NEPO – Successful Regional Procurement Collaboration Comes Of Age (Part 1)

It is quite a view from the NEPO office on the ground floor of the Newcastle Guildhall (under restoration at the moment – watch out for the scaffolding on your way in!). You look out of the window onto the underside of the iconic Tyne Bridge, and look in the other direction up the river to see two more famous bridges.

NEPO (the North East Procurement Organisation) goes way back to 1976, when five Tyne and Wear local authorities got together to start collaborating on procurement, focusing largely on schools, with exercise books being high on the initial list for a collaborative contract. In those days, NEPO held stock and delivered to customers.

Fast forward through various local government re-alignments, and NEPO gathered strength through the noughties under the stewardship of Gateshead Council, with Andrea Tickner and Ian Taylor important figures in its evolution. But a significant step was taken in 2014 when staff were transferred to be part of the Association of North-East Councils, which although as an organisation had limited scope provided a congenial home for NEPO, emphasising its independence from any single authority. That was also the signal for a refresh and a new strategy for the organisation – more on that shortly.

This was my history lesson during a recent visit to NEPO to meet Nicola Shelley (Associate Director) and Steven Sinclair (Head of Procurement). Member Authorities from across the North-east provide the funding and governance of the organisation. But North East based suppliers are also perceived as a key stakeholder group, while Associate Members include any public body from around the UK that wants to use NEPO contracts. Those associates must formally join in order to use NEPO’s contracts and services, but membership is free.

“Our overall goal is to use valuable resource to maximise delivery and meet new challenges”, as Shelley puts it. Austerity means that every council has to both work efficiently itself and maximise value from external spend, so organisations like NEPO save individual organisations duplicating effort, and can achieve better value from external suppliers and contracts. That comes from economies of scale but more critically (in our opinion anyway) by having deeper expertise than each council could ever develop itself in spend categories.

Now funding and governance always sound like boring topics, but we know from experience that they are critical success factors for collaborative organisations – and pretty much every public-sector collaborative procurement organisation in the UK seems to have a different way of working. But NEPO’s model does seem to work well.

The core costs are covered by the Member Authorities. 50% of that cost is split equally and the other 50% is split on a population-related basis. But in terms of governance there is one vote per authority. This means there is no pressure for anyone, even a Member Authority, to use a NEPO agreement if it is not the best route for an organisation. Core funding is secure.

This model also means that NEPO can charge fees to suppliers as they see fit. So in some categories, there are rebates at different percentage levels. “The construction industry would think we were weird if we didn’t charge something” says Sinclair. In others, like social care, there are no rebates.

Where there is a rebate, any earned on supply to the core members is passed directly back to that member, while rebates from spend with Associate Members is used for “invest to save” projects, such as their work with local suppliers – the NEPO Business Club.

The governance of NEPO seems at first sight a little complex but actually demonstrates how important it is to get all your key stakeholders aligned to make this sort of collaborative venture succeed. Collaboration North-east gets the top procurement leaders in each of the Member Authorities together to set direction, but also talk about operational issues, share views and knowledge across the community.

That group reports up to the regional Director of Resources group: “we have a strong profile on the agenda for those meetings, and these are key people for us. And they help us unlock work with other internal stakeholders – for instance, helping us to get the highways or social care communities supporting what we do and vice versa”, says Shelley.

There is also a Collaborative Procurement Sub-Committee with elected members, which meets three or four times a year and a stakeholder engagement group for external business people. “We see local suppliers as an extension of the family, and we want to be part of that community”.

(Stay tuned for part 2 tomorrow when we will have more on that supply side work of NEPO as well as insight into their approach to social value … and sausages!)

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