required by local procurement teams in maintaining this data for themselvesbut would allow greater control in how master data is managed.



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c. Finding: No integrated supplier management approach

One consequence of not having accurate and up-to-date supplier information is that the Statedoes not monitor and manage supply chain risk, or gather accurate information on spend withSME’s across the State that may inform national policy.

While relationships with suppliers under central frameworks are closely managed, the majorityof suppliers are not segmented and managed across the State. This results in professionalprocurement resources being engaged in lower level tactical and operational buying levelsinstead of of focusing resources on large strategic cross sector spend, suppliers and savingsinitiatives.

The figures illustrated in Figure 4.4 show the number of suppliers per €100m across a range ofpublic service areas and provides a benchmark of best practice. This highlights the lack of

segmentation and prioritisation of procurement professionals to larger spend areas.

Typically, procurement will segment the supplier base based upon level of spend, criticality ofthe service and level of risk, This allows procurement to focus on the top suppliers andcategories in order to maximise the return on investment.

The benchmark illustrates that 228 suppliers is the average number of suppliers per €100m ofspend, however the number of suppliers currently active across the state is greater than this.This is partially down to a lack of control over procurement demand but also linked to duplicationof supplier data within sectors, as relationships with suppliers are managed locally and remainuncoordinated nationally.

Figure 4.4: Number of Suppliers per €100m

On a positive note, the National Procurement Service has been proactive in enabling moretransparent and open communication with suppliers through the procurement.ie web portaland use of supplier engagement forums. It has also run initiatives to educate suppliers in thepublic tendering process and provide SME’s with the skills to compete in public tenders to themutual benefit of both the State and SME sector.

Although more than 67% of respondents to a recent NPS survey of State suppliers indicatedthat they had ‘limited or no knowledge’ of EU Procurement Directive and 75% indicated ‘limitedor no knowledge’ of EU Remedies Directive. This highlights the risk of non compliance acrosslarge numbers of suppliers and contracts in the Public Service.



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4.4.4 Requisition to Pay

Requisition to Pay is concerned with understanding the following:

How requisition to pay master data is managed across sectors

What guidelines and support is provided to end users

How compliance and non-compliance are managed

a. Finding: No buying channel strategy

There are a number of different procurement processes that can be used to manage thesourcing, contracting, ordering, delivery, receipt and payment activities. Procurementorganisations typically define standard processes and select the appropriate process depending

upon the category of purchase, level of activity and scale of spend.

Goods and services can typically ordered using one of the following processes:

1. Purchase Order2. Non Purchase Order3. Catalogue Order4. Non Catalogue Order5. Purchasing Card Order6. Cheque Requisition7. 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 functionsare responsible for establishing central framework agreements, it is the local contractingauthorities that are responsible for putting in place the contracts under these frameworks and forenabling their local end-users to order or call off of these contracts. There are multiplefragmented, non-standard processes and supporting systems across sectors that enableordering of goods and services by end-users, including paper-based purchase orders,buying portals, p-cards and e-catalogues. This causes additional internal order administrationand external supplier administration in dealing with difference departments and agenciessupplying the same goods or services.

For example p-cards are available to some buyers within local government for low value, ad-hocpurchases, while schools are exploring the use of a PayPal-enabled solution to manage lowvalue, spot buys.

b. Finding: Contracts are not integrated into ordering processes

There are groups within the Public Service whose contract databases are integrated into theirrequisition to pay processes. An Garda Siochana, ensures that end users are both aware ofwhat contracts are in place at time ordering and are channelled towards using them This is theexception rather than the rule and, in general, compliance with contracts is dependent uponmanual checks by procurement at time of order or retrospectively at time of invoice.

Usage of NPS framework agreements was approximately only 40%, but the State is currentlymandating their use. As highlighted above, the central procurement functions have limitedvisibility and control over orders under central frameworks. Responsibility is with contracting

authorities to ensure that framework agreements are easily accessible to end users andthat local buyers are compliant.



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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 theNPS does not have the ability to control demand within sectors. This is one of the key leversthat 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 insupporting end users in the development of appropriate technical specifications. In this roleCMOD have the opportunity to be involved at an earlier stage in the procurement process andcan positively influence the demand/specification through the sanctioning of spend from existingframework contracts.

4.4.5 Receipt to Pay

While the Receipt to Pay process was not covered extensively as part of the review, there aresome general observations related to process efficiency and effectiveness that should beexplored in more detail.

The NPS is piloting an e-invoicing solution with five organisations (HSE, Defence, LGMA,Justice and Enterprise Ireland) as part of PEPPOL (Pan-European Public Procurement On-Line). e-Invoicing is not supported extensively across the State, although there are notableexceptions such as the Department of Justice and Equality. e-Invoicing has potential tosignificantly reduce both internal and external indirect administrative processing costs and alsoto support greater compliance and supplier performance through more rigid financial approvalon satisfactory completion of work against contracts and purchase orders.

The Department of Justice and Equality also operates a Financial Shared Service in Killarney

for all bodies under its aegis as well as a number of other central government Departments. It isnotable that bodies under the Department of Justice and Equality had some of the highestcontract compliance levels across the State.

Due to limited system integration, there is evidence to suggest that significant manual effort isrequired to complete of the approval of invoices against purchase orders due to the manualmatching of paper based invoices.

Finding: No central management or control of spend and vendor master

There is no standard classification for spend across sectors (i.e. common classifications forState spend). Goods and services are categorised differently across sectors, and even withinsectors, making it difficult for the State to determine where it is spending its money and toidentify where there is commonality across sectors.

There are examples of classification currently in use, or in development, by purchasing units,however these are not aligned. For example the Department of Agriculture, Food and Marineare currently developing a standard categorisation for their spend as are the local authorities,while the NPS have their own top level categorisation for spend under their management.

As highlighted above, the State also does not have a standard vendor classification or havea central approach to managing vendor data.

A cursory review of supplier data from across sectors shows multiple instances of the samevendors codified with different vendor ID’s and different names. This makes it difficult for theState to understand how much it is spending with any one supplier, manage supplier

performance across sectors, or understand where there is risk in its supply chain.

In general, master data management is decentralised and controls to ensure the integrity ofdata is maintained are not rigorously applied across sectors.



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4.4.6 Workforce and People

Workforce and People is concerned with understanding the following:

Are there standard roles and responsibilities across State, sector and departmentprocurement

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 organisation’s capability

a. Finding: Accountability for procurement policy, strategy and delivery is

fragmented across central procurement functions

As highlighted above, the fragmented structure of central procurement functions has meant thatthe procurement objectives and practices of CMOD, the NPPPU and the NPS have not alwaysbeen fully aligned. There is no one central group accountable for procurement policy,strategy and delivery across the State.

b. Finding: NPS lacks the authority required to deliver savings optimally

Furthermore, while the location of the NPS within the OPW may have been optimal when theNPS was being set up, the NPS has lacked the authority to influence senior stakeholderson spend decisions, which has undermined its ability to implement category strategies within

sectors and deliver savings to the State’s bottom line.

In theory, the Procurement Officer should be the first point of contact for the NPS within eachsector to engage stakeholders and build buy-in for central strategies. While there is goodfinancial cost control in place across the Public Service, the reality has been that purchasingdecisions are mostly decentralised and that the NPS has had to engage multiple, fragmentedbuyers within sectors to implement category strategies and realise savings. For exampleapproximately 4,000 schools have been supported under the Energy framework.

c. Finding: Clear career path for procurement within the Public Service is notavailable

In general, procurement is still perceived as an area which offers limited career opportunitiesand development prospects. For example anecdotal evidence captured through interviewsreferred to resources within the civil service been encouraged to continue their career outside ofprocurement having recently finished a Masters qualification in Procurement.

Relatedly only 12% of procurement resources identify themselves as having a full-time role inprocurement, with 43% indicating that procurement formed only a minor part of their role withinthe organisation.

If the State is to realise the “substantial savings” that it hopes to deliver from its spend, then itwill need to invest in skills development, define clear career paths and position procurement asan attractive place to work.



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d. Finding: No integrated competency development programme

The NPS, in particular, has made progress in up-skilling its own people and trainingprocurement staff across sectors in tendering processes and how to be compliant with EUdirectives.

NPS and CSSO have produced a standard contract templates for goods and services thatare currently available to all sectors through the Procurement.ie buyer portal that has helped toreduce the effort required to run a tendering exercise and to develop consistency in how thePublic Service go to market.

However, in a recent survey of procurement staff across the Public Service carried out by theNPS, only 54% of respondents stated that they were using the template and 65% ofrespondents stated that their own Departments templates were better suited to their needs.

The same survey found that less than 23% of resources who procure goods and services aspart of their role have a procurement or supply chain qualification, and over 46% have notundertaken any public procurement training within the last 3 years.

Standard roles and responsibilities are not defined for procurement across the Public Serviceand national training programmes have tended to be one-size fits all and focused oncompliance. There are many different types of procurement resource currently working withinthe Public Service from part-time buyers responsible for processing purchase orders to seniorcategory managers responsible for managing national categories of spend. The skills andcompetencies required to successfully carry-out these roles are very different, and training anddevelopment needs should be correspondingly so.

e. Finding: Limited cross-sector communities of practice or opportunities forprocurement management to engage one another

The NPS run bi-annual procurement seminars that are open to Public Service procurementprofessionals across the State and have been well received. Outside of this event, there is noforum, or structure, currently in place to enable networking and information sharingamongst procurement staff . It has been evident from interviews that there are a lot ofinitiatives being implemented by some sectors to develop their own internal procurementcapability and that, while there is some ad-hoc sharing of lessons learnt and practices betweenprocurement groups, procurement organisations operated largely in isolation from one another.There is a lot of re-invention of procurement practices taking place.

Exceptions are in evidence at a sector level, such as the National Local Authority ProcurementGroup (NLAPG) that was recently established within local government.

4.4.7 Procurement Technology

Procurement Technology is concerned with understanding the following:

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 providevisibility 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



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a. Finding: eProcurement systems are fragmented

There are a wide variety of systems currently in operation across the Public Service that, to avarying degree, are being used to enable procurement processes within sectors. For examplethere are over 30 instances of Agresso in use across Local Authorities while VECs use SunSystems solutions.

These systems are highly fragmented with over 4,000 separate instances of financial systemsacross the State when primary and secondary schools are taken into consideration. In contrastto leading organisations, simple buying is still an overly manual process for the majority ofsectors with manual support required to approve, submit requisitions and issue a purchaseorder to suppliers.

Based upon the data gathered and interview feedback, there would seem to be a significant

number of administrative staff working across the State supporting transactional procurementactivity as part of their role. These resources could be freed up to support other areas of thePublic Service through greater utilisation of e-Procurement technology, amongst other things.

b. Finding: Central eSourcing systems are used and further upgrades are inprogress

The e-Tenders sourcing solution, which is maintained by the NPS, is being used by the State tomanage above threshold tenders in compliance with EU procurement guidelines. Localauthorities have also rolled-out their LA Quotes tool, developed by Kerry County Council, tosupport requests for quotations nationally.

The current version of eTenders only supports basic tendering activities, including tendernotification, communication and awarding. The system is being upgraded and future versionswill support tender appraisal, e-auctions and improved communications management. While notin place at the time of writing, the eTenders upgrade is also expected to include integratedcontract management and supplier relationship management functionality.

However it is also worth noting that there is still a substantial number of tenders that do not gothrough eTenders. Over 30% of respondents to a recent NPS survey of procurement staff statedthat 50% or more of the contracts they put out to tender in the last 3 years were not advertisedthrough eTenders.

c. Findings: No central contract database

There is no central contracts database or contract management process, and visibility andcontrol of contracts varies greatly between purchasing groups. An Garda Siochana, forexample, use a third party solution to centrally manage their contracts, while the DefenceForces and Department of Agriculture, Food and Marine are in the process of building aconsolidated database of all their contracts.

The fragmentation of purchasing systems and limited integration between sourcing and orderingsystems has meant that, while there is focus across the State on ensuring that costs are beingmanaged, the State does not have the systemised control over buying channels to enforcecompliance with contracts and reduce maverick spend.

A new version of e-Tenders is scheduled for deployment by the end of 2012 that will include

integrated contract management module and will go some way to resolving this issue forcontracts tendered through e-Tenders.



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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 centralvisibility of accurate, regular and timely State spend data. Significant manual effort iscurrently required to extract spend data from across the State’s financial systems, cleanse andnormalise the data so that it can usefully be analysed.

Access to quality spend data and spend analytical tools, which helps procurement understandwhat is being bought, who is buying it and who they are buying from, is critical to informingprocurement strategy and setting realistic targets. The NPS are currently using Microsoft Exceland 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 Recommendations5.1 Introduction

The review of the central procurement function has identified findings that have beenconsolidated in to a number of common themes across Public Service procurement that need tobe addressed in order to ensure and effective and sustainable procurement organisation:

Figure 5.1: Summary Observations and Recommendations

The above themes are not new to Public Service procurement and have been identified inprevious reports, including the PWC Strategy for the implementation of e-Procurement in thePublic Service report in 2001. Actions have been taken including the establishment of theNational Procurement Service in 2009 but we have not seen a significant impact on the coreunderlying themes. In order to ensure the successful implementation of recommendations, weneed to address the core issue that is “Why has the central procurement function not beensuccessful in implementing procurement policy, frameworks and savings ?”

The report has identified annualised potential savings of between €249m to €637m that can beachieved through a centre led strategic cost reduction programme, but this will requiresignificant investment in the capability and capacity of procurement to deliver the benefit.



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This section will outline the following:

1. Addressable Spend and Savings that can be delivered2. Capability and Capacity areas that need to be addressed in order to deliver a sustainable

procurement organisation:

- Strategy and Governance

- Sourcing and Category Management

- Supplier Relationship Management

- Requisition to Pay

- Workforce and Organisation

- Technology

5.2 Spend and Savings

5.2.1 Recommendation for Addressable Spend

From a total addressable spend of €6.9bn, as defined in section 3.1, we have identified thefollowing top categories of goods and services:

Table 5.1: Total Procurement Addressable Spend (2011)

The review conducted a spend analysis and validation of spend using existing financial estimateand procurement spend data together with supplementary contract, pricing, invoicing andsupplier data to validate the high level spend categories. UNSPSC, NATO NSC and e-ClassMedical Categorisation standards were combined to develop a single combined categorisationof spend that was validated with individual departments and agencies for accuracy. The reviewidentified sixteen (16) high level categories of common goods and services that are purchasedacross 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 furthergranularity given that this was a rapid six week review with multiple data sources.



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In order to effectively manage these categories we recommend that a category assessment be

conducted to determine where the ownership of the category should lie. At present there is noclear ownership and responsibility for managing common categories at either a national, sectordepartment or local level and this creates duplication of effort and dilution of spend leverage.

Categories of goods and services that have high levels of standardisation, are commonly usedacross all sectors and that have multiple users, e.g. stationery and office supplies, are deemedsuitable to be managed by procurement from a central perspective. Categories of goods andservices that are non standard, have single or few users and that require a high level oftechnical knowledge, e.g. defence supplies and medical suppliers, are deemed to be notsuitable to be managed from a central procurement perspective and are recommended to bemanaged either within the specific sector or department with the usage.

A standard category assessment model, in Fig 5.2, outlines the objective method of

understanding the characteristics of the demand and supply side of the category. This methodenables us to determine whether or not a category is suitable for central management.

Figure 5.2: Category Mapping Framework

Following the above high level category assessment exercise it has been estimated thatprocurement addr essable 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 withinsectors.

The categories deemed suitable to be centre led are contained in the Table 5.2 below thatshows the level of spend within each category across the sectors.



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Table 5.2: Target Centre-Led Categories

The common categories identified are used by all Departments with many buyers and aresuitable for a centre led procurement approach.

Table 5.3 below describes the categories not deemed suitable to be managed from the centreand to remain managed within Sectors or Departments.

Table 5.3: Target Sector/Department-Led Categories

5.2.2 Saving Opportunities

Accenture’s approach to estimating the savings opportunities was to conduct a high level

analysis of the categories, buyers and suppliers in use in order to determine the following:Category Maturity – For each common category it was identified how and what is being boughtin order to gauge the level of sophistication and maturity of the category. This was benchmarkedagainst Accenture’s Global Category Management Models and market research on categorystrategies to gauge how mature the categories are from a supply perspective.

Buyer Maturity – Interviews were conducted for each category which analysed the internalbuyers and their contracts to determine the level of sophistication and maturity in their sourcingstrategies. For each category the level of contracts in place, percentage compliance, totalnumber of suppliers, requirements gathering approach, sourcing strategy and historical savingsachievement was researched. This data was benchmarked against Accenture’s HighPerformance Procurement databases to validate areas of opportunity.

Ease of Adoption/Implementation – Procurement and key business stakeholders wereinterviewed to ascertain the level of interaction and support for procurement led initiatives. Thiswas validated against the buyer interviews contract, spend and compliance data captured in



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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 aretypically achieved across indirect categories in the Public Service.

Table 5.4: Breakdown of Estimated Savings Target Range (Annualised)

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 Travelwithin the Education sector for the school bus scheme that is deemed already contracted withlittle 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. Therevised figure of €4.98b is used as the basis for savings calculation.

Savings ranges have been recommended based upon Accenture’s prior experience with publicsector strategic sourcing engagements with similar spend and supplier fragmentation.Supporting this is our global category and marketplace knowledge that provides insight into howadditional benefits can be derived across common categories.

Our calculations have factored in the geographical spread of spend across the country and thecurrent maturity level of buying across sectors. In addition we have factored in the currentframeworks, compliance and savings achieved to date.

For each category we have estimated a specific low, medium and high savings range that couldbe achieved through a combination action that we have described as of demand and supplylevers. The low range figure is based upon the achievement of 60% contract compliance to the80% addressable spend figure. The mid range and high range figures are based upon theaddition 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 bystrategic sourcing and contracting. However, there still remains significant leakage to localalternative sources. With a focus on contract compliance and proactive demand challengeinternally we typically expect to deliver increased savings ranges up to 80% to 90% compliance.

5.2.3 Demand and Supply Levers

The traditional focus for procurement savings is on third party supplier price and cost reduction.This cost typically represents about one third of the total cost to serve. Additional savings canbe achieved through a combination of looking at what, why and how the Public Service conductcertain activity and challeng demand. By addressing the internal and external elements thePublic Service can achieve an average of 10% cost reduction through a strategic cost reductionprogramme.

In order to address the immediate and on-going need to reduce and manage cost it has beenrecommended taking a total cost of ownership approach. Focusing on the third party suppliercost alone will deliver a tactical short term efficiency that is limited in scope and is unsustainablewithout a significant organisation transformation. Third party cost typically only account for asmall percentage of the total cost to serve.

Total cost of ownership looks at the end to end business process and addresses the cost toserve from four perspectives:

1. Strategy and Policy – Review the requirements from a make or buy decision and considerif there is a better way of doing it. For example, provide this service internally (make) or usingthird parties (buy). What is the internal total loaded cost added to third party cost over a fiveyear period. Is this a fixed or variable service with changes in technology and innovation? Whatare the risks involved in doing or not doing this? Is there a way to control this from a policyperspective and reduce the direct involvement?

2. Demand – Identify if there is a justified need for this product or service? Can we stop buyingit? If there is an on-going justified demand can we reduce the demand or quantity. Implementinga cost conscious culture of challenging demand is very effective in controlling total cost.

3. Specification – Following demand challenge is specification review. This is where thePublic Service look at what they are buying and standardise the requirements. For example,how many types of stationery pads and blue pens are used and how many types are actually



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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 averagespecification. Again, using stationery is a leading branded ballpoint pen required or will ageneric pen do the job just as well. Challenging the specification in both these ways will reducethe cost to serve.

4. Price – Finally, the total cost from the other three aspects has been addressed. This isachieved through consolidation of suppliers and competitive negotiation. Leveraging NationalFrameworks and volume through competitive tendering will achieve substantial results forcommon 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 havecompiled an opportunities list highlighting the levers that can be used in each category.

Table 5.5: Breakdown of Category Savings Levers

Table 5.5, Breakdown of Category Savings Levers, highlights the demand and supply levers foreach 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 uponthe 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 thestrategic sourcing and price reduction that can be achieved through tendering. Usage refers tothe internal ability to reduce the usage of products through proactive demand challenge and



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limit usage at point of delivery/usage. Price can also be influenced by specification

standardisation and rationalisation of the range of products in office supplies. Compare thisapproach to Medical supplies where there is less opportunity to change specification or usagedue to patient needs and clinical product approvals.

A detailed category analysis and strategy development is required for each major category andindividual sourcing project and during this exercise the specific levers will be determined.

5.2.4 Sourcing Wave Delivery

To implement the identified opportunities it is recommended that the creation of a strategic costreduction programme sponsored by the CPO governance model outlined above is created.

In order to successfully implement the category specific initiatives a phased approach to

sourcing projects prioritised by the level of savings potential and the ease of implementation hasbeen suggested.

Figure 5.3 Strategic Sourcing Wave Plan is a suggested prioritisation of category initiativesacross sectors based on our high level understanding of the spend, opportunities for savingsand ease of implementation internally and externally. The review did not consider thedepartmental and sectoral project dependencies within the six week timeframe. The proposedapproach focuses on initial quick wins and improvement in framework compliance in categorieswhere there are typically least amounts of resistance and impact of change on the business.The exception to this is the medical category and this is suggested to start and continue acrossall phases given the scale and timeline involved in implementing clinical trials and contracts.This approach allows procurement to build momentum before approaching more traditionally

resistant categories such as professional fees. The suggested approach takes intoconsideration that there is also a limit on the level of change that can be taken on by local enduser departments before there is an operational service delivery impact. This is the reason whythe activity is spread out in three waves covering two years.

It is recommended that a detail strategic planning exercise is conducted in order to validate thefollowing recommended approach. The initial six week analysis did not cover a detailedintegrated planning and dependency mapping in order to finalise a detailed sourcing plan. Thisactivity should be completed together with a validation of national, sector and Departmentalinitiatives as part of an overall programme for cost reduction.

It is important to note that strategic savings are typically delivered over a number of sourcingwaves, prioritised to deliver bang for buck and build momentum. The ability to implement and

deliver savings is limited by the capacity within procurement to deliver and the ability of end userDepartments to manage the level of involvement and change while maintaining businesscontinuity. This is the reason a senior cost reduction programme governance with sponsorshipand participation from senior leadership across all sectors is recommended.



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Figure 5.3: Strategic Sourcing Wave Plan

The above sourcing wave is a high level view based upon a high level six week spendassessment. It will require a detail spend assessment at a more granular level with a detailedintegration and alignment plan with sectors and Departments before a final plan is executed.

5.3 Opportunity Identification for Non-Addressable Spend

During the review of central procurement a data gathering and spend analysis was conducted inorder to identify procurement addressable spend. Procurement addressable spend is defined asspend that has the potential to be influenced directly by procurement using either demand orsupply strategies to influence price, quantity and or specification.

The scope of the procurement review included annual reoccurring operational expenditure butexcluded capital expenditure. Capital Expenditure is estimated at €6bn and there may beopportunities to leverage the procurement review for common categories and generate savingswithin the capital expenditure. We recommend a detailed review of capital expenditure in aseparate exercise to determine the opportunity.

From an estimated annual reoccurring revenue spend of €9bn we identified an annualprocurement addressable spend of €6.9bn following a data gathering, cleansing, mapping andvalidation with sectors and Departments.

The remaining €2.1bn of spend was classified as either non-addressable or addressable but notaddressable by procurement. The reasons behind spend being considered non-addressablewere either where the spend was clearly not a procurement addressable item, e.g. wages orgrants, or where we did not receive granular enough information and were unable to validate thespend. We believe there is spend within this that could be classified as procurementaddressable but within a short six week period we were not able to identify the actual categoryor spend, supplier or buyer. Examples of the spend deemed un-addressable by sector areoutlined in Table 5.6 below:



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Table 5.6: Non-Addressable Spend by Sector

Addressable spend but not by procurement is a classification we have developed where thespend 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 Departmentof 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 butnot by procurement.

Recommendations for non-addressable spend:

During the review we identified a number of significant spend areas that are addressable but arenot influenced or controlled by procurement today. The following areas are examples of whereprocurement can add value in this category of spend and we recommend they are actioned.

1) General Medical Scheme – this category of expenditure relates to the portion ofmedicines dispensed through pharmacies and doctors under the medical card schemeand is controlled by the Department of Health with direct Ministerial intervention and

price setting.This expenditure has three components; drug supply; pharmacy fulfilment or GP prescriptionand fulfilment.

The drug supply comes from the same suppliers as the HSE and we recommend thenegotiation and control of this through HSE procurement who specialise in drug procurement.This will allow greater leverage and control of the spend and specifications through HSE clinicalengagement and procurement negotiation. In addition the standardisation of drugs and adoptionof generic medicines through policy within the scheme would reduce total cost and removesupplier led decisions by GP’s on prescriptions.

The pharmacy fulfilment recommendation is to challenge the model and to consider alternativefulfilment models, including direct fulfilment either from the HSE central logistics centre or from

an outsourced logistics provider. This model would utilise online prescription for patients eitherfrom the GP’s office, hospital or community care centre and would result in a large reduction infulfilment cost.



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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 ofHealth. To influence this price we recommend competitive price negotiation againstinternational sources and the adoption of cost plus model

5.4 Strategy and Governance

In order to address the potential savings and on-going management of spend a strategy isrequired for procurement that outlines its role in the planning, execution and monitoring of spendand savings.

Within our findings we have identified pockets of excellence in procurement across the PublicService within specific Departments and agencies. The challenge however is that there aredifferent customer groups for procurement with very different levels of maturity and associateddemands. At the centre, procurement is expected to deliver value for money and savings for thetaxpayer with the focus on national framework implementation and benefits tracking. Acrosssectors there are a variety of requirements, from immature Departments who want an end toend purchasing service to the mature sectors who want additional strategic sourcing capacity,supplier performance metrics and spend analytics. Customer expectations and satisfaction withservice levels are very different due to a lack of a consistent strategy and approach to managingprocurement services.

In order to address these issues we recommend that shared vision for procurement’s role in themanagement of spend be defined, shared and supported.

The recommended procurement strategy is for the development of a single, integrated

procurement function accountable for policy, sourcing and category management of commoncategories and support operations. This should have senior leadership and we thereforerecommend the appointment of a Chief Procurement Officer (CPO) within a new NationalProcurement Office (NPO).

We recommend the NPO prioritise visibility of spend, creation of the necessary governance andsupport model and the delivery of strategic savings.

The recommended approach has been developed from both interviews conducted with publicsector procurement organisations and Accenture’s Supply Chain global insight and thoughtleadership. This included interviews with senior procurement leaders, including the CPO of theUK Cabinet Office, and supply chain leaders in the UK, Canada, Sweden, the Netherlands andthe US. This provided context and insight on the lessons learnt and key success factors that

were adopted in other geographies. Accenture’s global insight and thought leadership in publicservice procurement was included, specifically “Seven Procurement Initiatives that can stretchPublic Sector Budgets”, “Consip Spa spearheads efforts towards high performance ingovernment procurement” and “High Performance through Procurement in Public Services”

In the UK and Europe we have compared the procurement strategy to understand both thechallenges and approaches taken to ensure effective delivery of procurement. The consistentthemes across Public Service procurement organisations have been the lack of governancemodel; organisational alignment and visibility of spend. In each benchmark discussion theapproach taken has been to redevelop the procurement strategy into a strategic centre ledorganisation focused on common categories of goods and services, supported by visibility ofspend through investment in technology and the support and engagement of senior civil

servants in key Departments to effect sponsorship of initiatives. Another key learning from other public service organisations is that automation will not solve allissues. In particular, it is limited value to implement fully automated compliance monitoring and



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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 moreeffective that trying to automate a compliance monitoring reporting capability initially.

5.4.1 Operating Model Recommendations

To implement the strategy, the procurement function needs an effective operating model. Theoperating model describes the interactions and responsibilities between the accountableDepartment, the central procurement function and the sector and Department procurementfunctions.

We have learnt from our findings that the current operating model is not effective and requiresrestructuring.

Earlier we discussed the various stages of procurement maturity. This evolution helps usunderstand the different procurement operating models and how they support current and futurePublic Service procurement needs.

This in turn helps to identify the most appropriate one for implementation in the Irish PublicService.

The key criteria to be met for a procurement operating model are:

Accountability – The organisation must be accountable for procurement policy and delivery ofsourcing and savings. It must be able to achieve its financial and customer goals.

Alignment – The organisation must be aligned across central support functions with a

consistent approach to managing policy and strategy across categories.

Clarity – The organisation must have clearly defined roles and responsibilities for the central,sector and Departmental procurement functions

Enablement – The organisation must have the right people, processes and technology to effectdelivery. It must be easy to implement and adopt and efficient in operation.

Visibility – The organisation must have visibility and control of spend.

Four procurement operating models were considered and outlined in Figure 5.4 below:

Figure 5.4: Procurement Operating Model Options



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Decentralised – There is no central procurement function and every Department and

sector is focused on its own needs. Procurement reports to the local Department.National policy guidelines exist but local Department policies are put in place to meetlocal needs. Procurement functions reside in local Departments or sectors and there islimited co-operation across sectors.

Hybrid Decentralised – A central procurement function exists but is limited to policy co-ordination and category strategy advice. Sectors and Departments have their ownprocurement functions who report within sectors and sourcing and buying is done withinthe sectors. There is limited co-operation between category buyers across sectors.Procurement operations are managed within sectors and Departments.

Hybrid Centralised – A central procurement function exists and has accountability andresponsibility for policy and sourcing for common categories of goods and services.

Procurement is a centre led model with sectors limited to sourcing proprietary categoriesagainst central policy and procedures. Sector procurement reports within the sector buthas a dotted line to the central procurement function. The central function managescommon categories of goods and services with cross sector category implementationteams. In addition the central procurement function provides an operational sharedservice for Technology, Reporting, Compliance, Master Data Management, Training andassisted buying centres for local adhoc purchasing.

Centralised – A single centralised procurement function exists for all sectors and ishoused in a single location. All strategy, policy and delivery are managed from thecentre.

An additional variation of the operation model would be to outsource the procurement

function. This model is described below but is not recommended at this point in maturity.We would recommend reviewing this following the completion of the procurementroadmap. This is described below.

Outsourced – The central procurement function would retain strategy and policy withdelivery outsourced to a third party. Procurement is process driven with clientrelationship management, demand management, strategic sourcing, assisted buyingand operational shared services managed by a third party. Procurement manage theservice level and performance against a balanced scorecard.

The central procurement review identified the current operating model at a national and sectorlevel as a Hybrid Decentralised.

Of the operation model options described above, we recommend the Hybrid Centralised modelbecause it provides the ability to drive efficiencies from the central function, leverages buyingpower and removes duplication of effort across procurement functions.

Sector and Departmental procurement officers retain their responsibility for procurement servicedelivery 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 fitsall approach. This model is not likely to be effective considering the scale and complexity of thePublic Service. It could also lead to a reduction in the local knowledge and engagement on theground 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 acommon approach to procurement and to provide leadership and direction on strategy, policy

and strategic sourcing. Decentralised models focus on local needs and dilute efficiencies inprice, 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.

5.4.2 Recommended Procurement Operating Model

The recommended procurement operating model is a Hybrid Centralised Model. The modelenvisages the following elements:

Establishment of a new CPO accountable for national procurement strategy, policy,implementation and compliance

The CPO role should be established as an office under the aegis of the Department ofPublic Expenditure and Reform.

A Policy and Compliance function responsible for policy, guidelines and compliance for

procurement at an EU, National, Sector and Department level. A Centre Led Strategic Sourcing and Category Management Model with responsibility

for common categories of goods and services across all sectors. The model wouldprovide a central procurement function responsible for strategic planning, categoryexpertise & leadership, demand management, framework delivery, savings target andperformance management responsibility.

A Procurement Operations function with responsibility for procurement technology,master data management, reporting, communications, training and development,operational helpdesk, assisted buying centres of excellence and compliance monitoring

Sector and Department Procurement responsible for proprietary categories of goods andservices

Sector and Department Procurement would continue to report within sectors but have adotted line responsibility to the CPO for policy, strategy and implementation compliance

5.4.3 National Procurement Office (NPO) Organisation Structure

We recommend the establishment of a new National Procurement Office (NPO) as a separateoffice under the aegis of the Department of Public Expenditure and Reform. This will provideprocurement with the credibility and support required in order to drive strategic cost reductionacross sectors.

We recommend that the NPO be responsible for procurement strategy and policy, sourcing andcategory management and procurement operations support. This will ensure alignment across

procurement functions and address the gaps identified in our findings.

In order for procurement to be effective it requires senior stakeholder engagement andinvolvement in early planning discussions with senior officers across sectors. We haverecommended a governance model that will require significant interaction between procurementleadership, policy and category management functions and senior department officials in D/PERand across sectors. For this to be effective we recommend the NPO is setup as an agencylocated in Dublin. The location will also facilitate greater sponsorship participation.



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Recommended NPO Organisation Structure:

Figure 5.5: Recommended Central Procurement Organisation Structure

5.4.4 Policy and Compliance Function

We recommend the establishment of a central policy and compliance function that combines theexisting central Policy Units and is responsible for the development and implementation ofnational procurement policy, including the incorporation of EU directives, national policies andsector requirements into operational policies, including sourcing guidelines and specific policieson SME participation and sustainability.

The unit would also be responsible for construction policy and the development of specific

strategies and policies on SME participation and sustainability.

We recommend the development of SME participation targets, including the indirect supplychain through the targeting of percentage of suppliers supply chain to be with SME’s. Werecommend the adoption of open competition as a preferred policy for competitive competitionand to allow SME participation.

We recommend that sectors and Departments maintain their ability to develop additionalspecific policies to complement national policy but that they cannot contradict national policy.

5.4.5 Sourcing and Category Management Organisation

Following our identification of common categories of goods and services we recommend that

the sourcing and category management function takes full responsibility for the developmentand management of sourcing strategy, strategic planning and management of nationalprocurement frameworks within those categories.



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Category managers should be appointed for the key categories outlined below and provide

leadership and direction within their category.

Figure 5.6: Recommended Central Category Management Structure

Within central government we recommend that ICT category procurement is led and managedwithin the NPO with the CMOD organisation maintaining the technical specifications andapproval from an IT perspective. We further recommend the adoption of the best practicesourcing approaches with CMOD be extended across all categories to achieve maximum valuefor money.

NPO Category Managers should have deep category expertise and create cross sectorcategory 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 frameworkimplementation but that they take direction from the category manager in the NPO andparticipate in the category team in developing requirements, defining sourcing strategy. Theyshould work as a team in completing tender, evaluation and framework completion.

The adoption of these strategies, and roles and responsibilities will remove the duplication ofeffort across procurement functions today.

In addition we recommend the consolidation of all procurement groups and resources withinsectors 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 andcategory councils should be tasked with developing and implementing demand side levels fortotal cost reduction, including demand challenge, specification change, product substitution andinternal controls and policies to influence behaviour and reduce cost.

5.4.6 Procurement Operations

Following our review we identified the need to provide standard processes, standardstechnology and operational supports from the central procurement function.

We recommend the setup of a procurement operations function within the NPO withresponsibility for:

Development of procurement technology strategy, including definition of informationtechnology requirements and the development and implementation of systems tosupport procurement across all sectors



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Development of savings definition, measurement and the implementation of tools to

track savings Development and implementation of procurement reporting and compliance, including

metrics definition and reporting

Development and implementation of supplier and contract databases across all sectors.

Procurement training and communications, including the development of the curriculumand management of training programmes

Development of business requirements definition, development and implementation ofall common procurement processes and systems including e-sourcing, project pipeline,contract administration, e-auctioning, e-procurement, master data management, pcards,savings database, supplier database, categorisation, portal and content managementand spend analytics

We recommend the immediate prioritisation of spend analytics, a contract databaserepository, categorisation definition and a pipeline project plan. These recommendationsare prioritised as they are the foundation for a successful procurement organisation.Without visibility of spend a procurement function is not in a position to define spendmanagement prioritises, monitor contract performance, contract compliance levels andto gathering detail requirements for contract renewals or new spend initiatives

The report has already identified potential savings but in order to start the strategicsourcing projects the procurement organisation needs to have granular spend usageinformation that is accurate and timely. The prioritisation of spend analytics, contractdatabase creation, categorisation data management and pipeline planning will enablethe successful implementation and monitoring of performance against the plan

We recommend the redevelopment of procurement training. This should move from thecurrent approach of raising the overall level of knowledge to specific targetedprofessional procurement development to address gaps in capability. We recommend afuture capability and capacity detailed analysis is conducted and specific training andprofessional development programmes are put in place for central, sector and localfulltime procurement resources

Figure 5.7: Recommended Central Procurement Operations Team Structure



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As part of our review of current operations we identified a number of sector specific

initiatives aimed at improving procurement co-operation and support for tactical andoperational needs

Sectors have started to develop geographical approaches to common categories ofsupply from a procurement support perspective. These initiatives are welcomed butthere is a lack of cross sectoral co-ordination to these initiatives. Sectors are looking tothe centre for direction and strategy

We recommend a phased approach to procurement shared service operations due tothe size and complexity of the challenges

With the development of national frameworks and adoption uplifts there will be a need to startproviding additional tactical support for lower level sourcing projects. Initial sectoral procurementinitiatives 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 procurementsupport services across sectors, reducing duplication and allowing additional procurementsupport 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 forgoods and services such as IT equipment, consumables, maintenance, print and stationery andutility services. These are supported through local authorities procurement who tender andimplement supply agreements. Local administrators act as part time buyers in managing thelocally 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, SocialProtection welfare offices, Central Government agency offices for the revenue commissioners,port authorities, customs offices and National Roads Authorities all with the same need forgoods and services from common suppliers.

At present all these local needs are supported from multiple sectoral or central procurementfunctions with duplication of effort.

Within sectors there are good initiatives underway to develop cooperation from a tactical andoperational buying perspective but there is a need to co-ordinate and co-operate across sectorsfor 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 providestandard purchasing helpdesk support, adhoc spot buying project support and provide on-goingcontract compliance monitoring. Examples of the types of services would be purchasing cardimplementation and support for schools, local ICT maintenance and support contracts for gardaand local authorities, local hospital IT hardware and consumables.

5.4.7 Sector Procurement Recommendations

Within the Health sector, we recommend as an immediate priority the centralisation ofprocurement resources across the HSE and HPSG into a single procurement unit within theDepartment. Health sector central procurement should prioritise the adoption of NPO ledcommon category initiatives and focus their sector specific sourcing on medical specific

categories.

Within health there is substantial opportunity to reduce total cost to serve but werecognise the capacity constraints within the current procurement function



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We recommend the immediate benchmarking of medical specific spend on large spend

areas such as drugs and medical devices and the development of targeted costreduction initiatives utilising internal and external capacity. Consideration should begiven to alternative commercial models to incentivise the delivery of service and costreduction

Within local government we recognise the development of a centralised approach tomanaging common categories and recommend the creation of a local authorityprocurement function within the CCMA’s remit. We recommend that the local authoritycentral procurement function be responsible for participation with the NPO strategicsourcing function for common categories and take direction from the centre. In additionwe recommend the local authority central procurement function be responsible for sectorspecific procurement policy and the sourcing and category management of non-commoncategories, including the setup and management of regional geographic buying centres

Within Education we recommend the Department of Education and Skills procurementfunction takes responsibility across the sector with responsibility for procurement acrossprimary, secondary and third level education as well as the central Department

We recommend the development of a supplier segmentation model for the educationsector with the establishment of a sector procurement team to conduct the sourcing andcategory management of non-common categories. We also recommend the sectorprocurement function has responsibility for participating with NPO strategic sourcingcategory teams, including requirements gathering, tender participation andimplementation delivery

We recommend the appointment of dedicated fulltime procurement officers for primary,secondary and VEC schools/colleges reporting into the Department of Education andSkills central procurement function. This reporting line is recommended to ensureobjectivity and accountability. We recommend the resources are embedded across theprimary and secondary school functions, specifically the ACCS, CPSMA and the JMB forsecondary schools

For education we recommend the implementation of purchasing cards for common itemsas a priority across the sector to enable visibility of spend. In addition, we recommendthe prioritisation of common consumable items and ICT maintenance and supportsourcing and the implementation of vendor catalogues to provide more efficient andeffective procurement

Within Justice and Defence we recognise the procurement compliance and operationalfinance shared services creation. We recommend the establishment of a sector

procurement function with responsibility for sourcing and category management acrossthe sector. The function should be responsible for participation in NPO sourcinginitiatives and requirements gathering, tender evaluation and implementation across thesector

Across central government we recommend the appointment of a procurement officerwith responsibility for the co-ordination, planning and execution of common initiativesacross central Departments. This is a key role that will avoid the NPO having to deal with16 Departments and their agencies on an individual basis and avoid getting involved inlower level tactical and operations support issues. The central government procurementofficer would be responsible for all procurement co-ordination, including requirementsgathering, participation in category teams and the implementation of frameworks across

central Departments and agencies



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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, sectorsourcing and framework implementation against policy.

5.4.8 Recommended Governance Model

For procurement to be successful it requires the appropriate level of senior sponsorship andengagement at all stages of the budgeting, planning and procurement process.

From our findings we have seen how a lack of awareness and understanding of procurementsrole and value can lead to a lack of support from senior leadership for procurement. This resultsin procurement being ineffective in influencing large spend decisions, leading negotiations anddelivering savings in time, quality and cost to the Public Service.

The central procurement functions were set up without a proper governance model resulting in alack of engagement and compliance with framework contracts.

There is a lack of senior sponsorship for procurement or forums for procurement to engageleadership in cost agendas. For procurement to be effective the establishment of a procurementboard is required, chaired by the sponsor and attended by senior leadership from each sectortogether with the Chief Procurement Officer. Through the establishment of a cost focused forumunder the aegis of the broader reform agenda, procurement can establish the right level ofengagement and support to drive change and deliver benefits at a strategic level.

To support the implementation of strategic cost reduction we recommend the creation ofcategory councils. These would be sponsored by procurement board members withpermanent Principal Officer representatives from the relevant sectors with responsibility

for spend in that area. The relevant NPO Category Manager would be a permanentmember and we would expect a technical lead from the relevant area, e.g. CMOD for IT.The role of the category council is to develop the category management strategy,including policy setting, demand management, sourcing strategy and executive decisionmaking on strategic sourcing initiatives, including implementation and compliancemeasurement. The category council report up to the governing procurement council onperformance, approvals, escalations and decisions

Procurement functions at the central and sectoral level need alignment and agovernance model to ensure the required co-ordination of policy, procedures,operational support and talent management. We recommend the establishment of aprocurement council, chaired by the CPO, and attended by the procurement leadership

from sectors together with the central policy, sourcing and category management andprocurement operations leads

Procurement governance requires senior civil service sponsorship and mandate forprocurement involvement in the early planning stages of spend. Procurement need tohave an effective communications and planning forum with senior leadership acrossgovernment Departments to ensure involvement and compliance to strategic initiatives



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The recommended governance model adopts six principles:

Figure 5.8: Procurement Governance Framework

1. Vision and Purpose – A clear shared vision for procurement and the objectives of thegovernance model within the context of the broader Public Service reform

2. Sponsorship and Mandate – Clearly defined executive sponsorship at ministerial andSecretaries General level which champions and endorses the governance and authority

3. Membership – A procurement board representing leadership across the Public Service withdefined roles

4. Process – A set of processes that enable the initiation, review and approval of categoryspecific 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 theprocurement council

6. Sustainability – The methods followed to embed the councils into the Public Service andenable the on-going delivery and management of spend

We recommend the NPO is sponsored by the Minister of State with responsibility forProcurement and the Secretary General of the Department of Public Expenditure and Reform.

We recommend the creation of a procurement board to govern the overall sustainableprocurement programme, chaired by the sponsor with permanent representatives from AssistantSecretaries General from each sector with responsibility for procurement. The CPO is also apermanent member.



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Figure 5.9: Procurement Board

We recommend the procurement board is given the accountability for procurementstrategy and objective setting, target setting, strategic cost reduction programme settingand performance measurement. The procurement board should be used as the vehiclefor ensuring objectives, targets and performance metrics are set and managed. Werecommend the council meets monthly to review the strategic cost reductionprogramme, individual project initiatives, approve decisions and resolve escalationsimpacting the programme

The Procurement Board should be responsible for procurement metric definition,measurement and performance tracking. Our findings from Public Service benchmarkinghave identified a number of key metrics that are recommended at a procurement boardlevel:

o Addressable Spend v Spend Under Management by Procurement (Frameworks)

o Spend Under Management v Contract Compliance/Adoption

o Spend Under Management v Savings

o Addressable Spend v SME Spend

o Addressable Spend v Sustainable Spend (Green)

o Days to complete procurement project

Category Councils should be setup for each major category of spend and be responsible for theplanning, target setting and alignment of spend across sectors. Category Councils are led by amember 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 theprocurement officers across sectors and are responsible for the category plan, projectrequirements gathering, supplier selection, negotiation, contract implementation andsavings recording

Figure 5.10: Category Council

The role of the procurement council is to act as the leadership team for procurement inthe Public Service, ensuring strategy, objectives and targets agreed by the ProcurementBoard are operationalized and that there is a management operation plan with jointaccountability and responsibility. The procurement council should be responsible for

ensuring policy, procedures, systems, resources and service levels are effective anddeliver against current and future organisational needs



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Figure 5.11: Procurement Council

5.5 Category Management Approach

With the implementation of a strategic cost reduction programme it is important to ensure thatthe benefits are sustainable. We recommend the adoption of a Category Management model forthe management of spend and suppliers.

Category Management is the on-going process of managing the products, services andsuppliers selected for each category, led by a category manager.

From our findings we have learnt that there is limited category management in operation acrossthe Public Service. A holistic approach to managing supply across sectors on a category basis,not a local, Departmental or sector level.

At present there are national and sector framework contracts in place and limited categorymanagement activity supporting this. Category management combines strategic planning,demand management, cross sector category led sourcing teams, contract compliance andsupplier performance management into a structured model for end to end supply chainmanagement.

We recommend that strategic sourcing and category management be centre led with cross

sectoral category teams working under the leadership of the central category manager forcommon categories. Examples of this are Energy Supply, ICT, Travel and Print and Stationery.The central category manager is responsible for establishing the cross sector category teams



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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 thecommencement of detailed category strategy plans, industry and market analysis in order todefine the sourcing projects and savings plans.

For sector specific categories we have identified the categories as either being suitable for co-operation or local requirements.

For categories that are suitable to co-operation we recommend the category being led by thelargest buyer with a national framework being implemented by the category team consisting ofthe relevant Departmental buyers. The reason for the largest buyer being recommended is thatthey will have the greatest leverage either in volume or value and is a more successful modelthat is in operation in an informal way today across sectors where co-operative buying isconducted. We recommend national frameworks be used for this co-operative procurement inorder to allow State wide access to the category if required. An example of this category iswithin Medical, where laboratory supplies, testing and chemicals are used within the healthsector, Universities, Garda and Prisons and Agriculture. HSE procurement would lead thiscategory from a procurement perspective with support and input from procurement in the otherDepartments. The technical category lead would be provided by the most knowledgeable areawith input from all other relevant departments following the Category Council model alreadydescribed in Figure 5.10.

Strategic Sourcing Methodology Recommendation

We recommend the adoption of a seven step Strategic Sourcing Methodology across all sectorsand categories, whether centre or sector led. This will ensure consistency in approach toplanning, requirements gathering, sourcing strategy determination, sourcing and contractexecution and implementation.

Our findings highlighted a number of different approaches and processes to sourcing andcontracting. While some elements were well documented, the broader Public Service did nothave a single consistent process other than EU Public Service Procurement Directives requiringopenness, transparency and equity.

We recommend the development of a consistent, fact based, objective evaluation and awardsprocess covering the broader seven step methodology.



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Figure 5.12: 7-Step Strategic Sourcing Process

EU Public Procurement Directive Compliant Sourcing Methodology

Figure 5.13: Strategic Sourcing Process (EU Compliance)



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5.6 Supplier Relationship Management

Our findings identified a number of different supplier management processes across sectorswith different levels of maturity. At a national level there is no standard process for supplierrelationship management where suppliers are segmented and there is an objective structuredapproach to relationship and performance management.

We recommend the implementation of a segmentation model for suppliers where suppliers aregrouped according to level of spend, criticality of the service and level of risk associated with thesupply. The Boston Scientific supplier segmentation model is recommended as a guide tocompleting the segmentation.

Figure 5.14: Supplier Segmentation Model

We recommend that all suppliers and categories, whether centre or sector led, are segmentedwith common categories managed from the NPO and proprietary categories managed within thesectors.

Typically a segmentation of suppliers will result in a pareto type distribution of spend andsuppliers with 80% of spend being with the top 20% of suppliers. Strategic procurementresources 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 strategicsupplier relationships, development of good will and deep product and supplier insight thatprovides a more competitive framework for tendering. We recommend that Tier 1(Partners) and2 (Strategic) suppliers, identified through segmentation, are managed from the central categorymanagement team with category managers appointed by supplier. It is not practical for seniorstrategic procurement resources to manage the smaller tiers of spend as the volume ofsuppliers grows exponentially and will require tactical and operational type support fromprocurement within sectors and local departments.

We recommend that the NPO strategic sourcing and category management own the strategicsupplier 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, projectdelivery, quality, innovation and savings. The model should outline the different relationshiplevels, activities, meeting format and frequencies.



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We recommend the development and implementation of a supplier performance dashboard is

put in place to provide visual measurement of suppliers across categories using the standardmetrics defined within the supplier relationship management model.

5.7 Requisition to Pay

The focus of the procurement review was not to assess the current procure to pay processes orinfrastructure, it did cover the framework compliance capability, master data management andvisibility of spend achieved through procure to pay data sources.

Our findings have identified over 4,000 independent financial accounting systems across thePublic Service with no procurement common standards for categorisation, mapping and spendanalysis.

5.8 Master Data Management

We recommend a holistic approach to developing master data management, informing strategicsourcing and enabling the capture of buyer and supplier data to manage and monitorcompliance.

From our findings we confirmed:

no current industry standards for spend categorisation are in use across the PublicService

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 reviewhaving to gather data manually from Departments and to build a categorisation to enableaccurate 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 similarclassification that is in operation across Europe for common categories of medical supplies. Fordefence we recommend the adoption of the NATO Supply Classification (NSC) that provides anindustry categorisation for common military and defence materials. For the remaining commoncategories of goods and services we recommend the adoption of the United Nations StandardProducts and Services Codes (UNSPSC) as it is the global standard for common goods andservices across multiple sectors and industries.

In order to achieve accurate spend visibility we recommend the adoption of the above industrystandards and the creation of a master data management team to setup and maintain theindustry coding and mapping of data sets across the public service.

We recommend the acquisition of a system agnostic master data management tool that willallow the mass data extraction, mapping and validation across the 4,200+ systems that weidentified during our review.

The first priority is to develop a baseline technical architecture allowing the development of atechnology interface to extract data from all financial and procurement systems on anautomated basis. We recommend the engagement of CMOD technical architecture skills tobaseline 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 enrichthe internal data and provide a holistic picture of spend, showing actual spend and category andcombining 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 contractdata and remove the complete supplier dependency for data. The combination of these two datasets 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 processesand tools within the shared services environment, building upon the success of the centralgovernment financial shared services. By using this approach procurement can developstandard sourcing and buying processes, enabling the increase of contract compliance. Thisactivity should be a second priority to establishing governance, spend visibility and embeddingstrategic cost reduction programmes. Developing a common vision and process for managingthese activities will allow a phased adoption of a common platform for purchasing across thePublic Service.

5.9 Technology

Our findings across procurement have identified a need for a strategy and ownership of allprocurement technology across the Public Service.

Our initial recommendation is to appoint a technology procurement owner responsible for baselining existing procurement systems and for the development of a procurement technologyroadmap across sectors.

We recommend initial prioritisation of accurate data capture and categorisation. This will allowstrategic cost programmes to capture the required spend visibility to make informed decisionson 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 PublicService organisations where the return on investment and time to deliver large scale p2pprocess reengineering is too high.

We recommend immediate investment in a spend analytics solution to develop a single andaccurate procurement addressable spend picture. The largest single dependency onprocurement is spend visibility and it is imperative that immediate steps are taken to maintainthe manual spend analysis developed from the review and to develop the detailed functionalityand technical specifications for a supplier solution to be acquired.

We recommend a spend analytics project team is created from across sectors, led by a seniorprocurement 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 weeksand conducting a request for information (RFI) in the marketplace, leading to definedrequirements 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 isimplemented across all sectors, providing the necessary detailed information to allow national,sector and local Departments analyse and inform their procurement decision making. The NPOshould 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 spreadsheet’s to more structured contract listings from SAP and OracleERP systems. We have also identified core usage databases including the SEI database onenergy 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 databaseacross 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 ownedand maintained by the NPO procurement operations function who provide a service to sectorsand Departments.

In order to conduct strategic sourcing and the implementation of framework agreements there isa need to provide a single and consistent process and technology for the execution of sourcingprojects.

Procurement across all sectors needs a standard tool to initiate and deliver sourcing andcontracting projects. We recommend the NPO set up a project team, again consisting of CMODand sector procurement managers to develop standard business requirements and to engagethe market in an initial Request for Information (RFI) in order to develop final specifications for atender for the provision of a solution.

5.10 Savings Definition and Measurement

The final key recommendation from procurement technology is the development andimplementation of a savings database.

In order to have a clear understanding of the sourcing performance, the saving definition,measurement and tracking processes need definition and adoption.

Over the past decade, many organisations in both the Public and Private Sector haveunderstood the potential value that procurement can bring. Many of those organisations havestarted a journey of transforming the way in which procurement is undertaken and haveinvested in increasing both the capacity and capability of procurement. In return for this

investment, organisations are seeking a return in the form of cashable savings and within atimely payback period. Building the case for change for procurement is compelling butevidencing the actual return is more challenging. The ability of procurement to show the realvalue of its activity will shape the agenda for the next decade.

Our findings have identified that there are no standard definitions or measurement for savingsacross all sectors. There is a need to define and implement a standard definition andmeasurement process.

The typical issues we identified in our review are:

There is an inconsistent understanding as to the different types of savings

There are inconsistent terms and definitions used to describe the different types of

savings

Savings methodologies that have been established are often based on forecast levels offuture expenditure rather than actual

Procurement savings are often delivered at the point of sale or purchase which negatesthe ability for the saving to be captured or realised fully

The measurement of savings at the point of invoicing can be costly and time consuming

From our experience the key enablers to tackling these issues are as follows:

A strong procurement governance framework that approves targets and monitorsperformance

A methodology for procurement savings including:o The establishment of a baseline from which to measure savings from

o Clear definitions of savings



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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.

5.11 Savings Calculation Methodology

For savings measurement, tracking and reporting to be credible we recommend the definition,agreement and implementation of the following key activities:

Figure 5.15: Savings Calculation Methodology



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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 pricingassociated with the award scenario recommended by the Project team. Savings due to pricereduction are calculated by multiplying the anticipated volume for the contract term by thechange in unit price under the approved award scenario

2. Usage – includes projected benefits from standardisation, product specificationimprovement, 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 witha project team effort. This savings result is generally calculated by subtracting the new orimproved process costs identified from the relevant historical process costs. A processsaving will occur where a reduction in FTE and an accompanying implementation plan tomanage that reduction has been put in place. For example, a process saving would not becounted where 30 minutes of an FTE’s time is saved each week, but will be counted wherethere is potential to realise a saving

4. Other – includes any other measurable benefits that do not fall within the Price, Usage orProcess categories but nevertheless impact Client benefits. Examples might include

preventions, recoveries and working capital improvements (i.e. payment terms (subject tothe Client’s prompt payment policy), inventory reductions, etc.)

5. Cost Avoidance – includes benefits related to Spot Buys and the rejection ofunsubstantiated price increase requests from suppliers that otherwise would have beenaccepted

We recommend that savings are tracked across each stage in the sourcing process to provide aconsistent and accurate benefit tracking. This following diagram describes our recommendedapproach:

Figure 5.16: Savings Calculation Process



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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 seenthe initial establishment of savings definitions together with savings targets by category on anannual basis. Initially organisations implement a manual recoding and reconciliation processwith the gradual automation of the process and potential incorporation of the savings with thestrategic sourcing, contracting and reporting module of a dedicated

We recommend the initial prioritisation of savings definition and initial manual reporting withinthe NPO. With the introduction of automated spend visibility and reporting we recommend thedevelopment of savings reporting that combines savings project targets, supplier contract dataand transactional order information.

In addition to the NPO recording savings we recommend the implementation of mandatorymonthly key figure reporting from Secretaries General to the CPO. This should contain key dataincluding total prior month spend, total prior month framework spend and total prior monthspend with SME’s. This will allow the NPO to provide a simple consolidated monthly spend andensure support for Frameworks across sectors.

5.12 People and Workforce

Procurement needs to have the required capability within its workforce and to be organised andstructured in an effective and efficient organisation structure.

Our findings have identified gaps in the capability and between support functions to enableeffective delivery.

With the introduction of a NPO organisation and the development of a category managementapproach to spend management we recommend the development of standard roles andresponsibilities for the procurement organisation.

In addition we recommend the development of a competency framework where roles arealigned to competencies with level of skill and experience.

Procurement should have standard role definitions and competencies ranging fromdepartmental procurement officers, sectoral procurement leads, central category management,central policy and compliance and procurement operations.

From our findings we learnt that training and development in procurement is a broad brushapproach to provide the same level of education in the procurement discipline but is not aligned

to competencies.

We recommend the adaptation of the current training and professional development programmeto requirements approach to building a high performance procurement organisation.

We recommend that a detail workforce planning and competency framework is developed forcentral and sector procurement and the completion of a detail capability assessment of thecurrent and future roles to identify the training needs.

Across the Public Service there are currently over 400 resources employed in procurementactivity. While there are different levels of skills and expertise the total workforce deployment isnot optimised.

We recommend the completion of a detail workforce planning exercise on completion of thedetail spend analysis and sourcing project planning. This will enable the correct sizing of thefuture NPO organisation and allow the prioritisation of procurement resource redeployment,



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upskilling through training and supplementing of resource either through recruitment or

contracting temporary support to deliver strategic initiatives.It is important to note that not all categories have the same level of complexity and strategicprocurement resource support. For example, Energy and Office Supplies have very differentmarket place and buyer characteristics that will dictate greater or lesser resource support. Inaddition, there is currently a high level of buyer duplication of effort both within sectors andacross sectors with procurement resources working on similar categories and with the samesuppliers.

From a global perspective our benchmark of €18.9m spend per procurement FTE wouldestimate 227 procurement resources are required to manage the €4b of common categories ofspend. At present there are 400+ procurement resources across the Public Service but they arenot all aligned to a consistent category management model. Training and professional

procurement development should be targeted at prioritisation of the strategic sourcing capabilityand analytics in order to support the reform cost reduction agenda.

Our findings also established a procurement attrition and knowledge loss issue due to no formalprocurement career path in the Public Service.

We recommend the development of a procurement career path within the central and sectorprocurement organisations in order to sustain the benefits identified. Without continuity ofprocurement capability and professionalism the Public Service will not be able to achieve orsustain the benefits identified.



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6 Implementation RoadmapThe procurement review has identified substantial savings that can be achieved through astructured approach to cost reduction, including demand management, strategic sourcing andon-going contract and supplier performance and compliance.

We have detailed our findings and recommendations on the current capability and capacity ofprocurement and recommended the short, medium and long term improvements required inorder to deliver and sustain benefits.

It is important to recognise that not all benefits can be delivered in the short term and thatparallel capability development will be required while delivery of sourcing and savings is inprogress.

Our suggested implementation roadmap is built upon the key principles of addressingimmediate opportunities while developing the building blocks of people, process and technologyto ensure sustainable progress.

The findings and recommendations within this report are based upon a rapid review ofprocurement and it is important to highlight that a detail planning and design project is requiredin order to develop the detail implementation plans and ensure alignment and understanding ofdependencies.

Our suggested implementation roadmap is phased as follows:

Figure 6.1: Proposed Implementation Roadmap



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6.1 Phase 1

This phase should focus on establishing the key pre-requisites to enable the start of strategicsavings projects. We recommend the prioritisation of the NPO organisation and governancemodel to drive implementation, detailed spend analysis and project planning. The key activitiesto be completed during this phase are detailed below:

Establish National Procurement Office

- Recruitment of CPO and Direct Reports for Policy, Sourcing and Operations

- Detailed Transition Planning Development

- Recruitment of Category Managers

Implement required Procurement Governance

- Procurement Sponsorship, Council and Category Team governance- Procurement Operating Model Development

- Development of Roles and Responsibilities

- Development of Processes and Procedures

Detail Spend Analysis and Planning Alignment

- Detail Spend Analysis and Category Profiling

- Spend Analytics Business Requirements and Sourcing

- Sourcing Wave 1 Planning and Target Definition

- Procurement Council Establishment

We recommend the establishment of a project team with separate work streams for NPOorganisational design, governance model and strategic sourcing planning.

The organisational design stream will see the development of the roles and responsibilitieswithin the NPO organisation, the assessment of current and future capabilities and transitionplans to support the migration from the current to future state.

The governance model stream will see the development of the procurement board, categorycouncils, procurement council and category team structures, roles and responsibilities andoperational agendas.

The strategic sourcing planning stream will see the completion of detail spend analysis acrosssectors and the integration planning and dependency planning for strategic sourcing projects. Itwill 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. Thestrategic sourcing waves will run over a number of fiscal years, dependent upon the internalcapacity and business change capability.

In parallel to the sourcing waves we would anticipate the development of system based spendanalytics and the development of procurement capability against identified needs in the designphase. We also recommend the development of the technology roadmap covering e-sourcing,spend analytics, e-procurement, contract and supplier databases, savings databases andsupport systems.

A key activity in this phase is the development and rollout of the procurement category councilswhere cross sector leadership and procurement establish the forums for tracking categorypolicy, sourcing and savings implementation. The typical deliverables from this phase are:



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Procurement Category Councils establishment for Wave 1 sourcing

Sourcing Wave 1 Execution Spend Analytics System Development

Sector Procurement Capability Development

CPO Technology Roadmap Development

The initial sourcing wave will take approximately six months to complete the sourcing andcontracting with implementation of the first initiatives commencing towards the end of thisperiod.

To support the completion of this activity and to manage the implementation and subsequentsourcing waves we recommend the on-going support of the PMO function and the specificStrategic Sourcing project support team. We would anticipate this team continuing through the

sourcing waves, supporting the category council establishment, policy creation, governanceexecution and implementation tracking across sectors. Our recommendation is that this supportinvolves dedicated category specialists for each sourcing wave to ensure maximum valuetargeting and delivery. The category subject matter expertise would supplement the NPO duringtransition where there may be capability gaps. This level of support would be anticipated tocontinue during the entire programme lifecycle.

6.3 Phase 3

In parallel to the rollout of sourcing waves, the procurement capability maturity will happenthrough the development and implementation of procurement operations, including adhoctactical and operational buying support, helpdesk functionality, operational reporting andcompliance and geographical shared services across sectors.

Our recommendation is to focus on delivering the initial strategic sourcing for commoncategories and sector specific initiatives with the support of governance model and operatingprocedures. Following completion of this we recommend the focus moving to tactical andoperational performance through the establishment of common support services.

We recommend the engagement of experienced implementation resources in the developmentand rollout of the model. This activity will require operational purchasing, shared services andlean process skillsets.



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Appendix1 Categories

The following Table indicates the categories that addressable spend was mapped to.

Spend Category Mapped To

Construction Architect

Civil

Electrical

MaterialsMechanical

Other

Quantity Surveying

Defence Aircraft

Aircraft Maintenance

Equipment

Equipment Maintenance

Naval Vessels

Ordinance EquipmentOther

Vehicle Maintenance

Vehicles

Vessels Maintenance

Facilities and Services 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 VehiclesMaintenance

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 Blood / Blood Products

Drugs and Medicines

LaboratoryMedical Equipment

Medical Gases



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Medical Supplies

Other

X Ray / Imaging

Office Equipment Copiers

Furniture

Multifunctional Devices

Office Equipment

Other

Plant Equipment

Equipment Hire

MaintenanceOther

Plant

Plant Hire

Print and Stationary 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 UnclassifiedUtilities Electricity

Fuels



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Gas

General

Utilities

Table A.1.1: Spend Categorisation Used in Review



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2 Data Sources

The following Table indicates the sources of the data used in this report

Sector Data Sources

Health Non-Pay cost 2009 -2011

"2011/2012 Outstanding PSR's"

"April 2012 PSR Report"

"PSR Received March 2012"

Procurement CTCRM BS - Key Result Areas

Procurement CTCRM BS - Logistics and Inventory Management Procurement CTCRM BS - Portfolio Medical, Surgical and

Pharma

Dashboard Analysis of National Invoices 2011 V3

Overview HSE Procurement Staff JS110612

Education Extract - Universities spend data by supplier

Extract – DEC VEC Goods and Services

Free Education Scheme – Income and Expenditure Sample forschools

The National Public procurement Service – “Cost Savings forSchools” Oct 2011

Extract – SCPN Partner Profiles Spend by IOT Partner Academic year 2010 2011

Extract – Procurement Update – IUA Council

Extract – Sample Income and Expenditure

VEC Corporate Procurement Plan Template

VEC savings sheet

Stationary Price comparison

Local Government Extract – Combined LA Procurement Data.

Interim Report to the Minister of the Environment, Communityand Local Government and the LGER IG March 2012.

Dún-Laoghaire Rathdown Procurement Review of Council

Expenditure in 2010 Extract – “Procurement Summary”

Dún-Laoghaire Rathdown County Council ProcurementGuidelines

Sligo CC Supplier and Spend extract

Local Government Efficiency Review Group Report

Dun-Laoghaire Rathdown County Council – ProcurementGuidelines

Justice Shared Services Invoice extract

Food Cost by Prison – Analysis by Supplier

Irish Prison Service – List of Contracts For The Supply Of

Goods And Service With A Value Over €100,00

2012 procurement workplan

Procurement Plan 2012/13



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CPU Contract Database

Report - Procurement Type Subheads and Top Suppliers 2011 4002 master 4002 List SAD

Corporate Procurement Plan (2010-2012)

Savings 2012

Contract List

Purchasing organisation

Defence Defence Force Estimates 2012

Defence Forces Organisation

Purchase Orders over €20,000 for Q1 of 2012

Central Government (Other) Shared Services Invoice extract

Revised Estimate for Public Services 2012 Accenture - "DAFF Cost Reduction Review 2011 Report"

Circular No. CP1 - "Planning for Procurement of Supplier andServices - Multi-annual Divisional Plans"

SAP records and procurement expenditure

Extract - DAFM Spend by Old Material Groups AR1

Extract – “Subitems” ( Supplier and Spend actuals)

Department of Public Expenditure and Reform – “Public ServiceReform 17 November 2011”

Department of Public Expenditure and Reform – “HumanResource Shared Services Centre Financial Appraisal April

2012” Department of Public Expenditure and Reform – “Revised

Estimates for Public Services 2012”

Central Procurement Chief State Solicitor's Office: "Irish Public Procurement Materials- April 2012"

“2009 Survey of Top 30 Categories of spend”

NPS - Expenditure/Purchasing Lines NPS Lot 1 Office Supplies2011

NPS - Live Contracts and Frameworks 2012

NPS - Organisational Chart

NPS - List of Supplier and Buyer Education Events Aug 2009 toNov 2011

Key Responsibilities of NPS Staff

"Strategy Statement National Procurement Service 2010-2012"

Draft Memorandum for the Government Public service ReformPlan - Public Procurement ( Framework Agreements) 3/5/2012

List - Stationary Contacts by Department and Associated State Agencies

List - Top 30 Supplier Contacts by Department and AssociatedState Agencies

PAC NPS Briefing 16.02.12

NPS Lifetime Contract Values 2012

NPS Supplier Survey 2011

NPS Buyer Survey 2011

Other Date Sources Consip Spa spearheads efforts towards high performance ingovernment procurement, Accenture



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High Performance through Procurement in Public Services,

Accenture High Performance through Procurement in Public Services,

Accenture

Scotland – Public Service Procurement Report

Scotland - Procurement Reform Delivery Plan

Strategy for the implementation of eprocurement in the IrishPublic Service

Table A.2.1: Key Data Sources



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3 List of Interviewed/Surveyed Stakeholders

Interviews and/or surveys were conducted with the following stakeholder groups:

Sector Organisation Stakeholder Type

CentralProcurement

NPS Procurement

NPPPU Customer/Procurement

NPPPU Procurement

Health Health Procurement

HSPG Procurement

LocalGovernment

County/City/TownCouncils

Procurement

Education VEC Procurement

Dept. of Education andSkills

Customer

Universities Procurement

Universities/Institute's Procurement

Secondary Schools Customer/Procurement

Primary Schools Customer/Procurement

Community Schools Customer/Procurement

CentralGovernment

Attorney General'sOffice

Customer

CSSO Customer/Procurement

Revenue Commisioners Customer/Procurement

Dept. of Social

Protection

Customer

Dept. of Transport Customer

Dept. of Agriculture Procurement

Enterprise Ireland Customer/Procurement

SEAI Customer

CMOD Customer/Procurement

Dept. of Public Exp. &Reform

Customer

Departments ofJustice andDefence

Dept. of Justice andEquality

Customer

An Garda Siochana Procurement An Garda Siochana Customer/Procurement

Irish Prison Services Procurement



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Dept. of Defence Procurement

Suppliers/ExternalBodies

GS1 Supplier

IBEC Business Representative Body

Codex Supplier

IMSTA Supplier Representative Body

Swords Medical Supplier

Table A.3.1: List of Interviewees



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4 Capability Assessment – Framework for Analysis

The assessment of the level of capability for central procurement and each of the key buyingOrganisations across the Irish Public Service was completed using Accenture’s HighPerformance Procurement Model, as depicted in the Table below.

Dimension Areas of focus

1. ProcurementStrategy

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 andCategoryManagement

What visibility of spend you have

How you identify opportunities and prioritise

How you develop and manage category strategies

What industry and category expertise you have

What methodology you use for sourcing, contracting and implementing

How you measure and manage demand and project delivery

3. Requisition to Pay How you manage P2P master data across sectors

What guidelines and support is provided to end users

How you manage compliance and non-compliance

4. SupplierRelationshipManagement

How you manage the supplier databaseHow you manage the contract database

How are suppliers tiered, segmented and categorised

How you rate, measure and manage supplier and contract performanceacross categories and sectors

How you evaluate and manage supply chain risk

How you manage supplier education

5. Workforce andOrganisation

Are there standard roles and responsibilities across State, sector and deptprocurement

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 andTechnology

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 endprocess 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

Health LocalGovernment

Education Justice &Defence

CentralGovernment

CentralProcurement

TOTAL

TOTAL 148 108 72 94 66 47 535

Table A.5.1: Estimated Headcount by Sector



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6 Supplier Data

Department Sub Sector Suppliers

Health HSE 75,000

Education All 100,000

Local Government Not applicable 9,000

Justice Defence 4,400

Garda 4,200

Prisons 2,300

Courts 1,100

Central Government National Museum 900

Property Registration 300

Dept. of Arts, Heritage andthe Gaelteacht

2,300

Departments (other) 12,500

Table A.6.1: Estimated Number of Suppliers by Sector



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7 Referenced Materials

"Defence Force Estimates 2012"

"Interim Report to The Minister of the Environment, Community and Local Governmentand the LGER IG March 2012"

"Strategy Statement National Procurement Service 2010-2012"

Accenture - "DAFF Cost Reduction Review 2011 Report"

Agriculture: Circular No. CP1 - "Planning for Procurement of Supplier and Services -Multi-annual Divisional Plans"

Agriculture: SAP records and procurement expenditure Chief State Solicitor's Office: "Irish Public Procurement Materials - April 2012"

Delegated Instruments Annex 5 Summary of Measures by Contracting Authorities toFacilitate the Participation of SMEs in the Public Procurement (D/F Circ 10/10)

Delegation Instruments Annex 1 Control And Monitoring Of Expenditure

Delegation Instruments Annex 2 Accounting Procedures

Delegation Instruments Annex 3 Procurement Procedures for Works, Supplies andServices

Delegation Instruments Annex 4 Value for Money

Delegation Instruments Annex 6 procurement Information

Department of Public Expenditure and Reform - "Public Service Reform 17 November2011"

Department of Public Expenditure and Reform - "Human Resource Shared ServicesCentre Financial Appraisal April 2012"

Department of Public Expenditure and Reform - "Revised Estimates for Public Services2012"

Draft Memorandum for the Government Public service Reform Plan - PublicProcurement ( Framework Agreements) 3/5/2012

Dún-Laoghaire Rathdown County Council Procurement Guidelines

Dún-Laoghaire Rathdown Procurement Review of Council Expenditure in 2010

Food Cost by Prison - Analysis by Supplier

Free Education Scheme - Income and Expenditure Sample for schools

HSE: "2011/2012 Outstanding PSR's"

HSE: "April 2012 PSR Report"

HSE: "PSR Received March 2012"

HSE: Procurement CTCRM BS - Key Result Areas

HSE: Procurement CTCRM BS - Logistics and Inventory Management

HSE: Procurement CTCRM BS - Portfolio Medical, Surgical and Pharma

HSE: Procurement CTCRM BS - Portfolio Medical, Surgical and Pharma

Dashboard Analysis of National Invoices 2011

Overview HSE Procurement Staff JS110612



98


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 forthe 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 Association of Community & Comprehensive Schools

CCMA City and County Managers Association

CMOD Centre for Management and Organisation Development

CPO Chief Procurement Officer

CPSMA Catholic Primary School Managers Association

CSSO Chief State Solicitors Office

DAFM Department of Agriculture, Food & the Marine

D/PER Department of Public Expenditure and Reform

ERP Enterprise Resource Planning

FTE Full Time Equivalent Resources

HPP High Performance Procurement Model

HPSG Hospital Procurement Services Group

HSE Health Service Executive

IBEC Irish Business and Employer’s Confederation

ICT Information and Communication Technology

IMSTA The Irish Medical & Surgical Trade Association

IVEA Irish Vocational Education Association

JMB Joint Managerial Board for 400 Voluntary Secondary Schools in Ireland

LGMA Local Government Management Agency

LGER Local Government Efficiency Review

NLAPG National Local Authority Procurement Group

NPPPU National Public Procurement Policy Unit

NPS National Procurement ServiceOPW Office of Public Works

P2P Procure to Pay

PEPPOL Pan-European Public Procurement On-Line

PMO Project Management Office

RFI Request for Information

RFP Request for Proposal

RFQ Request for Quotation

RFT Request for Tender

SEAI Sustainable Energy Authority Ireland

SME Small Medium Enterprise



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UNSPSC United Nations Standard Products and Services Code

VEC Vocational Education Committee

VFM Value for Money

capability and capacity review of central procurement function

Documents