Step 2 - Build

Audit and review existing practices

Auditing and reviewing existing financial regulations and procedures and processes related to expenditure is critical. The procurement board needs to address the following questions:

• Are the college’s rules governing procurement expenditure ‘fit for purpose’?
• Do existing processes and procedures encourage and support good procurement practice, such as using consortia and procurement cards? 
• Do the existing processes encourage procurement staff to monitor and review what is being bought, spotting trends and anomalies to identify opportunities and manage risks better?

Conduct a spend analysis

A spend analysis enables colleges to ascertain what they are buying, how much they are spending with suppliers and the number of transactions being processed.This delivers a number of benefits:

• It improves management information.
• It allows the identification of expenditure patterns as well as suppliers and prices for basic high-volume, low-cost items such as fuel, catering and stationery.
• It helps colleges prioritise procurement tasks to maximise opportunities for savings and efficiencies.

The spend analysis can be analysed in terms of ‘categories’ – a collection of related goods and services such as IT – and sub-categories which, in this case, would include laptops, scanners, consumables and printers.

A spend analysis helps identify the top suppliers together with areas of procurement that are weak, inefficient, costly and which do not conform to the agreed use of contracts.

A spend analysis involves looking at:

• The number and range of suppliers used.
• The number of transactions the college conducts.
• Spends for individual categories and sub-categories.
• Procurement methods.

Once the spend analysis is complete a plan for each category of spend can be developed before selecting the appropriate sourcing and procurement model, such as a framework agreement. Analysing expenditure by type,value and procurement method leads to a clearer understanding of how to reduce prices and transaction costs most effectively.This information can be refined and developed on an ongoing basis to obtain the best possible quality management information. A spend analysis becomes a useful tool for managing suppliers through reviewing their performance against data provided in-house or by consortia or external benchmarks.

If you do not feel you have the right expertise in-house, ask an external specialist to conduct the initial spend analysis for you. A number of companies offer this service, which involves taking data from a college finance system and re-presenting it in a format that allows it to be manipulated and analysed. 

Review or establish a contracts register

A contracts register provides easy access to relevant contract information and can help you plan procurement activity by, for example, putting in place a new contract (if necessary) before the current one finishes. A contracts register includes the following information:

What the contract is for:

• Contract manager’s name.
• Supplier name.
• Start and finish dates of the contract.
• At what intervals the contract is to be reviewed.
• Value of the contract (sometimes known, sometimes an estimate).

Conduct a risk analysis

A key priority for every college is to ensure it is exposed to as little risk as possible. A clear view of the risks and any potential consequences that could arise from procurement malpractice is essential. Financial and legal risks will almost certainly be high if:

• Large numbers of untrained staff are authorised to make purchases and negotiate contracts.
• Procurement processes are not compliant with EU public procurement regulations.
• The college does not have an established process for dealing with contracts if, for example: procurement contracts are verbal; it does not operate an electronic purchasing order system; and supplier relationships are based on their terms and conditions rather than those of the college.