Value for London

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By Morven MacNeil, GO Features Editor

With the Olympic Games fast approaching in 2012, the Greater London Authority Group has taken measures to ensure its procurement activity is both responsibly and sustainably conducted.

The Greater London Authority (GLA) Group is committed to pursuing socially, environmentally and economically responsible procurement to deliver improved quality of life and better value for money. This involves working in partnership across London to provide sustainable employment opportunities and higher living standards. It means opening up access to contract opportunities for London’s businesses, encouraging improved engagement with suppliers and, through the promotion of environmental best practice, making London a better place to live and work in.

Working within this framework, the GLA has refocused its approach and priorities under the new Mayor of London, Boris Johnson. In 2008, the GLA agreed a new delivery plan for action setting out commitments across three themes: people, businesses, and city. Desired outcomes are described, underpinned by measurable targets and a timetable. Each of the GLA functional bodies now reports quarterly to the Mayor’s office on their performance against the plan.

The GLA believes it is important that their work on responsible procurement is aligned with other London-wide strategies. Working more effectively with London’s boroughs on procurement can support the goals of the City Charter, which seeks to improve relationships across all London government, resulting in better public services. Responsible procurement has also been recognised as a key tool to deliver the Mayor’s Equal Life Chances For All policy vision. Promoting training and development opportunities among suppliers further helps meet the goals of the London Skills and Employment Board strategy in which the GLA Group, as an employer, procurer and developer of major projects, has an excellent opportunity to lead by example.

<h2>GLA Group spend</h2>

In buying the goods and services London needs, the GLA has trading relationships with more than 7500 trade suppliers. These include multinational organisations, thousands of small and medium-sized enterprises (SMEs), individual suppliers, and other groups including the third sector.

The Group’s annual expenditure of some £3 billion covers a diverse range of goods, works and services such as the purchase of police and fire service uniforms, the construction of the new East London rail line, and providing fireworks at New Year’s Eve.

In 2007-08, some £535 million, or 19 per cent of GLA Group total procurement expenditure, was spent with SMEs. Around 50 per cent of this spend was with London-based companies.

<h3>Economic development strategy</h3>

The Mayor’s draft Economic Development Strategy, issued for consultation in October 2009, sets out the Mayor’s ambitions for London’s economic progress. It provides the GLA Group and other strategic organisations with a vision and policy directions for achieving those ambitions. The proposals clarify roles and responsibilities with other parties who contribute to developing the capital’s economy.

Responsible procurement can make a contribution to achieving the strategy’s aims of improving London’s competitiveness, transforming to a low-carbon economy, and investing in London’s future. For example, the GLA’s experience of using procurement to drive apprenticeship opportunities will be valuable when pursuing the strategy’s goal of improving the skills of London’s workforce. Each part of the Group is already taking steps to introduce apprenticeships in their own organisation and in their supply chains.

<h4>Promoting supplier diversity</h4>

The GLA has encouraged key suppliers to promote diversity in their own workforces and in their own supply chains.

Over 150 GLA Group suppliers have signed up to the Diversity Works for London (DWfL) programme which seeks to help small and large businesses alike become more representative of the communities they serve. The DWfL online toolkit, which enables suppliers to assess their own performance, guides companies on challenges such as measuring diversity performance against best practice standards and provides possible approaches to meeting diversity and equality goals. The Group’s aim is to significantly increase the number of organisations who make use of the toolkit in the years ahead.

<h5>Supporting the Mayor’s Economic Recovery Action Plan</h5>

The Mayor’s Economic Recovery Action Plan (ERAP), launched in December 2008, sets out practical measures to help businesses and Londoners through the recession to ensure London is prepared to take full advantage of the recovery.

The plan’s initiatives are wide-ranging. They include actions specific to procurement and how it is carried out – such as CompeteFor – as well as wider measures that provide financial and operational assistance for business. Supporting SMEs is a central theme in ERAP, with actions designed to help smaller firms weather difficult economic conditions. Many of the steps being taken to simplify procurement processes will benefit SMEs.

Tailored support for SMEs reflects their importance to London’s economic future, as well as the UK as a whole. Information provided to the 2008 Glover Committee, which examined ways to reduce the barriers confronting SMEs when competing for public sector contracts, stated that SMEs represent more than 99 per cent of all businesses in the UK, employ 59 per cent of the private sector workforce, and account for 52 per cent of business turnover.

<h6>Improving transparency through CompeteFor</h6>

To help ensure businesses and especially SMEs are aware of the contracting opportunities that exist in London, the London Development Agency (LDA) has led the development of CompeteFor, a web-based system linking buyers and sellers that provides information on contract opportunities across the capital and beyond. Each part of the GLA Group is now advertising its opportunities on the system and in many cases seeking to ensure that new contracts include flow-down provisions so that suppliers’ subcontracts are also advertised. Transport for London (TfL), for example, has taken this approach with its contracts for Crossrail, which as a £16 billion project represents a major opportunity for the supply chain.

CompeteFor is changing the way some goals, such as seeking to attract a diverse group of bidding organisations, are being approached. Experience is suggesting that the system’s transparency is enabling companies to identify possible partners and bid in consortia for projects that have a wider scope of work and higher financial value.

<h7>Paying suppliers quickly</h7>

Ensuring SME suppliers are paid quickly is a commitment within ERAP. Quick payment is particularly important for smaller firms, who often rely on one or a small number of contracts. For an SME in this position, a payment regime of 20 or 30 days can create cash-flow problems, a challenge exacerbated if payments are delayed. The Mayor’s action plan therefore includes the commitment to reduce the standard time for payment of valid SME invoices to ten working days.

To ensure this is achieved, the GLA Group has introduced regular monitoring of performance across the GLA functional bodies. As part of this initiative, the Mayor has been lobbying public sector partners, public agencies and large businesses in London to reduce their standard payment periods for SMEs.

<h8>Simplifying contract pre-qualification</h8>

The GLA Group has taken action to simplify pre-qualification questionnaires (PQQs) to make the bidding process less burdensome. By standardising contract paperwork, the Group has reduced documentation by about half for smaller contracts, an efficiency welcomed by SMEs. TfL alone issued 27 PQQs in the first quarter of 2009, with a value of £260 million.

<h9>Engaging with suppliers</h9>

Each part of the GLA Group has sought to build positive and long-term relationships with key suppliers by developing coherent supplier engagement programmes. The goal is to identify opportunities for efficiency savings or service improvement, to create deeper and broader relationships, and to work in partnership in pursuit of responsible procurement goals.

<h10>Working together</h10>

While the GLA functional bodies are separate legal entities, with different roles and responsibilities, they all work towards meeting the Mayor’s priorities. As a result, they frequently collaborate on projects or co-fund them. The Responsible Procurement working group, with representatives from each functional body, acts as a platform for sharing knowledge across the Group and driving progress on delivery.

The Shared Services Strategy, launched by GLA Group chief executives in April 2009, seeks to build on past efficiencies to deliver further benefits and economies of scale. Sharing tools and good practice has long been an important aspect of effective procurement. The strategy includes a focus on how procurement services are delivered, taking account of potential savings made from eliminating duplicated effort and the potential to realise cost savings arising from the GLA’s buying power. Responsible procurement is embedded in all new contracts arising from the Group’s collaborative activity.

Further information

For further information, visit: www.london.gov.uk/rp