Hounslow Council – bringing contract management and procurement closer

(Hounslow High Street, 1905) 

So, you've completed your degree in Ancient History at one of England's best universities, you've then done a Masters in Roman Myth, and you've started a Doctorate in the use of poison in a historical context. A gentle life in an academia stretches ahead of you. Then you wake up one morning and think, never mind the PhD, what I really want to do is help build an airport terminal then buy waste management services for local government. That sounds much more exciting!

Well, that's pretty much what happened to Sarah Rayner, some ten years ago.

We wrote here about the radical step taken by Hounslow council in the UK, who are moving the operational delivery of service contracts, and all that goes with it, into the Supply Chain function – which also incorporates the traditional procurement activities. That function is run by Rayner, who I spoke to recently about the role and this fascinating strategy.

She talks softly and rapidly, with a very open and friendly style, which I imagine helps her manage difficult stakeholders.  A friendly councillor told her when she started that her voice needs to sound “stronger,” but personally I would stick with the “iron fist in the velvet glove” metaphor if I were in her shoes. It’s sometimes better not to look or sound too scary when you’re doing radical stuff!

The radical changes we’re talking about weren’t her idea, she stresses  – Mary Harpley, the CEO at Hounslow and Anthony Kemp, Director of Resources, are the chief architects. The thinking behind it relates to the financial pressures councils are under, and the assumption that bringing procurement and contract management closer together would save money. But it would also free up the “service leads” to be more strategic in their thinking, which would be more likely if they weren’t caught up in day to day detailed operational delivery issues.  So I asked Rayner how her team is organised to handle these responsibilities.

“I have three teams, 65 people in total at the moment, each with a ‘Head of’. Procurement is the traditional contracting area. Supplier Performance manages the contracts in the delivery phase, and Supply Chain Development mainly focuses on systems and data – the P2P process and so on.”

How has the strategy been perceived by internal stakeholders?

“It’s fair to say that ‘procurement’ as a function hasn’t got the best reputation in much of local government. That’s one of the reasons we’ve called the whole function Supply Chain – and generally talking to colleagues about the contract management focus of the Supplier Performance team and work has met with positive reactions”.

Which spend areas have migrated into your area so far?

“We’re handing adult social care, health, revenues and benefits, catering  and environment (which includes highways, waste and parking). Corporate categories and Children’s Services are migrating in 2014”.

And how does the new split between your team and the service heads work?

“If we take Highways as an example, the policy team that remains outside my team is just three people. They focus on policy, forward strategy, horizon scanning, formulating change and so on. They also play a client role in any procurement process – and we will involve other technical experts, probably external, as necessary of course.  But then responsibility for all the management of the providers, and all the operational matters around that, falls under Supplier Performance. So after the recent storms, it was our suppliers clearing up".

What are the practical actions you’ve taken to drive benefits post contract award?

When a contract first comes across to us we do an “MOT” type check on it. Some are in a good state  – others are not!  We’ll tend to start with relatively unsophisticated actions. Just paying more attention to where the money is going, what are we spending it on, checking and approvals. Then ensuring contract terms are adhered too – so no automatic inflation increases, for example. We’ll then get into deeper analysis and discussion with suppliers – how are they apportioning overheads for instance, and as efficiencies are generated through the contract period, how those are shared with us.

Then we have actions that are more collaborative or re-engineering in nature. Spend decisions  might cut across multiple areas – for instance, we spend more on CCTV cameras, and that saves money in another area because we can reduce fly-tipping.

You’re unusual in that you have targets for savings through both procurement and contract management phases – and they’re pretty ambitious?

Our target is around 15% cost reduction on re-tendering, plus a further 3-6% through contract management.

(In part 2 we’ll look at some of the people and skills aspects of this approach and have more from Sarah Rayner).

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  1. Phoenix:

    This sounds terrific – there will be lots of advantages to managing service conracts this way I’m sure. But the biggest disadvantage I can think of is when something goes wrong with one contract, say for highways maintenance, and the Councillors come looking for someone responsible. Service heads may decide that having contracts managed by the supply chain function will mean they can abrogate their responsibility – and they must at least share in this responsibility – for managing the relationship with the contractor. They might be tempted to point the finger of blame at the supply chain function, especially if they might feel aggrieved at having some of their power taken from them. Might it even be possible that client function and contractor could “gang up” on the contract managers? I’d be interested to know how Sarah’s team have prepared for this possibililty…

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