The City of London Corporation has signed a contract worth around £12.5 million with Accenture to help improve and cut the costs of its procurement function.
Under the five-year, value-based contract, the City of London hopes to develop a new, centralised procurement service which will be responsible for all the local authority’s procurement and procure-to-pay functions.
“With this deal, the City of London are going down a model where they want to run their own procurement but they want to make it better value for money
“This value-based arrangement will ensure that both Accenture and the City of London Corporation are committed to delivering these savings,” said Mark Lyons, Accenture’s UK and Ireland managing director for Health and Public Service.
Part of the work will include implementing an eMarketplace – an online catalogue of services the City of London can buy from – as well as a buyer portal to help departments use the new service.
The value-based arrangement means that Accenture will be paid a baseline fee, and another proportion of its fees will come as an agreed percentage of the savings that the City of London makes each year. Accenture hopes to help save the local authority more than £30 million over the five years, but the City of London said that the contract was only worth about £12.5 million.
“If Accenture delivers all of the savings and meets all of the targets, then our fee to them at the end of the five years will be somewhere in the region of £12.5 million,” Chris Bilsland, the City of London’s financial director told The Guardian.
Lyons said that essentially, the City of London will continue to spend more or less the same amount as it currently does on internal IT but that its procurement operations will be streamlined so it gets better value from its external suppliers.
The majority of savings made over the five-year term of the contract will go the City of London, with Accenture's fee coming from the savings the authority makes on purchases from other suppliers. The City of London expects to make actual financial savings throughout the contract.
“The City of London Corporation will continue to enjoy the legacy of both the financial and non-financial benefits after the contract period,” Bilsland.
The non-financial benefits include the training that Accenture will provide to the City of London staff who will continue the hopefully more efficient procurement operations once Accenture’s contract has finished.
“We will be making sure we train and give guidance so that they can understand how they go about buying and what the best way to buy is,” said Lyons.
Accenture has signed a number of value-based deals in the past, in central government and in health. Lyons said that currently, a similar contract with a health trust’s procurement function is delivering savings of 10 percent on previous spend after just five months.
He added that Accenture is also having discussions with other local authorities who are interested in deploying value-based contracts.