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					National e-Procurement Project
Delivering e-Procurement




          DESKTOP GUIDE
               TO
        E-PROCUREMENT IN
  LOCAL AUTHORITY CONSTRUCTION


         Efficiency and collaboration
       through the use of e-technology




                                May 2007

Supported by




                           www.localtgov.org.uk
                            www.localtgov.org.uk
NePP DESKTOP GUIDE: E-PROCUREMENT IN LOCAL AUTHORITY CONSTRUCTION

           Efficiency and collaboration through the use of e-technology



EXECUTIVE SUMMARY

This Guide
This Desktop Guide has been initiated by the National e-Procurement Project (NePP)
Board to accelerate local authority take-up of e-procurement in construction, in order to
achieve better procurement performance and generate efficiency and cost benefits.

The guide, compiled with the help and support of a cross-sector group of participants,
defines local authority construction and reviews the role of e-procurement in
underpinning the significant potential for efficiency and collaboration in this complex
area. It establishes the status of e-procurement systems and tools and proposes some
actions that could move e-procurement forward and deliver price and process savings.

The sector
Local Authority Construction encompasses a wide range of activities across three distinct
areas: Housing, Property (which includes schools) and Highways. The sector poses some
of Corporate Procurement’s greatest challenges, due to:
 • The value – over £14bn. That’s a third of all local authority external expenditure and
   includes an authority’s biggest contracts and lowest value transactions
 • The breadth of activity - new build, refurbishment, scheduled & reactive
   maintenance), each requiring different processes and expertise
 • The complexity of the supply chain - over 20 stakeholder groups identified
 • The variety of approaches to managing construction across authorities
 • The lack of influence by procurement managers on specialist construction
   functions.

The opportunity
The potential opportunity for cost and efficiency savings in this sector is significant (up to
30% is being saved in best practice examples) and, given that construction represents a
third of all local authority external expenditure, achieving these savings is of critical
importance in the light of the ongoing squeeze on resources from Gershon and the
Comprehensive Spending Review (CSR07).

Collaborative and partnership working models are becoming accepted as best practice in
this sector – the opportunity now is for these initiatives to adopt e-procurement
technologies to enable further efficiencies and cost savings.

The benefits of e-procurement in construction can be summarised as follows:
 • Visibility of data provides access to better management information, which leads to…
 • Aggregation of demand, control of maverick spend via frameworks and better
   supplier relationships, all resulting in a reduction in prices = cashable savings
 • Automation and streamlining of processes across the supply chain enables suppliers
   to cut prices = cashable savings - and results in…
 • Process efficiencies for authorities = non-cashable savings, but releasing time for…
 • Better management of contracts and projects, leading to…
 • Reduced risk of poor supplier performance = cashable savings and…
 • Improved customer satisfaction (citizens and internal customers)




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          Efficiency and collaboration through the use of e-technology



Examples
The potential opportunity for cost and efficiency savings from the use of e-procurement
tools in this sector is significant. For example:
 • Cambridgeshire Highways Partnership is using e-Procurement to order and, shortly,
   to pay for work worth £24m pa
 • Fusion21 and GM Procure are two examples of groups of social housing organisations
   working together, enabled by a vendor-neutral supply chain e-technology provider
   specialising in construction. Fusion21 is achieving 11% cashable efficiencies worth
   £5m year-on-year and is training hundreds of unemployed Merseyside people.
   GMProcure, which went live in 2006, has already achieved 31% cost savings and cost
   predictability of over 99%.
 • North Tyneside Council recently used e-Auctions to cut over £6m (30%) off the cost
   of building materials.
 • ODA is using e-Tendering to place all contracts for the 2012 Olympics so as to
   minimise costs.
 • The West London Alliance identified potential savings of 15% if they invested in an
   e-Contract Management System for housing and highways maintenance.
 • London Borough of Camden has integrated their specialist works ordering system
   with their procurement and financial management system to gain efficiency savings.
 • Wirral Council is using an online supplier pre-qualification service to save time
   and money – and it is playing a role in helping the council support local businesses.

Key things you should do:
 • Use suitable tools: construction services don’t lend themselves to simple one-size-
   fits-all solutions. Implementation of new systems and processes needs to take the
   complexity into account; tailored and bespoke solutions may be needed.
 • Use e-Procurement to collaborate: e-Procurement, and especially e-Contact
   Management, can bring real benefits in collaboration, sharing data and forward
   planning. Just having access to an online central contract and project database will
   start this process. Industry tells us that forward planning is the key to their being
   able to reduce prices.
 • Use your partners: Look to private and voluntary sector partners to collaborate in
   innovative use of e-procurement and e-collaboration tools to manage lifecycle
   frameworks and partnering – although industry partners have similar non-
   compliance cultures to overcome, partnering will drive change on both sides and
   deliver incremental service delivery improvement and cost savings.
 • Use online catalogues: don’t overlook the fact that materials procurement is an
   important part of construction and there’s a lot of scope for aggregation and online
   catalogue purchasing.
 • Integrate: if your authority has retained its direct labour force, give priority to
   overcoming any incompatibility between legacy works order systems and newer
   financial and e-procurement systems.
 • Use supplier pre-qualification: one of the simple things all councils can do
   immediately is to take advantage of standardised pre-qualification documents and
   processes to reduce buyer and supplier costs.
 • Improve skills and ensure take-up: Focus on upskilling staff and changing
   embedded culture before transforming processes and adopting new systems and
   tools – or they won’t get used.
 • Use the ‘Overcoming the Barriers’ Checklist in this guide to get started.




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CONTENTS
1.    Introduction                                                                 5
      1.1    Background                                                            5
      1.2    This Guide                                                            5
2.    What is included in Local Authority Construction and why is it important?    6
      2.1    Scope of Local Authority Construction                                 6
      2.2    Why is local authority construction important?                        7
      2.3    Who are the stakeholders?                                             8
3.    e-Procurement in Construction                                                9
      3.1    Typical current procurement practices                                 9
      3.2    What is e-procurement and how can it help?                           10
      3.3    Current status of e-procurement in local authority construction      10
      3.4    The Benefits                                                         12
4.    Examples of best practice                                                   15
      4.1    e-Commissioning and job management systems                           15
      4.2    e-Tendering                                                          15
      4.3    e-Auctions                                                           15
      4.4    Fully integrated e-sourcing and contract management system           16
      4.5    Integration of specialist systems with mainstream e-procurement      16
      4.6    e-Invoicing                                                          17
      4.7    Purchase Cards                                                       20
      4.8    e-Procurement in collaborative partnerships and e-collaboration      21
      4.9    Standardised supplier pre-qualification                              22
5.    What is industry telling us?                                                25
6.    Getting started                                                             26
      6.1    Implementing e-procurement in local authority construction           26
      6.2    Overcoming the barriers                                              26
      Checklist: Overcoming the Barriers                                          27
7.    Where can I get further information?                                        30
8.    Glossary of terms                                                           31
9.    Acknowledgements                                                            33




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1.     INTRODUCTION
1.1     Background
The National e-Procurement Project (NePP) has commissioned a library of high quality
guidance on matters relating to the implementation of e-procurement and the delivery of
benefits. This Desktop Guide to e-Procurement in Local Authority Construction
seeks to provide authorities with practical, experience-based guidance on how e-
procurement can contribute to their efficiency agenda in the construction sector.


1.2     This Guide
This Guide defines local authority construction and reviews the role of e-procurement in
realising price and process savings in this complex area. It establishes the status of e-
procurement in local authority construction and identifies examples of good practice
which could be used to help others realise the benefits. Finally it proposes some actions
(‘getting started’) that could move e-procurement forward.

The project had as one of its objectives to establish links with other public sector bodies
and private and voluntary sector partners to identify any similar work being done in
associated areas and create opportunities to share information.

A wide consultation exercise was carried out, including a stakeholder meeting and an
industry consultation meeting. Input from this activity is included in the guideline and the
authors wish to thank all those who have provided valuable information and support.

Who is this Guide for?
This Guide is aimed at finance, procurement and contract managers with property,
housing and highways construction and maintenance responsibilities in local authorities
and the many other organisations, agencies, companies and voluntary sector partners
that play an important part in this sector.

This document has the following structure:
 • Section 1 – Introduction
 • Section 2 - What is included in Local Authority Construction and why does is it
   important? The complexity and size of spend that characterises this sector
 • Section 3 - e-Procurement in Construction - sets out the case for e-procurement as
   a key to making significant cost savings
 • Section 4 – Examples of best practice – a wide range of examples to draw from
 • Section 5 – What is industry telling us? Looking at the problem from the other side
 • Section 6 - Getting started – including the Overcoming the Barriers checklist
 • Section 7 - Where can I get further information?
 • Section 8 – Glossary of terms
 • Section 9 – Acknowledgements




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2.     WHAT IS INCLUDED IN LOCAL AUTHORITY
       CONSTRUCTION AND WHY IS IT IMPORTANT?
2.1        Scope of Local Authority Construction
Local Authority Construction is a complex sector, encompassing a wide range of activities
across three distinct areas, as illustrated in Table 2 below.


Table 1 The local authority construction sector

Activity          Housing                     Property                  Highways
                  Residential buildings,      Office, commercial,       Roads, pavements,
                  incl. multi-storey, flats   schools and other         bridges, signage,
                  & individual dwellings      public buildings          fixed street furniture etc
                  Key activities include:     Key activities include:   Key activities include:
New build            Town planning                Town planning
                     Design                       Design
                     Tendering                    Tendering
                     Job scheduling               Job scheduling
                     Project management           Project management
                     Contract/supplier            Contract/supplier
                     management                   management
Refurbishment        Town planning                                        Town planning
                     Design                       Design                  Design
                     Tendering                    Tendering               Tendering
                     Job scheduling               Job scheduling          Job scheduling
                     Project management           Project management      Project management
                     Contract/supplier            Contract/supplier       Contract/supplier
                     management                   management              management
Scheduled            Tendering                    Tendering               Tendering
maintenance &
                     Job scheduling               Job scheduling          Job scheduling
repair
frameworks           Project management           Project management      Project management
                     Contract/supplier            Contract/supplier       Contract/supplier
                     management                   management              management
Reactive/            Job management               Job management          Job management
unscheduled
                     Contract/supplier            Contract/supplier       Contract/supplier
maintenance
                     management                   management              management
and works


All authorities have responsibility for housing and property construction                 and
maintenance, although some have passed aspects of this out to partners.

Local Highways Authorities (LHAs) have a role in maintaining local roads. LHAs are
County Councils (although they may give some executive functions to their District
Councils), Unitary Councils and Metropolitan Borough Councils.



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An ever-increasing proportion of authorities have passed responsibility for their social
housing stock to an ALMO and other activity is also being contracted out to private or
voluntary sector contractors. This includes planning, design of capital projects and
particularly property maintenance. Where housing stock has been retained, the authority
may have also retained a direct labour force and works orders store for reactive
maintenance.

Where an authority employs direct labour for its works orders function, the procurement
picture looks very different to where an authority has moved all this activity to arms-
length arrangements – most notably in the level of low value transactions being
processed, usually manually.

The construction sector poses some of an authority’s Procurement department’s greatest
challenges. This is due to:
 • The value – over £14bn. That’s a third of all local authority external expenditure -
   see Section 2.2.
 • The breadth of procurement activity (new build, refurbishment, scheduled
   maintenance and reactive maintenance and works), including an authority’s biggest
   contracts and some of its lowest value transactions – as shown in Table 1, above.
 • The complexity of the supply chain - over 20 stakeholder groups identified – see
   Section 2.3
 • The variety of approaches to managing construction across authorities
 • The lack of influence by procurement managers on specialist construction
   functions.

Construction procurement responsibilities can include managing some of the largest of an
authority’s contracts, with PFI, PPP and other complex contracting arrangements for
capital projects - and the smallest transactions, with the problems of how to aggregate
and integrate these into the corporate procurement systems.


2.2     Why is local authority construction important?
Over £14bn is spent per annum on new build and bought-in goods and services for the
construction and maintenance of highways, property and housing, as shown in Table 2,
below
Table 2: Local Authority Construction Expenditure
 £bn           HOUSING                    PROPERTY          HIGHWAYS         TOTAL
Capital        3.8                        6.1               2.8              12.8
Revenue        0.1                        1.5               0.1              1.7
Total          4.0                        7.6               2.9              14.5
Source: ODPM, National Statistics: Table 7a: Capital expenditure on fixed assets: all services:
England 2005-06 final outturn & Table A11: Subjective Analysis (SAR) 2005-06

The potential opportunity for cost and efficiency savings in this sector is significant (said
to be 5-15%) and, given that construction represents a third of all local authority
external expenditure, achieving these savings is of critical importance in the light of the
ongoing squeeze on resources from Gershon and the Comprehensive Spending Review
(CSR07).




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While there is a lot of work going on across the country to achieve improvements
through developing national framework contracts (e.g. OGC) and collaborative initiatives
(e.g. the East Midlands Centre of Excellence’s Transforming Local Government
Construction initiative), there is little focus on how to use e-technology to enable
efficiency and collaboration.

This guide will make reference to the improvement initiatives where appropriate (and
they will appear in the reference list of contacts at the back of this guideline) but will be
focusing specifically on the role of e-procurement and examples of benefits from
automation of construction procurement processes.


2.3     Who are the stakeholders?
In a sector as complex as construction, there are many stakeholders. One of the
challenges for this project was to identify them and involve them.

They include:


Table 3: Stakeholders




                                                                Confederation, RICS, CITE




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A group of more than 20 stakeholder organisations were consulted during the scoping of
the guide and this was followed by a further meeting with some of the top construction
companies.

An important conclusion that emerged was that private and voluntary sector partners are
often further advanced in their implementation of e-procurement than their customers in
local authorities.

Some examples of this are included in Section 4 and Section 5 reports the response to
the question: “What are the key things that authorities could do that would enable their
industry partners to deliver a better quality and more cost-effective service?”



3.       E-PROCUREMENT IN               CONSTRUCTION
3.1        Typical current procurement practices
There are a large number of procurement processes in local authority construction but
the main ones are included under contract management process and transaction
processes, illustrated in this high level diagram:


Fig 1: Procurement processes

                                                Contract exit or           Agree strategic
                                                renewal; asset             framework and
                                                  handover                     funding

                     Pay invoices
                                                                Contract
                                           Manage             Management
                                       contract/supplier                              Plan
                                                               processes
     Reconcile                           performance                                  and
      invoices                                                                       design



                        Transaction              Tendering and
                         processes                                   Develop spec,
                                                 contract award
      Receive                                                          issue ITT
      call-off/
      invoices

                                           Issue
                                         Purchase
                  Receipting; QA
                                          order
                  assessment &
                   certification


In most authorities, these construction procurement processes are predominantly paper-
based, are time consuming, resource intensive and inherently inefficient and may not be
undertaken by procurement specialists. Where unscheduled maintenance is carried out
in-house, there is also a lot of activity managed by a specialist works ordering process
(manual or computerised) which does not usually link into the mainstream transactional
processes of the authority and is not included in the high-level view above.




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Key areas of inefficiency include:
 • The planning and design of capital projects may use CAD systems etc, but the
   tendering and contract award process is typically paper-based and time-consuming,
   with some use of email and document attachments. There has been some progress
   made in the introduction of e-tendering where an authority has implemented this
   across the whole organisation.
 • Management information is usually paper-based and inaccessible so up-to-date
   performance information is often not available for use in managing suppliers or
   improving contract performance.
 • These constraints can mean that many construction contracts are not commercially
   well-managed, concentrating on the physical rather than the contractual aspects.
 • There is poor visibility of committed expenditure, especially for in-house works and
   all maintenance, which may be completed before an invoice enters the financial
   management system and the financial commitment is identified.
 • The invoice reconciliation process is resource-intensive. The processing of paper
   documents creates work and cost throughout the supply chain, affecting suppliers’
   ability to reduce prices as well as in-house staffing levels in authorities.
 • The resources currently being taken up carrying out manual tendering processes are
   under pressure so that contracts (e.g. maintenance) can be let for long time periods
   without review and renewed in a rush, without adequate preparation or competition.


3.2     What is e-procurement and how can it help?
e-Procurement is a collective term for a range of technologies that can be used to
automate the internal and external processes associated with strategic sourcing and
purchasing. It uses technology to support and enable the processes that link the key
stakeholders in a procurement relationship – these stakeholders include customers,
buyers, 1st tier suppliers and sometimes 2nd and 3rd tier suppliers.

A range of e-procurement systems and tools can be brought in to realise 5-15% cost,
efficiency and service delivery improvements to construction procurement, depending on
the activity. For example major new build projects may benefit from e-collaboration tools
based on an e-hub solution, whereas the efficiency of a reactive maintenance group
could be dramatically improved by using an online works order system integrated into
the mainstream e-procurement system.

Table 4 on pages 12-14 identifies the principle uses of e-procurement in construction and
the benefits.


3.3     Current status of e-procurement in local authority
        construction
Modernisation of procurement in the local authority construction sector is patchy. This
reflects the complexity of the sector and the fragmentation of management
responsibilities for construction in local government. In a clear recognition of the
problems of management and control, most authorities have passed at least some
construction activities to external partners.




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           Efficiency and collaboration through the use of e-technology


This has made it more difficult to pull construction procurement into the mainstream of
corporate procurement. Initiatives to bring procurement managers together to discuss
these issues have encountered difficulty in:
 • Identifying the stakeholders, as these include a wide range of agencies, partners and
   contractors in public, private and voluntary sectors.
 • Achieving a coherent focus for agreement, symptomatic of the very lack of direction
   and fragmentation that is undermining take-up of e-procurement in this sector.

Past surveys of authorities (for example, the NePP survey in 2003) found that that local
authority construction departments had made some progress towards the goal of e-
procurement, but many of these were only at the early stages and most of this was in
stores and goods purchasing.

They were in general motivated by simplifying procedures and obtaining greater control,
but respondents reported that much work remained to be done internally to overcome
cultural resistance and externally to engage with the supplier community.

Corporate procurement managers reported very little involvement in construction: Only
50% of respondents to a recent survey of London boroughs were able to comment in any
detail on the status of e-procurement in Highways and 57% on Property, reflecting the
lack of involvement of Corporate Procurement in these areas. Source: NePP in consultation
with London Centre of Excellence 2005


A poll of authorities reveals that many are still reporting a similar situation. Replacement
and upgrade of financial management systems has improved purchase order processes in
some authorities but even there, works order processes are often the last to change.


Industry has often overtaken its local authority customers in introducing e-technology to
bring efficiencies – see examples in Section 4.

Where an authority is engaged in setting up collaborative local or regional partnerships
with 1st tier and sometimes 2nd tier suppliers (e.g. Birmingham, Cambridgeshire,
Oxfordshire, Manchester, Redbridge… see examples in Section 4), e-procurement
systems are often brought in by partners to achieve the targeted efficiency benefits.




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          Efficiency and collaboration through the use of e-technology



3.4     The Benefits
The Stakeholder Group summarised the potential benefits of e-procurement as follows:
 • Visibility of data provides access to better management information, which leads to…
 • Aggregation of demand, control of maverick spend via frameworks and better
   supplier relationships, all resulting in a reduction in prices = cashable savings
 • Automation and streamlining of processes across the supply chain enables suppliers
   to cut prices = cashable savings - and results in…
 • Process efficiencies for authorities = non-cashable savings, but releasing time for…
 • Better management of contracts and projects, leading to…
 • Reduced risk of poor supplier performance = cashable savings and…
 • Improved customer satisfaction (citizens and internal customers)


These benefits are of critical importance to authorities in the light of Audit Commission’s
CPA Harder Test framework and the ongoing squeeze on resources from Gershon and the
Comprehensive Spending Review (CSR07).

Table 4 identifies the principle e-procurement tools available to local authority
construction and the specific benefits that each can bring. This is followed by a Section
detailing specific examples of implementations that are realising real efficiency and
cashable savings.


Table 4: e-Procurement systems and tools and the benefits they can bring
e-Procurement tools      Benefits
                          • All councils have some contracts with the construction industry,
e-Ordering
                            for work that includes building and maintaining roads,
via online
                            pavements, houses, schools, leisure and office buildings. They
framework                   all use the same group of major contractors as well as smaller
catalogues /                local firms and, directly or indirectly, most of them buy the
marketplace                 same materials, right across the country. The opportunity is to
                            generate cost efficiency savings from:
                          • Use of framework contracts and online catalogues to reduce
                            the high levels of ad hoc spend in construction materials
                            procurement
                          • Driving greater throughput into contracted suppliers
                          • Improve accuracy and reduce supplier handling costs
                          • Enforce agreed schedules of rates
                          • Encourage collaborative forward planning
                                                                        = Cashable savings




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 e-Procurement
      tools                                          Benefits
                     •    Often a sub-module of larger construction-related solutions,
Specialised e-
                          these systems can generate real-time management information
commissioning
                          and can improve speed and accuracy
and job
                         • Most effective if integrated with other project management
management
                           systems and linked to the authority’s mainstream procurement
systems                    and finance system to allow invoices to pass directly. Then they
                           can:
                              o Eliminate re-keying and associated errors
                              o Provide a single version of the truth between line
                                management and finance
                              o Improve payment performance
                              o Reduce conflict with suppliers
                              o Improve visibility of committed expenditure.
                                                          = Mainly non-cashable savings
                     •    Enables controlled and auditable management of tender process
e-Tendering
                          ensuring compliance, consistency and fair treatment of suppliers
                     •    Minimises administrative overhead, postal delays and re-keying.
                     •    Streamlines handling of (often complex) documents, including
                          specifications and drawings
                     •    Speeds up tender process, frees up management resources in
                          construction departments
                     •    Provides diarying of contract letting, imposes discipline on the
                          process
                     •    Improves planning and design of capital projects and
                          maintenance requirements.
                                                    = Mainly non-cashable savings
                     •    Automates final supplier selection process
e-Auctions
                     •    When used correctly (ie well-specified and taking whole life
                          costs into account in the preparatory stages) can achieve
                          market prices without loss of quality or distorting market
                     •    Enables the placing of cost-effective regional and national
                          framework agreements e.g. for building materials
                     •    In non-commodity categories suppliers may need longer-term
                          contracts to adjust cost base.
                                                                 = Cashable savings
                     •    Online data repository which may be shared within an authority
Central online
                          or across organisations to increase visibility of existing contracts
contract register
                     •    Prompts greater throughput and reduces off-contract spend
                     •    Better visibility can enable collaboration and aid forward
                          planning with suppliers.
                                                                   = Cashable savings




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                      •   Includes e-tendering and contract register and delivers greater
Fully integrated e-
                          benefits, including improved quality of service delivery
sourcing and
contract              •   Prompts     continuity    of   commercial   management      from
                          specification to delivery
management
system (eCMS)         •   Brings discipline and visibility to management and review of
                          contracts, measurement of supplier performance and continuous
                          improvement.
                                                = Cashable and non-cashable savings
                      •   Significantly reduces resources needed for invoice handling and
e-Invoicing
                          reconciliation
                      •   Improves accuracy and reduces queries, returns and disputes.
                                                                   = Cashable savings
                      •   As an e-payment mechanism, PCards can be used to:
P Cards
                      •   Improve compliance and throughput to approved suppliers
                      •   Reduce time and mileage in trips back to the stores depot
                      •   Deliver efficiency and cash flow benefits to suppliers.
                                                  = Cashable and non-cashable savings
                      •   Where an e-hub is used in the supply chain for back office
Use of e-hubs in
                          procurement transactions, such as invoicing, it can cut supplier
supply chain
                          costs by:
                              o Speeding up and increasing the accuracy of transactions
                              o Reducing re-keying errors (typically 12% to less than
                                7%)
                      •   Use of e-hubs in collaborative projects can provide an online
                          infrastructure for stakeholders to:
                      •   Manage workflow
                      •   Share and aggregate data
                      •   Exchange documents effectively while maintaining a single
                          version of the truth
                      •   Where supply chain e-hubs are linked to local authority e-
                          procurement and financial management systems they can bring
                          further back-office efficiencies.
                                                            = Cashable and non-cashable

e-collaboration       •   While not strictly e-procurement, these tools do have
                          transaction outputs and are often linked to e-hubs, e-
tools                     procurement and finance systems. Benefits include:
                      •   Reduces management time and costs for complex multi-partner
                          programmes
                      •   Significantly reduces process and communication timescales,
                          allowing faster build and completion
                      •   Shared data increases accuracy and improves effectiveness of
                          transition from build to maintenance phases
                                                  = Cashable and non-cashable savings




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4.    EXAMPLES OF BEST PRACTICE
The following are some examples where authorities and their partners have adopted e-
procurement systems and tools to achieve efficiency and collaboration across the local
authority construction sector. These examples represent tangible opportunities for others
to follow. A website or contact email is given wherever possible.


4.1     e-Commissioning and job management systems

  Camden is using a Northgate system to manage housing reactive maintenance to
  which contractors have access. This system is partially but not yet fully interfaced to
  their integrated ERP.

  Oxfordshire Property Partnership is using an online building management and
  maintenance solution, linked into the authority’s finance system, to commission work
  and    update    its    assets    register.   For     more     information,  contact:
  graham.twigg@mouchelparkman.com




4.2     e-Tendering

  Leeds City Council has been using e-tendering for building and refurbishment
  contracts as part of its early implementation of the technology and this experience is
  being pulled through into the Yorkshire and Humberside Regional e-Contract
  Management System – see below.

  The Olympic Delivery Authority (ODA) is e-tendering for all its 2012 Olympics
  contracts, using the OGC Bravo solution. For more information, see:
  https://etenders.london2012.com




4.3     e-Auctions

  2010 Rotherham Ltd, the ALMO wholly owned by Rotherham Council ran an e-
  Auction for its Decent Homes contracts in January 07 using the OGC Bravo solution.
  http://www.2010rotherham.org/

  The Birmingham Construction Partnership - see case study below - uses e-
  Auctions to award contracts for commodities for home builds

  OGC has created a Collaborative Frameworks Initiative which will enable public sector
  organisations to take advantage of national framework contracts for goods and
  materials, negotiated via e-Auctions. http://www.ogc.gov.org

  North Tyneside Council - As part of its Government Decent Homes programme,
  North Tyneside Council used a series of e-auctions to award contracts for a range of
  building materials, including windows and doors, plumbing and bathrooms, hardware,
  electrical components, heating components and kitchens.




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  One event alone, which attracted 211 bids for £17million of windows and doors,
  resulted in £6m saved: a price reduction of more than 30 per cent.
  Cliff Appleby, Strategic Development & Project Manager at North Tyneside Council,
  said: “We knew our building products were a big spend area and that the contracts
  were due for renewal. We selected six categories from twenty-seven which we thought
  would be easy to run through an e-auction and make savings. The results were
  beyond what we had ever imagined. We thought if we were able to save between
  £300,000 and £500,000 we would have looked on this as a huge saving. To save over
  £6 million was just amazing.”
  The council was supported by the North East Centre of Excellence (NECE). Case study
  at: www.rcoe.gov.uk/rce/aio/26033



4.4    Fully integrated e-sourcing and contract management
       system

  A study for the West London Alliance identified that the use of eCMS across a group
  of authorities could enable collaborative forward planning of roads and housing
  maintenance procurement. This was estimated to have the potential to realise an
  average of 10-15% of a council’s spend in this area – that’s £4-5m pa in the average
  London Borough. For more information, see:
  http://212.22.96.179/documents/WestLondonReportFinalv3.doc

  The Yorkshire and Humberside authorities, led by the Centre of Excellence, are
  rolling out an integrated e-tendering and contract management system, building on
  the positive results obtained by use of an earlier e-tendering system. Roll-out is still at
  an early stage – authorities are using the e-tendering module and are populating the
  central online contract register. The intention is to use this for construction contracts,
  building on the experience of Leeds City Council. For more information, contact:
  tony.wiltshire@leeds.gov.uk




4.5   Integration of specialist systems with mainstream
e-procurement

  Camden is using their integrated e-procurement & ERP system to manage property
  and facilities management.

  The authority has mandated that all ordering should be electronic and authorised on-
  line. This can either be through their new general purpose integrated procure-to-pay
  ERP system or, by agreement with the Programme Board, through category specialist
  systems. Both types of route are used for Construction-related capital or revenue
  spend in Camden.




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  Housing assets are managed through a Northgate system. Where maintenance is
  required:
    o The order is raised on Northgate
    o The supplier also has access to Northgate and can update the details of their
      activity
    o The supplier can also input a request for payment/invoice into Northgate
    o Camden then receipt the work/agree to the request for payment/enter QS
      certification to reconcile and clear the invoice for payment.
    o A payment file is then sent to the Finance system to be paid
    Maintenance for Properties is handled through the main e-procurement system:
    o An estimated requisition is raised on e-buy and once authorised automatically
      converted to an order and electronically despatched to the supplier.
    o The supplier does the job and invoices on the basis of contracted bill of rates.
    o Camden carry out relevant checks and enters value receipt
    o If the receipt exceeds the limits set in the original requisition then re-authorisation
      is required.
    o The invoice is paid automatically once it matches the receipt on an authorised (or
      re-authorised order.
  Camden is also using a Northgate system to manage housing reactive maintenance to
  which contractors have access. This system is partially but not yet fully interfaced to
  their integrated ERP. For more information contact:

  Mobile e-technology: Once e-procurement systems are in place, there are
  opportunities to use mobile technologies eg SMS alert facility, hand-held devices etc to
  communicate with direct labour force and contractors in the field. For example,
  Colchester is using PDAs to communicate with their direct works team and Camden
  are awaiting their supplier portal to pilot the use of SMS to their works order team.




4.6     e-Invoicing
e-Invoicing is one of the ‘big wins’ from e-procurement in construction, where there are a
lot of low value invoices being passed through the supply chain.
  Use of e-hub to automate back office procurement transactions - Geoffrey
  Osborne and Kier Group are among major contractors to the public sector who are
  transacting electronically with their suppliers via the COINS etc e-hub. Suppliers
  benefit from greater accuracy and speedier payment; buyers have more time for
  managing contracts etc. www.coins-global.com

  Hub Alliance - Many of the larger construction companies have joined sector-based
  marketplaces (trading e-hubs) to get rid of inefficient paper processes. However there
  are a number of such e-hubs and the tier 2 and 3 materials and service suppliers have
  had to join multiple hubs in order to link to their key customers, increasing costs and
  complexity.




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  The Hub Alliance is an initiative from Burns e-Commerce Solutions, Causeway
  Technologies and Asite Solutions to provide interoperability between electronic trading
  hubs, enabling over 50 major companies to exchange electronic documents
  seamlessly via a single connection.
  The Hub Alliance defines how interconnections are to be established and operated for
  the exchange of orders, order acknowledgements, delivery notes, invoices (including
  hire invoices) and credit Notes.
  This ensures transparency to customers of all Hub Alliance members and makes
  electronic trading easier for all their customers, based on the principle that no
  customer should have to pay twice to trade electronically.
  Companies benefiting from this initiative include: Alfred McAlpine, Amec, Sir Robert
  McAlpine, Balfour Beatty, Mowlem, materials companies such as RMC, Lafarge, Tarmac
  and Hanson, builders' merchants including Jewson and Wolseley, most of the major
  plant hire companies including Gap, HSS and Speedy Hire, and many others.
  More on this at: http://www.huballiance.org/

Fusion21 and GM Procure are two examples of an important collaboration model –
groups of social housing organisations working together, enabled by a vendor-
neutral supply chain technology and provider specialising in construction:
  Fusion21 was set up by seven Merseyside housing associations in 2002 to deliver
  efficiencies across a £225 million housing improvement programme across
  Merseyside in partnership with Knowsley Metropolitan Council by tackling two common
  issues:

   o Rising construction contract prices in the face of rent capping in the social housing
     sector
   o Skills shortages within the regional construction industry

  Fusion21 has three complementary objectives:
   o To use the strategic procurement partnership to gain maximise possible efficiency
   o To support industry and the local communities by providing training and
     employment opportunities for local people
   o To develop systems which          increase   both supply     chain   performance   and
     environmental awareness.

  The Fusion 21 model is driven by an online e-procurement service provided
  by Valueworks, an internet supply chain technology services firm. This technology
  controls ensures procurement compliance and elimination of project cost overruns
  through the building of accurate project budgets and self-priced purchase orders using
  customised eCatalogues containing only centrally selected, negotiated and priced
  products.

  Put simply, the technology controls buying behaviour across organisations by ensuring
  employees only buy the right items, from the right suppliers, at the right price and in
  the right quantity.




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  Fusion21 reported efficiency of over £5m for its partners during 2005-6 - 11.3% of
  total programme costs and projections for 2006-07 indicate a total £4.9m cashable
  efficiency, in addition to non-cashable value-added benefits to members from use of
  the e-procurement system.

  The partnership has also provided sustainable construction skills training for hundreds
  of unemployed Merseyside people. Over 350 of these trainees have since gained
  permanent construction jobs with Fusion21 contractors.

  “We know our approach to managing costs is working because suppliers like it and it is
  delivering some very big cost savings for the partnership” Iain Walsh, Valueworks
  (private sector technology services firm). More at: www.fusion21.co.uk


  GM Procure – the same supply chain technology company, Valueworks, have been
  involved in another, even more ambitious project, to build an end-to-end solution for a
  group of 10 Housing Associations in the Greater Manchester area whose annual spend
  is in excess of £400m.
  The stated aim of GM Procure is to: “work alongside its partners, and in true
  partnership with its chosen suppliers and installers to develop and implement an
  innovative, integrated supply chain solution that significantly reduces supply chain
  inefficiencies, delivers best value for residents, creates opportunities to develop
  sustainable communities and optimises long-term social and economic benefits.”

  In order to achieve these objectives, the group configured and implemented
  Valueworks online system to enable it to carry out cost analysis, sourcing,
  procurement and strategic cost management across the whole range of planed
  refurbishment work for the group’s Decent Homes programme. The system went live
  in 2006 with targets to achieve 10% savings on labour & materials and 98% cost
  predictability.

  With a throughput of £70m and 250k transactions to date, GM Procure has already
  achieved 31% cost savings and cost predictability of over 99%. How has it achieved
  these standards of efficiency?

  Mike Brogan from Harvest Housing, who is the CEO of GM Procure, explains:

  “The operational supply chain for housing refurbishment is complex. GM Procure has
  10 social housing providers, over 30 material suppliers and more than 25 installers.
  They will carry out a total of 2.6m procurement transactions through Valueworks’
  online system worth in excess of £439m.

  That’s 2.6m opportunities for incorrect suppliers to be selected, different products to
  be procured, price variations from suppliers and the wrong quantities called-off by
  installers. Just introducing e-procurement and developing framework contracts will not
  deal with this complexity – it needs detailed management.

  We achieve the efficiencies by a combination of centralised control and decentralised
  flexibility, proactively managing the group and using our web-based supply chain hub
  to ensure streamlined processes and shared access to key data.”




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  The Valueworks system provides the infrastructure, comprising workflow-prompted
  procurement and category management functions, as shown in the illustration below.


                                    The GM Procure Supply Chain Hub

                  Centralised Control                                           De-centralised Flexibility
                                                      Property
                                                      Payments
                                                                      5
                Rebate Collection
                                                                                               Property
                       &
                                                                                                Orders
                  Distribution 6                                                                            4


                                           Rebate      eProcurement       Procurement
                                         Management                         Ordering

                                                Supply Chain Hub


                                          Supplier        Buyer           Procurement
                                         Management     Management         Budgeting
                                                                                                 Project
                Standardised
                                                                                              Procurement
                Supplier
                Catalogue
                                                                                                Budget          3
                            1                         Specific
                                                      Landlord
                                                      Catalogue
                                                                  2


  The achievement of 31% savings is largely down to the focus on cost management. A
  team of category managers, facilitated by Valueworks, agrees a standardised list of
  materials for each category and carries out benchmarking to negotiate best value call-
  off framework contracts with suppliers.

  Labour activity is also coded and costed. All transactions and payments are
  processed via the web-based system which also allows capacity planning and the
  system is integrated into the back-office systems of each Housing Association,
  material supplier and contractor. More at: http://www.gmprocure.com/



4.7    Purchase Cards

  Manchester City Council, Edinburgh and Redbridge are among the authorities using
  PCards for maintenance works. Manchester City Council, as part of the roll-out of
  PCards across their organisation, are now using them to enable maintenance works
  staff to purchase materials from approved suppliers when out in the field.




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4.8     e-Procurement in collaborative partnerships and
        e-collaboration
The introduction of e-technology to streamline construction supply chain procurement
processes requires investment of time and money; it only happens where there are
established collaborative partnerships (between customers and 1st tier suppliers and/or
between 1st tier and 2nd/3rd tier suppliers). When these relationships are achieved, the
partners can use the technology to deliver very substantial efficiency and quality
benefits.
  Birmingham Construction Partnership - Birmingham City Council founded the
  Birmingham Construction Partnership – a unique collaboration of contractors, design
  and specialist supply chains, tasked with delivering every project in the city with a
  budget of more than £100,000. The Partnership aims to deliver construction projects
  to time and to budget, with less defects and accidents on site. Benefits for
  Birmingham include maximising construction spend, modernising the authority’s
  procurement process and delivering best value from improved predictability.
  Use of e-procurement and e-contract management tools enable the partnership to
  apply key principles that form the cornerstone of their success:
  o Project teams are created, then used and
    reused on a variety of projects. Benefit:
    shared learnings mean greater efficiencies,
    project to project
  o Work is allocated effectively, without the
    need     for   repeat     tendering    and
    procurement processes. Benefit: focus is
    on delivery of pipeline projects –
    contractor investment is in training and
    innovation rather than winning tenders
  o An open book environment on cost has
    been developed. Benefit: transparency
    removes the likelihood of financial dispute,
    and gives client and contractor greater
    control over budgets
  o A true partnering approach has been
    developed. Benefit: construction projects
    are aligned to Birmingham’s corporate
    objectives of sustainability, whole life costing, best value, local employment,
    training, and strategic alliances.


  Sheffield Council and Kier Group – Kier Group is working closely with its clients to
  develop integrated processes to increase efficiency. An example of this is the use of
  hand-held PDAs for operatives in the field to receive a work list for the whole week;
  another is the use of an appointment booking system for tenants through cable TV.

  Both sides benefit eg Gershon targets were achieved jointly. Kier is now using the
  Sheffield integrated team to bid for work in other authorities.




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  Cambridgeshire Highways Partnership is using e-Procurement to order and,
  shortly, to pay for work worth £24m pa - case study awaited

  London Borough of Bromley is developing sharing/integration of back systems.
  They are working on integration of their Asset Management system (Confirm) with
  their Oracle financial and P2P system. This integrated system will have an RFQ
  capability for simple e-tendering requirements but it is likely that this limited
  functionality will need to be enhanced with a specialist e-tendering package. More
  from: Dave.Starling@bromley.gov.uk


4.9     Standardised supplier pre-qualification
Opportunities for efficiency and cost savings in local authority construction arise from the
increased standardisation that comes with automation of procurement processes. But
arriving at an agreed set of standards and then gaining take-up by authorities is a key
issue. Supplier pre-qualification is an area where this is beginning to happen and
represents an immediate opportunity for cost and process savings.

Many Housing, Property and Highways departments in authorities are using their own
preferred lists for construction suppliers. These tend to be incomplete and out-of-date
and in many cases, are not consistently applied. They are, in any case expensive to
maintain.

Suppliers also suffer from the multiplicity of tendering and prequalification processes and
requirements from local authorities – this adds significantly to their costs. Standardising
the pre-qualification process would allow these costs to come down and the savings to be
passed on.


  Highways Agency has developed their Capability Assessment Toolkit which they are
  rolling to all their main contractors. This allows buyers and suppliers to review each
  other’s capability using a standard questionnaire and process and has measures to
  enable improvement programmes to be put in place. . An initiative is planned to bring
  this to the attention of local authorities.

  75% of authorities (including 17 of the 33 London boroughs) are using
  Constructionline’s1 web-based supplier prequalification service to some degree - see
  case studies below - but not consistently across their Housing, Property and Highways
  functions. They are also not yet taking advantage of the potential to use the service to
  identify common approved suppliers and reduce duplication of process.

  Tier 1 suppliers e.g. in partnerships with authorities, can also access
  Constructionline to find sub-contractors, including local companies where this is a
  requirement. They are not currently taking advantage of this facility.




1 Constructionline have a mission from DTI to reduce duplication and are establishing
models with EGS, @UK PLC, BIP etc to facilitate searching for pre-qualification suppliers
and create standard pre-qualification criteria.




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  Northampton Borough Council - looking for potential contactors

  Northampton Borough Council was an early adopter of Constructionline - the national
  pre-qualification register for construction contractors and consultants owned by the
  DTI. Since joining Constructionline some seven years ago, the register has proved
  invaluable to the Council, which now uses it four or five times a month.
  Most of the public and private sector organisations which now rely on Constructionline
  tend to use the service to draw up ‘long’ lists of suppliers - feeding in the parameters
  of the contract and using the automated search facility to identify which suppliers from
  a nationwide database of 13,200 suppliers can meet the contract specification.
  Northampton Borough Council uses the system differently, going through the database
  to identify potential suppliers and checking out their credentials. It is in no doubt
  about the benefits of using Constructionline.
  "Our Council policy is clear," says John Pygott, Contracts and Quantity Surveying
  Manager. "Constructionline is the starting point for all our contract tenders. In fact we
  only use contractors registered with Constructionline unless, because of the very
  specialist nature of the work, no-one suitable can be found - which is not very often."
  While Northampton Borough Council uses Constructionline for all its larger contracts,
  up to and including £3m projects, it's often with the smaller projects that it really
  comes into its own. "We are often looking for specific skills and Constructionline
  provides us with an invaluable list of potential contractors," says Mr Pygott.
  "And when anyone approaches us asking to tender for work, we always point them to
  Constructionline and advise them to join. Very few have not done so."


  London Borough of Havering - making the tendering process more competitive

  Havering is London's third largest borough with a capital budget of around £30 million
  a year, which is spent primarily on schools, leisure facilities and renewing its housing
  stock. The Council owns housing assets valued in excess of £500 million and £7 million
  a year is spent on maintaining this.
  The council decided to adopt Constructionline as the principal route for creating pre-
  qualified shortlists of companies to tender for contracts, in order to streamline the
  process for procuring construction contractors. Previously they had used an internal
  list of 500 approved contractors.
  "The motivation to adopt Constructionline was initially financial," says Havering's
  Surveying Services Manager Peter Sipple. "The list was very old and very moribund.
  We had not updated it for some time and to create a new one was going to take time,
  money and resources. We looked at what Constructionline could offer and it was an
  obvious solution."
  All contracts over £25,000 and up to the EU threshold are now appointed from an
  initial list of suitable companies sourced through Constructionline. For contracts below
  £25,000, Council officers have the choice of using the Constructionline list or using
  local suppliers already known to the Council. The largest tender awarded to date has
  been a £1.5 million contract to build an extension for a local school.
  “Constructionline has given us a much wider choice of suppliers and helped make the
  tendering process more competitive”. Peter Sipple, Surveying Services Manager,
  London Borough of Havering.




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  Wirral Council - saving time and money and playing a key role in supporting local
  businesses.

  Wirral Council serves a population of 312,293 residents (2001 census) in the North
  West of England. After running a series of successful trials, the Council has now been
  using Constructionline since April 2004.
  In its first 10 months of operation, Wirral Council made extensive use of
  Constructionline, producing some 80 long lists for tenders, to a total value of £15
  million, proving its value with both civil engineering and construction projects.
  "The projects vary considerably in value, from £50,000 right up to one worth £3
  million" says Ray Jinkinson, Procurement Officer with Wirral Council.
  The Council's stated policy is to support local employment wherever possible,
  consistent with achieving best value for the council-tax payers of the Wirral. That
  means, typically, that where they have six companies shortlisted for a contract, at
  least three of these would be from the Wirral, and that local sub-contractors would
  also be well represented.
  “You might assume that having access to a database covering the whole country
  might lead to us using more suppliers from outside the area. In fact that hasn't been
  the case” says Ray Jinkinson. “We have actually been able to source a great many
  local businesses that weren't on our list before. As a Council, we're saving time and
  money and playing a key role in supporting local businesses."
  More information at: www.constructionline.co.uk




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5.     WHAT IS INDUSTRY TELLING US?
An Industry consultation meeting was held at the Construction Confederation on 5th April
2007 to consider the question:
       “In the context of e-procurement, what do authorities need to do differently to
       enable suppliers to offer more cost-effective, higher quality service?”
A group of industry representatives discussed this and came up with some key
recommendations, that LAs should:
1.    Standardise more and develop greater consistency between LAs (procedures,
      documents etc). There are too many stakeholders and every project is bespoke.
2.    Recognise that the current approach taken by most LAs doesn’t enable best value,
      rather that savings come from incremental service delivery improvement,
      built on established relationships, rather than cheaper products.
3.    Encourage lifecycle frameworks and partnering, based on service delivery
      KPIs. These are proving useful in delivering efficiencies, but most do not yet use e-
      technology.
4.    Share data - LAs are mostly working in a closed way, reluctant to share
      information. Forward planning is key to reducing supplier costs (and prices) so any
      move to improving transparency would bring significant rewards – for example a
      forward look on how the LA (or regional group) plans to release work over the
      capital spend period and on what basis, and better information on how the LA (or
      regional group) plans to measure performance.
5.    Work with industry partners to overcome the significant non-compliance
      culture that prevails on both sides of the supply chain. There is some doubt that
      there is sufficient pressure on most LAs or construction companies at present to
      force the cultures to change (with notable exceptions, in particular in the social
      housing sector which is changing due to economic imperatives).
6.    Work with industry to improve skills. There would be big benefits in the
      widespread adoption of collaborative strategic procurement models, but there is a
      perceived lack of skills on both sides to implement partnering, manage supplier
      relationships, develop transparent cost-based pricing or implement e-technology.
7.    Find ways to speed up decision-making - the speed of decision-making is too
      slow to allow contractors to respond to changing requirements and deliver
      incremental improvements.
8.    Find ways (including e-sourcing) to reduce the high supplier costs of bidding –
      it all ends up on the bill!
9.    Adopt e-contract management systems etc to improve supplier relationship
      management. Current processes offer little opportunity for supplier performance
      improvement.
10.   Adopt appropriate e-procurement solutions. Mainstream e-procurement
      systems are not adequate to embrace the complexity of the construction sector’s
      requirements.




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6.     GETTING STARTED
6.1     Implementing e-procurement in local authority construction
Introducing e-procurement into construction is in some ways no different from doing so
in any complex area of an authority’s activity, but increasingly, these systems will be
implemented as part of a partnership or collaborative project. Many of these systems will
be implemented by the 1st tier private sector partner and the authority’s responsibility
will be to manage the interface with their own finance and procurement systems and to
ensure take-up and compliance to the new processes.

Where the e-procurement system is to be introduced within the authority (or group of
authorities) there is a wealth of guidance available from NePP, IDeA and OGC – see
Section 8.


6.2     Overcoming the barriers
The potential benefits from e-procurement are recognised by contract and procurement
managers in the construction sector. However the adoption of e-procurement in this
sector is well behind other areas of council expenditure. Some of the reasons have
emerged already. Discussions with the Stakeholder Group councils identified a set of key
barriers and some suggestions for overcoming them, which are detailed in a checklist on
pages 27-29.

Considering and addressing these challenges at an early stage in the implementation
process will help a council to overcome many of the barriers they face, and will help to
ensure that the introduction of e-procurement into construction is successful, in terms of
both the implementation and the benefits that it ultimately delivers.




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Checklist: Overcoming the Barriers
Look at the 7 barriers and consider which is stopping your authority from taking
advantage of e-procurement in construction.

Barrier 1: Complexity and culture change
A key characteristic of local authorities that prevents e-procurement generating benefits
in construction is the lack of a compliance culture. That means poor up-take of e-
procurement solutions and framework contracts, and duplication of effort across councils
in managing tendering and supplier approval etc.

The scale of the changes needed to adopt e-procurement into local authority Housing,
Property and Highways departments is felt by many managers to be too big to handle.

Where an authority employs a direct works labour force, the opportunities for process
improvement are significant, but often this is given low priority as “too difficult” or due to
uncertainty about the future of the in-house function.

Where the work is contracted out or passed to an arms length organisation, the authority
has little interest in the efficiency of processes – it can simply require that the external
partner delivers a cost-effective service.

Key actions to overcome the barrier:
 • Introduction of new processes and systems does raise culture change issues and
   many of the departments are not geared up for change. However it is also true that
   it is in these areas that there are the greatest potential benefits to be realised.
 • In some cases it will be necessary to outsource the functions to achieve real change.
   Whether work is done in-house or contracted out, the strategic view needs to be
   taken – cost will only be taken out of the supply chain when considered as a whole.
 • Focus on transforming processes and culture before adopting new systems
   and tools – or they won’t get used. This is particularly important where a
   department has been able to operate relatively autonomously until now, so
   resistance to change will be ingrained.
                                           Is this a key barrier for us?

Barrier 2: The focus is predominantly on procuring services which are more
difficult to automate
The Construction sector is more complex than many other markets because there is a
tendency for both the suppliers and customers to be compound organisations, especially
as the projects grow larger. Construction services don’t lend themselves to simple one-
size-fits-all solutions.
Key actions to overcome the barrier:
 • Implementation of new systems and processes needs to take the complexity into
   account; tailored and bespoke solutions may be needed.
 • Don’t overlook the fact that there is a lot of scope for improvement in simple
   materials procurement. Use online catalogues and other ways to aggregate and
   rationalise ordering and invoicing eg PCards.
                                          Is this a key barrier for us?




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          Efficiency and collaboration through the use of e-technology



Barrier 3: Organisation and political complexity
An important barrier to efficiency in construction is the number of tiers and the number
of people involved in decision-making in local authorities.

Key actions to overcome the barrier:
 • The complexity requires considerable effort and cost on both sides of the supply
   chain and ways to streamline decision-making should be sought wherever possible.
 • Use  workflow-prompted   systems    eg  e-Tendering     and    e-Contract
   Management Systems to speed up and improve the efficiency of the process.
 • These systems can accommodate the complex financial and political framework that
   authorities operate within and ensure consistent compliance to the rules.
                                           Is this a key barrier for us?

Barrier 4: Ineffective collaboration
Local authorities are perceived as risk-averse and, particularly the larger metropolitan
councils, not working together very effectively in the construction sector. London
boroughs in particular have been singled out as insular and not collaborating sufficiently.
“If government is not joined-up, e-technology solutions won’t improve things”.

Key actions to overcome the barrier:
 • The local authority construction sector is complex. However collaboration can be
   encouraged by the introduction of e-procurement tools. These make visible the
   management information needed to enable more effective collaboration.
 • As more data becomes visible and can be shared, use this to identify
   opportunities for collaborative initiatives and shared framework contracts.
   This will lead to improved results and greater acceptance of collaborative working.
                                           Is this a key barrier for us?

Barrier 5: Suppliers’ lack of readiness
Adoption of e-procurement, contract management and collaboration tools are dependent
on all parties having the skills and technological capacity to cope with the change.

Although the top construction companies are well advanced in their own process
modernisation programmes, this does not extend to the smaller companies who can find
aspects of e-technology difficult to manage. Many of these would also not be able to cope
with the large framework contracts that will be increasingly used in this sector.

Key actions to overcome the barrier:
 • Don’t overestimate these barriers – they may reflect out-of-date perceptions. For
   example the experience of Yorkshire councils is that most companies can cope with
   accessing supplier portals and submitting tenders electronically.
 • If there is a political motivation to include small local suppliers to protect
   the local economy, use the examples quoted in this guide (eg Fusion21) and
   elsewhere to design an approach that is economically sustainable.
 • Encourage these local suppliers to register with a standard pre-qualification service
   and alert them to any local or regional Supplier Portals.
 • Include relevant clauses in major contracts to encourage the use of local sub-
   contractors.
                                           Is this a key barrier for us?



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NePP DESKTOP GUIDE: E-PROCUREMENT IN LOCAL AUTHORITY CONSTRUCTION

          Efficiency and collaboration through the use of e-technology




Barrier 6: Lack of compatibility/integration between systems
The majority of the maintenance work that is carried out using direct labour is managed
manually or using specialist works order software etc. There is little evidence of
integration with mainstream procurement.

Key actions to overcome the barrier:
 • In some cases this is because the future of the direct labour force is being examined
   or actually in transition to an external contractor. Whichever outcome is decided
   should enable specification of change to more efficient systems.
 • If your authority has retained its direct labour force, give priority to
   overcoming any incompatibility between legacy works order systems and
   newer financial and e-procurement systems. If necessary, replace or
   upgrade specialist systems to enable integration.
 • Be aware that both local authorities and the construction industry deal with other
   types or organisation and other markets. Make sure e-Procurement solution
   providers understand how to bring construction into the solutions they are offering
   for use in other areas.
                                          Is this a key barrier for us?

Barrier 7: Lack of standards, sector specific issues
There are some practical issues specific to e-procurement in the construction sector, such
as the lack of standards for secure information transfer. These barriers are effectively
stalling the progress that authorities should be making in implementing e-procurement in
their construction functions.

Key actions to overcome the barrier:
 • Work to build up experience in the use of digital signatures and the transmission of
   drawings and large documents over the web. Once people are more familiar with
   these technologies, their confidence will grow and they will be prepared to invest in
   the time and effort to adopt the new systems.
 • Be aware, in introducing e-procurement solutions, of specialist accounting
   requirements such as the CIS tax regime for construction labour, which requires
   registration of subcontractors. System providers need to address such issues
   and find ways of incorporating these requirements into their solutions.
                                          Is this a key barrier for us?




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NePP DESKTOP GUIDE: E-PROCUREMENT IN LOCAL AUTHORITY CONSTRUCTION

          Efficiency and collaboration through the use of e-technology




7.     WHERE CAN I GET FURTHER INFORMATION?
Detailed “How to” guidance notes for e-purchasing, procurement cards, e-tendering, e-
auctions and e-contract management systems are available on the National e-
Procurement Project (NePP) website: www.localtgov.org.uk.

They contain fuller information on the benefits available from e-procurement including
suggested benchmarks, how to identify your benefits opportunity and how to deliver that
opportunity.

The NePP website also contains material on the key issues facing authorities in the
implementation of e-procurement including:
 • Preparing for e-procurement.
 • Choosing the solution.
 • Supplier Adoption.
 • Implementing e-procurement.
 • Collaboration and Regional Solutions.
 • Change management.

Detailed guidance on work to improve the efficiency of public sector construction can be
found at the websites of Office of Government Commerce:
www.ogc.gov.uk and http://www.ogc.gov.uk/guidance_achieving_excellence_in_construction.asp
and the East Midlands Centre of Excellence, the national lead RCE on construction:
http://www.emce.gov.uk/work_streams.htm#ConstructionNat

The Local Government Task Force, part of the Construction Excellence initiative, has a
selection of case studies, reports and guides on its website:
www.constructingexcellence.org.uk/sectorforums/lgtf

Specialist guidance is available on relevant websites. For example:
       the Highways Agency has published a Toolkit For Local Transport Highways
       Efficiency Gains on its website: www.highways.gov.uk/business. This and other
       reports and guidance are available on the website to help local highways
       authorities to develop and deliver their procurement strategies to achieve greater
       service delivery efficiency.
       Guidance from the Department for Education and Skills and Partnerships for
       Schools is available on the Building Schools for the Future portal:
       www.bsf.gov.uk/km, including building case studies.

Note that none of these initiatives and websites focus specifically with the introduction of
e-procurement tools into the local authority construction sector.




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NePP DESKTOP GUIDE: E-PROCUREMENT IN LOCAL AUTHORITY CONSTRUCTION

          Efficiency and collaboration through the use of e-technology




8.      GLOSSARY OF TERMS
This document contains a number of terms that may be unfamiliar. The following table
provides a glossary.


Table 1: Glossary of terms used in this document

Term                  Definition

ALMO                  Arms Length Management Organisation. Term given to a not-for-
                      profit organisation that manages a council’s housing stock. The
                      council continues to own the housing, but the ALMO carries out
                      day-to-day management like collecting rent and ordering repairs.
                      ALMOs are run by an unpaid board of directors that includes
                      councillors and tenant representatives.

Cashable and non-     Cashable benefits result in a reduction in expenditure. Non-
cashable benefits     cashable benefits are those that free-up staff from a task
                      (because it is automated or eliminated) but the time saved for
                      each staff member is not large enough to result in a reduction in
                      the number of staff required.

CITE                  Construction Industry Trading Electronically - CITE is a
                      collaborative electronic information exchange initiative for the UK
                      construction industry.

DLO                   Direct Labour Organisation – a local authority’s construction and
                      building works department. May be part of a larger Direct
                      Services Organisation (DSO).

e-Collaboration       Cooperation between partners with the aid of appropriate e-tools.

e-Hub                 An e-Hub, or e-Marketplace, is an 3rd party hosted, internet-
                      based facility that enables trade between one or more purchasing
                      organisations and a variety of suppliers. e-Hubs are
                      predominantly used in the construction industry to streamline
                      back office processes and share data. Marketplaces in the Local
                      Authority sector are primarily used to enable buyers to take
                      advantage of online catalogues provided by suppliers under
                      shared framework agreements.

e-Invoicing           e-Invoicing or electronic invoicing is an internet-based solution for
                      the secure exchange of electronic invoices between suppliers and
                      buyers.

e-Tendering           e-Tendering comprises:
                        • undertaking the tasks of advertising the requirement for
                          goods or services, registering suppliers, and issuing and
                          receiving tender documents via the internet
                        • automating the evaluation of responses to a tender.




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           Efficiency and collaboration through the use of e-technology



Term                   Definition

Local Highway          A Local Highway Authority refers to a local authority in England
Authority (LHA)        responsible for local roads under relevant legislation ie County
                       Councils (although they may give some executive functions to the
                       district councils), Unitary and Metropolitan Borough Councils. In
                       London, Transport for London manages the main roads and all of
                       London's traffic lights, the remainder of London's road network is
                       administered by the thirty three London councils.

Non-OJEU tender        The selection of a supplier through a tender. The level of
                       expenditure at which suppliers must be selected through a Non-
                       OJEU (Official Journal of the European Union) tender will be
                       determined by your financial regulations.

OJEU tender            The selection of a supplier through a tender, where the contract
                       value is above the level of expenditure at which EU regulations
                       require the contract to be advertised in the Official Journal of the
                       European Union (OJEU). The current levels of expenditure are:
                       Goods and certain services – £153,376
                       Public works - £3,834,411.      See www.simap.eu.int

PCards                 Purchase cards which work in a similar way to credit cards and
                       can be used to purchase goods or services. They can be
                       controlled effectively at both a transaction value (ie an order) and
                       spend type level (ie which goods or services can be purchased).

PQQ                    A document used in a pre-selection process to restrict tenderers
                       to a manageable number of capable organisations. Use of a
(Pre-qualification     standardised PQQ document and process eliminates cost for
questionnaire)         buyers and suppliers.

Process efficiencies   A reduction in the cost of a process or the time taken to complete
                       a process (e.g. processing a purchase order) as a result of
                       automating the process.

Purchase-to-pay        The transaction module of a financial management system that
(P2P)                  enables electronic purchase ordering, invoicing and payment. It
                       may also include RFQ functionality – see below.

Request for            The selection of a supplier through a Request for Quotations from
quotation (RFQ)        a predetermined number of potential suppliers. This functionality
                       may be provided by the P2P module of a financial management
                       system or a Marketplace solution.

RICS                   The Royal Institution of Chartered Surveyors

Tier 1, 2 & 3          Tier 1 refers to prime contractors and partners. Tier 2 and 3 are
suppliers              sub-contractors, often managed by Tier 1 as part of contract
                       arrangements.




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 NePP DESKTOP GUIDE: E-PROCUREMENT IN LOCAL AUTHORITY CONSTRUCTION

           Efficiency and collaboration through the use of e-technology




9.     ACKNOWLEDGEMENTS
This guidance note was compiled by The Imaginist Company on behalf of the National e-
Procurement Project, with the valuable input and support of the following organisations:
(project sponsors in bold)


Local Government and Government Agencies
E Midlands Centre of Excellence                     Manchester City Council
(lead RCE on Construction, member of Construction   North Tyneside Council
Excellence’s Local Government Task Force)           Northampton Borough Council
Highways Agency                                     OGC Construction & FM Efficiency Division
Leeds City Council                                  Olympic Delivery Authority (ODA)
London Borough of Bromley                           Sheffield Council
London Borough of Camden                            West London Alliance
London Borough of Havering                          West of England NHS Procurement Hub
London Borough of Newham                            Wirral Council
London Centre of Excellence                         Yorkshire and Humberside Centre of
                                                     Excellence

Construction Industry
Balfour Beatty                                      ISG Jackson
Bluestone                                           Kier Group
Bovis Lend Lease UK                                 Kier Support Services
Capita                                              Laing O’Rourke
Construction Confederation                          Mansell
Geoffrey Osborne                                    Willmott Dixon


Collaborative Partnerships                          e-Procurement solution and
      & ALMOS                                             service providers
Construction Excellence                             Asite
2010 Rotherham Ltd                                  COINS etc
Birmingham Construction Partnership                 Constructionline
Cambridgeshire Highways Partnership                 EGS
Fusion21                                            Valueworks
GMProcure
Harvest Housing
National Federation of ALMOs
Oxfordshire Property Partnership




This Guide was developed by The Imaginist Company on behalf of the National e-
Procurement Project. All enquiries to Peter Duschinsky at peterd@imaginist.co.uk




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