P2P Project - Edinburgh Council

Finance and Resources Committee 10.00am, Thursday 28 August 2014

P2P Project Update

6.10

Item number Report number Executive/routine Wards

Executive summary This report updates the Committee on progress with regard to the “Purchase to Payment” (“P2P”) Project and advises on next steps.

Links Coalition pledges

P30

Council outcomes

CO25

Single Outcome Agreement

Report P2P Project Update Recommendations 1.1

It is recommended that the Committee note the content of this report.

Background 2.1

The P2P (Purchase to Payment) Project is a key element of the Commercial Excellence Programme with the objective of improving control, efficiency and management information in the P2P processes. A report to the Council’s Corporate Management Team (CMT) in December 2013 highlighted a number of areas for improvement with regard to financial controls, and a project team was established to deliver the required changes.

2.2

The P2P process includes requisitioning, approving, receipting and invoicing for goods, services and works. The relevant system is the Council’s main financial IT system, Oracle.

Main report 3.1

The following drivers were identified for improving the P2P process: 3.1.1 Improved financial controls – having more expenditure pre-authorised through raising of purchase orders every time, at the right time (“Mandatory POs”) and routed to the appropriate contracted suppliers; 3.1.2 Improved efficiency – making the process quicker and easier for staff so that the right thing is the easiest thing; 3.1.3 Improved management information – having better information on what the Council spends its money on so that better sourcing decisions can be made and control can be exercised by managers.

3.2

The vision is that: 3.2.1 The Council has good financial controls in place that reduce the risk of fraud and error; a Purchase Order (PO) is raised every time and at the right time (or an approved alternative process is in place); and the PO approval process is fast, effective and efficient. 3.2.2 It is easy for Oracle users to do the right thing – order the best value product or service from the correct contracted supplier and that supplier offers best value; and accurate and up-to-date information is readily available (e.g. on the Orb) to assist with this.

Finance and Resources Committee – 28 August 2014

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3.2.3 Commercial and Procurement Services (CPS) provide excellent customer service and have a knowledgeable and professional helpdesk. 3.2.4 The Council has excellent management information about the goods, services and works that it purchases and this drives better value. 3.3

The CMT had identified in December 2013 that the value of invoices being paid which did not have a valid purchase order in place (or equivalent satisfactory control) was unsatisfactory and the P2P Project was established with the emphasis in Phase I on implementing “Mandatory POs” as well as a range of other improvements to improve efficiency and the overall control environment. The Project Team consists of staff from Commercial and Procurement Services (CPS), Payments Services and the Systems Administration Group (SAG). The Project Board is chaired by the Head of Corporate Programmes and includes representation from CPS, Payments Services, Communications, EY and Services for Communities.

3.4

The Phase I workstreams and the key achievements to date are: Mandatory POs 3.4.1 Following consultation through a survey to all 2,500 Oracle requisitioners and approvers, a “Mandatory PO” rule was introduced on the 28 April 2014, meaning that supplier invoices must quote a valid purchase order number. 3.4.2 Due to the high value and volume of invoices being paid without purchase orders, this was a transformational and cultural change that required significant levels of communication and engagement across a diverse range of services throughout the Council. It was recognised that procedural and behavioural changes were required to be made in all services areas. 3.4.3 Communications were made to all staff to raise awareness of the project and its aims in addition to systematic targeted engagement with key stakeholders. The Project Team worked closely with identified priority service areas on a one-to-one basis to assist with and support the changes required in working practices. 3.4.4 The Council’s suppliers have been very supportive of the enforcement of use of PO's. A communication was sent to all of the Council’s 5,000 suppliers in April, with reminders being sent when a supplier invoice does not quote a valid PO. Since 16 July further action is being taken where, despite a direct call and reminder letter, the supplier continues to submit an invoice without a PO. In such circumstances the invoice is being returned to the supplier with a covering letter requesting a valid PO in order for their invoice to be processed.


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3.4.5 Since implementation there has been a significant increase in the value and number of orders raised in Oracle and the value of invoices with no PO has steadily decreased since the launch of the Project (see table below).

Percentage by Value - No PO Percentage by Value - No PO 50%

Percentage of spend by value

45%

43%

40%

37%

35%

31% 32%

30%

34% 29%

36%

30%

29% 26%

25%

25%

27%

22% 19%

20%

15%

15% 10%

6%

5% Jul-14

Jun-14

May-14

Apr-14

Mar-14

Feb-14

Jan-14

Dec-13

Nov-13

Oct-13

Sep-13

Aug-13

Jul-13

Jun-13

May-13

Apr-13

0%

Catalogues 3.4.6 All existing electronic catalogues in Oracle have been improved to assist users in finding the item they wish to purchase more easily and selecting the best value product. This work has been extensive, working with over 100 suppliers on over 65,000 product lines to improve product descriptions, add product images and detail delivery costs and address abbreviations. 3.4.7 In most cases, suppliers have been co-operative in providing images etc, however in some cases images have only been forthcoming following significant intervention and escalation. There are five remaining supplier catalogues (out of 123) where images have not yet been provided and these are being actively pursued. 3.4.8 User experience is not presently optimised, as certain desirable functionality is not available in the current configuration of the system, for example displaying search results in ascending price order. Given the forthcoming IT system changes in 2016 officers are looking at whether making these changes would represent best value.


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P2P Process and Helpdesk 3.4.9 The P2P process has been fully mapped and documented. This had led to a greater understanding of not only how the process works now, but how it can be improved and lead to greater customer satisfaction. For example, there is work ongoing to reduce the time it takes from a requisition being approved in a service area to the purchase order being approved and issued to a supplier. 3.4.10 All Oracle requisitions from non-contracted suppliers are routed to the Helpdesk in CPS to allow the correct procurement route to be verified. This verification leads to inevitable delays in purchase orders being issued to suppliers. This process has now been reviewed and improvements are underway within CPS to improve customer experience. For example, buyer approval limits in CPS have been reviewed and amended, the effect being that more purchase orders are now approved timeously. Software is now being utilised to record all calls and emails to the procurement helpdesk so that trends can be analysed and changes made at the root cause to avoid similar calls being required in the future. Communication and Engagement 3.4.11 As well as the communication referred to above regarding mandatory POs, the procurement content on the Orb has been reviewed and is now up to date and more customer focussed. In order to further improve customer satisfaction, a Procurement Forum for Schools has been established providing an opportunity for two-way communications and continuous improvement. Various suggestions are now being taken forward. Feedback on the changes and improvements made so far has been very positive and requisitioners are already seeing a difference. 3.5

Phase I has taken us some distance towards improving control and improving management information and efficiency. Further improvements, set out below, are planned for Phase II of the Project, to get closer to the vision outlined above. Improved control environment 

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Retrospective POs - there are a large number of instances where requisitioners are raising orders in Oracle after the supplier invoice has been received. This presents a control risk, can lead to delays in invoices being raised and also can prevent invoice automation being progressed. This work will require changes to working practices in a diverse range of services across the Council and will require intensive and targeted advice and support on how these changes can be made. New suppliers – the Council adds around 200 suppliers to Oracle per month. Controls will be introduced so that new suppliers only result from a quotations or tender process or where it has otherwise been agreed in advance by CPS. In addition to this, the vendor process will be reviewed


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and improved with a view to reducing the time taken to add a new vendor to Oracle. Purchase card programme – the Council already has around 180 purchase cards in use across the Council and it is proposed that this is expanded. This is an effective and efficient way of dealing with low value one-off purchases and avoids adding a supplier to Oracle which may not be used again. Purchase cards also offer an alternative with improved controls and records of the use of petty cash. There will be a further report to the Committee late Autumn setting out the options and risks relating to this workstream.

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Improved efficiency 

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Contract mobilisation – this refers to the actions that take place post award of a contract to ensure that everything is in place and ready for users to place orders easily from that contracted supplier. The current process is not efficient or effective and requires to be improved and embedded. A-Z directory of suppliers - The A-Z directory on the Orb currently is distinct from the Council’s contract register which means that both require to be maintained. The project will merge the contract register and A-Z directory to improve accuracy, efficiency and effectiveness.

Improved user experience 





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Helpdesk - We will continue to improve the standards and service provided by the CPS helpdesk which will be merged with the Systems Admin Group (SAG) helpdesk to provide a “one stop shop” for customers. Categories in Oracle – Categories are used in Procurement as a way of classifying and grouping similar areas of spend. The Council’s expenditure can be analysed using these categories giving information which is useful for grouping future contract opportunities to drive efficiencies and economies of scale. One of the main pieces of feedback from Oracle requisitioners is that they have difficulty choosing a suitable category when placing a non catalogue order. New and improved categories will be introduced in consultation with service areas. Duplicate items – in some cases, there may be more than one supplier offering the same item at different prices. Working with service areas, duplicate items will be removed from Oracle so that choice is restricted to the item which provides best value. Catalogues – feedback from Oracle requisitioners is that ordering from catalogues is easier and quicker than raising a non-catalogue request. However, in some cases where a catalogue exists, some requisitioners are using the non-catalogue route. This will be analysed on a supplier by supplier basis to establish whether: requisitioners need to be directed to the catalogue: the catalogue needs extended; or the requisitioner is ordering alternative products that are available on the catalogue. This will


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require extensive liaison and engagement both with suppliers and with target service areas. Management Information Throughout the above workstreams, and as a result of the changes being made, further management information will be generated, for example from the helpdesk and the engagement and communication taking place, and this will be utilised to make service improvements.

Measures of success 4.1

The Project set out metrics to measure success in Phase I. These metrics are: Percentage, Value and Volume of invoices with no PO and retrospective PO and % of catalogues meeting minimum standard. Further metrics will be established for Phase II in due course.

4.2

The Council achieves further improvement in its annual Procurement Capability Assessment (PCA) score.

Financial impact 5.1

Effective procurement is a key factor in the Council achieving its financial targets. By improving the P2P processes and systems this will give the Council the tools to deliver projects and purchases more effectively.

Risk, policy, compliance and governance impact 6.1

There is a risk of interruption to service provision if staff do not raise a purchase order and suppliers are unwilling to provide the goods or services until a purchase order number is provided.

Equalities impact 7.1

There are no direct equality implications arising from this report.

Sustainability impact 8.1

Effective procurement allows the Council to achieve benefits for the community and support local economic development.


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Consultation and engagement 9.1

The Project Team engaged fully with service areas during the project.

Background reading/external references Report to Finance and Resources Committee – 5 June 2014, Commercial Excellence Programme – Update Report to Finance and Resources Committee – March B Agenda

Alastair D Maclean Director of Corporate Governance Contact: Nick Smith, Commercial and Procurement Manager E-mail: [email protected] | Tel: 0131 529 4377

Links Coalition pledges Council outcomes

P30 – Continue to maintain a sound financial position including long-term financial planning CO25 – The Council has efficient and effective services that deliver on objectives

Single Outcome Agreement Appendices


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