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A force for purchasing good
Supply Management – 5 August 2004

The procurement team behind London's police force is making big changes. Mark Smulian examines its record so far

The next order landing on their desks could relate to anything from a helicopter to a horsebox. With more than 44,000 staff to support and a 500 million annual procurement budget, the range and quantity of products the Metropolitan Police's 58-strong procurement team must buy is enormous.

This is the UK's largest local authority, by budget, at 2.6 billion. It would rank at number 61 were it a FTSE 100 company.

Everything from the war on terrorism to the fight against illegal parking comes under its remit, and the equipment it buys needs to be good enough to be relied upon when a police officer's life is at risk.

Yet until the authority was created as part of the Mayor of London's remit in 2000, the Met's procurement policy barely existed. Before that, as part of the Home Office, the procurement team had been "unloved and uncared for", according to Steve Atherton, the Met's director of procurement.

Goods were purchased on price alone, procurement officers handled orders as they arrived without any market specialisation, and only three of the 40 staff had CIPS qualifications.

There was a pervasive sense that no matter what was spent, the Home Office would always bail out the police service.

This attitude started to change when mayor Ken Livingstone carried out a series of efficiency reviews for his new empire.

Atherton joined soon after the authority's formation. He had previously worked for consultancy KPMG in its public-sector supply chain practice, having been a procurement and supply chain management specialist.

"I was part of the Metropolitan Police commissioner's and Metropolitan Police Authority's drive to professionalise these service areas, where there were capacity and capability issues," he says.

"What the mayor's efficiency review found was a department that was transactional in nature and used to doing what it was told rather than thinking about giving value back."

The department had been starved of investment for a decade and the new authority quickly recognised that unless it invested, resources would be wasted through poor buying decisions. Importantly, support would not be available for operational policing.

Senior support was essential. Commissioner Sir John Stevens, whose forthcoming retirement was announced in July, arrived at the same conclusion and sent out a message to service heads that good procurement mattered. The department's staff complement rose from 42 to 58.

Putting this into effect, says Atherton, "meant we had to introduce processes and procedures, training and development, tools and techniques that delivered best value for the authority, but also delivered operational support for our colleagues on the streets". He adds: "This was the start of a major change programme. We really did have to build from the bottom up because there was very little in place that would stand the test of going forward."

Atherton started with contract regulations and, with a small team, modernised these to deliver "better governance but freer processes with better oversight".

The next step was to map a 12-month improvement programme, which drew in consultant and interim manager Rob Knott of Sourcing Dynamics. Gary Caswell also assisted with only the initial stages.

Atherton explains: "What we didn't do was employ consultants to come in and do the change programme for us. It was better to devise and deliver it internally because there would be better ownership and people would feel emotionally bound to it."

Staff were encouraged to gain CIPS qualifications and all but eight are now qualified or in the process of becoming so.

"Sir John and his deputy, Sir Ian Blair, showed vision in terms of realising the benefits that could flow from an effective procurement organisation, not solely in pound notes but in operational support," Atherton says. "Their support was absolutely key."

The transformation programme and new procurement methods went under the banner of "Simply Smarter Sourcing". The essential step was to introduce category management and the supporting toolkit, working with ADR International to do so.

Before the authority was established, procurement staff simply handled orders as they arrived, often with no prior warning, and did not have any particular familiarity with specific markets.

Now staff specialise in one or two market areas and are switched around every 18 months or so to gain experience in other commodities or services, Atherton explains.

"It has moved them from simply doing what they are told to knowing they have a valuable part to play in strategic decision-making and operational delivery," he says.

The department was also realigned to the way the rest of the Metropolitan Police Service works and organised into three main divisions: information and communications technology; corporate support; and operational support.

It is the last of these that deals with the front-line equipment that law enforcement requires, which can range from protective clothing and guns to vehicles.

Despite its recent upheavals, the team has been able to deliver savings through better negotiation, leverage and aggregation of just under 14 million, "which, bearing in mind the level of change and everything else impacting on operational support, is not a bad result", Atherton says.

This might sound like a small proportion of the 500 million annual spend, but only 180 million worth of contracts come up each year, so the new procurement approaches will take a while to work through the whole budget.

Atherton is aiming to cut the Met's 2,000 suppliers by 30 per cent, buying from longer-term, "higher-value" relationships.

One example of the savings achieved was for the police radio system. The Met led a consortium of other police forces. By packaging their requirements, they were able to secure a better deal. The Met's share was around 30 per cent below what it would have paid on its own.

"It sounds simple, but it just would not have been done before," Atherton says.

For yellow waterproof jackets, a 40 per cent saving was delivered by aggregating the Met's own requirements. With about 100 business units, jackets would in the past have been ordered and bought in dribs and drabs as required.

"Instead, we were able to go out to the marketplace and say 'we are going to buy this many' and so exert leverage," he says. "The savings came about purely because we brought together what we wanted internally and went to the market in a consolidated way."

Staff negotiation skills have improved, Atherton adds, and buyers now attend supplier meetings "with a clear view of what they want to achieve.

"It could be lower price, better quality or improved service levels, but they do not go in empty-handed. There has been an attitudinal change," he notes.

Even when highly specialised equipment is being bought, "there are sufficient players for us to run effective market competitions", according to Atherton.

One person who has been right through these changes is category manager Trevor Illsley. He says: "In the past, the job was being done adequately, but now we are getting a more professional set of skills. The most important trigger was the increased resources for procurement. Without them, we could not do the business."

Illsley deals with uniforms and personal protection, including firearms and body armour. He is halfway through his CIPS studies and says staff and management are strongly backing professional development.

"Under the previous system, a request would come in and whoever happened to be available would handle it," he says. "Now we have a relationship with the client, we know what they need and why and can to some extent anticipate that. We also have a relationship with the supplier. "We no longer just phone up saying 'can you do me a price on X'."

Top-level support for procurement might be vital, but so is the support of those at the sharp end of policing. Atherton goes on an operational shift every few months - patrolling the streets or travelling on a police boat - so procurement can see and be seen and get an understanding of operations.

"It means we can better appreciate what the impact would be of a failure to provide something on time," he says, "or what effect the failure of a piece of equipment would have on our operational colleagues."

In the police environment, availability and performance of equipment comes first, because officers have to be able to react to emergencies.

"It might sound strange coming from a procurement person, but operational support and quality are paramount, and only then do we think about saving money. It has to be that way round," he says. "The safety of colleagues on the streets is directly affected by what we buy."

There are 11 outsourced contracts, collectively worth about 150-200 million a year. These include facilities management, buildings maintenance, information technology, vehicle repair and pay and pensions. They are about to be retendered on a seven-year basis, and the Met is likely to seek long-term partnering.

"We've begun to put in place contracts that give us clear performance measures and improvement targets," Atherton says. "As contracts come up for renewal, this will become standard practice."

There is no sharing of savings with suppliers yet, such as might be found in a conventional partnering deal. This is not a policy decision, simply something Atherton feels his department is not yet in a position to handle. "We need to enter into far more sophisticated arrangements in which we share more reward and risk," he says.

"That is the only way you'll get a supplier that engages with you and goes through the good times and the bad times. But no contract has yet come up for which we can enter that arrangement, and my people are still developing that level of sophistication."

Procurement culture varies widely across the police forces in the UK. Atherton says that although the will is there for different constabularies to collaborate, this is hard to achieve in practice because each has its own chief constable and its own agenda.

"We haven't been able to sensibly maximise the savings leverage or market penetration that we ought to have."

A group is looking at adapting the regional centres of excellence procurement model set up by the Office of the Deputy Prime Minister, although one school of thought is that policing lends itself to national rather than regional buying.

Atherton's boss, Keith Luck, director of resources, came to the authority from the London Borough of Lewisham, where he was finance director, and says he saw his task as to bring the Met "more into line with local authority contracting, with all of its rules and procedures, rather than that of a government department". Luck jokes that almost everyone he has appointed has told him he should be prosecuted under the Sale of Goods Act because the task has been harder than they envisaged.

"It has really been an enormous job. It has had to move from a civil service general administrative culture," says Luck. "If procurement can do its job properly, it can free resources for other parts of the budget."

Gathering the evidence

Luck was shocked by what he found at the outset during a five-week handover period. "It was clear procurement had suffered and was unable to deliver," he says. Nor was there a clear statement of what procurement was expected to do.

"I had to make the case that it was worth investing and paying the salaries to attract the staff we needed rather than stick to civil service pay scales," he says. "They used to buy always on lowest price. Now we use the whole-life costing approach."

He gives the example of the vehicles fleet. London's familiar white Vauxhall police cars are being replaced by silver BMWs. The reason is that these cars are not only cheaper but also have a better resale value, silver being a more popular colour than white. "Some people just like to own an ex-police car," Luck notes.

He thinks that in the medium term the Met procurement team could offer its expertise to other police services, the capital's emergency services and possibly parts of local government, but there is further to go.

"We have a lot more data mining to do," he says. "Sometimes suppliers do not realise how much business we do with them because it goes through others."

Gary Pugh, director of forensic services, arrived in 2001 after the authority had been set up, and initially bought only from the Forensic Science Service, a trading fund agency of the Home Office.

There is, obviously, a limit to the commercial market in forensic science, but Pugh has since added two private suppliers for parts of the work, taking together about 5 million of his 30 million spend, and better procurement practice has allowed keener negotiation with the FSS.

"DNA profiling is core to what I deliver, so I really need to get relationships right and get value for money. Prior to 2001 there was nothing in place to do that," he says. "The changes in procurement and the support provided by Steve personally means we can take a more strategic view of how we interact with market players."

FSS is soon to be privatised, and Pugh warns that it would be "complacent to assume that if it doesn't provide what we want we won't go elsewhere".

Better procurement has not cut spending on forensics, but has allowed Pugh to keep his spending at a roughly constant level while providing a DNA-profiling service whose use increases by some 20 per cent each year.

"Everyone contracts with FSS in different ways, and we could possibly go to regional structures or national contracts."

Stuart Middleton, director of transport services, thinks the procurement reforms have brought "much more focus on the competitive element, and that gives us better value for money". The ethos introduced has, he says, "given us an additional interest to drive down costs".

The procurement service won a CIPS certification standard of excellence in purchasing policies and procedures in June, only the second public-sector organisation to get it. It was sign of the new procurement practice and culture taking root in the service.

Atherton thinks it is vital for procurement professionals to bring colleagues along with them.

He says: "You can be the best technocrat, but if you cannot communicate or don't have the extrovert nature that allows you to go out there and sell your service, then you get marginalised."