The LAPV Fleet Procurement Forum

Published:  30 May, 2014

The LAPV Fleet Procurement Forum on March 26 attracted around 90 attendees from local authorities and from the supplier side. It was one of the first times that both sides of the coin met face to face to discuss the challenges that lie ahead and take steps towards a more holistic and transparent specialist fleet procurement process. Amongst several key findings, all speakers shared the same sentiment – for local authorities and suppliers to engage in richer commercial dialogue.Ann-Marie Knegt reports.

LAPV invited four speakers involved in local authority procurement in different ways. Phil Clifford, Fleet and Technical Manager for Forest Heath and St Edmundsbury Council (West Suffolk Councils), also founder of the Public Authority Transport Network, kicked off the first session with his perspective on the procurement of fleet and related services, in his presentation: 'Fleet procurement – Do you sell or do I buy?'

Phil asked how many suppliers and how many local authorities were in the room, and concluded that it was about a 50/50 split.

‘There is a good mix of people here. The only party that isn't here is the public and you could argue that they are our employers. There is a lot of pressure on us, the local authorities, to do the best that ‘they' think we can do. We could end up feeling like piggy in the middle, however it is our job to satisfy all these different parties and work with what we have within the confines of overarching legislation.'

The new EU Procurement Directive comes into force in 2014. It will take the emphasis away from bottom-line price and local authorities will have to award the contract to the most ‘economically advantageous' bid, and this takes into account issues such as whole-life cost and sustainability amongst other factors. Other changes include that more negotiation can be built into the process, making it more competitive, and submission times will also be reduced when using electronic tender mechanisms.

More importantly, said Phil, is that only the successful bidders will be required to submit the information relating to their organisation (H&S documents, company accounts, policies etc) in a PQQ (Pre-qualification Questionnaire), instead of having to send one in for every new tender they are bidding on.

The House of Commons issued a document on March 13, 2014, called ‘the Government's procurement', which stated: ‘Local Government spends about £45 billion on procuring goods and services from third parties For reducing the cost of business the Government identified three steps that local councils can take quickly.'

‘First, too many councils are applying EU regulations overzealously using them as a self-serving justification for retaining overly bureaucratic processes,' said Phil.

‘Secondly, the LGA should take the lead in ensuring that pre-qualification questionnaires are standardised and where possibly sensitized to reduce burden on suppliers.

‘Third, councils must include requirement in contracts and track or stick to timetables of paying their subcontractors right down the supply chain, with spot checks on implementation.'

Phil added that the statements in this document were a clear indication that the mood was changing in favour of small and medium-sized enterprises, and that the Government was trying to create a more open market for these organisations.

Another issue that Phil raised was the great variety of contract negotiation procedure rules maintained by local authorities. West Suffolk had just implemented a set of new contract procedures, after the St Edmundsbury and Forest Heath Councils became a partnership. Within these contract negotiation procedures there is change for the positive towards electronic procurement, and he also advised suppliers to sign up at Suffolk County Council's e-procurement portal www.suffolksourcing.co.uk to stay up-to-date with any new tenders that are being issued in the Suffolk area with the added correct procurement codes. He also stated that many other authorities in the country had similar portals, and advised the audience to sign up for the Crown Commercial Service's e-procurement portal, which also hosts a service for fleet and related products and services.

Phil then came to the crunch line of his presentation and called for some real honesty. ‘People do business with people, because they choose to. Not because they have to. We can always find other ways of doing the same thing, and selling the same product. It is the personal connection that makes the difference. As we talk about developing relationships with suppliers and buyers, we deal with people, not nameless faces. During the procurement process I want to know who I can talk to, and if it goes wrong, I need to know who can help me solve the problem.'

Phil then threw in the gauntlet and raised the main issues he had encountered from the supplier side.

‘Guarantees; I receive many guarantees from suppliers. A common one is, I can guarantee we can save you 15% fuel. This isn't true, because they don't know my organisation and they don't know how I work, nor what I am doing at the time. So how can they give me a guarantee? This is the biggest turnoff for me.

‘Secondly, social media is a powerful tool and ultimately suited for exchanging information about best practice, and to discuss and share ideas. Many times I connect to people from the supplier side only to be bombarded by sales offers the next day, and this doesn't work for me.

‘Thirdly, complacency is a very bad habit. Some companies offer very good vehicles indeed, which are well-priced and well-supported, but some dealers automatically assume that you will just buy their product, and this is complacency bordering on arrogance.

‘My other pet hate is criticism of competitors. When a sales person visits me and slates competitive products, this is very bad indeed, because it is for me to find out what I think about these products.

‘In other instances, I perceive that there is a lack of understanding how local authorities work. Many do not understand the difference between a district, a borough, a county or a metropolitan council, and therefore they do not understand my requirements,' explained Phil.

He then asked the audience what some of their issues with suppliers were. Some of the local authority attendees raised issues such as blind cold calling, and surveys to find out how many vehicles a local authority owned, which didn't define what type of vehicles but were read from a script.

Also, many local authorities seemed to receive freedom of information requests from suppliers, often aimed at finding out what a local authority paid for competitor's vehicles.

Then Phil turned the situation around and stated some of the most common issues that suppliers encounter when dealing with local authorities.

Favouritism towards one certain supplier was mentioned as one of the most frustrating challenges from suppliers, and Phil called for an open-mind approach as to what was available on the market.

Secondly, procrastination during the procurement process and leaving things to the last moment were mentioned as a common frustration and therefore Phil recommended forward-planning for the LA as the key solution to this.

The third issue raised was clear cut. ‘Procurement based on the cheapest price doesn't work. There are authorities out there where the person in charge of fleet, doesn't actually have any knowledge about fleet management, while at the same time these people are leading procurement processes, and this is a sure way of ending up with the wrong fleet management solution,' said Phil.

The audience also had some bugbears to add; including sending demo vehicles in and then hearing nothing from the local authority about how the vehicle had performed. And another supplier raised the issue that in some cases it took a long time before the council took a final decision at the end of the procurement process, and the process kept therefore dragging on for months. Phil related this to his earlier comments of procrastination, with this sometimes being caused by a lack of communication between fleet and transport and procurement departments.

‘How do we progress as an industry?' asked Phil. ‘Engagement between suppliers and local authority end users is key. Today's event is a good start towards better and more constructive fleet procurement dialogue. We need dialogue on a local and national level and on a regular basis, and we need it in the shape of specialist local authority fleet based events, where you can compare different vehicles against each other. We need media, such as LAPV, which provides contextual information, where information can be disseminated from supplier to end-user, and which also shares best practice from supplier to supplier. Roundtable debates are very useful for this purpose as well and, to go back to electronic networking, local authorities can join PATN (Public Authority Transport Network) and use the information provided on the network to improve standards within their respective organisations. As a buyer and a local authority, you need to be very professional about this, so technical expertise about fleet can be measured up with expertise from the procurement teams, so the right operational solution for an authority can be achieved time after time.'

Rob Mallows, Senior Policy Advisor, CBI (Confederation of British Industry), followed with his presentation: ‘Getting the best from your supply markets – a procurement perspective.'

The CBI represents about 240,000 businesses across the UK ranging from very large to medium and small enterprises. Rob Mallows aimed to provide a broader perspective on the work that CBI had carried out with its members who deal with local authorities and central Government.

A number of CBI members are involved in fleet management, including Babcock, which has a large contract with the Metropolitan Police Service as well as with the London Fire Brigade. The Met contract is expected to deliver over £22 million in savings over its 10-year life. Other fleet management clients were AMEY and Vauxhall.

The CBI surveyed its members in 2013 about their views on government procurement, with the aim of gaining more information on how to achieve a broader and more transparent market management.

Rob asked: why do we need good procurement? ‘Good procurement as well as getting local authorities better value, is good for the economy and good for the nation. We know that local authorities are going to have to work together smarter with business over the next 5-10 years as pressure on services will increase significantly.

'Fleet and other areas of public service delivery have to become more creative and innovative, and not just about what they purchase, but actually how they design and manage services.'

The prioritisation of how and where to spend taxpayers' money will increase pressure on procurement teams, which have to ensure that they achieve best value for money, and this is not only for the authority's benefit: their supportive role in their local and national supply chain should also be acknowledged.

The CBI survey included responses from over 450 members from every size of organization, including SMEs. One of the most prevalent issues that came out of the survey was standardisation. 67% of members said there was too much variation in procurement processes. Every local authority seemed to have its own process and this can lead to becoming ‘process' orientated instead of leading to the best outcome and developing a healthy commercial relation, and this is especially time and money consuming for SMEs.

Despite the reforms introduced by the Government, 35% said they were facing longer PQQs. ‘There is some progress in standardising and reducing the length of PPQs, but this hasn't had an impact yet on the commercial sector, it is still seeing the PQQ as a major barrier, and this is particularly true for SMEs,' said Rob.

Frameworks were viewed with mixed feelings, as many said they were ‘okay' but not particularly well managed. Companies that didn't manage to join frameworks felt that they were effectively shut out from the market for 4-5 years. So where was the driver for them to stay in the market?

‘We asked our members to score different parts of Government on quality of information supply, dialogue, commercial skills and processes. Local government didn't score very well on any of those criteria. One of the most interesting points that came forward was that the public sector needs to focus on shortening of the tender process which can be an overly descriptive and a lengthy process and expensive for bidders, and this perspective came forward from all sizes of companies.

‘There are many things going on within local authorities, but it seems that there is a trend, similarly to in central government procurement, over the last 2-3 years where there are questions being raised about how government procurement is performing. What the survey is telling us is really a very mixed picture. The commercial sector wants to have a more intelligent and commercial conversation with the buyers. Even though this is already happening in many markets, it is just not consistent enough, and this is making it more difficult to have a more commercially satisfactory output for suppliers as well as buyers.'

Rob explained that it was important that local authorities should look beyond individual contracts, and create a broader market perspective, so they could become better market managers, especially with regards to the increasing pressure they would face over the next 5-10 years.

Demographic, employment and social changes were set to transform the environment authorities operated in completely. Over the next 15 years, the public sector will have fewer funds, so there is a requirement to be more stringent about how money would be spent, and how this would be prioritised.

Questions to be asked included:

n What will be delivered by the LA itself? What should be contracted out?

n What should be delivered in partnership with other authorities?

n What existing models of delivery need to change in response to demand?

Fleet management will encounter the same pressures as other areas of service delivery, so more value would have to be achieved from these services. Rob explained that more and more local authorities were now sharing services. ‘This is a great development and we as the CBI are very supportive of that, since it is essential that local authorities start thinking about scale. The more non-local services can be aggregated, the more likely it is that they get better value.

'The management of the pricing of risk is an essential skill and the more local authorities have rich, commercial conversations with the private sector, the more likely it is that solutions can be created that can help process issues such as risk.

‘Analyse the long term challenges, and talk to suppliers in between procurement processes, because this would enable LAs to shape the market instead of react to it. Obviously procurement is the big push for our members, and encouragement from the Government was to reduce complexity and manage risk approach in the procurement process was essential for a good outcome,' he added.

The CBI is working on a market management toolkit, which will be launched this summer. It will contain feedback from CBI members on what local authorities should be thinking about in terms of using more effective commercial behaviour, which would help them with a better procurement outcome in the long term and bringing innovation into the organisation.

Rob concluded by saying that there needed to be more transparency and trust in the market and that the CBI played an important role in helping to establish this, by setting out a simple set of principles for public service contracting, which will help create good deals and satisfactory outcomes for suppliers and end-user.

The CBI members have agreed four areas to improve transparency in contracting:

n Contractors and customers should discuss at the contract stage how to release information proactively

n In every contract, there should be a presumption in favour of open book accounting

n All Government contracts should be published online, so public scrutiny can be encouraged.

n The National Audit Office should be able to audit government contracts on a structured and systematic basis.

‘We should start looking at more than just the lowest cost and have a richer commercial dialogue between public and private sector, so we can get better procurement outcomes for all involved, resulting in the best possible service for the tax payer.

‘The CBI is serious in terms of engaging with local authorities on this. We're encouraging them to sign up to our Public Services Network as a way to engage with business on this key issue,' concluded Rob.

Steve Brown, Principal Consultant Ricardo, AEA, then presented his perspective and experiences on competitive dialogue in his presentation: ‘Essex fleet procurement – using a competitive dialogue procurement route'.

Gary Edwards, Operations Director for Basildon Council, approached Steve Brown, who was then a consultant for White Young and Green (a local authority management consultancy), around five years ago. The council faced low MOT pass rates, high charge-out costs, a large numbers of spare vehicles, an ageing workforce, and poor workshop infrastructure. Whilst the workshop was large, it was quite old, and had poor heating and ventilation systems, and the office environment needed updating.

A review of the workshop with a view to improving performance was carried out. However, the authority failed to improve and therefore it was decided to outsource the service.

Gary Edwards wanted to keep the process as simple as possible, by keeping one monthly invoice. He knew that he was looking for an outsourcing option that included contract hire with maintenance, but wanted to avoid driver damage claims at the same time. The question was, how could this be achieved?

It was decided to opt for the competitive dialogue procurement option in order to achieve a solution that was fully inclusive.

Steve explained that they decided to engage the industry. ‘We approached suppliers and started talking to them, but we received a rather mixed response. Some loved the idea, others dismissed it immediately. Gary wanted to see if they could provide an income sharing concept as well, so the successful bidders would make use of the workshop as a third party income revenue, and part of the proceeds of this would be invested back to the council.'

Steve added that in the initial stages of setting up this process, six local authorities were approached to see if they wanted to join the partnership. There wasn't a single response. ‘Nobody wanted to come and play.'

'However, 18 months after the award of the Basildon contract to Riverside Truck Rental, we were approached by Uttlesford District Council who had seen the progress made in Basildon and were now keen to try the competitive dialogue route. Again other Essex authorities were approached, but this time Colchester and Braintree signed up.Castle Point and Brentwood Councils also declared an interest – only to drop out of the process in the early stages.

All three councils had similar issues; all councils had poor MOT pass rates, large numbers of spare vehicles, and poor workshop infrastructure. In Braintree the workshop was outsourced to a local company and the Council did not own a workshop.

The Uttlesford workshop needed to be vacated because there were plans to sell the site. In Colchester the workshop was leased at an extremely high cost, so it was decided as part of the process to build new workshops for the three councils.

So what was to be included?

All three councils required purchase of new fleet, maintenance only, contract hire, continuing services in house was not going to be an option In order to develop matters further the requirement was for a fully inclusive contract that included driver damage as well as tyre damage, with workshop provision and the sharing of income.

The competitive dialogue process enabled the authorities to work together, whilst allowing them different permutations. The process was split into lots with an option for partnership working. ‘This was important,' said Steve, ‘because partnership working can be challenging, due to politics and personalities involved. During the negotiation process it was found that partnership working indeed proved to be the most cost effective solution and provided the best quality for all parties involved based on a 60% price /40% quality evaluation matrix.'

Why was competitive dialogue the best option for these councils?

Traditionally fleet contracts are procured via open and restrictive procedures or via frameworks, and with the latter there is still a restricted procedure to be followed.

Steve initially contacted many frameworks to see if they provided any options that enabled them to purchase with any flexibility. However, the frameworks only offered direct purchasing of fleet and contract hire or lease – there were no solutions or lots for fully inclusive driver damage, sharing income or building a workshop.

‘All were restricted procedures, which can work very well, if you know exactly what you require, and we wanted a more organic, tailored outcome. Competitive dialogue offers this outcome,

Steve also highlighted the importance of sending out a crystal-clear OJEU notice supported by a well-written Descriptive Document (DD). The DD is a description of what the process wishes to achieve along with detailed information about the authorities and process. Bidders should also be given the chance to see what they are buying into, which is why a bidders day is important. All questions and issues raised at the day should be documented and shared with all interested parties.

Initially there were 17 expressions of interest, but following evaluation of the PQQs this was reduced to 10 bidders who were then taken through to the dialogue stages

Riverside Truck Rental was awarded the contract at the end of the competitive dialogue process, based on an all-inclusive arrangement. This award provided average contract savings for the authorities involved of 10 to 15%. Riverside built a new workshop and office premises for Braintree, and staff from the councils undertook a TUPE transfer to Riverside.

‘There could be arguments that competitive dialogue may not always be the answer. However, it is clear that the local authority market is up for fully inclusive and holistic fleet and workshop management solutions.

‘Whilst competitive dialogue can provide good answers, it can still be expensive and time consuming. However, we now have a full set of tender documents with which we can provide guidance. Fleet management is not all about money, it is about offering the best service to a client. Talk to industry, and work together,' concluded Steve Brown.

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LAPV (Local Authority Plant and Vehicles) is the only UK information source purely dedicated to local authority vehicles and affiliated plant equipment. Appearing four times a year, it offers well-researched technical articles on the latest equipment/technology as well as in-depth interviews with key industry professionals. More...

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