Comments on: Government negotiations with major suppliers – a progress report http://blog.procurement-excellence.com/government-negotiations-with-major-suppliers-a-progress-report/ Supply, Cost & Public Procurement Management Fri, 25 Feb 2011 10:30:30 +0000 http://wordpress.org/?v=2.8.4 hourly 1 By: Atos Origin sign MOU with UK Government to reduce costs; share price rises rapidly | Supply, Cost & Procurement Management http://blog.procurement-excellence.com/government-negotiations-with-major-suppliers-a-progress-report/comment-page-1/#comment-4877 Atos Origin sign MOU with UK Government to reduce costs; share price rises rapidly | Supply, Cost & Procurement Management Sat, 11 Sep 2010 13:25:40 +0000 http://blog.procurement-excellence.com/?p=3022#comment-4877 [...] major suppliers to sign a formal agreement following the initiative around “negotiating contracts with major suppliers across Government to reduce costs” (Cabinet [...] [...] major suppliers to sign a formal agreement following the initiative around “negotiating contracts with major suppliers across Government to reduce costs” (Cabinet [...]

]]> By: Measuring procurement savings – part 1 | Supply, Cost & Procurement Management http://blog.procurement-excellence.com/government-negotiations-with-major-suppliers-a-progress-report/comment-page-1/#comment-3774 Measuring procurement savings – part 1 | Supply, Cost & Procurement Management Wed, 11 Aug 2010 07:25:59 +0000 http://blog.procurement-excellence.com/?p=3022#comment-3774 [...] broadly agreed – my answer is also here as a comment.  But it got me thinking about savings more generally, which is a perennial issue and [...] [...] broadly agreed – my answer is also here as a comment.  But it got me thinking about savings more generally, which is a perennial issue and [...]

]]> By: More on Government’s central negotiations with top suppliers | Supply, Cost & Procurement Management http://blog.procurement-excellence.com/government-negotiations-with-major-suppliers-a-progress-report/comment-page-1/#comment-3560 More on Government’s central negotiations with top suppliers | Supply, Cost & Procurement Management Sat, 07 Aug 2010 07:40:16 +0000 http://blog.procurement-excellence.com/?p=3022#comment-3560 [...] wrote here at some length about the government initiative to negotiate immediate cost savings from major contracts.  I [...] [...] wrote here at some length about the government initiative to negotiate immediate cost savings from major contracts.  I [...]

]]> By: Peter http://blog.procurement-excellence.com/government-negotiations-with-major-suppliers-a-progress-report/comment-page-1/#comment-3358 Peter Mon, 02 Aug 2010 06:46:20 +0000 http://blog.procurement-excellence.com/?p=3022#comment-3358 Great question! I think there are two elements here; the nature of the saving, and who takes the credit for it. What you describe is a cut in service level - an equivalent would be using lower specification product. Unless you can show that it has no effect on <strong>output </strong> this is not an efficiency saving, even under the 'old' Treasury definition! It is a "cost reduction / saving" but not an efficiency saving because although input has reduced, so has output. I guess if you maintain citizen satisfaction while reducing number of bin collections that is different; we would argue output has been maintained so it is an efficiency. I saw many claims of 'efficiency savings' when I worked with OGC post Gershon where people had just cut budgets and there was no accompanying action to get better value from the spend. NOT an efficiency! 2nd point - who gets the credit? I'm with you, doesn't really feel like a 'procurement' saving (although I have probably happily taken credit for such savings when I was a CPO!) I guess you could make a case where it is genuinely Procurement's idea (you come up with a novel new way of scheduling bin collections) but where it is a pretty simple 'cut' then it feels like a Departmental cost saving. Great question! I think there are two elements here; the nature of the saving, and who takes the credit for it.
What you describe is a cut in service level – an equivalent would be using lower specification product. Unless you can show that it has no effect on output this is not an efficiency saving, even under the ‘old’ Treasury definition! It is a “cost reduction / saving” but not an efficiency saving because although input has reduced, so has output. I guess if you maintain citizen satisfaction while reducing number of bin collections that is different; we would argue output has been maintained so it is an efficiency. I saw many claims of ‘efficiency savings’ when I worked with OGC post Gershon where people had just cut budgets and there was no accompanying action to get better value from the spend. NOT an efficiency!
2nd point – who gets the credit? I’m with you, doesn’t really feel like a ‘procurement’ saving (although I have probably happily taken credit for such savings when I was a CPO!) I guess you could make a case where it is genuinely Procurement’s idea (you come up with a novel new way of scheduling bin collections) but where it is a pretty simple ‘cut’ then it feels like a Departmental cost saving.

]]> By: Makeman http://blog.procurement-excellence.com/government-negotiations-with-major-suppliers-a-progress-report/comment-page-1/#comment-3343 Makeman Sun, 01 Aug 2010 21:25:14 +0000 http://blog.procurement-excellence.com/?p=3022#comment-3343 I am a procurement manager at a local authority. In the course of formulating our approach to contract reviews, I was recently having a debate with a fellow procurement colleague about how savings from contract reviews should be counted. He thinks that savings gained from a reduction in service levels (e.g., reducing the number of home visits, or number of bin collections) should be counted as 'procurement' savings, whereas I was of the view that, regardless of where the initiative came from, in most cases reductions in service levels should really be counted towards departmental savings as it is the dept. who determined the service levels in the first place, as well as having responsibility for policy outcomes (and any fall out) as a result. Any thoughts? I am a procurement manager at a local authority. In the course of formulating our approach to contract reviews, I was recently having a debate with a fellow procurement colleague about how savings from contract reviews should be counted. He thinks that savings gained from a reduction in service levels (e.g., reducing the number of home visits, or number of bin collections) should be counted as ‘procurement’ savings, whereas I was of the view that, regardless of where the initiative came from, in most cases reductions in service levels should really be counted towards departmental savings as it is the dept. who determined the service levels in the first place, as well as having responsibility for policy outcomes (and any fall out) as a result. Any thoughts?

]]> By: Rob http://blog.procurement-excellence.com/government-negotiations-with-major-suppliers-a-progress-report/comment-page-1/#comment-3250 Rob Fri, 30 Jul 2010 07:34:32 +0000 http://blog.procurement-excellence.com/?p=3022#comment-3250 Recently (very), I led a significant negotiation of the largest (by spend and profile) supply contract for a high profile public body. It led to 'annualised' cost savings (measured at a budget level, ie not 'projected savings') of 39% - I was ever-so-slightly disappointed that we didn't quite hit the 40% mark... Most notably, and relevantly, the supplier sits on Mr Maude's 'top 19' list. The negotiation, from inception to receipt of the negotiated schedules, lasted just under three months. A fairly significant cross-functional team was formed comprising approx 20+ relevant people selected from both the client organisation and the supplier. To achieve the savings, we reviewed the strategy and focus of the service provision (to align it to delivering more relevant outcomes), refined the scope and specification, overturned every stone while challenging every existing cost (in some instances, with benchmarks), and even introduced a new incentivisation scheme to encourage the supplier to achieve, maintain, and surpass service levels, especially during transition which, due to the scope/profile of the service (and reduction in headcount) and its focus on supporting 'front-line' users, would last six months. We planned out our strategy, approach, and tactics in detail, and established a cross-functional team that brought together the right blend of 'policy-lead', 'specifier', 'buyer' and 'provider' together to enable every stage of the negotiation to take place on an informed basis, and at speed. I would expect to see similar dynamics underpinning these central negotiations, not simply because of my recent, personal experience (having led and delivered a successful renegotiation with one of these suppliers), but because, after more than two decades as a procurement practitioner, I know that this is simply best practice. Recently (very), I led a significant negotiation of the largest (by spend and profile) supply contract for a high profile public body. It led to ‘annualised’ cost savings (measured at a budget level, ie not ‘projected savings’) of 39% – I was ever-so-slightly disappointed that we didn’t quite hit the 40% mark… Most notably, and relevantly, the supplier sits on Mr Maude’s ‘top 19′ list. The negotiation, from inception to receipt of the negotiated schedules, lasted just under three months.

A fairly significant cross-functional team was formed comprising approx 20+ relevant people selected from both the client organisation and the supplier. To achieve the savings, we reviewed the strategy and focus of the service provision (to align it to delivering more relevant outcomes), refined the scope and specification, overturned every stone while challenging every existing cost (in some instances, with benchmarks), and even introduced a new incentivisation scheme to encourage the supplier to achieve, maintain, and surpass service levels, especially during transition which, due to the scope/profile of the service (and reduction in headcount) and its focus on supporting ‘front-line’ users, would last six months.

We planned out our strategy, approach, and tactics in detail, and established a cross-functional team that brought together the right blend of ‘policy-lead’, ’specifier’, ‘buyer’ and ‘provider’ together to enable every stage of the negotiation to take place on an informed basis, and at speed.

I would expect to see similar dynamics underpinning these central negotiations, not simply because of my recent, personal experience (having led and delivered a successful renegotiation with one of these suppliers), but because, after more than two decades as a procurement practitioner, I know that this is simply best practice.

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