Cabinet
Agenda Item 101
Subject: Corporate Systems
Improvement
Date
of meeting: 14 November 2024
Report of: Cabinet
member for Adult Social Care, Public Health & Service Transformation
Contact Officer: Head
of Welfare, Revenues & Business Support
Email:
Graham Bourne@brighton-hove.gov.uk
Ward(s)
affected: (All Wards);
Key
Decision: Yes
Reason Key: Expenditure which is,
or the making of savings which are, significant having regard to the
expenditure of the City Council’s budget, namely above £1,000,000.
For general release
1
Purpose of Report
1.1
This report covers a new vision and approach to improve the council’s
core HR/Payroll, Financial and Purchasing systems and associated applications.
These systems support the Council Plan priority to be a responsive and well-run
council.
1.2
The report covers the substantial one-off capital investment required to
develop, design and install new processes, applications and technologies to
make the systems more efficient to maintain and use, and to improve data
quality and accessibility to improve decision-making.
1.3
It also covers the re-procurement of the HR/Payroll system which is
nearing the end of its current contract period. The Financial and Purchasing systems
are still within contract.
2
Recommendations
That Cabinet:
2.1
Agree the Outline Business Case for the Phase One capital investment
requirement of £2.75 million from borrowing with a loan period of 10 years.
2.2
Agree the re-procurement of the HR/Payroll and Finance/Purchasing systems
and associated modules for a maximum period of up to 5 years, including
extensions, and delegate authority to the Corporate Director Corporate Services
(or a successor role) to take all steps necessary to secure best value and award
the contracts.
2.3
Agree to delegate authority to the Corporate Director Corporate Services
(or a successor role) to procure other intermediary products, applications and
licences during Phase One to support the improvement programme.
2.4
Note the expected requirement for further capital investment of £4m to
£6m (at current prices) for Phase Two to fully realise the vision and that a
further business case will be submitted to Cabinet for this phase of the programme.
3
Context and background information
3.1
This report sets out a proposed change of approach to the development of
the council’s corporate HR, Payroll and Finance systems and the many associated
systems within scope, such as Purchasing and Recruitment systems.
3.2
Implementing changes to major corporate systems involves both capital
and revenue considerations. The development and redesign of hundreds of
processes and the installation of these in new or current systems is a major
undertaking involving many staff, technicians, business analysts and IT specialist
support. This will almost always require substantial one-off capital investment
for at least two years. The other aspect is the ongoing annual licence costs of
the systems and associated applications.
3.3
The report therefore covers two key aspects. First, it seeks approval to
re-procure the HR/Payroll system for which the current contract is due to
expire in March 2025. Second, it seeks to secure capital investment for a major
change programme that will improve the quality and efficiency of our systems by
improving our data, automating many business processes, and ensuring the
systems are easier to use and maintain.
3.4
The current systems, although regularly updated, have been in place for
a long period of time and a review was undertaken to consider where
improvements were needed and what options may be available to meet the
council’s information and service needs for the future. The review was
considered by the former Policy & Resources Committee in July 2022 and the
recommendation, at the time, was to aim for a highly integrated solution known
as an Enterprise Resource Planning (ERP) system with a capital programme
envelope of around £8 million. This estimated cost subsequently increased
considerably to over £10 million following a period of high inflation.
3.5
During this period, there were many changes in the marketplace, not
least the rapid emergence of AI and integration technologies, but also
considerable changes (increases) in the cost envelope for different solutions,
particularly cloud-based (SAAS) ERP solutions. Given these and other escalating
risks, a re-evaluation commenced at the end of 2023 and a further review of
options was explored to check the efficacy and alignment of the original
approach to the council’s evolving digital and technology strategies.
3.6
A revised approach has been developed that reflects the important
learning from the process of developing and market-testing the specification
for an ERP system, including key lessons learned from around the country and in
particular from three neighbouring Sussex and Surrey county councils who have
all recently experienced serious cost over-runs and implementation challenges
when installing ERP systems.
3.7
As noted above, in recent years the marketplace has changed
significantly and different products such as AI engines, PowerApps, integration
technologies (APIs) and other intermediary products have emerged, and their
capabilities are rapidly improving. All of these products have the ability to complement
our existing corporate systems to achieve similar benefits to an ERP system but
at potentially lower overall cost and without the need to commit (‘lock in’) to
a single product for a very long period of years. In addition, the council is
evolving its wider digital, data and technology (DDaT) strategy to be more
responsive and innovative as these technologies begin to prove themselves.
3.8
The proposed approach below is considered to represent the council’s
best opportunity to safely manage and de-risk systems improvement, enable
responsive and well-run corporate services to support the Council Plan, and
provide the platforms to take advantage of emerging technologies.
4
Corporate Systems Improvement Programme
4.1
The corporate HR/Payroll, Finance, Purchasing and related systems,
including procurement, banking, recruitment, income management and on-line
payments, link to (interface) and receive data from many other systems and
processes across the council including major Housing, Social Care and Revenues
& Benefits systems. They are critical to the effective functioning of the
council and can therefore affect its reputation with residents, customers,
partners, and government departments and agencies such as HMRC.
4.2
These business systems are primarily used internally rather than by
residents, but they are critical to the council’s reputation as they are used
to pay suppliers, purchase goods and services, pay staff, invoice people and
businesses for fees & charges, produce the Authority’s financial
statements, monitor budgets, recruit staff, manage absence and many, many other
critical business processes.
4.3
Making changes to these systems therefore requires careful consideration
but, like all systems, they should be kept under review to determine if
improvements are possible. In particular, it is important to take learning from
the way systems have been installed or are used in other authorities and to seek
to achieve better alignment with the council’s development of other
capabilities including Microsoft PowerBI reporting, digital forms (Mendix), AI
and robotics (RPA/AI), and integration technologies (e.g. Boomi). This has
resulted in a new vision and approach for developing our corporate systems as
set out in Appendix 1.
4.4
In summary, the approach is to use separate systems that are fit for
purpose (‘best of breed’) but to use them (re-install them) in the way they
were designed to be used (‘adopt not adapt’) rather than tailoring them for
unnecessarily complex and superfluous local requirements. The data will be
cleansed and new technologies and modules will be used to link data across the
systems, automate as many processes as possible, improve the ease of use of the
systems and make reporting and decision-making quicker.
5
Implementing the Vision and Improvement Programme
5.1
Implementation of the improvement programme will be a significant project
involving many steps, including procurement or re-procurement of systems and
modules and their installation or re-installation.
Phase One – Fundamental interventions for a strong foundation
[Capital investment requirement: £2.75 million]
Activities and capital costs are expected to
include:
i)
Re-procuring
time-aligned cloud service contracts for the current core HR/Payroll and
Finance/Purchasing systems, initially for a time limited period of up to 5 years.
ii)
Undertaking
a major project to cleanse, archive and restructure HR, Finance, and
Procurement data, some of which has been unarchived since 1996.
iii)
Undertaking
detailed analysis to identify key barriers to system efficiency to identify
priority areas for improvement.
iv)
Removing
unsupported interfaces and processes that have built up over time and are
adding to maintenance costs and system recovery risks.
v)
Implementing
new modules and services.
vi)
Costs
will include considerable internal staff backfill, business analysts, systems
technicians and specialist IT contractors.
Phase Two – Building for the future and
transforming how we work
[Capital investment requirement: £4 to £6 million]
Activities and capital costs are expected to
include:
i)
Developing
and deploying emerging technologies and AI, learning from implementations and
successes achieved across the sector;
ii)
Putting
in place a Digital and AI skills development programme to ‘upskill’ the
organisation over the programme period to maximise the use of new technologies
and emerging capabilities, particularly around the use of dashboards and AI
reporting capabilities;
iii)
Development
of priority web-forms, automated processing (EDM) capabilities, and digital
services to improve self-service capabilities and achieve a step change in the
efficiency / automation of processes;
iv)
Extending
licences and implementing additional system modules, PowerApps and Microsoft
Tools (e.g. PowerBI, Co-pilot) to improve data reporting (building dashboards)
and manipulation.
v)
Costs
will include staffing and IT specialist support as in Phase One but will also
include a considerable increase in these resources to implement the
technologies required to link data across the systems and create an open data
structure that AI can utilise to gather information and create reports.
5.2
Phase One (Foundation) is expected to require capital investment of a
minimum of £2.75m and would run from early 2025 and conclude by 31 March 2027.
Phase One foundation-level investment is considered critical, as not
undertaking this work will leave the council with increasingly poorly
maintained data, an inability to identify where developments and new technologies
could have most impact, and therefore increasingly inefficient and under-used
systems providing poor value for money. In addition, if migration to an
alternative system or solution in future (e.g. an ERP system) is ultimately
desired, this would be increasingly costly and high risk.
5.3
Additional investment and time will be needed for Phase Two to achieve
the full vision of robust, open data systems that are digitally and AI enabled.
This is not readily quantifiable at this stage and will be determined by the
improvements, developments and acquisitions identified and proposed as part of
the Phase One programme. However, further investment in the range £4m to £6m is
likely to be required to fully realise the vision and provide high levels of
data integration, fully enabled and highly automated digital and AI processes,
and accessible (‘open’) and standardised data and reporting. This would put the
overall financial envelope for Phase One and Two in the range £6.75m to £8.75m.
This may seem significant but is considered to be a significantly lower cost
alternative, particularly compared to ERP systems or other supplier
collaborations, that can still achieve good outcomes.
Contract Renewals
5.4
Phase One includes the re-procurement of time-aligned cloud-based
systems contracts for our HR/Payroll and Finance/Purchasing systems. However, the
most pressing contractual consideration is that of the HR/Payroll system,
MidlandHR (MHR) iTrent, which is due to expire on 31 March 2025. This system is
very widely used across the country (hundreds of installations) in mid-sized to
large private and public sector organisations and is considered to be a leading
HR/Payroll product. Its wide userbase and success indicates that it is
effective and competitively priced.
5.5
MHR iTrent therefore fits well with the new vision and approach and the
company’s strong userbase means it is expected to be able to adapt to and
invest in the changing technology environment as the company continues to develop
the product. However, even were this not the case, a new contract for this
system would need to be secured to ensure continuity of service as a replacement
system would take up to 2 years or more to implement. However, as the MHR
product is considered a leading product for local authorities, subject to
competitive pricing, a longer contract period could be appropriate and should
be more attractive to the supplier. It is therefore recommended that the council
seeks to secure best value through re-procurement of a new contract with MHR
using a compliant government framework and procurement route. A key
aspect of the contract renewal will be the inclusion of flexibility to on-board
new functionality and modules later in Phase One or Two.
5.6
Similarly, the Finance/Purchasing system contract will expire in March
2026 and re-procurement of this system will be necessary during 2025. This
should be time-aligned with the contract period for the HR/Payroll system if
possible.
6
Benefits Realisation (Business Case)
·
Values for re-procured contracts, which can only be estimated
based on current market information;
·
Similarly, licence costs for new modules or extending the user
base of AI and PowerApps will need to be updated following procurements;
·
Data Sizing and scoping work is required to fully understand the resources
required to cleanse and restructure data across a whole range of systems;
·
The balance of resourcing between internal and external (more
costly) resources is dependent on the availability of skills in-house and the
ability to release capacity without impacting current business-as-usual
services;
·
A more detailed analysis of where savings and efficiencies will
fall and the scope for cashable savings. Current assumptions are based on
industry standard efficiency assumptions relative to the scale of investment
planned.
6.2
The foundation-level investment is significant but should enable the
cashable benefits set out in Appendix 2 to be achieved. As a minimum, these are
broadly expected to match the Phase One financial commitment (i.e. loan
repayments) over the period of the loan (10 years). Further cashable benefits
will be possible in Phase Two but these will need to be identified and
quantified through the discovery and foundation work to be undertaken in Phase
One. The cashable benefits for Phase One are based on industry standard
assumptions for achievable efficiencies across support functions, business
support and administrative roles, and management roles (tasks).
7.1
The re-evaluation identified other potential options for future
development or replacement of the council’s corporate systems. While all
options below, except ‘Do Nothing’, can demonstrate potential benefits, they
were dismissed for a wide range of reasons of which the most important are summarised
below:
Do nothing (“Keep the Lights On”)
– commit to our current suppliers through renewed ‘as-is’ contracts and make
only minimal necessary investments to maintain our current technology
landscape, user experience, processes, and policies.
·
Advantages – none identified
·
Disadvantages – data quality, processing and services
would become increasingly outmoded, inefficient and expensive to maintain.
Costs would increase as more fixes and/or workarounds would need to be deployed
as is increasingly the case. The move to a new system or approach at a later
point in future would become exponentially more expensive with time as poorly
maintained data and continued modifications (workarounds) would make for a
complex and lengthy migration.
Aim for an ERP System replacement by
2028 – go back to the market for an ERP system and implementation but
extend the timelines, with a staggered rollout of new technology due to finish
in 2028.
·
Advantages – ERP’s provide high levels of data integration
with all functionality and modules being within the one common system
environment. Modern ERP’s are aesthetically pleasing and have common user
screens and interfaces. They are cloud-based and regularly updated.
·
Disadvantages – ERP’s do not do everything well and
therefore cannot provide a ‘best of breed’ offer for all elements of the
system. For example, Payroll is known to be more challenging for many ERP
products. Costs are very substantial and although potential benefits are
potentially significant, the complexity of the installation means that ERP
installations are very high risk as seen in many, many examples across the
country. In particular, the financial risk does not fit well with this
authority’s financial resources or risk appetite. The major scale of investment
means necessarily ‘locking in’ to an ERP supplier for a minimum of 10 years,
potentially falling behind other technologies if the ERP supplier does not continue
to invest in development. This can often be the case as most ERP suppliers tend
to completely replace their products periodically (e.g. SAP, Oracle), which
does not allow an upgrade path.
Prioritised Investment – commit
to current suppliers through renewed contracts but make only small, considered
capital investments to achieve some improvements to the systems in priority
areas.
·
Advantages – minimal capital investment and resources
required. May provide some benefits and could address a few problematic areas.
·
Disadvantages – the narrow scope of the programme would
mean that any benefits are likely to be outweighed by other aspects of the
systems becoming increasingly obsolete and poorly maintained, leading to
greater longer term costs of either maintenance or migration to a new system.
7.2
Following consideration of the extensive analysis across different
criteria, and assessment of the financial viability of each option, an
approach based on re-procuring our current, separate HR/Payroll and
Finance/Purchasing systems but changing the way we install and use them, alongside
bringing in new modules and other emerging technologies and capabilities, was
considered to offer the best balance of benefits, risk and cost.
8
Community engagement and consultation
8.1
Senior officer stakeholders from Finance, HR, Payroll, Procurement, and
IT & Digital form the Programme Board and have been consulted during the re-evaluation
of options as has the Corporate Leadership Team (CLT). Subject matter experts (SMEs)
from in-scope corporate services were also engaged as part of the review.
9
Financial implications
9.1
The report recommends the investment of £2.750m for a programme to
improve and develop key Corporate Systems. The investment would be funded by
borrowing, at a repayment cost of £0.339m per year for a 10-year period.
9.2
The recommendation is considered to represent the best value option for
the authority within the changing technology environment and is expected to result
in a range of improvements across the organisation which are expected to realise
cashable savings of approximately £0.572m per annum by year four. These savings
can fund the capital financing costs and the expected increase in systems costs
(licences).
9.3
If approved, the financing costs of the programme will be added as a
commitment to the council’s Capital Financing budget and additional systems
costs will be added to future service budgets. The detailed savings will be
confirmed each year through the annual budget setting process to offset these
commitments, but the projected savings set out in Appendix 1 will be assumed within
the 4-year Medium Term Financial Plan.
9.4
Appendix 2 sets out the notes and assumptions built into the projected
Outline Business Case. In particular, it should be noted that all figures
(except current budgets, capital costs and capital financing) are illustrative
best estimates. Exact contract costs and prices will not be known until
re-procurements are completed. Similarly, potential savings and efficiencies
will also need to be identified and allocated in detail as the programme
progresses.
9.5
The cumulative net cashflow of the Outline Business Case indicates that
the council may need to internally borrow up to a maximum of £401,800 (Year 3)
from overall cash reserves. However, this sum is relatively small and would not
present cashflow challenges.
Finance Officer Consulted: Haley
Woollard Date: 24/10/2024
10
Legal implications
10.1
The Council is required to comply with the Public Contract Regulations
2015 in relation to the procurement and award of contracts above the threshold
levels for services. Using a framework is a compliant route to market and it
may be possible to directly award a contract to a supplier under a suitable
framework agreement. Any procurement process commenced after 24th
February 2025 will be subject to the new rules under the Procurement Act 2023
and legal input will be required to ensure that the procurement procedure
complies with the new law.
10.2
The Council’s Contract Standing Orders will apply to any procurement
exercise.
Lawyer Consulted: Eleanor
Richards Date: 31 October 2024
11
Equalities implications
11.1
Discussions with all suppliers include consideration of the ability of
systems to utilise assistive technologies available within the council for people
with sight impairments.
12
Sustainability implications
12.1
Using cloud-based systems is expected to reduce carbon emissions as
these centrally hosted database installations can service many organisations
simultaneously on a reduced number of Servers. Similarly, archiving and
cleansing the data held in all systems will reduce data storage capacity
requirements (i.e. Servers) and reduce enquiry times (CPU processing), further
reducing carbon emissions.
13
Social Value and procurement implications
13.1
The procurement and re-procurement of systems and associated products
and licences will normally seek to secure Best Value through the use of
competitive public sector buying frameworks which suppliers will have been
through a tendering process to join. However, in some circumstances ‘Direct
Award’ can be more beneficial, particularly, if non-standard contract periods
are desired. The council will need to consider all options.
13.2
Social Value in IT systems and licences is challenging as this is a
highly competitive market and companies have to work at a national or even
global level to be competitive and to be able to afford the very substantial investment
in continuous product development. However, the companies themselves often
offer valuable apprenticeships and training programmes and many support
charitable objectives or organisations.
14
Health and Wellbeing Implications:
14.1
None specifically identified.
15.1
The overall technology landscape is changing very rapidly. Procurement
of and long-term commitment to a major new system or systems collaboration
carries high risk in this situation as it risks buying systems that could be
out of date before they are even fully implemented.
15.2
The report concludes that re-procuring current HR/Payroll and Finance/Purchasing
systems but with a new set of requirements and potential new modules, alongside
utilising emerging technologies and capabilities such as AI, is likely to be
lower risk and lower cost but should be equally, if not more, effective as it
will enable the authority to take up new capabilities and technologies as they
emerge and develop over the next few years.
Supporting
Documentation
Appendices
Appendix
1 – Vision and Approach for improving corporate systems
Appendix
2 – Outline Business Case (Financials)