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Procurement pressure
21 Oct 2008
Topics: Procurement, Sustainability, Kitemark®
Purchasing strategies can make or break a business, and from blue-chip boardrooms to town halls, managing procurement risks is a high priority. LHC Network is a major national public procurement body with clients including local authorities, housing associations and schools. It's Britain's biggest public sector consortium for the procurement of building components and services, with bulk purchasing arrangements encompassing everything from replacement windows to insulation.
Cost control is critical. But controlling the quality of goods and services delivered is equally important. LHC Network's PVC-U door and window business is worth more than £20m annually and provides an insight into the procurement quality challenge.
"Windows are probably one of the most intrusive building elements we deal with," explains Chris Powell, development officer, LHC Network. "With window replacements, you need to have access to somebody's dwelling and you take the place over for a day. People want to see that things are being done properly."
As procurement specialists, LHC Network vets and selects suppliers - it does not carry out building work itself. It has to be confident that its suppliers are providing clients with goods and services that are up to scratch. Standards and certification schemes - such as the BSI Kitemark for PVC-U window installation - play an increasingly important part in this process: "The Kitemark means there are certain parameters a company is working to and it provides additional quality assurance," says Powell. "We're focused on providing best value for our clients, which very much includes site performance as well as product quality. The Kitemark provides an extra element to this including the provision of BSI inspectors as well as our own."
Businesses seeking to work with LHC also benefit. Compliance with standards and Kitemark certification mean they're more likely to pass LHC's stringent pre-qualification checks and become appointed suppliers.
In both the public and private sectors, the Kitemark offers a procurement benchmark for products and services, with schemes covering everything from cricket balls to construction products. Kitemark is a win-win solution for business. For procurement managers, it provides assurance; for suppliers, it offers the prestige of independent certification of quality and best practice.
Buying power
The automotive and financial services industries provide another example. Motor insurance companies spend around £5bn every year procuring vehicle repairs. Launched last year, the Thatcham BSI Kitemark for vehicle body repair shops allows insurance company procurement managers to select repair specialists with confidence. More than 170 workshops have now earned the Kitemark and a further 305 are in the process.
Traditional approaches to procurement focussed on initial purchase costs. But the need to consider sustainability and risk - including long-term costs associated with assets - is an increasingly important part of the equation.
"Standards can help procurers select products and services that are more sustainable," says Katherine Hunter, BSI British Standards' head of market development for sustainability. "They tell the procurer more about the organization that's providing a product or service. Standards also help you to understand more about the products themselves." New standards include PAS 2050, the greenhouse gas emissions standard for goods and services (see the cover story on page 10), and BS 8901, the standard for sustainable event management launched last year.
The sustainability agenda has major implications for the construction sector in particular. This is driven in part by government initiatives, such as the Code for Sustainable Homes, and also by questions surrounding the legacy value of new buildings for London's 2012 Olympics.
Ensuring that buildings offer whole-life value for money is the role of a new standard, BS ISO 15686 part 5. Launched in July 2008, the standard means that the life cycle cost of construction projects can be directly compared at the tender stage. It looks beyond the headline capital cost of buildings and allows the long-term impact of operation, maintenance and energy costs to be taken into account.
"Life cycle costing is a hot issue in terms of procurement," says Charles Whitlock, programme manager, BSI British Standards. "This is the first standard method for getting a life cycle cost for a procurement project in construction. Before the standard, if the government asked for a life cycle cost for a project, people could base it on their own assumptions. Now it can ask for a life cycle cost based on a standard methodology. It's a step forward."
BS ISO 15686 part 5 puts life cycle costing at the top of the drawing board. And with contractors expected to quote on the basis of the new standard, it's set to have a significant impact on the design of new buildings. Businesses and organizations commissioning buildings will be able to make an informed assessment of competing bids - standardized methodology will make it much easier to make comparisons between different quotes - with less risk of incurring unforeseen long-term costs.
The life cycle costing standard is expected to have a significant impact on construction procurement for major projects, including PPP and PFI schemes. Plans for a new responsible sourcing standard for construction products, announced in August 2008, will lead to a commonly-agreed specification to support sustainability.
Standards and independent certification schemes, such as Kitemark, deliver a competitive advantage and provide procurement managers with peace of mind.
"We have to be seen to be independent and the Kitemark offers us the assurance we need," concludes Powell of procurement specialists LHC Network. "Third party certification means a company is serious about quality control. That's our safety net."
For more information on Kitemark: www.bsigroup.com/oct08kitemark
For more information on life cycle costing: www.bsigroup.com/oct08LCC
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Sustainability takes the podium
With sustainable procurement now high on the agenda, BSI is hosting a major conference on the subject this autumn:
Sustainable Procurement Conference
London, 12 November 2008 with post-conference workshop on 13 November
BSI's second annual conference covering the latest developments, including how sustainable procurement can benefit business and save money, practicalities of implementation, socio-economic aspects and enhancing reputation. With case studies from experts in private and public sector organizations.
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