Procurement experts promise to save millions
Start-Up Nation: Keelvar Systems:UCC start-up adds a new layer to procurement to produce significant savings
“We’re saying to central government in Ireland that we can save them up to €250 million per annum.” For a company that’s barely three years old, there’s no shortage of confidence in Keelvar Systems’ Cork offices.
Run by former member of the UCC-backed 4C (Cork Constraint Computation Centre) group, Alan Holland, alongside non-executive director Kieran Moynihan, and vice president for engineering Conor Mooney, Keelvar claims it can make these savings through building a new layer into procurement procedures.
The algorithms and artificial intelligence which form the basis of the company’s IP take information relating to a public tender and break down the procurement process into numerous parts in order to gain the best value-for-money offering.
Recent clients include the Department of Foreign Affairs, which brought in Keelvar to manage an international courier services tender for delivery of diplomatic documents. Where once such a deal might have led to one fat contract for a single courier group, instead it was divided into minute details of geography, cost and delivery time to gain the best deal on offer, combining several bidders.
Holland says that since the company started trading in 2010 – following years of research into economic mechanisms “and how to cut out waste from the system” – they realised they had created a money-saving alternative to the standard auction process.
“After I finished my PhD, we went to Cork City Council’s head of procurement and said we can help you conduct your business more efficiently, says Holland, adding that Cork city recently used Keelvar’s software for its vehicle fleet tender.
The method – which goes under the name of Sourcing Optimiser – is based on gathering more information from suppliers than ever before.
“Bidders for a government contract, for example, would normally have a word document for the tender that describes what they’re going to supply and how they’ll supply it. Then they’d also have an Excel spreadsheet with their prices,” explains Holland.
“We remove that Excel spreadsheet from the process and now bidders go online to our website to prepare their financial proposals through our software.”
The main downfall with the old-fashioned approach, he says, is that when using the spreadsheet method suppliers had to bid on different lots within the contract independently, whereas their true cost for servicing multiple lots would actually depend upon “what combination of contracts” they would eventually be awarded.
“So we basically structure the capture of pricing information using our software to elicit more flexible bid information,” says Holland. They use, as he puts it, “heavy-duty computing power” in order to work out what’s the best way to partition out each tender among the interested suppliers to get the best overall result.
While the company is not at liberty to divulge much of its client base, interested parties have come from across Europe – both from regional and central Governments, as well as the private sector.
Holland is also keen to mention that this new element in procurement can help out suppliers as well. Previously, he says, they may have had to take on loss-making elements of a tender in order to gain the entire contract, but Keelvar’s software should help avoid such situations occurring again.
“That’s the thing, plus you can keep SMEs in the process and if they’re better than the big guys in niche areas of demand – be it servicing far-flung regional locations or niche aspects of the products you’re buying – then they can still compete,” says Holland. “Everyone can play to their own strengths and then you have a level playing field.”
Last October, the company announced it had secured €750,000 in funding from a combination of ACT Venture Capital, Enterprise Equity and Enterprise Ireland.
Now with eight full-time employees working alongside two part-time workers and “about a half dozen consultants”, the company plans to target more public sector work during the rest 2013 as “they actually want to show how they’ve saved money” as opposed to commercial clients who often “don’t want to reveal how they’ve gained an advantage”.
“There’s a spend per annum in the order of €12 billion in Ireland on procurement,” notes the former UCC-man, adding that while some of this is “not addressable” such as the State’s drug bills because “they have their own mechanism”, he estimates that the average saving per procurement process from using Keelvar’s software would be four per cent.