Procurement
Procurement policy
Our sustainable procurement policy, which was produced working with Forum for the Future, is for all NWL procurement activities and processes to be carried out in a consistent manner that is fair, open and transparent in line with our published code of conduct. This will facilitate fairness of treatment between suppliers and also ensure best practise, and ensure that a competitive edge is maintained within the procurement process.
It is our policy to see better environmental and social performance in our supply chain to ensure that all the products and services that we use have taken these issues into account. This translates differently for different contactors and suppliers, but is based on the following core principles:
• Best value (all procurement must be made on the basis of best value including environmental and social criteria and not simply the lowest price. All contracts entered into by the company are made on this basis. The focus is therefore on the needs of the contract, with concentration on an efficient, rather than lowest price, delivery).
• Competition based.
• Legal and Regulatory compliance.
• High standards.
• Ethical trading and respect for people’s quality of life.
• Good environmental performance.
• Performance improvement.
• Transparency and fair application.
NWL has adopted many of the good practices outlined in the British Water Guide to Sustainable Procurement. This includes the use of key performance indicators, risk management, incentives and whole life costing. The guide comments that ‘the use of third party vendor databases may reduce the workload of both the purchaser and supplier. We have taken account of this advice and during the implementation of the AMP4 contracts we have used the Achilles Utilities Vendor Database (UVDB) as a means of providing a single focus point for the collection of supplier prequalification information thereby reducing costs, time and administrative workload of both ourselves and suppliers. This also allows suppliers to demonstrate their capabilities through a single process. This process places a high emphasis on Safety, Health, Environment and Quality (SHEQ) and it has provided us with an opportunity to assess in detail suppliers capabilities through a single gateway that includes the use of an independent verifier and an on site visit. We are represented on the System Steering Committees.
All NWL procurement activities will be carried out in accordance with good ethical business practices that create a culture of respect in the way that NWL performs its business and treats its suppliers. In return we expect our suppliers to be clearly adding value to our business. Examples of where and how we expect suppliers to add value may include helping us to:
Use of Chemicals
• Eliminate use where possible.
• Recover and re-use (on site whenever possible).
• Reduce volumes.
• Ensure security of supply.
• Introduce innovative partnerships (resulting in alternative chemicals/methods with less risk).
Energy
• Reduce energy use.
• Promote renewable energy.
• Use energy more efficiently.
• Reduce carbon emissions.
• Use alternative fuels where possible.
• Minimise fuel used in transportation.
Waste
• Adhere to waste hierarchy: eliminate, reduce, re-use, re-cycle, dispose.
• Work with suppliers on packaging.
• Work with suppliers on reusable materials.
Contractors
• Ensure that our core principles are incorporated into the project design phase and that a genuine assessment of these criteria, including social and environmental factors is incorporated into the tender assessment process.
• Solutions for social and environmental challenges will be encouraged from contractors through the tender process and the duration of the contract.
• We will work towards whole life costing for our major capital expenditure projects.
Procurement action plan
• Ensure that all business partners are treated with fairness and transparency.
• Introduce risk matrices in key category areas such as chemicals, transport, waste and utilities. These matrices will identify, and group, actions under key headings that relate to our values.
• Build partnerships with suppliers to identify improvement opportunities and develop innovative solutions with benefits to all partners as well as to society and the environment.
• Focus on areas where we have a high impact on society or the environment: areas of high spend and products that involve a large amount of capital expenditure.
• On an ongoing basis, review the works, goods and services we procure to ensure that they reflect a real need and that specifications include social and environmental criteria early in the process.
• Assess our suppliers on the basis of social and environmental criteria, in addition to the financial ones.
• Ensure that all new suppliers are reviewed on their financial, health and safety, environmental and insurance records and performance.
• Seek to lead and support the local and economic development of the communities we serve and, to this end; we will use local suppliers where possible.
• Communicate our approach to our suppliers and engage with them on how improvement scan be achieved, working in partnership where appropriate.
• Review the policy annually to ensure that it is in accordance with the principles stated in our Sustainable Development Policy.
Procurement KPIs
• Where practicable to make payment within 30 days of receiving the invoice.
• 100% of our major suppliers to be screened for performance against financial, health and safety and environment factors.
• Use the Achilles Utilities Vendor Database as a means of standardising an integral area of our pre-qualification assessment. Use the ‘verify’ system to maintain an up to date measure of top supplier performance against the categories of financial, health and safety and environment.
• Use the balanced performance scorecard to measure performance and provide regular feedback for all major suppliers.
• To ensure that goods and services are procured from sustainable sources, contracts are awarded following a tender process which takes into consideration service, price and environmental performance analysis.
Procurement case study
Risk management
Risk management is a key area for the business. In order to identify risks and allocate suitable action plans, owners and timescales a risk matrix has been devised based on the core themes for the business which are Competitiveness, People, Reputation, Environment and Customers. Each identified risk is scored in order to understand the magnitude. Outputs of the risk matrix allow risks to be allocated to business owners such that the action plans are close to the 'business as usual' role of the owner. Examples of the action plans for Purchasing include:
• Achilles Verify – Health & Safety checks
• Analysis of Full costs
• Catastrophe management (Supplier)
• Commodity Indices
• Development of new suppliers
• Financial risk
• Improved Supplier Relationship
• Monitor Consumption
• Monitor supplier failure
• Security of supply
• Setting up/Development of key suppliers
• Terms and Conditions
Local Sourcing
The recent tender for our canteen services has resulted in the use of local produce e.g. meat sourced from local farms, thus reducing the required food miles!
Bottled water sold in our canteen services is our own brand 97 bottled tap water and all money from sales is donated to our adopted charity WaterAid.
Supplier performance measurement
During the course of 2006/2007, we have further enhanced our Supplier Performance Measurement System that has operated since the AMP3 period. The new system is used to measure and compare the performance of all our Strategic Suppliers across 18 key performance indicators in a common and consistent manner. This includes the assessment of supplier performance in the areas of environmental, corporate and social responsibility. Outputs from the system, including areas of strength and weakness (both individual suppliers and with the whole Supply Chain collectively), are then shared for incorporation into continuous improvement plans.
In addition to this, we have also established a Supply Chain Forum during the course of 2006/07. The Forum consists of procurement managers from NWL working with a core group of Procurement Managers from our Framework Contractors to look are areas of best practice and potential for better performance in the Supply Chain.
These two initiatives that we have started during the year, not only support the implementation of our Sustainable Procurement Policy, but are also wholly consistent with one of the key aims of the British Water Guise to improve trading relationships and performance in the Supply Chain in general.