A Strategy for the Local Government Sector
Circular IPPP 05/03
19 December 2003
Modernising Public Procurement
A Strategy for the Local Government Sector
Dear Manager,
The aim of this circular is to update you on progress on the development and implementation of the Local Government eProcurement Strategy[*] and other initiatives relating to the modernising of procurement practices within the public sector.
You are also invited to participate in a programme of work and pilot projects designed to assist the local authority sector prepare itself for the full implementation of recommendations under the eProcurement Strategy. Applications are invited from interested local authorities to undertake pilot or demonstration projects for which part funding will be available from the Department.
eProcurement is the process of sourcing, buying and paying for goods and services using Information and Communications Technology as the communications mechanism. It provides a business opportunity for local authorities to reduce the transaction costs associated with public procurement and to provide value for money through enhanced competition and better management of the procurement process and the supply chain.
eProcurement, therefore, provides a major opportunity to achieve savings through improved procurement practices supported by electronic procurement. However, if its implementation is to be successful, it is important that current procurement practices and processes are examined and, where necessary, modified. Co-operation and co-ordination between local authorities is essential if real progress is to be made in terms of maximising value for money through the aggregation of purchases. The correct application of information technology is also important, but critically as a facilitator rather than a driver of the process. In the end success will depend on our ability to modernise the practice of public procurement within local government.
The circular is divided into three parts :
- modernising public procurement – an update,
- implementation of the local government eProcurement strategy,
- the programme of work for 2004 and funding for pilot projects.
Modernising Public Procurement
In April 2002, the Department of Finance received Government approval to the implementation of the recommendations in A Strategy for the Implementation of eProcurement in the Irish Public Service. The recommendations cover the civil service and the health, education and local authority sectors.
The eProcurement strategy recognised that there were substantial savings to be made from modernising public procurement practices within the public sector. Key to the implementation of the strategy was the recognition that action needs to be taken on a number of different fronts, including the enhancement of organisation capacity, improved training and the development of specialist skills, procurement aggregation at local, sector and national levels and the application of new technologies, in particular those related to eProcurement.
The recent report from the Information Society Commission entitled Modernising Public Procurement is available on the Commission’s website
The Department of Finance has set up a multi-Departmental implementation team. The focus in the initial 12 months [to the Autumn of 2004] is to achieve maximum enduring change through ensuring stakeholder buy-in, knowledge sharing and skills transfer. Two members of staff, one from the Department of the Environment, Heritage and Local Government and one from the Local Government Computer Services Board, have been seconded to the inter-Departmental team for the 12 month period.
The work programme for the team will include projects to improve organisation capacity in the main sectors, including local government, the development of a procurement aggregation strategy based on key goods and services and, building on work already underway in some local authorities and the LGCSB, a number of information and communications technology [ICT] eProcurement initiatives.
Implementation of the eProcurement Strategy in Local Government
The programme for the modernising of public procurement within local government is designed to be implemented in stages. The Local Government eProcurement Strategy, which was released earlier this year, envisages implementation as follows.
Stage I : Capacity building and demonstration.
This phase is currently under way and will last until the end of 2004. The purpose of this phase is to demonstrate the cost effectiveness of eProcurement through pilot or demonstration projects and to enhance the technical capacity to implement the programme through ICT projects. The implementation of this phase has been assisted by the Department of Finance’s approval of €500,000 in matching funding to support this year’s programme of pilot projects. Funding will also be available in 2004. At the end of this stage there will be an assessment of the effectiveness of the pilot projects and other initiatives to determine if the business case justifies moving onto the next stage, with or without changes in the implementation strategy.
Stage II :Mobilisation
Subject to the business case showing that there is a reasonable prospect of real savings through the procurement modernisation process and that the pilot projects have demonstrated that they can provide value for money, the implementation programme will proceed to the mobilisation phase. This will involve putting in place support systems, including funding mechanisms, to enable local authorities to experience the benefits of eProcurement. It is envisaged that the second stage will be of a year’s duration. Again there will be an assessment at the end of this phase before proceeding to the full roll out of the programme.
Stage III:Roll-out
The final phase is scheduled to last five years and will concentrate on further development of the procurement systems within local government by ensuring that the proven concepts and benefits are rolled out across the sector.
Details of pilot projects that have already commenced are set out in Appendix I
Programme of Work for 2004
If the benefits of the eProcurement Strategy for the local government sector are to be realised, it is essential that each local authority commit itself to the modernisation of their procurement processes and to the use of eProcurement as a means of minimising transaction costs and achieving value for money.
At this point local authorities are invited to participate in the ongoing implementation of the work programme in one of a number of ways :
- by undertaking pilot projects that will help modernise procurement practices in local government in line with the recommendations of the Local Government eProcurement Strategy. Financial support may be available from the Department for suitable projects. For further details see Appendix II,
- by undertaking changes within individual local authorities to support the implementation of the eProcurement strategy. This might include organisation changes to create a dedicated procurement function within the local authority, increased training, the upgrading of computer systems and/or the conduct of information surveys to identify areas where the greatest potential exists for procurement savings, and/or
- by participating with other local authorities, the LGCSB and the Department in efforts to promote the strategy, to disseminate information about the potential benefits and to share experience on implementation. Local authorities may wish to nominate personnel to attend meetings of a review group set up to oversee the progress of the pilot projects and/or to participate in an online forum of local authority personnel with responsibilities for public procurement within their organisation that the Department intends to set up in 2004.
Feedback and Further Information
Local authorities are requested to nominate a staff member to contact the Department to discuss how they can best participate in the modernisation programme referred to in this circular. The Department’s contact person is Vincent Coyne, Infrastructure/PPP Unit, tel. (01) 888 2582 or e-mail .
Yours sincerely,
______
Eddie Lewis
Principal Officer
Infrastructure and PPP Section
Infrastructure/PPP Unit
Appendix I: Demonstration and Capacity Building Projects
Kerry County Council are undertaking the pilot of an online Request for Quotations solution, an analysis of the Council’s procurement practices in terms of investment of time, capital and working capital in delivering value for money and the development of a tracking/scheduling system for machinery so as to reduce, or ideally eliminate, commercial plant hire.
Three projects are currently being undertaken by the LGCSB. These include:
- Streamlining and Automation of the Purchase to Pay Cycle with a view to reducing transaction cost, reducing purchase to pay cycle time and automating the links between authorities and suppliers.
- Product Catalogue development, which will reduce cycle time and hence reduce transaction cost for raising a purchase order by negating the need to manually maintain product files, price lists and supplier files for aggregation contracts.
- Developing a system for reporting, analysis and performance measurement which will provide a framework for compiling information pertaining to procurement in a consistent and manageable format.
The successful implementation of each phase of the strategy, starting with the demonstration and capacity-building projects as outlined above, should ensure that the benefits of the overall strategy will accrue to the local government sector as a whole and to each local authority within the sector. Furthermore, the efficiencies introduced as a result of improved sourcing and of streamlined and automated processes should benefit the supplier base, representatives of which have been or will be involved in some of the projects described above.
Appendix II :Call for Project Proposals
The Department of the Environment, Heritage and Local Government invites local authorities to submit project proposals that will contribute towards the modernisation of procurement procedures currently in place and that will further the aims of the Local Government eProcurement Strategy.
In evaluating proposals submitted, priority in the allocation of funds will be given to those projects which most clearly meet the objectives set out in the Local Government eProcurement Strategy and which are most likely to have a benefit for other local authorities.
Funding will be made available to suitable projects subject to the following conditions:
- Funding will be available for up to 50% of the total vouched expenditure. In exceptional circumstances a higher percentage may be considered.
- Funding will not be available for staff costs or related expenses.
- Expenditure claims should be made monthly and should be accompanied by invoices and other supporting documentation,
- Progress reports are to be submitted on a quarterly basis and will be reviewed by a Project Review Group made up of local authorities, the Department, the LGCSB and the Department of Finance,
- Funding is provided on an annual basis and every effort therefore should be made to structure the pilot projects so that they are completed within the calendar year.
Applications for funding should provide the information as requested in the enclosed form to be received in the Department before the end January 2004.
eProcurement : Project Proposal Form
1Name of Local Authority
2Contact Details
- name
- current responsibilities
- work address
- contact numbers
3Description of Project [including setting out the expected benefits/returns]
4Explain how the Project will contribute to the modernisation of procurement in your Authority?
5Will the project benefit other local authorities. If ‘Yes’ provide explanation.
6Estimated cost of project.
- provide details of all direct [recoupable] costs,
- set out local authority contribution [not counted under direct costs]
7Provide timetable for completion of work and schedule of any milestones.
I have read the conditions associated with funding for the eProcurement projects as outlined in Annex A, and, in the event of the project detailed above being successful, I agree to abide by these conditions.
______
Name [Manager, Director of Service or Finance Officer]
Date ______
1
[*] The Local Government eProcurement Strategy Report [April, 2003], issued through the LGCSB.