Agenda item

The Director of Finance and Transformation submitted a report, the purpose of which was to provide a summary of the Council’s procurement activity over the last financial year, including compliance with Contract Procedure Rules, practice changes and contracts awards.

The Specialist Commissioning and Procurement Manager highlighted the following:

·        The financial thresholds worked to were set by the government.  These had increased following a bi-annual uplift in January 2024; the light touch regime threshold had and would not increase.  In relation to Brexit arrangements, contract values were required to be inclusive of VAT.

·        From 1 April 2023 to 31 March 2024, the Procurement and Commissioning Team had been involved and supported service areas with 325 procurement activities, which had equated to approximately £29,028,719 worth of contracts being awarded in the year.  It was noted that the £29m was not the annual contract spend in the financial year, it was the total contract value of all contracts awarded in that period.  This activity was broken down into the procurement routes as follows:

o   76 – Quotations;

o   10 – Tenders;

o   79 – Exemptions;

o   60 – Dynamic Purchasing System (DPS) further competitions;

o   98 – Direct Awards/Further Competitions via Framework Agreements; and

o   2 – Provider Selection Regime (PSR).

• The new Procurement Act 2023 was due to go live at the end of October 2024, but was then delayed until 24 February 2025.  The new act would bring significant change which officers were now preparing for and had been involved in a range of training and workshops that the Government had been holding.
• With regards to the North East Purchasing Organisation (NEPO), Middlesbrough Council paid a small member fee of £46,000 annually.  However, in return, the Council received a rebate of approximately £140,000 per annum due to the flexible procurement solutions available through membership of the organisation.
• In 2023/24, about 25% of the Council’s procurements utilised a NEPO framework.  Without this investment, the Council would require additional resource in the procurement team to meet the demands of the procurement activity of the Local Authority.  Middlesbrough Council had annual conversations with NEPO to review the available frameworks and discuss opportunities for future commissioning plans.
• OPEN was the Council’s new tendering portal and had gone live in October 2024.  It was developed and fully maintained directly by the NEPO team.  The new portal had been in development for a considerable period and the benefits of the system would develop as the system matured, and officers worked to understand how it could best meet the Council’s needs.  The first quotation had been published via the system and, in next year’s report, the Committee would receive more detail on how the system was working and had developed over time.
• NEPO continued to work on the North East Environmental, Social and Governance (ESG) model which was being developed and would deliver the North East’s priorities.  Over the course of the next year, Middlesbrough’s social value would be developed.
• With regards to purchasing cards, it was explained that since the last report, a number of actions had taken place that had seen a significant move away from their usage.  These had included a full Directorate review of all purchasing card holders, which had identified which staff should continue to hold a card; those where cards should be cancelled; and identified new cardholders.  The Purchasing Card Policy had been updated and data dashboards rolled out to all Directors and Heads of Service.
• Regarding a Supplier Incentive Programme (SIP), this was the Council’s early payment programme that gave suppliers the opportunity to be paid earlier than standard practice. 
• The SIP gave suppliers the option to be paid as soon as the invoice was authorised.  The aim was to complete this within 10 days - the normal payment term was 30 days.  Suppliers paid a small pre-agreed rebate which was applied as the invoice was paid. The rebate was proportionate to the number of days the authority accelerated the payment by and was only applied if the invoice was paid earlier than 30 days. 
• The SIP programme had been operational since May 2022, with savings of over £40,000 up to 31 March 2023 being achieved.  As part of SIP, the Council had Free Pay, which allowed the Council to identify and pay early, without rebate, local suppliers who were classified as being a Small and Medium sized Enterprise (SME).  Appendix 2 showed a summary of Free Pay performance in the current year and showed how the Council had paid £6m within three working days, which was a proactive approach by the Council in supporting its local suppliers.

A Member referred to section 3.5 of the report, which focused on local spend data.  It was felt that because the 40% target had consistently been achieved, this could be raised to 50% to offer an increased challenge.  In response, the Specialist Commissioning and Procurement Manager indicated that the achieved 49%, 48%, 50% and 51% rates were excellent progress as, previously, performance had sat between circa. 35-43%.  The Member wished to encourage an increased target to achieve greater expenditure within the Tees Valley.

A Member referred to unclaimed VAT and queried work taking place in this regard.  In response, it was explained that work was currently underway with the VAT officer and service areas to set required categories and spends.  A Member queried whether documentation/ receipts with VAT details would assist officers.  In response, it was explained that suppliers registered with banks as level 1, level 2 or level 3.  Suppliers at levels 2 and 3 did not always require receipts, but for good practice this was encouraged.  In terms of level 1 suppliers, it was the Council’s responsibility to claim valid VAT receipts.

A Member referred to section 3.3.2 of the report, which indicated that the number of active purchase cards had reduced.  There were currently 194 active cards: of those, 179 were for Council staff and 15 were for maintained School staff.  It was queried whether these numbers were still accurate.  In response, the Committee was advised that, at one stage, there were between 400-500 active cards, which demonstrated the reduction in their usage.  The Specialist Commissioning and Procurement Manager advised that these figures, i.e. the current number of active purchase cards and how much this figure had reduced over time, would be checked.

A Member referred to section 3.5.3 of the report and queried whether there were any up to date figures available, as those detailed in the report ended at March 2024.  In response, the Specialist Commissioning and Procurement Manager indicated that the current position for the last three quarters would be available.  Following a short discussion, Members felt it prudent to wait until figures for the full year were available and able to be presented at a future meeting.

A Member referred to fraudulent activity and queried the processes involved in instances where this was suspected.  In response, Members were advised that where fraudulent spend was suspected, an investigation would be undertaken and reported to internal audit and the Director of Legal and Governance Services.  If anything was found to have occurred, disciplinary action would be taken.  Suspected fraud could be identified in several ways, including: transactions that card holder(s) did not recognise; whistleblowing; or if a transaction was felt to be illegitimate.

A Member referred to the scrutiny of receipts and queried how this was undertaken.  In response, the Committee was informed that the dashboard could be searched and receipts analysed.  Officers constantly reviewed card usage.  It was noted that the Council’s Purchasing Card Policy was currently being updated to provide clearer guidance to those with cards and ensure that they were being used correctly.

The Chair thanked the officer for her attendance and contribution to the meeting.

AGREED that:

1.     The current number of active purchase cards, and how much this figure had reduced over time, would be checked.

2.     The information, as presented, was noted.