Intelligent strategic procurement is at the heart
of Best Value and so it is important that local
authorities address the effectiveness of their procurement.
Best Value is set to challenge all local government
services and will radically change the way in which
local authorities perform their duties. It embraces
all aspects of local government, from support services
to front line services that directly interact with
the public. It demands that the way in which services
are provided is accountable, measurable and above
all justifiable. Performance indicators can provide
an accurate and comparable measurement of the service.
It is recognised that the purchasing function is
carried out using a variety of different methods by
individual authorities. The type of different methods
used range from a strategic procurement role with
the purchasing function being delegated to many staff
within an authority, to a totally centralised system
being located within a specialist organisation either
within the authority or as a consortium, and there
are many different variations in between these two
This guidance therefore attempts to provide simple
advice which may be used by authorities of all sizes
as a general health indicator for procurement. It
is considered that by developing effective procurement
using the advice and indicators in this guidance local
authorities will be able to identify appropriate measures
for the community, members and chief executives as
well as heads of the purchasing profession.
In summary, local authorities that have addressed
the issues in this paper will be able to demonstrate
a commitment to continuous improvement of procurement
activity in support of Best Value.
Dave Wheller Andrea Tickner
Chairman Assistant Secretary Membership Secretary
To demonstrate effective procurement a policy/strategy
reflecting a local authority's objectives should identify:-
a. Allocated responsibility for all areas of non-pay
spend supported by professional procurement advice.
(Generally 30% or more of a local authority's budget
is spent on non-payroll costs). (1)
b. How this responsibility is coordinated.
c. A procurement strategy which includes corporate
objectives such as:
- Best Value;
- Continuous Improvement;
- Economic Development;
- Environmental Issues and Local Agenda 21;
- Health and Safety;
- Quality Assurance;
- Investors in People;
- High Ethical Standards;
- Customer Consultation and Review.
d. Consideration of whether any corporate procurement
resource should recover its costs and demonstrate
its contribution to the co-ordination of procurement
(1) Best Value and Competition - Procurement
Survey Results 1999 - SOPO
BiP GUIDANCE 10/2000
Targets should be set according to the time-span
in which you hope to achieve them. They should always
follow the SMART principles, i.e:-
S Specific - must be clearly defined.
M Measurable - in order to gauge achievement. Appropriate
'measures' might be quality, quantity, cost, time
A Agreed - those responsible for achieving them must
agree with them.
R Realistic - must be achievable within the time allocated.
T Timed - a deadline must be imposed for achievement.
Each Local Authority should be able to achieve:-
a. Effective financial monitoring systems to capture
relevant departmental expenditure on goods and services.
b. An officer with specific responsibility for procurement
on each departmental management team. (7)
c. An Annual Report/Business Plan to the Chief Executive/Members
on progress in continuous improvement of procurement
d. Benchmarking with other Local Authorities and
private sector procurement organisations. (35)
e. A plan to recruit, motivate, retain and develop
professional procurement staff. (36)
f. Compliance with EU Directives and relevant recording
and collating of information on purchasing intentions
Where procurement is delegated to departments the
following issues should be addressed to demonstrate
best practice procurement:-
i. Review the effectiveness of systems for ensuring
procurement procedures are being applied comprehensively
and consistently to all departmental procurement.
ii. Departments to adopt a policy of favouring collaboration
with others wherever this offers equal or better value
for money. (21)
iii. Procurement Officer's job descriptions to incorporate
a requirement to contribute, as fully as possible,
to collaborative procurement issues. (22)
iv. Hold a single register for use by all departments
of all contracts in place (and proposed). (23)
v. Create a network of department purchasing staff
building on arrangements which may already exist.
vi. Ensure those involved in procurement receive
appropriate level of procurement training. (38)
vii. Include procurement as a core skill in non-procurement
managers' training. (39)
viii. Departments using non-procurement staff to
manage contracts to ensure they receive specific procurement
training beforehand. (42)
(Figures in brackets refer to actions detailed
in the HM Treasury report 'Efficiency in Civil Government
Procurement' obtainable from Public Enquiry Unit,
Room 8912, HM Treasury, Parliament Street, London
SWLP 3AG, telephone (0171) 270 4558 at a cost
Selecting Performance Indicators
There are a few simple guidelines to take into account
when selecting performance indicators:-
a. Performance indicators should be measurable without
greatly increasing administrative costs.
b. Select indicators which the authority will find
useful in assessing performance. The results will
be of greater benefit if the indicator is crucial
c. Ensure that the performance indicators are unambiguous
so that when data submission takes place there is
no doubt that the interpretation of data required
is the same between all participating organisations.
It is also better at this stage to determine what
constitutes good or poor performance.
What should Performance Indicators Cover?
In general, performance indicators should cover all
aspects of a service including:-
- Access to the service;
- Quality of the service including customer satisfaction;
- Total cost of the service;
- The efficiency with which the service is provided;
- The effectiveness of service management;
- The strategic objectives authorities have for
ensuring that the service meets the needs of the
Accurate performance measurement is of paramount
importance in order to demonstrate best value. It
can be compared in a variety of different ways:-
a. Procurement activity can be measured in terms
of the proportion purchased by competition through:
- Local authority professional contracts;
- Departmental professional purchasers;
- The rest.
b. The Warwick Business School suggests the following
indicators of competitiveness: (l)
- Percent of net spend in Best Value services allocated
via a competitive process in the last two years;
- Percent of net spend in Best Value services delivered
in the last two years through partnerships, voluntary
sector agencies, public sector agencies, private
c. It is vital to develop baseline measures from
which improvement can be quantified. Self-comparison
over time is probably the easiest method of performance
measurement to achieve. It is a useful mechanism to
measure trends and identify continuous performance;
however it offers no insight into alternative methods
of service provision.
d. External comparisons can be made with many different
types of organisations:
- Local authority purchasing functions;
- Other public sector purchasing functions;
- Private organisations which perform the purchasing
function, including consultants;
- Comparisons can also be made against a prescribed
standard or procedure.
Performance results should be analysed to identify
differences and possible reasons for them. A benefit
of using external comparisons is that any alternative
methods of service provision will be highlighted and
perhaps investigated in more detail.
(1)Warwick Business School Local Government
Centre Best Value Paper 6 Competition, Benchmarking
and Performance Networks.
PURCHASING SERVICE PERFORMANCE INDICATORS <Top>
A list of performance indicators which have been
identified by a number of local authorities are detailed
below. This is by no means a comprehensive list, nor
are all appropriate for all authorities:-
a. Volume and Value of Business, including:
- Total number of customer orders;
- Total number of contracts managed;
- Total value of business including orders and contracts.
b. Cost Effectiveness of Service
- The total cost of service as a percentage of value
- Cost per £ spent;
- True cost of placing an order from quotation
to payment of invoice.
c. Competitiveness of Prices
Using a basket of goods comparison with other public
and private sector supplies organisations. This must
include sufficient detail to enable exact and accurate
Measure price movements against RPI or price trends
published in trade and procurement journals.
d. Customer Satisfaction with Service covering:
- Range of goods and services;
- Quality of products;
- Helpfulness of staff;
- Speed of response for advice and assistance;
- Clarity of advice and assistance.
e. Response Times, including:
- The average time taken to satisfy a customer order
(from receipt to delivery);
- The percentage of customer orders satisfied within
target response time;
- The percentage of fixed term contracts renewed
by the due date;
- The percentage of other contracts and purchases
where work is completed in accordance with timescales
agreed with customer.
f. Quality of Service
- Number of orders processed completely and accurately;
- Number of orders subject to error (non-delivery/short-delivery
/over-delivery/incorrect item delivered/customer
- Percentage of orders completely satisfied at first
Reproduced by kind permission of SOPO.
OF SOPO <Top>
The Society of Purchasing Officers in Local Government
- Promote the strategic purchasing, contracting
and supplies function within Local Government by:
(i) providing a forum and network; and
(ii) providing guidance and promoting best practice.
- Promote co-operation among member authorities;
- Represent the interests and views of member authorities.
For more information regarding this guidance please
Andrea Tickner (Assistant Secretary)
City Of Sunderland Council,
PO Box 109, Civic Centre,
Sunderland, SR2 7DN.
Tel. 0191 553 1085
Fax. 0191 553 1090
Details regarding membership of the Society
can be obtained from:
John Scowen (Membership Secretary)
London Borough of Havering,
Upper Rainham Road,
Essex, RM12 4ET.
Tel. 01708 773165
Fax. 01708 773145
Sponsored by SOPO.