Annex 3 - Financial Indices
The working group has been careful to ensure that the BPIs are consistent with the KPI recommendations in the McClelland report.
This annex gives details of how these existing indicators have either been adopted as BPIs, Financial Indices, or have otherwise been dealt with by the BPI Working Group.
A comparison of the BPIs and FIs and the procurement performance indicators contained in the UK Public Sector Audit Agencies report May 2007 Value for Money in public sector corporate services is available under 'Supplementary Information'.
McClelland KPIs
The McClelland report contained the following KPI recommendations:
1. Average Process Cost per Transaction (P2P)
2. Total Cost of Resources in Procurement Department
3. Total Cost of Resources in Procurement Process, i.e. including support departments, e.g. Accounts Payable
4. Procurement Resources Analysed by Commodity or Service Procured
5. Procurement Department/Process Cost per £ of Specific Commodity Spend
6. Procurement Department Cost per £ of Spend
7. Average Spend per contracted supplier.
The group has decided that the following McClelland KPIs should be recorded as useful Financial Indices, however, we will not be measuring a trend against these numbers at a national level (local organisations may find this useful however).
F1 | Average Process Cost per Transaction (P2P) |
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| In most organisations there will be many P2P processes, and all of these cannot be measured. You should define the most commonly used P2P process that accounts for the majority of transactions. In many cases, they will be paper-based processes or perhaps legacy systems for job costing, facilities management, etc. We advise that Accounts Payable staff are contacted to define the most commonly utilised P2P methods. The process includes: |
An 'Efficiency Measurements & Measurable Benefits' project was recently undertaken by eProcurement Scotland ( ePS) and their customers.
The main aims of this project were (1) to effectively communicate to ePS customers the recommended eProcurement 'Efficiency Measurements' and the methodologies that should be used when applying these to eProcurement projects, (2) to effectively communicate to ePS customers the recognised 'Measurable Benefits' of implementing ePS and (3) to facilitate and streamline reporting of the these (both internally and externally) by using an agreed tool.
The recommended eProcurement 'Efficiency Measurements' that came out of this project were (1) Scope of Implementation, (2) Business Process Re-Engineering and Integration with Finance Systems (or baseline measuring) and (3) Reduction in Supplier's Prices.
Though developed to specifically report ePS Efficiency Measurements, these measures are equally applicable to any other eProcurement implementation and it is recommended that they form the basis of any global cross sector tracking mechanism. As a direct result of this, the tool and methodology applied will be rolled out to the wider Scottish Public Sector (should these organisations require it) via the relevant Centres of Procurement Expertise.
For organisations who have not undertaken a process cost analysis, the guidance document arising from this process is available at the SPD website:
www.scotland.gov.uk/topics/government/procurement
It is not mandatory to use this guidance, however, your calculations should be robust enough to stand up to scrutiny from audit bodies. Your local auditing function may be able to assist with this process.
In recognition of the fact that this process can be time-consuming, this financial index should be calculated at the start of each spending review, and used as a baseline for the length of the spending review period.
Therefore, the first calculation of this financial index should relate to the average process cost per transaction in 2007/08.
F2 | Total Cost of Resources in Procurement |
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| Where 'Resources' = FTE core procurement staff who spend at least 50% of their time on procurement related work. This could include any staff member involved in either strategic or operational procurement activities, such as contracting for goods services or works from third party suppliers, full-time procurement support services or the development of procurement policy or practices. The staff involved may not necessarily sit within the corporate procurement function, and may be involved in areas not traditionally thought of as procurement, e.g. involved in capital projects, care commissioning, etc. (This specifically excludes accounts payable, routine requisitioning and other staff in purely transactional activities using previously established contracts and agreements with suppliers, but includes support and administrative staff who spend more than 50% of their time on procurement related support work.) Costs should include total costs for all staff including "on cost" such as overheads and pensions. |
F3(a) | Number of Procurement Staff ( FTE) |
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| Total number of Full-Time Equivalent Procurement members of Staff, where 'procurement members of staff' refers to staff who spend a significant proportion i.e. more than 50% of their time, specifically on procurement related work. This could include any staff member involved in either strategic or operational procurement activities, such as contracting for goods services or works from third party suppliers, full-time procurement support services or the development of procurement policy or practices. The staff involved may not necessarily sit within the corporate procurement function, and may be involved in areas not traditionally thought of as procurement, e.g. involved in capital projects, care commissioning, etc. (This specifically excludes accounts payable, routine requisitioning and other staff in purely transactional activities using previously established contracts and agreements with suppliers, but includes support and administrative staff who spend more than 50% of their time on procurement related support work.) |
F3(b) | Number of Procurement Officers ( FTE) |
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| 'Procurement Officers' - refers to staff who spend a significant proportion, i.e. more than 50% of their time, specifically on procurement related work. This could include any staff member involved in either strategic or operational procurement activities, such as contracting for goods services or works from third party suppliers, full-time procurement support services or the development of procurement policy, strategy or practices. The staff involved may not necessarily sit within the corporate procurement function, and may be involved in areas not traditionally thought of as procurement, eg. involved in capital projects, care commissioning, etc. (This specifically excludes accounts payable, routine requisitioning and other staff in purely transactional activities using previously established contracts and agreements with suppliers, or support and administrative staff who spend time on procurement related support work.) |
F4 | Procurement Department spend per professionally-qualified procurement staff |
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| McClelland recommended that there should be broadly one procurement professional for every £15m of contracted expenditure. If organisations record the number of professionally qualified procurement staff under BPI 7, then this can be compared against spend data held in the Hub, to give this Financial Index. |
F5. | Procurement Department Cost per £ of Spend. (Automatically generated from the Scottish Procurement Information Hub) |
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| Answer to 2 ÷ Total procurement spend. For example: Total cost of resources in procurement department = £150,000k Total procurement spend = £100,000,000 Procurement Department Cost per £ of Spend = 150,000 ÷ £100m = 0.15% Procurement spend is all expenditure against goods, services and works from third party suppliers from either the private or third sector. This figure can be obtained from the Scottish Procurement Information Hub - core trade spend. ( www.spikescavell.net ) Exclusions From Expenditure Data - Payroll and pension data expenditure
- All social services direct payments to individuals and foster carer payments
- Internal spend - i.e. 'spend' or cross charging between departments
- Investment transactions - e.g. bank and building society deposits, receipts, and loans from any source
- Statutory transactions with other public sector organisations, e.g. ODPM, Inland Revenue, Local Authorities, Precept funds, etc.
- Payment and/or refund of parking fines and or Her Majesty's Court Service
- Council Tax Refunds
- Imprest accounts.
Information available from the Hub The Scottish Procurement Information Hub will have the facility to automatically generate reports which will calculate the following financial indices per organisation, if the supplier and spend data from the annual refresh is provided. |
F6. | Average Spend per contracted supplier |
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| Total spend with contracted suppliers ÷ number of contracted suppliers. |
F7. | Average Invoice value |
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| Total Spend ÷ Total Number of Invoices. Other potential measures The following McClelland BPIs will not be measured nationally, but organisations can calculate them if they wish using supplier, commodity, and spend data available on the Hub. - Total Cost of Resources in Procurement Process, i.e. including support departments, e.g. Accounts Payable
- Procurement Resources Analysed by Commodity or Service Procured
- Procurement Department/Process Cost per £ of Specific Commodity Spend.
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Reporting method and frequency summary:
Measure Type | Measure Definition | Method | Frequency |
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BPI | 1. Total Savings Achieved Year on Year | Manual | Quarterly |
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BPI | 2. Customer Satisfaction Survey | Automatic* | Annual |
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BPI | 3. Supplier Satisfaction Survey | Automatic* | Annual |
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BPI | 4. % procurement spend that is channelled through a collaborative contract | Automatic** | Quarterly |
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BPI | 5(a) & 5(b) Spend with contracted suppliers (on contract) | Manual*** | Quarterly |
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BPI | 6. % of BPIs that show improvement since previous report | Automatic | Quarterly |
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BPI | 7(a) % of procurement officers who hold the professional procurement qualification, Member of Chartered Institute of Purchasing and Supply ( MCIPS) | Manual | Quarterly |
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BPI | 7(b) % of procurement officers with an appropriate procurement qualification | Manual | Quarterly |
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BPI
| 7(c) % of procurement spend actively influenced by a procurement
professionals
| Manual | Quarterly |
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BPI | 8. % procurement staff undertaking formal training | Manual | Quarterly |
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BPI | 9. (a)-(e) E-procurement measures | Manual | Quarterly |
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FI | 1. Average Process Cost | Manual | Spending Review |
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FI | 2. Total Cost of Resources in Procurement Dept | Manual | Quarterly |
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FI | 3. Number of Procurement Staff | Manual | Quarterly |
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FI | 4. Procurement Department Spend per professionally qualified staff | Automatic# | Quarterly |
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FI | 5. Procurement Department Cost per £ of spend | Automatic## | Quarterly |
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FI | 6. Average Spend per contracted supplier | Automatic | Quarterly |
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FI | 7. Average Invoice Value | Automatic | Quarterly |
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FI | 8. % Private Sector suppliers with a formal contract agreement | Automatic | Quarterly |
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FI | 9. % Third Sector suppliers with a formal contract agreement | Automatic | Quarterly |
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FI | 10. % spend with SMEs | Automatic | Quarterly |
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* if email addresses are provided to Hub provider by local organisation
** if contract data is uploaded by local organisation
*** but this will become automatic over time as contract data matures
# if local organisation inputs figure for BPI7(a)
## - if FI2 is input by local organisation