MIDDLESBROUGH COUNCIL

Report Title: Collaborative Procurement – Regional Governance Arrangement

Deputy Mayor / Executive Member for Finance and Governance

Chief Executive: Mike Robinson

Date: 23 June 2014

PURPOSE OF THE REPORT

  1. To provide an update on progress in respect of Regional Collaborative Procurement Transformation and specifically the changes to governance, finance and staffing.
  1. This report deals with each of these issues and seeks endorsement for the way forward.
SUMMARY OF RECOMMENDATIONS
  1. Approve the actions and next steps as detail in this report including paragraphs 37 and 38; and
  1. Note and endorse the work that has been undertaken to ensure the finance and performance arrangements are appropriate, transparent and sustainable.

IF THIS IS A KEY DECISION WHICH KEY DECISION TEST APPLIES?

It is over the financial threshold (£150,000)
It has a significant impact on 2 or more wards
Non Key / X

DECISION IMPLEMENTATION DEADLINE

  1. For the purposes of the scrutiny call in procedure this report is

Non-urgent
Urgent report / X

This report is urgent as the new arrangements are to come into effect from the 1st July 2014.

Functions and objectives

  1. The overall functions and objectives of the NEPO Collaborative Procurement Service have been revised in light of the Review undertaken last year and subsequent discussions with all authorities. They have been discussed and agreed by the Joint Committee Executive as follows,
  • ensure that the region’s views and needs are represented, in order to provide a regional voice in the development of national level policy or procurements;
  • secure a rate of return or commission on spend by the region;
  • manage regional mini-competitions against national frameworks where authorities agree that the category lends itself to aggregated demand;
  • procure regional frameworks and contracts through a category management based process;
  • implement frameworks or contracts in the region where this is agreed to be necessary because of the complexity, risk or novelty of the solution;
  • contract manage regional frameworks and contracts, where necessary, to manage supplier performance as distinct from local call off and management;
  • provide support services for the operation, use and development of collaborative procurement across the region;
  • support services for the implementation, development and use of the Strategic Analysis System or other tools which help identify spend and priorities for action;
  • work with Stakeholders from the Business sector and with Local Authority business development and procurement teams to provide strategic regional co-ordination and development of relevant procurement training/support for local suppliers;
  • provide a regional voice to ensure inclusion of procurement activities in Strategic Economic Plans so that future funding opportunities are available within the region and sub regions; and
  • devise, implement and refresh a performance management framework to ensure collaborative procurement is transparent, well managed and effective for all parties.
  1. These objectives will be delivered within a culture of collaboration, innovation and with pace to secure the desired outcomes for authorities and generate a positive effect for local, sub-regional and regional communities, economies and suppliers. This will be rooted in good understanding of individual parties and local/sub-regional communities in order to promote economic growth. The intention is to be a Centre of Excellence for all collaborative procurement activity. NEPO will work closely with colleagues across authorities to create buy-in to proposals rather than mandating or requiring formal opt-outs. The options for procuring through other agents such as YPO, ESPO or CCS will continue.
  1. In a similar vein, and as a consequence of the Review clarifying what needs to happen, it has become clear that local authorities focus needs to be on:
  • undertaking local contract management as and when required;
  • acting as regional lead or ‘spokes’ in particular categories (as agreed);
  • resourcing local procurement solutions ,removing duplication of resources where there are suitable national and regional solutions in place;
  • resourcing and delivering lead authority or spoke roles for agreed categories and projects, supporting the collection and redistribution or resources where appropriate;
  • undertaking local call-off against regional or national frameworks and contracts as appropriate;
  • providing input on requirements and forecasts of demand for regional and national procurements – including providing procurement and service experts to support elements of the procurement process;
  • suggesting new collaborative procurements where appropriate;
  • implementing agreed regional and national procurements to maximise benefits; and
  • feeding into the performance management arrangements for collaborative effort to ensure accountability and transparency.

Governance

Summary

  1. It has previously been agreed in principle by the NEPO Member Authorities that the Joint Committee shall be dis-established and new governance and delivery arrangements for the collaborative procurement service (of which the NEPO brand and function is a critical element) be established under ANEC/ ANEC Ltd.
  1. All authorities are currently being asked formally to terminate the Joint Committee arrangement and, through ANEC, agree a new arrangement under the Leaders and Elected Mayors Group (as ANEC’s Member Management Board), with strategic direction and advice made through a proposed member-led Collaborative Procurement Sub-Committee. This Sub-Committee will be advised, as agreed, by two Director of Resources on behalf of the Directors of Resources Group – one taking a Lead role, the being an ‘alternate’. Under the new arrangement issues can be referred to this Group if necessary. The nominations to start this arrangement are Don McLure, Director of Resources at Durham and Julie Danks, Director of Resources at Stockton.
  1. Local Authorities would appoint one member to the Sub-Committee and whilst it would be a matter for each local authority to determine who it appointed, Members with responsibility for collaborative procurement and/or economic development would be encouraged. In this way there is an expectation that the role that procurement can play in delivering value for money and generating economic growth can be enhanced.
  1. In summary the new Member arrangements will be:

Leaders and Elected Mayors Group:

  • overarching responsibility for the North East Collaborative Procurement activity and service;
  • on the recommendation of the Collaborative Procurement Sub-Committee, approval of the Annual Business Plan, Annual report and work programme including agreeing a budget and Strategic priorities;
  • receipt of regular (six monthly) updates from the Collaborative Procurement Sub-Committee; and
  • receipt of reports on other relevant issues where necessary, for decision.

This Group is supported by the Regional Chief Executives Group.

Collaborative Procurement Sub-Committee

  • develop an annual business plan and work programme for NE Collaborative Procurement activity including NEPO, and to prepare and agree an annual report, for approval by the Leaders and Elected Mayors Group;
  • monitor and scrutinise the service and its budget;
  • monitor the range and effectiveness of collaborative activity being undertaken undertaking scrutiny activity as required;
  • provide the Leaders and Elected Mayors Group with assurance on all aspects of internal controls and risk management;
  • keep under review appropriate strategic plans, a regional procurement strategy/workplan and an appropriate performance management framework;
  • ensure that there are appropriate and effective arrangements for stakeholder engagement in the NEPO service; and
  • ensure appropriate protocols and procedures are in place to secure the effective operation of the service and collaborative procurement across the North East.

This Group is supported by the Regional Directors of Resources.

More detail is attached at Appendix E

  1. A draft governance structure (which includes the officer advisory arrangements – see 11 below) is attached as Appendix A.
  1. The Regional Chief Executives Group will have a key role in advising Leaders and Elected Mayors on key strategic issues relating to NE collaborative procurement, underpinned and supported by the advice and work of the Directors of Resources Group. Collaboration North East will assist in supporting the activity and will, as part of the new way forward, have a work programme which will form part of the new framework.
  1. Further work has been taken forward with Gateshead Council regarding the legal arrangements required taking into account the proposals set out above and the implications of being part of ANEC’s company structure; these arrangements will be comprised in a new Collaborative Procurement Services Agreement currently being negotiated and which will be entered into by ANEC Ltd and the Member Authorities
  1. As part of the changes work has started on looking at how best to involve stakeholders. Work is being undertaken to review the role and remit of the Stakeholder Board. This will include looking at how stakeholders from the business community can best be engaged to generate success for procurement and local suppliers. Contact has been made with the LEPs to see where there might be areas of common interest and opportunities to collaborate.

Staffing

  1. Following completion of the staffing review and implementation of a new structure, staff will transfer to ANEC Ltd in accordance with TUPE regulations and all existing assets and contracts. The intention is for a new structure and governance to come into effect on 1 July 2014 and for staff to transfer under TUPE to ANEC Ltd on 1 August 2014.
  1. In terms of capacity and capability, it was clear from the Review that there are opportunities to downsize the organisation so that it can concentrate on what it does well. A structure has been devised by assessing the purpose, functionality and effectiveness of NEPO to ensure it is fit for purpose and sustainable. The new structure is also intended to deliver a cultural approach which maximises collaboration across the North East and encourages other organisations to buy into the NEPO offer, so that the financial benefits to each authority and the broader economy are maximised.
  1. The structure proposal was approved by the Joint Committee Executive Sub-Committee on 9th April following consideration of a Report setting out detailed staffing proposals intended to be subject to formal Trade Union and staff consultations; that decision was taken in accordance with clause 7.2.7 of the Joint Committee’s Constitution and for the reasons set out in para 14 of that Report, primarily to avoid the adverse impacts that might have arisen had these processes been delayed.
  1. These consultations were concluded on 15th May, 2014 and have led to a small number of minor changes to job descriptions but no significant changes were made to the overall structure as a result of consultation on the proposals.
  1. The structure has been devised to provide capacity in the areas where consultation indicated there was a clear need for NEPO support. It recognises that some local authorities will lead on particular activities, where the authority has the capacity and capability to lead on behalf of the region. The detail of this is dealt with in the next section under Hub and Spoke.
  1. The design of the structure is intended to remove single points of reliance in the current structure. It is also intended to ensure there is sufficient leadership and technical expertise, whilst becoming part of the ANEC family, and providing value for money to all authorities. It also provides sufficient capacity to ensure resources are used productively and deployed as business requires, recognising that there are usually peaks and troughs in workloads (particularly in relation to particular categories/ contracts).
  1. The structure has also been designed to be as ‘flat’ as possible whilst providing some opportunity for career progression. Activities have been grouped together to provide reasonable capacity at all levels and ensure teams have a proportionate spread of activity and resource. The individual roles allow for staff to specialise/ lead on certain activities, without creating such specialism that leaves the organisation vulnerable if a key member of staff leaves or is absent for any length of time.
  1. As staff are currently employed by Gateshead Council the jobs have been evaluated using the Gateshead process but with an eye to the ANEC roles in order to avoid any need for reassessment immediately after transfer.
  1. There is no dedicated administrative capacity in the structure on the basis that staff will take responsibility for their own needs and that there is sufficient capacity within the existing ANEC structure to take on limited activities such as supporting the strategic governance arrangements.
  1. A Workplan and Performance Management Framework for all collaborative effort will be constructed to ensure everyone knows what activities are taking place and how they are performing. This will aid accountability and transparency and ensure that appropriate and timely decisions can be made about resource allocation and mitigate against underperformance. The intention is for this framework to work through from a Strategic level down to setting individual workplans and objectives. It will be a key document for Directors of Resources and the new Sub-Committee to assess how well the new arrangements are performing so that timely action can be taken as necessary.
  1. Provision needs to be made in the budget to ensure all staff are appropriately trained and developed on an on-going basis. This is especially important to protect the staff and the participating organisations from legal challenge.
  1. The existing structure has a total of 25 posts at a cost of £1,236,228. The proposed structure has a total of 18 posts at a maximum cost of £800,352, a reduction of over a third. In terms of specific changes this amounts to a reduction in costs as follows:

Leadership/ Management - -£164,409

Business Support/ Administration - -£45,401

Systems Support - £17,521

Other changes - £208, 545

  1. It is intended to populate the majority of the new structure through a mixture of ring-fencing and slotting in arrangements during late May/June. Any posts that are not appointed to following the ring-fencing process will be subject to external appointment. Any employees who do not secure posts in the new structure will be covered by Gateshead Council’s redeployment and redundancy processes.
  1. The new structure is attached at Appendix B together with the existing Structure.

Hub and Spoke

  1. As part of the review a piece of work was undertaken to identify which areas should be procured locally and which should be procured regionally to maximise the resource within the region in relation to local authority procurement teams and NEPO. The breakdown of responsibility was agreed which meant that NEPO would lead on their existing portfolio of contracts plus a couple of new opportunities where this had widespread support. This left a number of key activities which needed a local authority to take on responsibility for leading these activities on behalf of the Region, thus creating a ‘Hub’ (NEPO) and ‘Spoke’ model (Local Authority X).
  1. A group comprised of Directors of Resources and Procurement leads met to identify leads for spoke-led activities and the protocols to guide this work. Agreement was reached on activities and the guiding principles. Further work is underway to look at use of the e-tendering system to ascertain the optimum solution, as well as to agree a set of protocols around spoke-led procurements and contract management. The intention is to create the right climate for collaboration based on local needs and to make better use of expertise across the Region.

Future Financial Arrangements for NEPO

  1. As part of the NEPO transformation consideration has been given to the future financial arrangements for the ‘transformed’ NEPO. In doing so a number of issues have been taken into account:
  • the NEPO Review highlighted one factor in eroding the trust necessary for effective regional collaboration between NEPO and the 12 North East authorities was a lack of transparency about NEPO finances, costs, and the use and payment of rebates;
  • members gave a clear steer that they wanted a detailed understanding of financial arrangements and proposals for the transformed NEPO;
  • NEPO is to be vested in ANEC, specifically in ANEC Ltd. At the moment financial transactions are reported as a small, private sector company, using the approved form of accounts required by Companies House. These are audited annually. ANEC’s current size and remit mean that this financial reporting is fit for purpose, but in vesting NEPO into ANEC, it has been necessary to reflect on what, if any, impact NEPO and its role and finances will have on ANEC’; and
  • NEPO currently enjoys the support and security of a financial arrangement with Gateshead MBC using a Service Level Agreement.
  1. Going forward it is intended to create a separate financial identify for NEPO within Gateshead’s accounting system with NEPO not having a separate bank account and its cash still being administered within the overall cash balances of the Council. This will provide NEPO with a separate financial identity, but with a familiar and known set of financial arrangements. There are transition costs for NEPO and Gateshead in creating a new and distinct client. Gateshead MBC have experience of this, as they did a similar process in creating the Gateshead Housing Company (ALMO). Whilst the ALMO already had its own income bank account, it continued to pay its expenditure from the Council’s main bank account, and its transactions are reflected within the Gateshead MBC Ledger system.
  1. In terms of the Financial model, work has been undertaken by a Sub-Group of Directors of Resources to assess how best to fund NEPO and collaborative procurement going forward. This is a complex piece of work but a number of options have been looked at to assess which is the best way to ensure NEPO is viable but also that funds are used transparently and appropriately. The Directors of Resources have unanimously agreed a way forward and this is based on a 50/50 split between equal share and population size. Appendix D sets out the costs per authority in 2014/15. The Directors of Resources will keep this arrangement under review to ensure it is fair, transparent and facilitates collaborative effort.

Next steps