Councils combine for banking economies

Three local authorities have launched a joint procurement exercise for banking services in an attempt to achieve economies of scale.

Cambridge City Council, South Cambridgeshire District Council and Northampton Borough Council are looking for a single manager for their accounts which currently jointly receive around £16m of income a year.

The procurement process is being run jointly, but each authority will enter into a separate contract with the successful bidder on the common terms contained in the tender documents.

Stephen Bevis, VAT and treasury accountant at Cambridge City Council, told Room151: “We expect that we will be able to get a better price for our banking services by combining forces. That saving would be expected to come from the fee we pay the banks.”

The process has been made easier because all three councils’ current banking contracts end within six months of each other. The new contracts with Cambridge and South Cambridgeshire are planned to start from 1 April next year, with Northampton’s beginning from 1 October.

The initial contract periods for Cambridge and South Cambridgeshire are five years, with an option to extend for a further five years. The contract for Northampton is expected to be three years, with a two year extendable option.

Tender documents show indicative annual income of £12m for Cambridge, £3.5m for Northamptonshire and £3.5m for Northamptonshire.

Bevis said that banks would be required to have a minimum BBB+ rating, which will rule out the currently unrated challenger banks.

Bevis said that his council is also hoping to reduce the number of its accounts from eight to between two and four in order to achieve further savings.

He said: “We have asked tenderers to price on eight accounts, but we will consider if further reductions in fee can be achieved from reducing the number of our accounts as we move closer to the award.

In 2013, three county councils – Cambridgeshire, Northamptonshire and Hertfordshire – became the first councils to jointly procure banking services, with estimated savings of £174,000 over the life of that contract.

Photo (cropped): Lucas Hayas, Flickr.