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Value for Money from Energy Procurement

A key LEP objective is to ensure Participating Authorities receive value for money energy supplies.

The business environment for energy and carbon is fluid. Securing a contract price saving on a one-off basis through a tender process is no guarantee of optimum value for money or future savings and cost avoidance. By participating in the LEP, authorities act together and use their combined spending power to shape markets and influence suppliers and achieve value for money, consistently over a period of time.

Demonstrating Value for Money

LEP offers authorities a range of independent management resources and supplier management activities that enable authority staff to clearly demonstrate whether their energy supplies are delivering value for money. We:

  • recommend the best forms of contract for authorities’ full portfolio of energy supplies and sites;
     
  • recommend the most appropriate risk model for authorities’ portfolio and business needs;
     
  • provide effective governance of energy buying organisations – through LEP’s seat on governance boards we challenge providers and suppliers to develop energy services and appropriate risk strategies that authorities want; and,
     
  • provide independent benchmarking of energy buying organisation and supplier performance, providing VfM assurance in granular detail for those responsible for energy management and ‘traffic light’ business-focused assessments for senior managers.
     

The independence and neutrality of LEP’s support is important for authorities’ VfM assurance.  We work closely with authorities and their energy suppliers and providers, yet we offer independent expert analysis and easy-to-interpret evaluation of achieved contract prices against market rates. 

LEP VfM RAG chart extract

Strategic Supplier Management

LEP SMP report coverUnderstanding whether energy contract prices are good is only part of the value for money puzzle.  LEP then works with suppliers of energy and ancillary services in a co-productive way to deliver meaningful change and improvements in energy contract performance and service planning.  This work continues across framework periods and contract renewal cycles.

Our Strategic Supplier Management Programme ensures that:

  • core energy-related services delivered by suppliers meet authority business requirements and expectations for service and value for money;
     
  • improvements in supplier services reflect what authorities want and need rather than what the supplier may prioritise as part of its commercial strategy; and,
     
  • suppliers receive a clear collective set of requests for service development and performance improvement, with the LEP Team taking an intermediary role in monitoring and managing agreed improvement actions.
     

LEP’s work brings together authorities and their providers and suppliers to engage in open dialogue through facilitated meetings, workshops, focus groups, surveys and supplier briefings.

Interventions lead to savings and cost avoidance through the lifetime of a supply contract, for example a simple change to a supplier’s invoicing process delivered 20% savings in administration for both customers and the supplier, while changes to the metering of street lighting permitted by a Network Operator through LEP’s intervention saved authorities £4m.