ArcBlue Consulting Group www.arcblue.com.au @arcblueconsulting

Data Analytics – Transforming our Understanding of Procurement in Local GovernmentChris Newman MBADirector ArcBlue Consulting21 November 2014

ArcBlue Government Procurement Development Activity across Australia/NZ

VIC State Government• CIPSA Certification• Training and Development

VIC Local Government• Procurement Roadmap

development• Contract Management

Guidelines and Training

NSW State Government• Accreditation Program – preparation

and assessment• Procurement Project support

NSW Local Government• Roadmap Program with LGP• Procurement Leadership Program• Social Procurement Development• Metro and Regional Collaborative

Procurement development

State Government

Local Government

SA Local Government• Roadmap Program• Regional Opportunity

Analysis

Procurement Capability Assessment / Development

Federal Government• Contract Management

Development• Regional Procurement

Development Programs

Federal Government

Gold Coast Council –Capability Development and Contract Management Training

WA Local Government• Procurement Training

Program• Spend Analysis

NZ Government • Departmental reviews

Qld State Government• Translink Contract Management

Capability Assessment

SA State Government• Procurement Transformation

Why Procurement? • Procurement is moving from an administrative role to a strategic one• E.g. NSW $30bn/ year – State Gov’t $25bn/ Local Gov’t $5bn

– More than half of most councils’ overall expenditure– Has received little focus (administrative – not strategic)

Local Government Procurement Roadmap and Spend Analysis Programs• Councils now recognising the importance of a structured approach to

procurement capability development• Supported by Regional Groups and other peak Local Government Procurement

Bodies around Australia• 180 Councils across 3 States have participated since 2010• 75 Councils now with Procurement Dashboards in place• 2013/ 2014 NSW Regional Programs – NOROC, Riverina, WSROC, Centroc• 2015 Programs in planning

Procurement Development

Centroc Regional Procurement Roadmap Program - Objectives and Process

Program Objectives: Make sustainable savings & create efficiencies Stimulate local and regional economic and social development Improve probity and reduce risk Build staff and organisational capability in procurement Strengthen regional collaboration

Joint Council Kick‐off

Data Collection

Individual Council 

Workshops

Individual Council 

Roadmaps

Detailed Joint Spend Analysis

Opportunity Analysis and Validation Workshops

Regional Roadmap Priority Project 

Identification

Progress Reviews and Support

NOROC Regional Procurement Roadmap Program - Objectives and Process

Program Objectives:• Make savings and create efficiencies by sustainably reducing the cost of

goods, services and infrastructure sourced through external suppliers• Stimulate economic activity across the Region through providing broader

opportunities for local suppliers of the goods, services and infrastructure• Provide a structured model and Regional Roadmap to strengthen on-going

collaboration and regional cooperation

Organisational Assessment

Strategic Procurement

External Focus Internal Focus

Priorities – Wave 1 Wave 2Road Reseal Street SweepingBulk Cartage Waste Management – including leverage NORMA contractLine Marking EWMSBuilding Maintenance & Cleaning ICTServices Panel ‐ Including Shared Portal Rubble Raising & Crushing

Heavy Plant & Equipment sharingMaterials supply

Regional Roadmap Example

• Sustainable savings in external expenditure through:– Strategic Council contracts– Expanded use of LGP contracts– Regional collaborative procurement– Demand management strategies

• Increased usage of local and regional suppliers, e.g.– Gold Coast spend through local suppliers increased from 49% to 63% over 2 years

• Improved performance, e.g.– Increased completion rates for Capital Works– Improved Contractor Performance

• Streamlined internal processes– Targeted productivity savings

• Improved probity and reduced risk• Social Procurement - Employment generation for local and disadvantaged

communities, e.g.– G21 GROW Project – cross sector development of job creation strategies through

procurement – GSW Social Procurement Taskforce

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Procurement Transformation and Collaboration Benefits

• National Contracts (National Procurement Network)

– Structured National Governance – single contracts negotiated nationally

• State Peak Body ‐ Local Government Procurement– Wide range of contracts in place

– Supporting procurement capability development/ excellence

• Regional Bodies– Collaborative Governance

– Regional Development Focus

– Resources to ‘herd cats’ and support regional arrangements and bring organisations on to State/ National contracts

• Individual Organisations– Well structured Procurement organisations

– ‘Centre‐led Models’ to support contract take‐up and capability building

Procurement Model in Local Government

National

State

Regional

Local

Procurement Opportunities through Reform

• Structures– New economies of scale and maturity leading to new Centre‐led structures

• Collaboration– Opportunities for stronger collaborative models and approaches

• Across Councils

• Local, Regional, State‐wide

• Resourcing– Organisational restructuring ‐ new opportunities

for strengthened procurement commitment

• Contracts– Reset of contracts creates an opportunity to move

beyond ‘business as usual’

Data Analytics

• Data analytics is transforming our understanding of local government procurement.

• Regional Procurement Roadmap Programs across NSW and SA in 2014 have incorporated new technology and data collection and analysis ‘Dashboards’ tailored specifically for local government.

• The ‘Dashboards’ create a new understanding and capacity for driving cost savings, compliance and regional economic development outcomes.

• There is much broader application of data analytics in transforming our capacity to understand and drive individual development and regional and sector collaboration across a wide range of council activities

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Data Analytics Transforming Local Government

Why analyse spend?

• LG Sector generally has a poor understanding of what we spend and who we spend it with

Reduces Councils ability to:– Analyse spend and transaction patterns, and strategically plan for better

procurement (opportunity analysis)– Easily track spend and performance by category, supplier or contract– Track compliance, cumulative/purchase card spend etc.– Quickly and effectively report on procurement and performance

Reduces Regional/ sector ability to:– Track spend patterns and identify opportunities to improve existing

contracts or identify new ones– Accurately monitor and measure contracts and suppliers– Benchmark performance

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Spend analysis challenges

• Reasons for lack of spend analysis in LG Sector:– Range of financial systems used: Civica, Tech One, Oracle

etc. makes it difficult to extract and then consolidate data– Systems are set up for finance processes, not procurement– Data in the systems is often poor quality (not ‘clean’ – not

categorised, inconsistent supplier names used, etc.)– Spend analytics done in-house is often time consuming

and expensive because skills are underdeveloped in the sector

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Procurement ‘Dashboards’ – Overview

Procurement ‘Dashboards’ – Categories

Procurement ‘Dashboards’ – Sub‐Categories

Procurement ‘Dashboards’ – Suppliers

Procurement ‘Dashboards’ – Geo‐spend

Procurement ‘Dashboards’ – Transactions

Procurement ‘Dashboards’ – Spend Patterns

Procurement ‘Dashboards’ – Contracts

Procurement ‘Dashboards’ – Purchase Card Tracking

Regional Demographics

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Procurement ‘Dashboards’ – Regional Overview

Procurement ‘Dashboards’ – Regional Geo‐spend

ArcBlue Dashboards overview

• Tailored application using modern Business Intelligence software → standardised set of interactive, user driven Dashboards designed specifically for Local Government

• Displays categorised areas of spend with the ability to drill down to enable detailed review

• Data can be both aggregated at national, state and Regional level or drilled down for use by individual Councils

• Intuitive and visually attractive• Easy to use and understand• Online interactive ‘Dashboards’ that allow flexible analysis

and reporting• Very Cost Effective Solution for Councils and Regions

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Spend and Opportunity Analysis Process

Cleanse data

Initial review  

Define output requirements

Define coding structure 

Check sufficient data granularity exists

Import additional data sets into database  if necessary

Agree which fields are to be used for the analysis

Initial spend analysis 

Develop graphs and analysis on spend 

Highlight ‘influenceablespend’ 

Add in contract view to understand contracted spend 

Develop hypotheses

Create       hypothesis opportunities  

Hypotheses   cover areas of potential opportunity that has been highlighted through the  spend analysis process 

Validate

Validation to review priority potential opportunities

Detailed spend analysis per opportunity 

Review of constraints (egcontracts) 

Discussion with key stakeholders 

Validation of opportunity 

Implement

Development of implementation plan 

Establish Governance and  Implementation Team

Confirm resourcing 

Provide implementation support where required

On‐going review and tracking of progress  

3311 44 55 66Categorize 

data

Review current coding structure

Remove  irrelevant categories

Implement consistent coding structure 

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Spend Analytics Opportunity delivery

Applying Dashboards

• Fit for the Future– Regional – Joint Organisations (JO) Dashboards– Strategic Alliance Development– Collaboration

• Procurement• Shared Services

– Benchmarking

• Managing and measuring on-going performance– Contract spend– Compliance– HR– Customer Service– Asset Management

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Next Steps - 2015

• Roadmaps– New Programs for individual and Regional Council Procurement

Roadmap development, including Spend Analysis and Dashboard provision

• Spend Analysis and Dashboards– Individual Spend Analysis– Regional/ Sub-Regional/ Spend Analysis and Dashboards

• Savings Programs– Procure-to-Pay Health Check and Productivity Program– Opportunity Analysis and Savings delivery– Targeted Demand and Process Management Programs

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Questions