National Assembly for Wales

I'd like to welcome Members back to the Economy, Infrastructure and Skills Committee. We had a joint meeting earlier with the Finance Committee, so finance members have now left and we'll continue with our meeting this morning. Our next item is in regard to our inquiry into public procurement in the foundational economy, and we have a panel of witnesses this morning to help us with our work. I'd be very grateful if you could introduce yourselves for the public record, if I start from my left.

Liz Lucas. I'm head of customer and digital services within Caerphilly County Borough Council, but ultimately responsible for procurement as well.

Morning. Ian Evans, procurement and information manager for Caerphilly County Borough Council.

Bore da—good morning—I'm John Paxton from Cardiff Council. I head up the strategy team.

Good morning—bore da—my name is Richard Dooner. I'm a programme manager at the Welsh Local Government Association.

Right. Well, thank you very much for joining us this morning and for your written evidence as well. We're very grateful for that. Members have different questions. If I start with the first, the Future Generations Commissioner for Wales has said that

'three years since the legislation came into force, the extent to which the Act is informing the procurement process and procurement decisions in Public Bodies is not clear'.

Do you think that's right? Who would like to start?

I'm quite happy to start.

Thank you.

I think there's a lot of good work going on within Wales, certainly in individual local authorities and across our public services boards and across the work that is being undertaken by the WLGA with 22 heads of procurement within Wales. There's a lot of good work. Maybe the commissioner's not seeing that work and we're not publicising the good work that we are doing with our supply chains. This is an old topic that's been ongoing for a number of years now, and we've failed to get the message out—the good work that we are doing. That can be frustrating from a profession.

Okay. Would anybody else like to comment?

I'd have to agree with that. I think the nature of procurement in Wales is we've been a modest bunch, as a whole, particularly local government procurement. The paradigm is to get the job done and really just get on with it, and provided local authority leadership is happy with what you're doing, there's really not any need to grandstand it.

Can I just point out, as well, that, in my written evidence, one of the reports I shared with you was a business case called 'The Future of Local Government Collaborative Procurement in Wales'?  And that's quite deliberately got a subtitle of 'Investing in Local Government Procurement to deliver for Future Generations'. That is exactly what we're working on. Now, the future generations commissioner's staff have been present at most of the meetings of those heads of procurement and fully briefed, and have had every opportunity to input to the consultation.

As well as this, the WLGA has provided officer support to the commissioner to support local authorities in their preparations, and we've been involved with them as well. So, it's a little bit of a surprise to us not to be more recognised as being proactive in this role.

Why do you think the commissioner has made that statement?

I don't know.

Can I just comment that—? When we started developing out, in 2018, our programme for procurement and the way in which we would work within Caerphilly, we totally engaged with the commissioner's office, and they had an opportunity to be consulted on our documentation and our forward work plan for procurement within Caerphilly, and they actually contributed to that. So, it's quite frustrating, really, to sit here today and having a comment to say that we are not engaging and we're not delivering on that when we very much have been doing the opposite.

I'm wondering—. Well, I'm speculating, as well, whether the commissioner feels that it's grand having documents and making statements, but something not being delivered on the ground. I don't know that's the case, I'm speculating perhaps that's what's behind her view.

Commenting on what's happening in Cardiff, I know we've obviously embedded the Well-being of Future Generations (Wales) Act 2015 into our procurement strategy, into our socially responsible procurement policy, it's at the heart of what we do. We're a strong advocate of the living wage, fair work practices. We're proud to be a living wage employer; we've played a key role in driving the increase in the number of living wage employers in Cardiff up to approaching 100. We've just put an application in to be recognised as a living wage city—the second in the UK, the first capital city. We've been quite ambitious; we've got modern slavery statements. So, our focus has largely been on the fair work agenda, and I think—you know, we've done a lot.

Hefin, you wanted to come in.

Yes. We've taken evidence from Professor Kevin Morgan, and one of the things he's very clear about is that there's patchiness across Wales. There's some excellent good practice, and I'm seeing people he's referenced sitting in front of us today, but also there are patchier areas. So, I'd like to ask Richard Dooner, could that explain it, perhaps?

I'm familiar with Kevin Morgan's views on this and, actually, I felt a little unappreciated the first time we met, but we've since—

We'll pass that on.

—we've since reconciled that. We're getting on fine. I think there is a reality when it comes to resourcing in local authorities. I appreciate that austerity cuts across—it applies to everybody in Wales, not just local authorities. But the scale of the task here is quite major; we're talking about major change and different ways of doing things. And the best way to do anything is to do it, but, to do it, you need bodies on the ground—you need people not to write reports on how it should be done, although those are important in their own way, but what you actually need is people within those operational units able to carry out those functions of doing things a different way.

Now, some authorities are more ready to do that than others, so, when we started this exercise, there were authorities that naturally led on some of the initiatives, not necessarily because of any central initiative but because they were doing it for the right reasons anyway. A lot of this work is very much the sort of work that authorities want, it's what local government leadership wants, so we're already, to a certain extent, delivering that. But 'depleted' I think is the word I would use for the procurement community. We have a small core of survivors. We're working very hard at reforming this and there's a lot of experience out there, but, actually, that experience itself is diminishing. So, in terms of the speed of change, yes, authorities that have the resources to change and will change faster than those that don't have any people in place and no resources to hire people in to do it. 

Okay, fair point.

At the heads of procurement meeting this week, the point was made that there's procurement profession and there's a procurement process, and it's a challenge for us, as procurement professionals, changing the culture within organisations to grasp this agenda, because ultimately, the directorates are the budget holders. So, we are slowly doing that, but it's the oil tanker analogy, I suppose.

This task isn't procurement related as a singular, and I think we need to understand the cross-functional working of government and all the disciplines. We need the lawyers, we need the finance officers, the auditors, the procurement people—we need to be working together. You can't keep pointing the finger at procurement to deliver this. And the points made by John and Richard are well made, because we have got a reduced resource, and there are not many organisations like Caerphilly and Cardiff, who sit before you today, that have got the senior people at the top table within those organisations who are able to make the difference and make a point to the budget holders of the differences we need to make. So, we need to be careful. It is patchy across Wales, there's no question about that. It would be patchy within our own organisations, and we need to be realistic. But what we need to be sure of is that this is for all of us to deal with, not just procurement professionals.

So, just briefly, what are the objectives that you want to see come out of your procurement activity?

From Caerphilly's point of view, the main driving force has always been local procurement. We have defined what 'local' means to Caerphilly. We actually look at all our contracts—

What is 'local'?

Within the south-east Wales region, and now we've put it to the city deal region. Previously, it was within south-east Wales, the WPC, but now, we've put it to the city deal region. We actually measure against that target. We've done a lot of work with local people, and Ian's got some statistics he could share with you today. But, for me, it's about getting as much of our spend as we possibly can in and around our local region and within Wales, and developing that supply chain in an appropriate manner.

And Richard?

Just briefly—that's the hard bit—it's about the £3.6 billion support for local authority spend, and not about the small amount that's currently going through framework agreements or current arrangements, and it's about the influence that that £3.6 billion can have on the country. So, we're looking at resourcing a cadre of people to deliver good things better, in line with the needs of leadership—local government leadership and Welsh Government as well.

So, I said 'just briefly', but, within that, there's a lot. So, if we're talking about things like social services commissioning and having new ways of doing commissioning, we really need to equip people to be able to do it and to make those links and those connections work in different ways. We also have the challenge of doing that within the present legislative arrangements, and we think we can. We think we have the knowledge and the ability to do it, but, again, what we're short of is boots on the ground. So, we need to find a way to resource that.

Okay. Members might dig in more a bit later on. Joyce Watson.

Good morning. Public services boards have a major part to play at the moment in all things at a local level, so I'd like to understand, really, the amount of local procurement by local authorities—because we're talking local authorities—that's considered in the public services board.

Ian Evans.

Quite happy to answer that, yes. In terms of Caerphilly's PSB, we've got a specific procurement group. As I understand, it's the only PSB that's running at the moment that's got a specific procurement and commissioning group, which works with our PSB members. Certainly, in terms of our delivery plan, we talk a lot about local procurement, which is in line with Caerphilly, as a council, in terms of our procurement strategy, and we are endeavouring to deliver against the objectives we've set out in terms of the delivery group. We seem to work well. We don't meet as often as we would like, however there is quite a lot of communication by other means, not just in meetings, in terms of establishing what we're doing as a PSB. In fact, one of our work streams at the moment is to do with social value, so we are meeting with members of the NHS and the Gwent Association of Voluntary Organisations, and there was an invite to others as well to meet with us next week to develop a Caerphilly PSB-specific social value policy.

Okay. You've given me an example of good practice, but, very often, what people are told and what we're told, when it comes to procurement delivering more locally, is that they can't operate it because of the European Union rules. So, I'd like some thoughts on that.

Liz Lucas, and then, Richard, did you want to come in as well?

I'm happy to speak, but I'm just aware I've got practitioners sitting next to me who can give you the practitioner's view as well.

Liz, I'll come to you first.

The EU procurement rules are very, very flexible as they stand, and we demonstrated that within Caerphilly. I think, at the end of the day, we're a public body, we spend the public purse, and, therefore, we need rules and regulations on how we deliver that on the ground. We had to deliver the WHQS programme for our housing stock within Caerphilly, and we recognised the number of local contractors, builders, that were currently working with the authority. To put that out to open procurement would have meant that some of those very, very small businesses were unable to bid for work. So, we looked at the regulations, and sat within the regulations is the clause that allows the small lot exemptions—so, you're allowed to exempt 20 per cent of the total value of expenditure, and you're allowed to use that within your local rules to award to local businesses. We did that very, very successfully.

Unfortunately, it was so successful that our local providers couldn't manage the amount of work, which is a big issue. So, then we had to widen it from contractors within Caerphilly. We had to go wider into the city deal region, and we even had to go wider than that again then—up to a radius of 50 miles to try and get enough contractors within our small lot exemption classification so that we could get the work done. It was very, very successful. The rules do not stop you looking after your local contractors.

The problem we've got with local contractors is we are not publishing far in advance the work that's coming so that they're able and prepared to carry out the work. We've got two supplier relationship officers—again, one of the few local authorities within Wales—who sit within the procurement team. They are procurement professionals. However, what they do is they work with the supply chain to get them bid ready. They support them through the bidding process and help them with the electronic tendering process as well. Lots of these small businesses are one-man bands. They don't know how to do it, so we help them with that. So, we need a forward work plan—what is coming down the track that we want to procure locally. That is the plan we need. We don't need to change the regulations. Then we need to get our supply chain ready. Once they're ready and able to bid and win the work, we then need people to help and support them through that delivery mechanism, because they work together, but they are failing to develop their businesses. Business knowledge and business sense is limited in some of the small businesses.

Okay. If I can just pick up on the Welsh housing quality standard, which is what you were talking about—it would be useful if we used the full title so people know what we are talking about.

Yes, sorry.

But it's not a new project. It's a project that's been running for a very long time, and it's hugely successful. It does tie into procurement because you identified that small companies weren't job-ready—that's really what you said. So, if we go to the other side of procurement here, in terms of getting job-ready, long-term contracts, supply chain requirements, have you looked at apprenticeships within that supply chain so that you're building up, effectively, the expertise that you know is going to be needed and the shortfalls that need filling?

Yes, all our contracts address those areas. Some of them are mandatory and some are not, but we've got evidence that Ian can share with you now on some of these contracts where we've actually had very good success with this.

Yes, I'm happy to share them with you and send hard copies in. We've developed some case studies that link into the dynamic purchasing system, which again is a mechanism under the regulations that worked quite successfully on our WHQS programme and on various other commodities within Caerphilly. We run seven or eight at the moment, which cover home-to-school transport, buildings, grounds maintenance and those types of works aspects, all in line with the OJEU and EU regulations.

In terms of case studies, we've got various ones developed with our local builders, and what I mean by 'local' is defined as the south-east Wales region or the city deal region, and also with some of the good work we've done 10, 15 years ago with our milk provider. Again, going back to the foundational economy, using local, Caerphilly ran a meat project some 15, 20 years ago now in terms of the original Farm to Fork initiative, where we used a local butcher in terms of providing meat to our schools and other establishments. So, we have got quite a bit of evidence on the good work that certainly has been done in Caerphilly, but also, we know, across the WLGA and the 22 local authorities. Again, there are examples of good work that's gone on there.

Yes, it's similar in Cardiff, I think. It's largely been on the construction projects in Cardiff, so we have got figures on the number of apprentices. We've got an internal Into Work service that helps organise apprenticeships, work placements, et cetera, and we've also got something called Cardiff Commitment, so we're matching contractors to that service to provide a service. But, for us, the challenge is getting the monitoring information from the contractors, so we're looking at alternative systems at the moment. They tend to use the Welsh Government's community benefit measurement tool, which is good, but it's clunky, and I think the contractors find it quite difficult to use, so we're looking at something called the social value portal, which is much more dynamic. It's being used in England quite widely with English councils, and there's a real opportunity, we think, to match that into the future generations or whatever monitoring system you want, and it massively improves the ability not just to track what is delivered, but you've got a record of what was there in the contract to start with, so you're in a much better position to start challenging non-delivery. So, yes, quite an exciting proposition, and I know Caerphilly are keen on that, and hopefully Welsh Government and future generations and others will be, so we can try and roll the project out across Wales.

So, what do you want  or expect to see in the Welsh Government's forthcoming new procurement strategy document regarding local procurement?

Personally, I don't think we need another strategy. We've got the Well-being of Future Generations (Wales) Act 2015. It is very detailed. We've got our individual strategies that we work with. We tend to have strategy upon strategy, rather than actually delivering on the ground. So I question do we need it. We certainly haven't been consulted on any new strategy, so that is a concern. 

In terms of 'local', we need to define what 'local' is and what it means. And, for me, it's what the outcomes of that local expenditure are. Last week, I was in a conference that talked about upcycling furniture and the need to stop purchasing new furniture but to upcycle. I was very excited to hear the case studies being demonstrated, but the next morning when I got up and put my tv on, there was a gentleman leaving the Triumph site in Merthyr Tydfil that had been closed, and one of the reasons given was the fact that Government contracts had no longer gone through that business. Isn't that a failure of local procurement in Wales? I was shocked to think that, on one hand we are talking about upcycling, but where was the business-to-business intelligence and the working together in the communities of the public sector procurement teams to identify that that business was in trouble, and how could we have reshaped what we were doing to support it, going forward? That's real local procurement. And these are the tough topics that we need to get into.

The other thing is, as Richard talked about, the value of this expenditure in Wales. We've got one pot of money, and if I take the money from this business to give it to the social enterprise down the road, I'm impacting that business that employs a lot of people who work in and around our local communities. We need to understand the impact of some of these changes that we are looking to make, because we need a fairer way of ensuring that we support business in Wales. So, the outcome needs to be clear on what we are trying to achieve and, if we're not careful, we'll have another scatter-gun approach and we will be robbing Peter to pay Paul, and that is my great concern. 

I'm sure we'll put those concerns to the Minister when they come in. 

You talked about not being target driven, which is what Care and Repair Cymru have said. It can't be target driven or an end just in itself. So, you've sort of demonstrated that by what you've said. So, I'm going to bypass you now and move on to John.

In terms of the original question, in terms of the procurement strategy, I suppose that there are so many different policies that impact on procurement, a bit of joined-upness would be good and a link probably into the future generations. The commitment in that is about whole-life costs—well, let's have some co-ordinated action across Welsh Government. If you take the twenty-first century schools programme, for instance, there's a massive opportunity there to influence schools for generations ahead, but it's very difficult to get carbon-neutral schools with the way that money is allocated. There's a cost per square metre, which makes it very difficult to use innovative solutions to deliver carbon-neutral schools, and it would be good if that, somehow, could be worked, maybe, into that strategy and other strategies, so local councils across Wales could start delivering carbon-neutral schools and we look at the whole-life cost, not just trying to get that initial cost as low as possible. That would be a big step forward, I suppose. 

I think there's a thread to all of this, around procurement, and the line of questioning started around the mention of 'EU regs', which is common parlance for the Public Contracts Regulations 2015. And, in 2015, those regulations were changed somewhat to make things like ensuring proper value for money and local supply easier to do. They were also firmed up in some areas. So, it changed the way the procurement process itself can be undertaken. However, when we talk about procurement, we don't just talk about the business of contracting, because I think there are a couple of things sort of bound into the conversation, and into the narrative, that we need to separate out. But the big question of procurement is strategic, and in many ways it's a pre-procurement process, where, at high level, you decide, basically, what is it you need, why you need it and how you're going to go about getting it. And those high-level decisions are what then inform the technical process of procurement, which is the process that operates within the procurement contracting regulations. And that process just needs to be minimised. We really don't want to egg this up to be any more than it needs to be. It needs to be right sized to the job, and it needs to be done by people who know what they're doing.

But a lot of questions, and, if you like, the underlying motivations behind the questions, are around those big questions like how can we do things better, how can we support local business, local economies, how can we make Wales a better place, how can we do this better? And a lot of the answers to those questions are actually in that decision before you go anywhere near the procurement process that says, 'What is it we're trying to do, and, really, is there a better way of doing this?' And that is still part of procurement. It feeds into the procurement process. That then supplies the operational delivery on the ground, and, again, operational delivery is part of it, because it's no good having optimum procurement arrangements that are great in a case study but which people on the ground can't use. So, it has to be supporting the day-to-day operations of local authorities themselves. And I am being specific to local authority operations now. So, it links with local authority leadership, the needs of the leadership, which has been likened to being in a pinball machine sometimes. So, sometimes, that fixed arrangement that you set up five years ago, you've got to rethink it now because we really need something different today. So, it's about the here and now. It's about the needs of leadership, and it's the mechanism, the regulations. We just need someone who knows what they're doing to get that done, but the important bit is what you ask them to do in the first place.

It may be in my paper, but I keep thinking about it—one of the procurement officers said to me, 'Richard, I can buy anything, but you just need to tell me what you want.' And that's really one of the hard parts of this—what is it that we really want to achieve in the first place? Sorry, I'm on a soapbox here. 

That's fine. Thank you. Oscar Asghar. 

Thank you very much, Chair, and thank you, panel. Liz mentioned earlier this company, Triumph—the furniture company you mentioned earlier. I think they were trading since 1946. It's an old company, very successful, but sometimes circumstances do change. Management do try to save the company, or staff level, up to the last extent, and they do not expose themselves to the public where they're standing financially, until it really goes to the top of the cliff. So, basically, there's some trade secret that management must know exactly. So, we should not blame them for the procurement side, and the business management side, which are totally two different things. 

And the Minister said in the committee that he wants to go beyond what Preston did, because what they did in Preston, he said, was like a postcode lottery. If £100 is spent in Kwik Fit in Preston, that would be counted as a local spend, but that is clearly not the case. That is the Minister's statement. So, I would like to ask the panel here how you monitor and define local procurement. 

We have defined local procurement—

And monitor.

And monitor, and I've got the statistics here that I can actually say to you. So, the percentage of contracts tendered electronically—. Sorry, I've got the wrong ones there. The spend with Caerphilly-based companies, of suppliers, currently stands at £59 million out of our £219 million. And that has grown since 2016-17 at £46 million, 2017-18 £50 million, and today, 2018-19, £59 million. So, we monitor that, and we report these statistics into our policy and resources scrutiny committee within Caerphilly. There are regular reports to our cabinet and the policy and resources committee on the programme for procurement and what we are actually delivering out of it. All this information on all the spend within Caerphilly is fed into Welsh Government on a quarterly basis—all that information. 

Quarterly basis—when the accounts are prepared by any company, any financial accounts, whether it's in the public domain or not, you can get the information when the accounts are published for any company as to where the company is standing financially. That's what I'm saying. So, whether the company is really going bad or worse, or doing very well. So, procurement, actually, is related to the company's performance. Am I right? 

Yes, but—. One of the problems we've got with some of the small companies is that they rely heavily on the public sector and on local government contracts. They've got no business elsewhere, and this is the bit that I was trying to explain earlier, where I was saying that once somebody gains a contract with a local authority, they know they've got business, say, for four years, but what happens after that four years, because we reprocure and they don't win the business? They haven't developed their business enough to be able to go and bid for work elsewhere and grow that business. There isn't this wraparound care with some of the contractors on business.  

I'm sorry to interrupt. This is exactly what I mean—after four hours you evaluate, rather than during the four years when they were not performing properly. 

No, we have yearly reviews of the contractor. We have regular performance and management reviews for all of our contracts, and it's dependent on the risk profile as well. So, if you've got a very large contract, the monitoring is far more aggressive than it would be if it's a low-value, low-spend contractor that you haven't got any issues with, but you have annual reviews of all of your contracts. But, again, this comes down to the fact that practices within different authorities differ, because we have all got different-sized teams and we do things in a different way.  

Within Cardiff, we take a similar approach. So, we report on spend within Cardiff, spend within the Cardiff region, spend within Wales and outside of Wales. In Cardiff in the last financial year, about 52 per cent or £220 million was spent within Cardiff, and we also break that down to SME and third sector. But listening to the evidence of Professors Morgan and Williams, I think what we're looking to do is break that down further so we can look at those whose head office is in Cardiff, and then look at the spend at the branch offices, so we can—. But it would be interesting to find out, obviously, their work around which sectors add most value to the local economy, and then we can develop some strategies to address any potential weaknesses we've got within Cardiff. 

And there is another question along that line now. If Cardiff city council is giving a £2 million contract to somebody for procurement, it's a very small item, and compared to Blaenau Gwent or a small council—. So, there may be a different type of standard. For top down, it is how much money you've got, where you're spending and how you're spending it, so maybe the criteria are a bit different on that level.

In your experience, how well do public sector organisations tend to collect and analyse the type of data that would be required in order to get a true picture of spending in the local area?

There are a couple of different things to this. In Caerphilly—and you've just heard about Cardiff—we interrogate our data. We all provide our spend data to a Welsh Government system, like I said, every quarter. Now, we shouldn't be doing that; that's retrospective. What we need within Wales is a central portal that we all access and all our suppliers are registered within. We don't need separate e-procurement systems; we can all feed into one portal so that we can use our data in a different way. We don't analyse and share our data across Wales. We've got a big issue with supply voids. We don't understand where the supply voids are within Wales. There was a lot of work done on it previously, and it never really achieved anything. We need to get back and revisit that. But, for me, we've still got a lot of work. We've got a lot of data, but what do we do to inform the decision makers with that data? That is an area we need to improve on. Okay?

Okay. Thank you very much.

Thank you. Can I just check on your definition of local procurement? If Caerphilly spent money in a business that's a national chain based in Caerphilly, is that local procurement in your definition?

It's where we pay the invoice.

Really?

Yes.

So, it could be a national chain that just has a branch in Caerphilly.

There are two sides to it. So, we pay, and Ian can give you more information on this—we might pay the branch. So, we have some organisations that are local, but they've got a head office that we pay outside of, but a lot of the workers are Caerphilly-based people. So, that is improving the local community, whereas we may have a local branch, but then we pay someone in England, because that's where the head office is.

And that's not classed as local procurement, or is it?

No.

It's not.

No, it's not; it's where we pay the invoice.

Certainly, there's further work that needs to be done on that, and it's linking back into Liz's comments about supply voids, and, for me, that's one of the key areas where we've got to take our information, going forward, and understand those supply voids. Because Caerphilly, if it's a south-east Wales region, if it's Wales, if it's wider, then it's understanding who we are paying outside of Caerphilly, possibly across the bridge, and how that then is feeding back into the local economy, but also then it's, where we've got collaborative spend that's going national, potentially outside of Wales, understanding how we can move together, working with regeneration, with business services, and understanding what we've got within Wales that could potentially meet our requirements.

So, how should local procurement be defined? Or is that a question that's still being considered in terms of how you define local procurement?

We are currently working on this. Probably about 12, 13 years ago, an initial centralised approach to data was undertaken by the predecessor to Value Wales—the Welsh procurement initiative—and that, using the technology of the day, was able to take a direct feed from the accounts payable systems at local authorities. So, it then grew from something that looked at how much money we spend and who we spend it with. But the nature of that data is that it's fairly limited in what it can tell you. It just tells you you've paid a bill and who you've paid it with. It doesn't really tell you what's happening within the supply chain, nor does it necessarily point to local, but, knowing the postcode to which you paid it is a good start, and, at the time, it was good enough.

Now that we're looking at local foundational economies, we have understood that that is not—. I say 'now'; local authorities in truth have been doing it all the time, day to day. But now that we're taking this formal review of data and how we use it, we understand that it isn't good enough to rely on simply the location that we're paying the invoice to. I could probably create a massive percentage increase in Welsh spend simply by instructing my energy supplier to send me the bills from their Newport call centre instead of from their London call centre, and that wouldn't change anything, but it would make the figures look better, and I'd probably get credit for doing it—wouldn't do it, by the way; that's just not in the culture.

What we're really looking at here is actual money: where it goes and what it does. And so that's much more difficult to measure. So, I've been doing a lot of work with Professor Karel Williams on this, and he's shown us how to measure it. The practicalities of it are that our systems are currently geared up to see where the spend goes. That's not enough for foundational economies, because, in foundational economies, you need to know what's happening then within the supply chain and what you're buying. So, if the money goes to an intermediary, for example, that's now important for us to know. That is critical to the foundational economy. It's also critical to know where you're spending the money with, perhaps, a global company—Microsoft being a very good example. You'd think that, Microsoft, it's an American company, so the money is going to America, but what that doesn't count is how many Microsoft developers and engineers are actually small and medium-sized enterprises and microbusinesses here in Wales. There are a lot of them: Microsoft, Fujitsu—any hi-tech company.

Okay, thank you. Hefin David.

Yes, with that in mind, Peter's Pies have just announced that they're creating 110 new jobs in Bedwas. What they've done is created a healthy, alternative product, which they can then supply to the NHS, to schools and things like that. Are you aware of that particular example?

No, I'm not.

Okay, I don't want to go into it, but that is a clear example of what is going to stay local and is going to be spread in a local supply chain, in co-operation with the public sector. But the bigger challenge that is coming through from your answers today is that we really don't know what that bigger supply chain—Peter's Pies stands out, but we don't really know what that bigger supply chain looks like. It's much more like a supply web. So, what are you doing to capture that information and map that out?

We are currently working with Welsh Government officials around the current provision of data, but one of the things we've recognised is that we need to get underneath the data that they're giving us. There are barriers in getting hold of that, not least of which is data protection legislation, because, within the tail of the Pareto, which is the small numbers, is a lot of personal data, people being paid expenses and that sort of thing. So, it's actually proving quite difficult, much more difficult than you might expect, to get hold of it.

It's quite fragmented. It's a fragmented supply chain with micro firms proliferating, so I would imagine it would be very difficult to capture.

Certainly, the flow of goods and services through local authorities in Wales—. Flow is the right way to look at it, and it is—. If we think of it as many tiny little tributaries of spend then going into collective pools and then flowing as a river, that's a better way of looking at it than looking at it as large aggregated contracts. Because even large aggregated contracts are themselves a sum of lots of little business needs.

So, the big need is to satisfy the operational needs of the authority, not necessarily that process that—. We talked about this arbitrary measurement earlier and you asked a question about that. Arbitrarily measuring something that was created artificially to aggregate spend isn't quite the same as using the total spend to provide better business for the local authority. So, again, very tricky change, and some difficult things that we have to now do.

So, to use your analogy, these pools of collaboration that occur, you are working with—you are trying to maximise their opportunities, though.

Where appropriate. It has to be appropriate to the subject matter and what it is we're trying to achieve. So, again, these things need to be—. They need to be set up periodically, but we also need to question them and say, 'Well, is that actually the best way to do this?' It's a continuous process. 

Certainly in Cardiff, we're fortunate we've got a couple of data analysts and we produce quarterly spend data. That really drives the business. We've got a category management approach and use that spend data to identify potential areas of savings or opportunities to innovate, but, yes, the scale is huge. We spend about £430 million a year, we've got 8,500 suppliers. So, it's quite a challenge, and that's just the direct suppliers, and then you weave in the supply chain. It's—.

So, with regard to—. Liz Lucas, you said earlier that not publishing contracts early enough for local contractors to bid into was a challenge, but there's a bigger challenge as well, isn't there, in getting them to collaboratively bid?

Absolutely. We really need to know where the spend is coming from. There are a couple of points here. One of things that causes us a lot of pain is the way in which funding is released from Welsh Government. So, we get an amount of cash released to us that we've got to spend relatively quickly, so we can't get our supply chains ready for that. But we've done a lot of work over the last five years now on joint bidding—the excellent work that's come out of Cardiff Business School with Jane Lynch and the work that she's doing there. And we've had a number of construction contractors that couldn't bid for some of our work in its totality on their own, so we brought them together to bid in a consortium way. It's all great in the beginning, but then they start to have internal fights, or one doesn't deliver on what they're supposed to, and the whole business mechanism of working together becomes very, very tense. Certainly, the ones that we've tried—and we shouldn't be afraid to try these new things—they haven't gone particularly well. They take a lot resource then out of my team to try and facilitate them and work together. So, we've got to encourage more joint bidding, because some contracts within the Welsh public sector are large contracts and they need to go to market in that way. But we need some help and support from business people to help them be able to shape their business and work together. 

So, what you're doing is you're disaggregating the big contracts where you can, and then aggregating the micro firms to bid for them.

Yes.

But the problem is getting those micro firms to stick together, which is a cultural issue.

It is a huge cultural issue and a big change for them because they think it'll work to start with, there is a lot of legal process that goes on behind the scenes to form this collaborative, but they very rarely succeed to the end. 

Okay. And, with that in mind, do you think it's a problem we'll ever get towards resolving? For example, is it an education thing? Is it a funding thing? Is it such a massive change in culture we'll never do it?

Business support.

It is business support, is it?

It's the independent business support, from my experience, I would say, that would help them be able to develop it going forward. 

Okay. So, you think educating those firms to say, 'It is in your interest to take a lower cut at this point and have a higher cut in the future', that is a possible outcome of what might—?

I'll give you an example of some work we did many years ago with some farmers and butchers. We had an agreement that the farmer would sell their meat into the butchers so that the butcher would then supply to Caerphilly, and then all of a sudden we had, 'Well, hang on, is he getting 5p more a kilo for his lamb than that one?', and all these arguments start and, 'We're not showing him our prices because then once we bid on another contract and we're not working together, he'll know how much I'm making as a profit and not'. So, there was no trust with each other. 

The other thing is it's about having the trust with us, the local authority. One thing we haven't touched on today is about commitment contracting. We're looking at developing local companies. We're talking about bringing social value. There needs to be commitment. We've got far too many frameworks in operation, which everybody puts their name on and then they never, ever get any work or any business. They think they can earn x amount, but they never get it because they've got to re-bid or their prices weren't right in the beginning. We need to look at being able to commit to some of these organisations, and, like with the Wales housing quality standard programme that we've had, what are we doing now for the small businesses in and around Caerphilly that have had work for the last five years? What's going to happen when that funding stops? We've got a duty of care, in my view, to make sure that we have a strategy going forward that they're able to continue to receive business from us in some shape or form. We're not thinking far ahead in our procurement processes. We're always thinking now—'Let's get the procurement done and out the door'. It's a much bigger picture.

So, if I can ask a bit of a cold question, we're talking about the sustainability, long-term sustainability, of local supply networks. Is the amount of effort—?Because you're going to be introducing additional things with business support that aren't currently on offer, you're adding to the public sector role and financial burden. Is the amount of effort required in doing that worth the outcome in sustainable, long-term local supplies?

In my view, yes: 100 per cent. 

And how would you measure that value?

We don't measure it at the moment, but, when you look at health and well-being, you will look at the whole future generations. So, if you were putting money into contractors in Caerphilly, they're buying their supplies from in and around Caerphilly. They're employing local people who otherwise would be claiming benefits, would have health issues, would have low education, low self-esteem—.

So, there's multiplier effects that currently aren't quantified. 

There are huge multiplier effects, and I go back to the work—and it's got to be well over 20 years ago now—of Justin Sacks with the ripple effect, and, you know, you put £1 into Caerphilly, and what does that actually do out there. We've lost sight of that, I believe, and we need to get back to it. 

It's certainly something we've done on a local level, but going back to your web-based theory, it should be something that can be done wider, and this is why we're looking at different ways of measuring that now, certainly via the social value portal and potentially other mechanisms. 

So, with that in mind, you're doing it. Is this something that the Welsh Government should say—which they aren't currently doing—'Right, there's a model here that we should be talking about for every local authority or every region of Wales. There's something that we can actually conceptualise and then implement'?

Well, it's something we're working through and certainly something we're working to via the WLGA heads of procurement. 

Okay. So, we could recommend to Government we'd like to see a model like that if we get an idea of what it would look like?

Absolutely. But it comes down to capability and capacity within the procurement activity.

Okay.

We are working with Welsh Government officials and the future generations commissioner's officers around the social value portal. To my mind, it's an absolute no-brainer. I see a 25 per cent increase in social value, so that's 25 per cent for every £1 million spend in terms of social value being perfectly attainable within Wales. I don't see that as being at all overambitious.

That's great.

But we've got to go through that process.

If a group of butchers and farmers saw a social value portal, they'd go, 'What on earth is that?' You also need to make it—

That's part of it.

The beauty of it is it puts a kind of proxy value on the typical social value that's being delivered, and it's the Local Government Association and Cabinet Office-approved stats. So, you can see if you take somebody who's been unemployed for 12 months into work, it's worth this much. And also there are opportunities to target that. Obviously, you're well aware of the deprivation in Cardiff, particularly the southern arc of Cardiff. It would allow us to say, 'We can put a weighting of up to three on that value if you employ somebody from a specific ward where there are high levels of poverty'. So, it really encourages the contractors. When they're tendering, that's when you're going to squeeze most out of them, I suppose. So, it really sends a sign to them that social value's important to us and to help us deliver it, and it's in their business interest as well.

Supporting those businesses.

Yes. Richard, did you want to say something?

Yes. I was going to say that part of this is about messaging rather than specification, because, in John's example, you could specify a percentage of workers that you require, or apprentices that you require, on a particular project, particularly a major project. And what would happen is the contractor would just build that into their costs, so you'd just be paying for it that way.

The approach we're looking at is one that encourages other providers to illustrate what perhaps they would otherwise do. So, instead of making a requirement, you make it known that you're evaluating on the basis of social value. What that means is, with providers who would ordinarily provide social value simply because they're located within your community and perhaps they do that kind of work—the owner of the firm is that school governor and this sort of work happens anyway—it's now being recognised and measured, whereas previously it was just allowed to happen without anybody recognising it was there.

Okay. I won't say any more.

Joyce, did you want to come in?

No.

No. Vikki Howells.

Thank you, Chair. Liz, you said there that it all comes down to capability and capacity, and that's exactly what I want to ask some questions around now. If I start with you, Richard Dooner, you said in your openings remarks something about procurement specialists being a very modest bunch and also about how the workforce has been decimated. So, I'd just like to unpick some of that, if I may.

Here in the Cardiff Bay bubble, especially in the Chamber, you will hear politicians of all colours talking at great length about the power of procurement. And here, within these four walls, the value of procurement is being talked up constantly. It's one of the key buzzwords, and I think there's a perception among people here that councils are packed full of procurement specialists who can sort out local economies just like that. But, certainly, the evidence that we've been taking here, and when I've looked at this previously on the Public Accounts Committee, is very much to the contrary. So, if I can start by thinking about the way that procurement is perceived, and you said yourself that procurement specialists are a modest bunch, which jars with the way that we talk up procurement here, what organisational status is given to procurement functions within local authorities? We'll look at the impact of austerity a little later, but is that part of the problem, really?

It differs with different organisations, and part of that is really about definitions of what you think procurement is. Some councils would see procurement as being a largely administrative function: there to be minimised and, really, about risk— about compliance and risk. Others would see it as more of a business support function with a more integrated approach. So, you have people who have a procurement role actually performing more operational-type tasks. Those are choices that are made by the operational management of those organisations. Partly, it's to do with the perception of what procurement is and what they call it. So, that one word, 'procurement', can cover a wide variety of definitions. So, at one level we have the technician, the humble technician, who can quite happily produce terms and conditions of contract and do contracting all day, but procurement is not just about contracting. Earlier, I mentioned the three stages, one being the pre-procurement, which is that bit that says, 'What are we going to do in the first place?'. It's about engaging with market, engaging with suppliers, talking to people like Peter's Pies about their new products and not working off, perhaps, assumptions from five years ago. It's about knowing what your local business infrastructure looks like and knowing what it is that the authority wants to do and knowing what influences you might play. And some of these things might not yet have been thought about. The point is it's not always about getting big and ugly; some of this is about having a better relationship basis for the provision of the goods and services that you buy. So, strategic procurement is a high-level process that some would call 'management' and wouldn't think of as being part of the procurement process. So, when we ask the question, sometimes when the response comes people are thinking about different things.

The same happens at operational level. At operational level there are a lot of people who do procurement who don't have procurement in their job titles and wouldn't consider themselves as doing procurement. They might call themselves commissioners, for example, or something else. But the point is that the whole process of the local authority obtaining goods and services from third parties is commissioning and, within commissioning, one of the options is to procure. Other options might be to grant fund or to collaborate, or to do something else. We can do a lot of things simply by asking, or just talking to people, and awareness—that sort of thing as well.

So, would you still say that we have a bit of a job of work to do to raise the status of procurement across the board and to encourage local authorities to really invest and to see it as a value-creating tool and a tool that can benefit the local economy, rather than simply as a cost-cutting instrument?

I'd say, as an overall objective, that is indeed what we're attempting to do with the officer network. We do need to be a little bit careful in how we approach that, because a homogenous approach isn't necessarily helpful. What we've really got to look at is what the local needs are and the whole purpose of doing this is to satisfy those local needs. So, it is part of the process of delivering local authority services; it's not a process or an end in itself. So, the objective is not to build some great procurement empire. That would be a bad thing. The objective is to support authorities in their business, but to do it in a joined-up way and to be efficient about it. So, where we can collaborate and where we can specialise to make our expertise more effective, then we should do that. So, there are lots of things we can do.

Okay, thank you. Looking at the loss of procurement expertise in the last few years within the public sector as a result of austerity—and I'm one of a few people who've been trying to raise the profile of the need for a training scheme to replace home-grown talent—even if we get people through that, how do we actually keep them in the public sector when the wages for procurement specialists are so much higher in the private sector? Any thoughts from anyone on that?

I'm amazed we've kept who we have. It's very difficult. The nature of austerity is that when people go, and when senior staff have gone, they're not necessarily replaced. What we do is we ask juniors to step up to do that work. And it's remarkable how versatile human beings can be—people will step up and they will do that and they will do it well, but it only lasts for so long. Eventually things start to creak. So, when we are resourcing procurement, we need to find new ways of doing it. I think part of it is to do with your expectations in terms of funding. For a while now, we've not expected additional funding at all, so we've tried to do better with what we have, recognising that what we have is probably all we're likely to get in the short term.

Joyce Watston.

I just want to come in and seek some clarification. I heard you say—and I'd be the first to agree—that austerity's played a major part in everything that we've seen. In terms of procuring and trying to keep your money close to you for the benefit of your community—and I'm not talking about you; I'm talking about all of you—then is there not a greater need to invest in procurement? Is there not some political leadership that's needed? And I'm not talking about here, by the way; I'm talking about in the local authorities. I can see you're shaking your head, in Caerphilly, anyway. What are you doing to get that through your advice—I'm trying to be careful here, because you're not politicians—when it comes to advising your executives, who will be making those decisions politically?

It's a tough call, because, certainly, the politicians and those operational managers are making tough choices all the time. So, up til now, it's been about cuts. The local government procurement officers network—there are a couple of things we're doing. One of them is we're collaborating, for a start, so we're working very closely around identifying what it is, what the needs are and what the capability currently is. So, we've looked to national, regional and local preferences for particular categories of procurement, just to try and agree what the best mix should look like. We're also working with Welsh Government officials on that as well, to try and find the best way of producing those national collaborations. So, we're being very efficient in using the little resource that we currently have. I realise that doesn't fully answer your question—

No, it doesn't.

Certainly, in Cardiff, I think we recognise that it's a challenge. In probably 2011, 2012, we struggled to recruit people of sufficient calibre, so we decided to develop a graduate scheme, a grow-your-own scheme. So, we've worked closely with the University of South Wales. We take between one and three students a year, and thank goodness we do—it's been a fantastic resource for us. I think we've probably employed seven of those students. They're really high-quality, bring fresh ideas, and, as your colleague said, we would have struggled. It's a very competitive procurement market locally, particularly in Bristol. We've lost quite a few staff recently to well-paid jobs in the private sector in Bristol, so we're fortunate we've got that really good relationship with the University of South Wales. We've got a case study on our website. We are very proud of it; it's a UK award-winning scheme.

We're fortunate in Cardiff that we have got strong backing from the chief exec and the political team. It has been challenging. We were faced with budget cuts, like all departments, and we would have had to have probably lost about eight of our team. So, we've got a team of about 30, which is quite big in local government circles—still below what McClelland was recommending about one member of staff for each £1 million in spend. But we've been innovative, we've set up a local authority training company, called Atebion Solutions, which is delivering services across Wales, England, and Scotland now. But it is a balancing act, because, obviously, if they're doing work for the company, bringing income in to protect those eight jobs, there's got to be a balance in terms of the work we're doing for the council.

Okay, thank you.

We're just over time a little, so if I can just ask you, in bullet-point form, whether you think that there are any examples anywhere else in the UK or the EU in terms of good practice or initiatives that you think we should follow, or if you've got any other points that you think would be useful to make to help our work that have not already been drawn out through questions. Any final comments at all? Liz.

We don't need to look outside of Wales, really. There is some very good work going on in Wales, and we've talked about Professor Morgan, and obviously Jane Lynch of Cardiff business school—there are some excellent academics that can help us. There are two local authorities sat in front of you today who are desperate to do the right thing through public sector procurement. We need to harness that, work together and do it better.

Thank you. Anybody else? John.

I would say, obviously, look to Scotland. Cardiff is a big advocate of the real living wage. We would like that to be applied to our social care contracts. Obviously, social care works on a regional, national level. We'd look for Welsh Government to consider implementing what the Scottish Government has done to enable local authorities in Scotland to pay the real living wage on adult social care contracts. You look at the stats in Cardiff: the average weekly salary, male to female, there's a £100 difference. That sector is largely a female sector. So, yes, it would be good if something could be done. 

Thank you. Anybody else?

Social value portal. Better Jobs Closer to Home. Sorry—Welsh Government and WLGA.

It's fine—agree with Liz.

Can I thank you for your time this morning? That's really invaluable evidence for our piece of work, so we're very grateful how open you've been with us this morning. So, thank you very much—diolch yn fawr. 

I move to our final item today. We have two papers to note. We have a paper from the National Federation WI Wales Office asking us about our—telling us about their campaign on better bus services, and I have written back to them already outlining the committee's work in this area. We've also got a paper from various Welsh Government Ministers regarding the European transition officials group negotiations sub-group meeting, which is just there for our information. Are Members happy to note those two papers?

Yes.

That's great. In that case, that draws our meeting today to an end.