ITEM EX22
BEST VALUE COMMITTEE – 29 NOVEMBER 2001

Review report and action plans

Service area under review:	

Fire Service Procurement
Core review team membership 	Review leader:	John Hurren, Deputy County Fire Officer
PPRU officer:	Ian Wilson, Performance & Review Adviser (to July 2001)
	Neil Lawrence, Performance and Review Adviser
	(from July 2001)
Designated member:	Cllr Mrs Diana Ludlow
Independent members:	Martin Slade, BV Manager, Thames Valley Police
Other core team members:	Steve Dutton, Procurement Manager
	Helen Sawala, Supplies, 
	Pam Block, Head of Corporate Service, OFS
	Kurt Moxley, Social Services	
Service budget	£3.2m for procurement of all goods and services
of this, £1m (32%) for supplies and services 	
Terms of reference (taken from the Baseline Questionnaire)	1.	Develop a procurement policy
2.	Develop key contract strategies
3.	Develop collaboration groups (other Fire Brigades, OCC depts etc.)
4.	Review uniform (non-firefighting) supply chain against best practice
5.	Review Store stock, to consider appropriateness
6.	Develop performance indicators and management information to ensure appropriate levels of service are being achieved
7.	Develop ‘e-procurement’ (ordering on-line, use of purchase cards)
8.	Develop cost management centres to facilitate the use of purchase cards etc
9.	Market test Fire Service procurement activities	

Best Value Review
Fire Service Procurement – Executive Summary

Introduction and Review Focus
The Home Office has required a review of procurement across all Fire Services to be carried out in 2001/02. In advance of this, and in the knowledge that the service was not performing to a satisfactory standard, it was decided to instigate an independent audit in May 2000 to act as a precursor to the national review. 
Informed by the outcome of the independent review, and the Audit Commission’s national study on fire service procurement in January 2001, the focus of the best value review was to;
•	develop a procurement policy
•	develop key contract strategies
•	develop collaboration groups (other Fire Brigades, OCC depts etc.)
•	review uniform (non-firefighting) supply chain against best practice
•	review Store stock, to consider appropriateness
•	develop performance indicators and management information to ensure appropriate levels of service are being achieved
•	develop ‘e-procurement’ (ordering on-line, use of purchase cards)
•	develop cost management centres to facilitate the use of purchase cards etc
•	market test Fire Service procurement activities

Conclusions
The conclusions of the independent review are set out in the body of the report, and fall  into the following key areas;
•	The Procurement Function
•	Savings Opportunities
•	Management of Stores and Stocks
•	Measures of Performance
The independent review has allowed the best value review to focus on key areas for improvement, and also to act at the earliest opportunity to instigate the necessary changes. These have been monitored throughout the best value review process.
Action completed to date
•	A procurement policy was developed and introduced in May 2001
•	Key contract strategies now operate, including major expenditure items being transferred to a ‘total care management’ service, and call off contracts introduced for repeat items of stock.
•	Collaborative working with Buckinghamshire and Milton Keynes was introduced in November 2000. for fuel procurement and leasing emergency response cars. 
•	A substantial reduction in stock has been achieved by better managing the stores function, and selling stock back to the supplier at market value, and also through using externalised contract strategies
•	The introduction of purchase cards to specific budget holders by November 2001 to reduce the volume of low value orders to be processed.
•	Ensuring specific terms and conditions are included on all orders, and actively pursuing price reductions and other benefits.
•	Local performance indicators have been established, and are being monitored using the Service’s Performance Management System
•	Redeploying staff within the Service to reflect the revised procurement function, and to reduce overhead costs.

Actions for Service Improvement	
Action 1	Establish a single procurement function to cover the brigades in Oxfordshire, Buckinghamshire and Berkshire. Form a project team by January 2002 to develop an implementation plan with specific timescales to achieve this.	
Action 2	In the intervening period, develop more extensive collaborative working between the three brigades. Specifically;
•	Develop common replacement policies and specifications for fire appliances by May 2003, with a view to aligning procurement programmes where possible 
•	Establish a managed service for uniforms jointly with Buckinghamshire by December 2001, and seek to  include Berkshire in the arrangements at a later date.	
Action 3	Establish if there are any advantages in using the approach to risk assessment and design used by consortium groups that may benefit the fire service by March 2002	
Action 4	Fully implement Cost Centres for all establishments by April 2002, and provide each Cost Centre Manager with purchase cards.	
Action 5	Rationalise the IT system used for stores management, to avoid duplication with the current LAFIS system and the proposed County MIS, by March 2002	
Action 6	Roles and responsibilities of other staff to be modified to suit the future needs of the function, dependent upon whether contingency stocks of operational equipment are retained centrally or stored elsewhere.	

Best Value Review
Fire Service Procurement

1.	Introduction

1.1.	Procurement is central to the management of any operation.  It is vital to get the necessary goods, services and works of the right quality, at the right price and at the right time.  Improving the efficiency and cost effectiveness of procurement is an important part of the Modernising Government agenda. National guidance on Best Value highlights a specific role for procurement strategies in determining the Best Value option for future service delivery.
1.2.	All fire authorities are required to conduct specific Best Value Reviews as part of a five year programme, directed by the DTLR.   Procurement has been identified as one such review, with a requirement for all authorities to complete this by 31 March 2002.
1.3.	Procurement functions are defined as the securing of equipment necessary to meet all normal requirements for the Fire Service to discharge its duties under the Fire Services Act 1947.  In practice, procurement covers every aspect of the process of determining the need for goods, works and services and buying, delivering and storing them. In many instances, the activity is seamless in terms of whether it is supporting the discharge of firefighting duties or other aspects of the Authority’s statutory responsibilities.

________________________________________________________________________________________________

2.	Scope of the Review
The scope of the Review, as agreed by the Best Value and Audit Sub-Committee on 6 June 2001, was to;
•	develop a procurement policy
•	develop key contract strategies
•	develop collaboration groups (other Fire Brigades, OCC depts etc.)
•	review uniform (non-firefighting) supply chain against best practice
•	review Store stock, to consider appropriateness
•	develop performance indicators and management information to ensure appropriate levels of service are being achieved
•	develop ‘e-procurement’ (ordering on-line, use of purchase cards)
•	develop cost management centres to facilitate the use of purchase cards etc
•	market test Fire Service procurement activities

3.	Work Undertaken
A number of initiatives contributed to the work necessary to the Review;
•	The Audit Commission’s national Value for Money study on Fire Service Procurement ‘A Uniform Approach’, which reported its findings in January 2001.
•	An independent Procurement Review (May 2000) conducted by First Procurement Associates Limited 
•	The report of the Chief and Assistant Chief Fire Officers Association (CACFOA) Benchmarking Club dealing with Fire Service Procurement published in June 2001.
•	Establishing best practice from the outcomes of other Fire Authorities Best Value Reviews on Procurement being conducted at this time.
Full copies of these reports will be deposited in the Members’ Resource Centre

4.	Independent Procurement Review
The following is an extract from the report produced by First Procurement Associates Limited. Recommendations arising from the report fall into the following key areas:
•	The Procurement Function
•	Savings Opportunities
•	Conditions of Contract
•	Management of Stores and Stocks
•	Measures of Performance

4.1.	The Procurement Function
4.1.1.	All activity on procurement issues should be reported on an annual basis within Oxfordshire Fire Service (OFS) by a senior member of the management team who will assume overall responsibility for all procurement issues within OFS.  Such a report should highlight the overall contracts position, savings made and future strategic issues within Procurement.
4.1.2.	To allow OFS to operate to best practice within Procurement that is also auditable under Best Value and against HMFI inspections, OFS should introduce individual contract strategies for all major contracts, highlighting supplier selection, supplier evaluation criteria, development of a tendering and contracting strategy, tender evaluation criteria, negotiation strategy and contract award procedures,
4.1.3.	For each contract for the purchase of materials, services and maintenance, OFS should include the provision of dedicated procurement support to undertake the activities indicated above.  With the introduction of call-off arrangements for items stocked in the Brigade Stores, this should allow the Supplies Manager more time to concentrate on strategic contracting.
4.1.4.	There are opportunities for OFS to collaborate with other local Fire and Rescue Services, particularly on Utilities, Uniform and Total Care packages for operational equipment and P.P.E.
4.1.5.	Although there is an understanding of the importance of adherence to European Union Legislation, there is not a detailed internal knowledge of the process and procedures that support the Legislation.  OFS rely on Oxfordshire County Council to provide assistance when required.  OFS should familiarise themselves further with the applicable Legislation to ensure that they can build any European Legislation tendering requirements into their strategic plans for contracting.
4.1.6.	The new Procurement and Stores system can produce a variety of information  relating to stock management reporting, supplier information and analysis of trends.  Presently, the system is not being utilised as well as it could.  OFS should review their internal requirements for reporting on procurement issues to regularly monitor spend and levels of stock.  Such a review would set targets with regard to reduction of stock levels in both Brigade Stores and Transport Supplies.
4.2.	Savings Opportunities
4.2.1.	Presently, no savings targets are documented on an annual basis within OFS.  To identify savings opportunities, OFS would need to take advantage of the following opportunities.
•	Build upon an understanding of each key area of expertise identified for key suppliers.  Comprehensively focusing on each area should identify opportunities for competition, supplier rationalisation and reduce administration.
•	Adopt a strategic approach with regard to all major contracts relating to contract placement and contractual negotiation.
•	The collaborative identification and use of outsourced agreements to exploit economy of scale situations.  Working collaboratively with other Fire and Rescue Services also warrants review, particularly relating to agreements for Utilities procurement, a Total Care package for operational clothing and Uniform clothing.  OFS have already worked in a collaborative approach with Royal Berkshire Fire Authority and Buckinghamshire and Milton Keynes Fire Authority with regard to the Procurement of Road Vehicle Fuel.  This collaboration resulted in a price saving of 5%.
•	Each of the above areas should detail potential savings before any contractual work is undertaken.  If work is undertaken, this should become the savings target against which performance is measured.
•	All savings as a result of special reviews and ad-hoc challenges should be classified to establish ‘real savings’, eg. by negotiation or by the identification of new suppliers.
4.3.	Conditions of Contract
4.3.1.	Purchase Orders presently issued by OFS do not carry a set of general conditions of contract on the reverse side.  They do not protect OFS with regard to recourse for late delivery, quality protection and warranty issues.  It is recommended that a set of general conditions are constructed and issued with all Purchase Orders as soon as practicably possible.
4.4.	Management of Stores and Stocks
4.4.1.	OFS hold very high levels of stock.  As a matter of urgency, the following steps are recommended to begin the process of stock reduction.
•	Non-strategic items and non safety critical items should be reviewed initially, particularly Stationery and Catering items.
•	A contractual review of uniforms and the supply chain is required.  Suppliers who may be unwilling to grant price concessions may offer to hold consignment stocks for next day delivery.
•	With regard to other items stocked, there may be further areas where suppliers are willing to hold stocks.
4.4.2.	There are opportunities to drastically reduce the stock levels of both the Brigade stores and the Transport stores as follows:
Brigade Stores
4.4.3.	With regard to Stationery, a call-off contract via a competitive tendering exercise should be set-up which would take into account consignment stocks (if necessary), Just-in-Time deliveries, consolidated invoicing.  Such an exercise would benchmark existing arrangements and ultimately reduce stock values radically from their present value of £11,000.
4.4.4.	Examples were given of excessive stock levels for rarely used items. OFS should perhaps address this area by taking the equipment off stock and distributing this amongst Wholetime and Day-Crewed Stations.  
4.4.5.	A physical check should be undertaken to ascertain what the value of stock actually is for both the Transport and the Brigade Stores.  There are a number of potential stock discrepancies relating to procedures and processes, together with the loaning of stock to other Brigades, that has taken place over the last few months.

Transport Stores
4.4.6.	There is an opportunity to meet and discuss with Volvo regarding the levels of items stocked by OFS.  As they deliver on a very frequent basis to Kidlington, it should be possible to negotiate an arrangement with Volvo whereby they hold specific stocks of materials at their site.  This would mean a significant reduction in the amount of materials stocked within the Stores and have an effect on capital tied up in stock holding costs.
4.4.7.	As a point of general note, the typical costs of holding stock are between £0.25p and £0.40p in the pound.  This is according to information provided by H M Treasury Purchasing Unit.
4.4.8.	Transport should review the need to keep old parts / spares from appliances that could be useful in the future.  There are Health & Safety and Warranty considerations that need to be taken into account when undertaking this practice.  The review would also generate additional storage space when these old parts have been disposed of.
Measures of Performance
4.4.9.	Measures of Performance and Stores provide an indicative array of performance measures, some of which could be adopted by OFS.  In summary, these are:
•	Profit:	Price Reduction, Price Increase Resistance, Recording Savings, 
•	Quality	Reject Rates, Supplier Performance
•	Stock:	Stock Turn, Stock Level (Value), Stock Movements (Identify Zero or Low), Stock Outs / Stock Out Periods, Incoming Stock Value per Period
•	Delivery: 	Late / Early Deliveries
•	Suppliers: 	Number of Suppliers, Number of Supplier Changes, New Suppliers Sought / Found
•	Buyer / Department: 	New processes / Material Identified, Number of Supplier Visits, Invoice Queries, Number of Items Purchased, Communication Expenses

4.5.	Conclusions of the Independent Report

The implementation of the recommendations detailed would, in the opinion of First Procurement Associates Limited, enable Oxfordshire Fire Service to:
4.5.1.	Demonstrate the movement towards Best Value purchasing practice whilst achieving tangible cost, commercial and operational benefits at no risk to OFS.

4.5.2.	Benchmark all the high value expenditure contracts and fully test operational need with value-for-money criteria.

4.5.3.	Take an assertive step to overcoming the current high volume of purchase orders and set out a series of contract reviews.

4.5.4.	Develop focused supplier relationships for all major suppliers, establish review meetings and formulate robust competitive strategies for current and future workloads.

4.5.5.	Implement a structured approach to procurement needs to be considered against HMFI plans to audit OFS against the Government policies of Best Value.

4.5.6.	Reduce Stores expenditure and present the opportunity for redeployment of staff.

5.	Audit Commission’s National Report: ‘A Uniform Approach’

This presents an overall assessment of national practice in procurement for Fire Services. The main findings of the report are reproduced below

5.1.	General
5.1.1.	The Commission’s analysis showed that in most areas of procurement there are significant variations between Brigades against standard cost and volume indicators.  For the most part, these variations cannot be explained by:
•	Type of Authority,
•	CACFOA region, or
•	Home Office family group.

5.1.2.	No Brigades performed well in all areas.  Some Brigades visited were making good progress in developing a professional approach to procurement.  However, frontline staff in these Brigades were no more satisfied with the equipment provided to them than those in Brigades that had made only limited strategic progress.  

5.1.3.	There is, therefore, no clear explanation of how and where good practice occurs.  Best Value Reviews should address this as Brigades will need to track their performance through all stages of the procurement process and to identify how they will improve in the weaker areas.
5.2.	Procurement Strategy
5.2.1.	Considerable management time is devoted to the procurement of Fire Appliances and operational equipment but there is little strategic focus to the procurement of non-operational goods and services.  This is despite the fact that these services represent 50% of a Fire Authority’s non-staff expenditure.  Although the prioritisation of operational purchases is to be commended, the procurement of costly support services should also receive corporate attention.
5.2.2.	To achieve Best Value in Procurement, the Fire Service will need to challenge how the procurement function is delivered – currently only 13% of authorities have outsourced the function.  Few Fire Authorities delegate financial responsibility to local managers.  This limits their capacity to target spending on good and services more effectively.  It also limits the potential to control usage.
5.3.	Procurement Processes
5.3.1.	The user of modern supplies management techniques is limited, with too much capital still tied up in stores.  This appears to be due to a lack of awareness of the alternative means of supply for items such as clothing and consumables.  Because there is minimal monitoring of the performance of contractors and suppliers or of procurement activity, Fire Authorities are currently unable to judge whether or not they are obtaining value for money in procurement.
5.4.	Potential for Efficiency Savings
5.4.1.	To satisfy the PSA requirements for 2% efficiency savings, the Fire Service in England and Wales needs, in broad terms, to save around £36 million per annum in total.  For the non-staff cost areas looked at in this report, 2% savings would represent around £5.5 million.  This would appear to be achievable through a combination of a reduction in the procurement overhead and in more efficient procurement of key commodities such as fuel, energy and clothing within individual Brigades.  Greater savings should be possible if the Service could realise the potential administrative economies that should come from collaborative purchasing.  Collaborative initiatives by the Police and some Fire Authorities indicate that the cost of uniforms could be substantially reduced.
5.5.	Potential for Collaboration
5.5.1.	Although one-half of Fire Authorities now procure Appliances through consortia and 86% of Brigades use purchasing agencies for some general commodities, there is considerable scope for increased collaboration to purchase uniforms and operational equipment.
5.5.2.	More standardisation of specifications would facilitate greater partnership purchasing, but this continues to be inhibited by personal and local preferences.  As CACFOA is not yet able to co-ordinate procurement activity nationally, it has limited capacity to eliminate these obstacles to collaboration.
5.5.3.	These concerns must be addressed in the current series of Best Value Reviews examining the procurement function.  Procurement is an essential activity to the delivery of an efficient and effective Fire Service.  The Audit Commission’s research has identified a series of challenges for all those involved.  These recommendations are echoed in the Commission’s companion Good Practice Guide to this report, which is designed to help Fire Authorities to carry out their Best Value Reviews.
5.6.	Recommendations of Audit Commission Report
5.6.1.	Fire Authorities should:
•	Ensure that their Best Value Reviews (BVRs) of procurement include a review of the overall approach to procurement across all functions of the Brigade.
•	Ensure that BVRs are sufficiently challenging of current practice by involving reviewers who are independent of the Authority’s internal procurement function.
•	Encourage Officers to work with other Brigades and other partners to increase purchasing power and to secure efficiencies in procurement.
•	Work with elected members in other Authorities to eliminate any policy differences that prevent standardisation in procurement.
5.6.2.	Chief Fire Officers should:
•	Develop a strategic approach to the procurement of all good and services needed by the Brigade.
•	Work with other Brigades and other partners at a strategic level to increase purchasing power and to secure efficiencies in procurement, locally and nationally and work with other stakeholders to develop a national procurement strategy for the Fire Service.
•	Work with members and with other Chief Officers to eliminate any differences of style that prevents standardisation and economy in procurement.
•	Consult with frontline staff about their requirements for goods and services that can optimise operational efficiency and ensure that diversity issues are addressed.
•	Reduce the amount of time spent by uniformed staff in the procurement process, confining their input to giving expert guidance on operational needs.
•	Invest in the technology necessary to streamline procurement systems and procedures to provide useful performance information.
•	Ensure that procurement functions are carried out by staff or contractors who are competent to act as ‘intelligent clients’ and provide training to ensure that procurement staff are kept up to date with industry best practice.
•	Monitor procurement performance against a set of key cost and quality indicators.
•	Control demand for goods and services through effective delegation and the monitoring of usage.
5.6.3.	Fire Service Procurement Officers should:
•	Work with Procurement Officers in other Brigades and other partner organisations to share good practice, to increase purchasing power and to secure efficiencies in procurement, locally and nationally.
•	Consult with frontline staff about their requirements for goods and services that can optimise operational efficiency.
•	Regularly benchmark procurement performance against a range of price, quality and efficiency measures and set targets to deliver continuous improvement in the services provided.
•	Develop positive and constructive relationships with contractors and suppliers, ensuring that performance is regularly monitored, that quality issues are dealt with promptly and that supply chain costs are minimised.
•	Tailor procurement procedures to the value and importance of the purchase, opting for outcome specifications and longer term contracts wherever feasible.
•	Work always in support of the Brigade’s core operations, consulting with staff, and other stakeholders where appropriate, to ensure that the right tools for the job are available when needed
5.7.	Progress against recommendations to date
5.7.1.	The majority of recommendations made in the Audit Commission’s report have either been implemented during the best value review, or form part of the recommendations for further action (see section 8).

5.7.2.	The recommendation to reduce the time spent by uniformed staff on the procurement process is not being met, as the introduction of purchase cards provides cost centre managers with the ability to place orders directly. However, this recommendation was intended to apply to brigades with a larger, uniformed staff working in a centralised stores operation.

6.	CACFOA Benchmarking Club
6.1.	Introduction
6.1.1.	Benchmark data was gathered by the Audit Commission using a study questionnaire, completed by all authorities in England and Wales during July and August 2000.
6.1.2.	The study was undertaken to provide brigades with a set of clear and robust indicators to allow them to identify their performance in relation to national and family group benchmarks as part of the best value review process.  From this information brigades were encouraged to analyse their own performance and make judgements and decisions for improvement processes within the context of their own unique brigade background
6.1.3.	The benchmarks identified by the study reflect both input benchmarks (BM1 and BM2) and output benchmarks (BM3, 4 and 5);
	BM1 Cost of procurement staff per staff member
	BM2 Cost of procurement staff as a percentage of annual spend
	BM3 Basket of goods
	BM4 Purchase cost per appliance
	BM5 Cost per appliance per annum
6.1.4.	Comparative data for these benchmarks was made available against a  ‘family group’ consisting of 13 fire authorities with similar geographic and demographic characteristics, and also the national group

6.2.	Key Recommendations of the Study

6.2.1.	That these benchmarks, and the best practice guidance contained in the Audit Commission reports, ‘A Uniform Approach’ be adopted nationally for the purpose of best value reviews
6.2.2.	That further benchmarks based on systems recommended for self-assessment of the procurement processes be adopted as further data becomes available.
6.2.3.	That the procurement benchmarking initiative is recognized as an ongoing process with benchmark data up-dated and disseminated at agreed review periods.
6.2.4.	That CACFOA considers establishing a system to support electronic exchange of ‘basket goods’ information on a half yearly basis.
6.2.5.	That CACFOA establishes methodologies for the ongoing exchange of procurement and best practice.
6.2.6.	That brigades introduce IT based systems to capture data to reflect the true ‘whole life’ costs of appliances and that this data is taken into consideration by brigades before they commit significant resources in providing major items.
6.2.7.	That authorities consider the introduction of systems to effectively manage procurement volume (a key element in identifying and controlling procurement costs).

6.3.	 Oxfordshire’s Performance
6.3.1.	Whilst Oxfordshire was judged to be in the top quartile in three of the five benchmarked areas, is was found to be below the mean in two others; 
•	BM1	Cost of procurement staff per staff member
•	BM2	Cost of procurement staff as a percentage of annual spend

6.3.2.	Further examination of comparative data confirmed that the full cost of the Procurement Manager was included, whilst half that cost should have been apportioned to another function.  In addition, a number of improved quality processes identified will reduce staff costs for this function (see implementation).

	National	Family Group	Oxfordshire	
	Top Quartile	Mean	Top Quartile	Mean		
Cost of procurement staff per staff member (BM1)	£131.34	£195.57	£135.83	£189.48	£187.19	
Cost of procurement staff as a percentage of annual spend (BM2)	2%	4%	3%	4%	4%	
Basket of goods (BM3)	£4,692.76	£4,279.91	£4,805.53	£4,842.81	£4,201.06	
Purchase cost per appliance (BM4)	£117,461,61	£130,596.74	£116,313,33	£130,481.58	£93,792.95	
Cost of appliance per annum (BM5)	10,671.50	£10,472.09	£10,472.09	£12,271.13	£9,901.08	

7.	Conclusions and Implementation
7.1.	Methodology
7.1.1.	The Independent Procurement Review provided a sound footing from which to proceed with the Best Value Review. Many of the areas highlighted in the Baseline Questionnaire were considered as part of the Independent Review, and recommendations were made on how improvements could be achieved. A priority recommendation was for the brigade to employ a manager with the necessary experience and qualifications to develop an implementation plan and ultimately the procurement function.  An opportunity arose through the retirement of the Fleet Manager to employ someone with the relevant skills.  As a result, Mr Steve Dutton was appointed and has led the second part of the review.

7.1.2.	A number of actions were undertaken quickly, as there was a clear need for change identified in both the Independent Procurement Review and the Baseline Questionnaire. Other actions have required option appraisals in order to determine the best way forward. Progress against these actions has been monitored throughout the Best Value Review process

7.2.	Recommendations from the Baseline Questionnaire

7.2.1.	Develop a procurement policy
•	This was completed and introduced in May 2001.  The policy matches current best practice within public service organisations.

7.2.2.	Develop contract strategies
•	Some major expenditure items, i.e. Personal Protective Equipment (fire kit) and breathing apparatus, have been transferred to a ‘Total Care Managed Service’, which has reduced administration, improved service, provided known costs, reduced risks to the authority and increased reliability.

•	Plans are well progressed for other areas of major expenditure, including fire appliances and uniform, to secure longer term contracts for security of supply.  Economies of scale may be achieved through collaboration with other fire brigades.

•	Call-off contracts for repeat items have been, and will continue to be, developed taking full advantage of Oxfordshire County Council’s procurement contracts.

7.2.3.	Develop collaborative groups
•	The potential to collaborate has been explored in detail and active collaboration takes place where there are financial and other mutual advantages.  The Thames Valley fire brigades are progressing a managed service for uniform, which will be enhanced by decisions taken regionally for a corporate uniform specification.

•	Opportunities for collaboration with the Ambulance Trust are being actively explored, although no decision can be made until Ambulance Trust amalgamations have been finalised.

•	Collaboration with Buckinghamshire and Milton Keynes Fire Authority was successfully introduced for fuel procurement and leasing of emergency response cars in November 2000.

•	By benchmarking costs for fire appliance procurement through two major consortiums it was identified that the brigade will not realise any monetary advantage in participating.  However, further work is being carried out to establish if there are advantages in the consortium approach to risk assessment and design, which may still achieve value for money. 

•	Following a meeting between representatives of Oxfordshire Fire Service, Buckinghamshire & Milton Keynes Fire and Rescue Service and Royal Berkshire Fire and Rescue Service to discuss effective collaborative working between the counties, the Chief Fire Officers and Procurement Managers of all three brigades have agreed to work towards a single procurement function providing a service to all three counties. In the short term there is a commitment to synchronise strategies, policies and procedures, capitalising on best practice and opportunities for joint procurement to realise economies of scale. A project team is to be established to draw up an implementation plan to consolidate the procurement functions within the three brigades, with the longer term aim of creating a single procurement team for all three

7.2.4.	Review uniform supply chain against best practice
•	Fire Service uniform has been the subject of national debate for some time and there is a commitment to maintaining a corporate identity in the south-east region.  
•	Joint procurement, utilising a managed service, appears to offer Best Value and the brigade are currently ‘out to tender’ on this matter.  Discussions with other brigades, to achieve economies of scale are progressing.

7.2.5.	Review store stock, to consider appropriateness
•	A substantial reduction of stock has occurred during the review period. Arrangements are to be put in place as follows:

•	Uniform – change to a managed service, delivered direct to the point of use
•	Consumables – provided from OCC call-off contracts, ordered by Cost Centre Managers, utilising purchase cards and delivered direct to the point of use.  The brigade is acting as a county council pilot for this approach.
•	Operational equipment – contingency stocks to be identified and made available 24-hours a day to support operational needs.
•	Roles and responsibilities of staff within the supplies section need to be modified to ensure a quality support service for the provision of outsourced services, repairs and maintenance and the procurement of higher value, one-off items.

7.2.6.	Develop performance measure and management information

•	A number of new processes are being introduced as pilots before applying across the service, on the further development of Cost Centres in April 2002.  The following performance measures have been identified to manage the quality of service provided and will be introduced for new and existing processes to allow monitoring of performance.  This information will be reported routinely within the Brigade’s Performance Management System.

•	Costs:		Reduced Unit Costs, Price Increase Resistance, Recording Savings
•	Quality:		Reject Rates, Supplier Performance
•	Stock:		Stock Turn, Stock Level (Value), Stock Movements (Identify Zero or Lower), Stock Outs/Stock Out Periods, Incoming Stock Value per Period
•	Delivery:		Late/Early Deliveries, Delivery Time Between Order and Receipt
•	Suppliers:	Number of Suppliers (Reduction?), Number of Supplier Changes, New Suppliers Sought/Found
•	Buyer/Department:	New Processes/Number of Errors Made, Number of Supplier Visits, Invoice Queries
•	Customer Satisfaction:	Number of Complaints, Customer Ratings for Service, Training Needs Analysis

7.2.7.	Develop ‘E-Procurement’
•	Purchase cards are being introduced in November 2001 as a pilot scheme for specified budget holders.  This will be extended to all Cost Centre Managers in April 2002.  
•	Opportunities for on-line ordering will be identified progressively after Cost Centres are established, aligned to the Brigade’s commitment to the County’s E-Procurement Strategy.

7.2.8.	Further Development of Cost Management Centres
•	These are to be extended in April 2002 and substantial work is underway to devolve budgets to the lowest point where they can be effectively controlled.

7.2.9.	Market Test Fire Service Procurement Activities
•	Some operational procurement activity has already been externalised, including personal protective equipment and breathing apparatus, but market testing of  support services has not taken place. This was highlighted as a national issue by the Audit Commission in their report ‘A Uniform Approach’ (see  7.2.1)
•	However, since the service is actively seeking to reduce support service costs, either through rationalisation or further collaborative work with other brigades, it is felt that market testing is not necessary to ensure a best value approach.

7.3.	 Additional Recommendations from the Independent Procurement Review
Although falling outside the scope of the Best Value Review, areas of work identified in the Independent Procurement Review identified further areas of improvement which have been adopted

7.3.1.	Terms and conditions accompanying all orders
•	These are now included on all orders

7.3.2.	Compliance with CRE Level 3 for procurement contracts
•	Terms and conditions which state the requirements for compliance have been added in to contracts

7.3.3.	Reduction of stock
•	Surplus stock has been reduced, with the remainder being sold back to the supplier at the market price, and replaced by imprest stocks. It has been calculated that a saving of just under £8,500 has been achieved through this action. Stock levels are maintained at low levels by the use of ‘just in time’ delivery services. 
•	The reduction of stock and/or transfer of contingency stocks of operational equipment will release space for other uses.  This may be used to meet the need for additional office space on the Headquarters site.

7.3.4.	Actively challenging suppliers prices
•	Considerable price reductions and other benefits, such as increased warranties and free spares, have been achieved by challenging supplier quotations

7.3.5.	Reduced administration and bureaucracy
•	The introduction of purchase cards will significantly reduce the volume of low value orders and invoices that need to be processed.  This represents approximately 50% of the transactions involving supplies staff
•	The move to Total Care and a managed service for uniform further reduce administrative time.
•	There are significant weaknesses and a large degree of duplication with the current electronic processing system and the Council’s LAFIS system. This is currently under examination by the Audit and Risk Management Service with respect to its value to the Fire Service. Management data currently stored on this system will need to be transferred to a combination of internal and external managed services, dependent upon the outcome of this examination, and the future facilities afforded by the corporate MIS system.

7.3.6.	Staffing and associated costs
•	The staffing costs associated with the procurement function will be reduced as a result of implementing this plan. Some of the new and refined processes introduced are more effectively managed within the finance section and a redeployment of staff will be needed to facilitate this.  One part-time member of staff has already been redeployed in the finance section to administer the purchase card system in addition to other duties.
•	Roles and responsibilities of other staff will need to be modified to suit the future needs of the function, dependent upon whether contingency stocks of operational equipment are retained centrally or stored elsewhere.

8.	Recommendations for further action
8.1.	The actions taken to date have resulted in a significant improvement in the procurement function. However, as highlighted above, there are still steps to be taken that can build on this success.

Establish a single procurement function to cover the brigades in Oxfordshire, Buckinghamshire and Berkshire. Form a project team by January 2002 to develop an implementation plan with specific timescales to achieve this. 
In the intervening period, develop more extensive collaborative working between the three brigades. Specifically;
•	Develop common replacement policies and specifications for fire appliances by May 2003, with a view to aligning procurement programmes where possible.
•	Establish a managed service for uniforms jointly with Buckinghamshire by December 2001, and seek to  include Berkshire in the arrangements at a later date.
Establish if there are any advantages in using the approach to risk assessment and design used by consortium groups that may benefit the fire service by March 2002
Fully implement Cost Centres for all establishments by April 2002, and provide each Cost Centre Manager with purchase cards.
Rationalise the IT system used for stores management, to avoid duplication with the current LAFIS system and the proposed County MIS, by March 2002
Roles and responsibilities of other staff to be modified to suit the future needs of the function, dependent upon whether contingency stocks of operational equipment are retained centrally or stored elsewhere.