Minutes:
The
Executive Member for Environment and Finance & Governance and the Director
of Finance submitted a report for the Executive’s consideration.
The
purpose of the report was to seek approval of the procurement and
implementation of a SIP for Middlesbrough Council.
As
part of a drive to improve commercialisation, an opportunity had been
identified which planned to allow the Council to continue to support the local
economy and suppliers but also create an income stream that was not currently
being achieved.
The
SIP offered the Council the ability to continue to support the local economy
and suppliers but also make a commercial return of approximately £150k per
annum over the next 5 years.
The
Council had been considering the implementation of the SIP programme for some
time and it was hoped that the solution would further enable electronic
receipt, matching and payment of supplier invoices thereby improving processes
and cash flow for all suppliers as well as providing the functionality for an
optional three way incentive programme to deliver even earlier payments (e.g.
even earlier than 20 days).
With
enhanced checks and controls in place as part of the SIP programme, it also
planned to reduce the risk of duplicate and fraudulent payments, which
presented a heightened risk in the current economic climate. The SIP planned to
enable thousands of invoices to be processed early, injecting millions of
pounds of liquidity into the economy, with the additional revenue generated
from the SIP Programme being channelled into frontline services for the benefit
of local residents.
The
SIP worked on the following principles:
·
e-invoicing;
·
supplier
payment terms were set at standard 30 days; and
·
no supplier was compelled to sign-up to, or
participate in, the programme.
A
description of the key objectives of the project were:
·
to
procure and implement a SIP to suppliers;
·
to
on board at least 40% of in-scope suppliers (3rd party Trade spend);
·
to
improve P2P processes to maximise invoice acceleration; and
·
to
improve cash flow for suppliers that could assist in recovery from COVID 19 and
generate additional funds that could be reinvested into frontline services (on
a free of charge basis for small local suppliers - “Freepay”)
OPTIONS
Implementing a SIP
internally had been considered, however, the cost associated would have been significantly
more than the cost of procuring it via the NEPO Framework.
Oxygen Finance were
working with over 30 other local authorities and had proven experience in
implementation and delivery that the Council could not duplicate without
significant additional resources.
Oxygen had over 10
years’ experience in running Early Payment Programmes and had developed a tried
and tested methodology. That included templates and a fully resourced team to
minimise the effort required by the Council.
The Oxygen solution was
VAT compliant and had been subject to legal guidance to ensure compliance to
various relating legislative requirements including the Construction Act.
ORDERED
1.
That the Council
reverting back to the Statutory payment term of 30
days be approved.
2.
That the procurement
and implementation of a Supplier Incentive Programme (‘SIP’) with Oxygen
Finance Ltd (‘Oxygen’), via the NEPO 521 Early Payment Services Framework, be
approved.
3.
That utilising the
E-Invoicing format to ensure compliance with Public Contract Regulations 2015
(PCR) be approved.
REASONS
In addition to the
rebate there were also other non-cashable benefits that could be realised
through the implementation of the system:
Benefits to the
Supplier / Economy
·
Suppliers could secure even
quicker payment terms, which would further improve liquidity and cash flow.
·
Local small and micro
businesses would be able to benefit from ‘Freepay’ at no cost.
·
Deliver social value,
contributing to the development and post Covid-19 recovery of the local economy
through the earlier payment of invoices.
Benefits to the Council
·
There were legislative
drivers that may be partially addressed through a properly implemented SIP:
o The Public Contracts Regulations 2015 - liabilities paid
within 30 days (increased compliance to target);
o The Public Procurement (Electronic Invoices etc.)
Regulations 2019 - Electronic Invoicing Directive contained provisions relating
to the processing of electronic invoices (ability to comply through
implementation of eInvoicing);
o The Late Payments Directive - automatic entitlement to
interest for late payment (reduction in late payment liability).
·
Improved Council
performance in terms of Accounts Payable.
·
Improved strategic
engagement with suppliers who choose to sign up.
·
Encouraged suppliers to
help drive best practice (e.g. e-invoicing) and compliance (e.g. no PO/ no
pay).
·
Contributed toward
social value goals by improving cash flow for local businesses and creating
added social value in Middlesbrough.
·
Over the medium term
the programme would generate a net return (after implementation costs and lost
interest on balances held) that could be reinvested into the delivery of front
line services.
Supporting documents: