GROUP PROCUREMENT STRATEGY 2016-19 12 December 2016

Prepared by: Samantha Donigan, Assurance EIA Required? ☐ Manager Date effective from: 12/12/2016 EIA Completed? ☐ Policy approved by: Board Revision number: 1 Review Date: 16/12/2019 Lead officer: Samantha Donigan, Assurance Manager

Group Procurement Strategy 2016-19

1 INTRODUCTION

1.1 The aim of this strategy is to ensure that the organisation is able to deliver its strategic corporate aims and objectives by procuring goods, works and services in a way which is both legally compliant and represents best value, stretching public and corporate resources as far as possible.

1.2 Ensuring that outcomes are delivered for Stockport Homes’ customers is at the heart of the work the organisation undertakes. As the company diversifies into different sectors and areas, this commitment to outcomes will remain constant but additional complexities will need to be considered.

1.3 The commitment to focus upon customer need, secure value for money, support local economic development and deliver wider social value will be a key part of all procurement projects.

1.4 The organisation is on a journey in terms of its Procurement Strategy. A procurement legal compliance framework has always been in place. However, the growth and aspirations of the new Group make for a step change again in terms of procurement. Stockport Homes seeks to maximise innovative procurement practices, some of which it has already succeeded at, but wants to build on this at the same time as maximising opportunities for encapsulating social value and maximising economic contribution to the Borough as a whole.

1.5 The principles embodied in this strategy apply to all procurement undertaken by the organisation and its subsidiaries.

2 CONTEXT

2.1 The financial environment for all public bodies has changed dramatically over the last five years and will continue to do so. Maximising efficiencies will remain a high priority to aid balancing budgets and procuring in an efficient and effective way is one way to aid this.

2.2 The legal environment for procurement is also likely to change. As an ALMO, Stockport Homes have always been governed by EU procurement law. In 2015, a new set of Public Contracts Regulations came into force in the UK, implementing the 2014 EU Directive on Public Sector procurement.

2.3 Since the referendum vote around Brexit there has been some uncertainty as to what the regulatory landscape will look like for public sector procurement once the UK is no longer an EU Member. At this time, there are no definitive answers and the organisation is keeping abreast of any key changes. It is likely that the UK government will implement domestic legislation around public procurement which will largely be in line with the EU Directive. What is certain is that the Regulations continue to apply until they are formally replaced by other legislation.

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2.4 Communication with managers will take place on an ongoing basis as updates around procurement legislation emerge.

2.5 The corporate and group context for procurement is set out in the Mission and Aims :

Mission: One Team, Transforming Lives

Aims:

 Be a great place to work  Be accountable to customers  Maximise efficiencies  Reduce inequalities  Build strong, collaborative relationships locally, regionally and nationally  Improve the environment

3 GROUP STRUCTURE ENVIRONMENT

3.1 In 2016, Stockport Homes developed a corporate group structure arrangement incorporating a trading company and a development company; with a charitable company to follow in 2017.

3.2 This strategy therefore takes into account not only procurement principles to be followed by each company individually, but also addresses the additional procurement considerations that a group structure creates.

3.3 An intragroup agreement has been developed which sets out a number of key principles, processes and approaches to be adhered to within the group, such as the parent company setting the strategic direction of the subsidiaries, approving their business plans and budgets and delivering procurement of all external services to the Group.

3.4 The Board of Stockport Homes Limited has reserved powers to approve the Group Contract Procedure Rules which are the operational framework by which significant purchases are made. The Contract Procedure Rules will be updated to reflect the move to a group structure.

3.5 Procurement requirements relating to a group structure which need specific consideration include:

 Ensuring that intragroup SLA’s exist for services provided by the parent to the subsidiaries for services provided to them  Ensuring that thresholds for non-OJEU procurement activity (for works and services) are developed which are fit for purpose  Considering how Leasehold ‘Section 20’ consultation requirements can be met for capital works delivered by the TradeCo

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 Monitor the use of the ‘Teckal’ exemption when awarding works in- house to the TradeCo  Obtaining legal clarity about whether the TradeCo is a ‘contracting authority’ as described by the Public Contracts Regulations 2015, or not.

4 VISION FOR PROCUREMENT

4.1 Procurement is defined as “the process of acquiring goods, works and services, covering acquisitions from third parties and from in-house providers. The process spans the whole life cycle from identification of needs through to the end of a services contract or the end of the useful life of an asset. It involves option appraisal and the critical “make or buy” decision which may result in the provision of services in-house in appropriate circumstances”1.

4.2 Stockport Homes has significantly high public spend2 and has a responsibility to ensure any public money that is spent on behalf of its customers is done so in a compliant and efficient manner.

4.3 Stockport Homes’ vision for procurement is to:

 Maximise the benefits from spending public money with third parties, demonstrating value for money at all times  Support the delivery of innovative procurement solutions leading to high quality service provision  Ensure there is a consistency in approach across the group (and each individual organisation)  Deliver procurement projects that are aligned with the group’s aims and corporate plans  Maximise social value and local employment in its purchasing powers  Embed a culture where all managers undertaking procurement activity know where roles, responsibilities and accountabilities lie, where they are trained in procurement requirements, and where advice and guidance on all matters on procurement is readily available from a specialised central procurement team.

5 PROCUREMENT DELIVERY MODEL

5.1 Procurement is devolved to budget managers within Stockport Homes. Budget managers lead procurement projects within the organisation, taking responsibility for developing specifications, project managing the process, awarding contracts and being responsible for the delivery and management of that contract throughout its lifecycle. Budget managers know their areas of expertise and the detail of what services they require in their specifications, and know how the contractor is performing on a day to day basis in terms of service

1 National Procurement Strategy for Local Government in England (2014) 2 Turnover of £41million in 2015-16

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delivery and so is best placed to monitor performance and manage the contract over the long term.

5.2 The organisation recognises that in addition to this there is a central role required for providing strategic advice and guidance, producing template documentation which is in line with legislative requirements, and ensuring compliance via monitoring and embedding best practice approaches, which includes continuing to remain up to date with changes to procurement law, best practice and emerging case law. This element is fulfilled by a dedicated Procurement Officer.

5.3 As the organisation continues to grow and diversify, this Strategy aims to review resource implications on budget managers and the current Procurement Officer role and assess whether additional support is required. This is something that some members of the Leadership Team have felt needs addressing in particular.

5.4 In terms of other delivery aspects, Directors and Heads of Service provide leadership for procurement across the organisation, ensuring compliance within each team and Directorate and receiving monitoring reports from the Procurement Officer to ensure sufficient oversight of spend is gained and maintained.

5.5 It is imperative that there is a consistent approach to procurement given the devolved nature of the services delivered within the Group. This Procurement Strategy and associated action plan will assist in embedding working practices which support compliance yet continue to meet the needs of the organisation as it continues to evolve and diversify.

5.6 Finally, Stockport Homes Group will have its own set of Contract Procedure Rules, Scheme of Delegation (related to both financial and governance) and Financial Regulations which are communicated to and must be adhered to by all staff and effectively govern the decisions made within the procurement delivery model.

6 EXTERNAL FACTORS / DRIVERS

6.1 There are a number of external factors which influence the design and delivery of the internal procurement function and which shape our demands from the market.

6.2 From a legal perspective, these include compliance with EU Procurement Directives (2014) and the UK Public Contracts Regulations (2015), as well as OJEU3 tendering processes. These apply to Stockport Homes Limited.

3 Official Journal of the European Union

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6.3 Other drivers include a requirement to consider / adhere to the following:

 Value for money  Social value  Sustainability  Safeguarding  Modern Slavery Act  Living Wage Accreditation  Equality and Diversity  Working with SME’s  Health and Safety  Leaseholder Consultation  Customer Involvement

7 STRATEGIC OBJECTIVES AND OUTCOMES

7.1 This strategy has identified six key objectives, encompassing all aspects of procurement that are key to the needs of Stockport Homes Group. These are supported by a three year action plan.

 OBJECTIVE 1: MAXIMISE VALUE FOR MONEY , EFFICIENCY, SOCIAL VALUE AND INNOVATION VIA PROCUREMENT EXERCISES, ENCOURAGING COLLABORATION AND BENEFITS FOR THE LOCAL COMMUNITY

7.2 The organisation has a dedicated Value for Money Strategy which considers the corporate approach to ensure VFM is achieved across the organisation.

7.3 It is a requirement of PCR 2015 that all procurement exercises award contracts on a Most Economically Advantageous Tender (MEAT) basis – this means considering quality and the total life cost together (although some contracts are permitted to be awarded on cost alone).

7.4 The Public Services (Social Value) Act 2012 means that all public bodies in England and Wales are required to consider how the services they commission and procure might improve the economic, social and environmental well-being of the area in which they operate, ultimately transforming the way public bodies choose to buy services.

7.5 Social Value is about how scarce resources are allocated and used and involves looking beyond the price of each individual contract and looking at what the collective benefit to a community is when a public body chooses to award a contract.

7.6 The achievement of social value is at the heart of Stockport Homes’ mission and aims and links to a number of key strategies in place across the company, recognising that the organisation and its customers face harder economic times, increased uncertainty and a reduction in public sector spending. It is

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therefore more important than ever that Stockport Homes’ spending power has a positive impact on the Borough.

7.7 Furthermore, Stockport Homes has explored and embraced a number of innovative procurement opportunities in recent years and work will be done to consider how this innovation can be continually achieved, via collaboration, partnering and pioneering thinking.

Action Outcome

Ensure managers are aware of the Efficiencies generated and best value need to deliver value for money in re- achieved from public funds procurement exercises

Look for opportunities to enhance Public funds being used to obtain service delivery / improve quality via a more for the same, or more for less re-procurement exercise

Contributions to be made to the Capturing where procurement has Efficiency Log where procurement directly influenced efficiency exercises have led to quantifiable efficiencies

Undertake thorough spend analysis of Opportunities to deliver better value contractors being used by more than are identified and pursued one service area to ensure compliance is maintained and options to jointly re-procure are considered

Identify where partnering / Best use of public funds secured via collaboration could be used to deliver an innovative approach better value for money

Consider how frameworks would offer Saving on manager time and / or value and whether there is a need to contract price create and run a Dynamic Purchasing System

Continue to review whether contracts Understanding developed of whether for services being delivered by value is being maintained by procuring Stockport Council offer best value via the Council

Consider how social value can be Organisation can evidence how social obtained from each relevant value has been promoted and secured procurement exercise (in terms of for the benefit of the local community economic, social and / or

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environmental value)

Give due consideration to how SME’s Opportunities are opened up to SME’s can be encouraged to tender for SHG which may not have otherwise existed opportunities, potentially by using lots

Ensure links with the VFM Strategy Aligned processes deliver outcomes exist to obtain maximum value from against multiple strategies procurement exercises

 OBJECTIVE 2: REINFORCE LEADERSHIP, ACCOUNTABILITY AND GOVERNANCE OVER PROCUREMENT

7.8 For procurement to be effective, there must be clear leadership from the top down. Procuring managers must own the tender process, ensuring that it is undertaken compliantly and deliver an outcome that is in the best interests of the Group.

7.9 A key part of this is ensuring that decision making is robust and undertaken in line with agreed Stockport Homes delegated authority levels, as documented in the Scheme of Delegation.

Action Outcome

Ensure leaders of the organisation A culture where procurement is provide strategic direction over embedded into working practices and procurement and a commitment to led from the top compliance

Ensure procurement roles and Clarification over accountability responsibilities are properly obtained to remove ambiguity or lack of understood across the organisation understanding

Ensure there is sufficient oversight of Managers and leaders within the spend, via regular reporting, and that organisation have access to the right such reports aid decision making information to make decisions upon

Ensure that integrity / probity are Improved anti-fraud measures in maintained at all times, including procurement creating a register of interests for budget managers

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 OBJECTIVE 3: ENSURE SERVICE MANAGERS ARE SKILLED AND TRAINED TO LEAD PROCUREMENT ACTIVITY IN THEIR AREA AND HAVE ACCESS TO SUFFICIENT HIGH QUALITY RESOURCES / ADVICE / GUIDANCE AND SUPPORT

7.10 Given the devolved nature of the procurement function within Stockport Homes, it is imperative that both the guidance and advice given from the centralised team is reliable, but also that the budget managers undertaking procurement are trained and knowledgeable about the process and their responsibilities.

7.11 Recent procurement experiences have allowed the organisation to derive learning to further improve its systems and approaches in relation to procurement. Furthermore, an internal audit of the function has highlighted areas of improvement and the actions arising from that report have been encompassed in the objectives within this strategy.

7.12 It is essential that capacity and competency are built across the organisation in relation to procurement to enable confidence to be gained that procurement is being delivered compliantly. This will be supported by the strengthening of a business partnering approach to procurement.

Action Outcome

Develop an understanding of the skills Clarity about skills levels which can and knowledge which exist amongst inform training plans budget managers in relation to procurement

Develop and deliver appropriate More knowledgeable managers training to budget managers covering leading to better compliance key aspects of procurement

Deliver 1:1 coaching and support to Targeted assistance provided at the budget managers embarking on a point a procurement activity is to procurement exercise, particularly for commence to manage risks and those who infrequently procure ensure compliance

Review if the current, delegated A fit for purpose procurement offer for approach to procurement is the right the organisation one, and in turn also review resource levels in the central procurement team and whether more projects are centrally managed

Ensure standardised templates and Procurement is facilitated to be less documentation is available for budget burdensome on a manager managers to use

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Consider how knowledge can be Better sharing of information and shared amongst budget managers experiences to improve processes and and that lessons learnt can lead to approaches improved procurement processes

Ensure technical / specialist advice is Knowledgeable procurement team to maintained within the organisation by share information and insight with ensuring the central procurement others team undertake appropriate learning and development and keep abreast of key changes in legislation / guidance / case law

Identify procurement specialists which Correct external support is available could be utilised to deal with complex / as and when needed difficult procurement exercises

 OBJECTIVE 4: ENSURE THAT COMPLIANCE IS AT THE HEART OF ALL PROCUREMENT PROJECTS ACROSS THE GROUP

7.13 Procurement undertaken by Stockport Homes Limited must be undertaken in line with the Public Contracts Regulations (PCR) 2015.

7.14 For the TradeCo, it is envisaged that they will not fall into the definition of a ‘contracting authority’ and so will be able to procure outside of the PCR 2015. However, an approach to procurement for this subsidiary will be developed to ensure the principles of public procurement are maintained and upheld at all times mirroring the public regulations insofar as is required, e.g. anti-bribery, value for money.

7.15 It is necessary to ensure that the Contract Procedure Rules for SHL and group companies are robust and provide an appropriate framework by which procurement activity can be undertaken.

7.16 The consequences of not adhering to the requirements of PCR 2015 include:

 The contract is made ineffective  The contract is shortened  A fine is levied on the contracting authority  A bidder claims damages for its losses resulting from the breach

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Action Outcome

Update the Contract Procedure Rules Fit for purpose framework for to ensure they reflect the Group procurement is developed and Structure arrangement documented

Ensure the Teckal exemption is Compliant approach to delivering applied correctly and is monitored against PCR 2015 in relation to regularly awarding works to an in-house company

Clarify the different procurement Clear guidance for managers on which thresholds for each company, and for route should be taken for a specific different types of procurement activity procurement activity

Undertake spend analysis on a regular Information available to senior basis to ensure procurement is managers to challenge and question compliant spend as required

Capture changes to legislation, advice Compliant approach to procurement at and best practice on an ongoing basis all times to ensure compliance is maintained at all times

Monitor implications of Brexit on Ensure the organisation is kept procurement legislation abreast of changes relating to Brexit

Ensure high quality legal advice is Legal advice and legal agreements in available to procuring managers to place with contractors protect the enable fit for purpose Terms and organisation appropriately Conditions to be used for tenders

 OBJECTIVE 5: DELIVER PROCUREMENT VIA EFFICIENT, ELECTRONIC BASED PROCESSES WHICH DRIVES THE CREATION OF A PROCUREMENT PROGRAMME DETAILING ALL FUTURE PROCUREMENT REQUIREMENTS

7.17 By September 2018, all organisations within the EU will be required to embrace e-procurement and accept electronic submission of tenders. At this time, the organisation accepts tender submissions and correspondence on email however the move towards electronic procurement could be further embraced, by embedding a system to manage tender processes.

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7.18 By understanding and having oversight over which contracts are held by the organisation, and when they are due for renewal, the organisation is able to more effectively plan and match resources to activities.

7.19 A procurement programme will outline where there are upcoming procurement requirements and allow sufficient time to be dedicated to considering the most effective option, including thought being given to insourcing and collaboration.

Action Outcome

Establish a scope / key requirements Clear understanding of the for a procurement portal for the requirements of a new system organisation

Procure a provider of an e- Identification of a system that is fit for procurement portal system to be used purpose and offers best value for the by all budget managers and award organisation panels

Embed the e-procurement portal into Shared and consistent use and the organisation and provide training understanding of the new system and guidance to managers

Migrate all procurement projects over Best use of the investment is being to the new system / approach made and consistency is achieved in procurement procedures

Review processes by which suppliers Organisation is using suppliers that are vetted and made available for offer required quality and value selection on procurement systems

Ensure the electronic Contracts Clearer understanding of upcoming Register remains up to date and leads procurement exercises to the development of a Procurement Programme

Use the Procurement Programme to Correct use of resources and better identify, plan and prioritise consideration given to all options procurement activity across the available to a budget manager organisation

Regular reporting of the Procurement Allow strategic decision making to take Programme to the leaders of the account of upcoming opportunities to organisation engage with the market regarding

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service delivery

 OBJECTIVE 6: EMBED A CULTURE WHERE SUPPLIERS ARE MANAGED MORE EFFECTIVELY THROUGHOUT THE LIFE OF THE CONTRACT

7.20 Contract management is defined as “the management of provider relationships to ensure their compliance with contract obligations and to understand and control the financial and risk implications of any change. Contract management is responsible for the performance monitoring and quality assurance of the provider”.

7.21 A successful procurement exercise can easily be undone by poor contract management. It is essential that sufficient focus is given to contract management.

Action Outcome

Ensure sufficient focus and resource is Relationships and expectations are given to the post award period within set out from the beginning to ensure procurement exercises to ‘on-board’ a positive working relationship new supplier in a positive way

Develop a framework which can guide Suppliers continue to meet managers in ensuring that active, organisational requirements and ongoing management of suppliers is assurance is gained on a continual taking place basis as to their ability to deliver

Ensure T&C and specifications are Value is continued to be gained from delivered throughout the life of the contracts as they are actively contract by closer management of managed suppliers

Embed effective relationship Better value being obtained by management, delivering continuous ensuring the service is continually improvement and innovation within the delivered to a high standard and contract (as required) variations are enacted to enable this

8 CONSULTATION AND COMMUNICATION

8.1 Sessions were held with all Directorate Management Teams to enable the strategic themes of this strategy to be consulted on and also to seek new ideas. In addition to this, a consultation exercise was held at the Manager’s Conference to understand more about the learning and development

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requirements of budget managers to enable training to be tailored to their individual need.

8.2 Benchmarking with other organisations was undertaken in the development of this Strategy and a “health check” on the procurement function was undertaken by Service Matters4. These activities have provided useful insight into the procurement model in other social housing providers, and where Stockport Homes can strengthen theirs further.

8.3 This strategy will be available to all staff via the HOG and will be promoted to budget managers by way of specific emails drawing their attention to the strategic themes, actions and proposed outcomes, as well as tailored training sessions.

9 LINKS TO POLICIES

9.1 This strategy links to and / or supports the following other strategies and policies within the organisation:

 SHL 3 Year Business plan  The Delivery Plan  Value for Money Strategy  Risk Management Strategy  Corporate Finance Strategy  Team Specific Business Plans  Contract Procedure Rules  Financial Regulations  Scheme of Delegation  Documents relating to delivery of a Group Structure  HRA Thirty Year Business Plan and Asset Management Strategy

10 ACTION PLAN

10.1 A thorough action plan detailing all of the actions that will enable the strategic objectives to be met can be found at Appendix One.

11 MEASUREMENT, REPORTING AND GOVERNANCE

11.1 This strategy will be reviewed on a regular basis and reports will be provided to Leadership Forum and Board on the achievement of the aims of the strategy.

11.2 Following an internal audit in 2016, actions are being delivered to improve the monitoring and oversight of procurement spend and quarterly reports are being provided to Directors of spend and procurement requirements for them to drive through their Directorates.

4 A division of the Orbit Group providing specialist services to other housing organisations

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11.3 Spot checks are being undertaken to verify compliance with procurement rules and ensure managers are all operating within the requirements for purchasing with public money.

12 OWNERSHIP, MONITORING AND REVIEW

12.1 The Procurement Strategy is owned by the Assurance Team. It will be monitored on an ongoing basis, particularly in terms of any changes to laws, regulations and best practice approaches. It will be reviewed every three years, or sooner if there is a business need for early revision.

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