How National LGPS Frameworks are saving funds and pools millions
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With more than 247 contracts already let and £105m secured in savings, National LGPS Frameworks have become the ‘go-to-route’ for specialist procurement within the LGPS, according to Leon Thorpe.
Across the public sector we are all continually looking for new ways to be more nimble, to box clever, to sweat our assets, to be creative, to protect resources to meet our responsibilities as effectively and efficiently as possible.
The world of local government pensions is no different, for both scheme administrators and for the 14,000 or so scheme employers.
Unlike most other public service pension schemes, the LGPS is funded, with responsibility for stewardship of c£263bn assets resting with pensions committee, officers and professional advisors, in order to pay the pensions of the 5.6m scheme members.
Across the UK every LGPS fund, every LGPS investment pool and potentially every scheme employer needs to access specialist services.
This has its challenges, from identifying qualified, experienced service providers, through the often time consuming and costly procurement process to finally securing services that deliver value for money!
Collectively they have established a “notfor profit” enterprise which reduces each of these barriers and is deliveringvaluable benefits and savings across the LGPS, its employer base andincreasingly the wider public sector pension schemes.
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The National LGPS Procurement Frameworks
– ‘By the LGPS, for the LGPS’ – are now a well proven opportunity for all funds
and employers to save precious time and money by allowing quicker and more
efficient sourcing of high-quality value for money services via an OJEU
compliant route.
They leverage combined buying power whilst maintaining local decision making
and enabling services to be specified to local requirements.
Although widely used for many years in the public sector, procurement frameworks were relatively new to the LGPS when, in 2012, a group of six authorities set up the first National LGPS Framework for actuarial and benefits consultancy services.
Building on the success (and lessons learnt!) of this first framework, 38 funds and pools have now helped to set up 13 specialist frameworks (including 3 re-lets), and more than 90% of funds and pools have used one or more of them.
Uniquely ‘owned’ by the LGPS, the enterprise sets its own agenda, allowing it to be flexible in its approach and focus resources on what the LGPS needs most. This is helping to support the LGPS through a time of significant challenge and change, including the establishment of the investment pools.
Collaboration in action
The National LGPS Frameworks are driven by the requirements of the LGPS with over 38 funds and pools working as ‘founders’ across one or more framework to leverage the combined buying power of the LGPS to drive quality and value.
The ‘founders’ are vital to successfully shaping each framework to meet the diversity of needs of the LGPS.
They own the content of each framework, playing a key role in designing the specification of requirements, the tender documents and the evaluation of bids.
As the National LGPS Frameworks are a ‘not for profit’ programme the founders also sponsor each framework and provide financial backing to the set-up of each framework.
This is then recovered via a supplier rebate on work won via the framework and a small administrative joining fee for users.
The National LGPS Frameworks are supported by a small full-time specialist team (hosted by the Norfolk Pension Fund), supplemented by specialist advisors, including legal and procurement.
Savings and benefits
By using the National LGPS Frameworks, funds have already saved in excess of £105m in procurement and legal costs, effort and fees savings.
The National LGPS Frameworks will save significant time and money.
Timewise undertaking full OJEU procurements will typically take between six to nine months.
Because this is done when setting up the framework, funds (and other users) using the frameworks can run a further competition in as little as two to three weeks or, where appropriate, direct award on the same day.
Fee savings are made by leveraging our combined buying power, competition to get on the framework and then additional competition when users call-off framework.
For example, using the National LGPS Framework for Passive Investment Management Services the LGPS pool ACCESS pooled £11bn worth of assets, saving funds £5m a year.
The ACCESS group worked with the National LGPS Frameworks team to set up the OJEU compliant framework and then ran a further competition to secure these significant savings.
Added value and additional benefits for users are built into the frameworks including ceiling prices (the maximum a supplier can charge), a full set of supporting documentation including for example further competition documents, order forms, award letters, pricing schedules and supplier catalogues.
There is also the added benefit of receiving a collaborative cumulative rebate.
This is based on the overall value of all work awarded to a supplier under a framework and paid at the end of the financial year.
A large number of users have received far in excess of their joiner’s fee in cumulative rebate.
Challenges
- Building Credibility – When the National LGPS Frameworks were launched in 2012 the challenge was to build credibility with funds and suppliers. How did we do this?
- We engaged with our user community and key stakeholders
- We demonstrated ability and commitment
- Evidenced benefits for all parties
- We built a track record
- Ensured key suppliers were engaged and recognised the benefits for them
As more and more funds used made use of the National LGPS Frameworks and realised the benefits, requests gathered apace for further frameworks, new founders came on board and the programme snowballed. The support of suppliers in promoting the frameworks has also helped enormously to promote their use.
- Getting the right specification – When you are working with a wide range of funds and pools bringing all their ideas and requirements into a single specification can be a challenge. However, having a diverse range of founding authorities, together with their dedication and expertise, helps to bring a specification that is comprehensive for the service being procured and covers the requirements for all funds and pools.
- Terms and conditions – One of the strengths of the frameworks is each supplier signing up to pre-agreed terms and conditions for each framework. However, as you can imagine, getting a number of large multi-national companies to all sign up to the same terms and conditions can require a lot of patience and negotiations. However, the pre-agreed T&Cs has become one of the major advantages and cost savings for users and suppliers.
- Market coverage – From six suppliers in 2012 we now have more than 60 suppliers, some of whom are on more than one framework.
- Changing needs of the LGPS– The introduction of pooling has seen new requirements for the LGPS. A number of the investment pools have acted as founders. ACCESS, Brunel, Border to Coast, LGPS Central, London Pension Partnership and the Wales Pension Partnership have all acted as founders and offered valuable support to ensure the frameworks continue to provide services that meet the needs of the LGPS.
Future frameworks
The enterprise continues to grow as more services are added to frameworks and usage increases. Having recently launched National LGPS Frameworks for both member data services and legal services we are now in the early stages of exploring the possibility of setting up a framework for pensions administration software.
The National LGPS Frameworks are now regarded as the ‘go-to route’ for procurement within the LGPS.
This is a direct result of LGPS funds and more recently pools, working together to make a real difference.
The National LGPS Frameworks are a clear example of collaboration that has delivered demonstrable savings and efficiencies.
Leon Thorpe is frameworks officer in the National LGPS Frameworks team.
To find out more about the National LGPS Frameworks, please contact Leon Thorpe on 01603 495922, email leon.thorpe@norfolk.gov.uk or visit www.nationallgpsframeworks.org
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