New South Wales Health Minister Brad Hazzard says the Government is reversing its decision to dump Norco as the milk supplier for 15 north coast health facilities.

Last week it was revealed the contract had been awarded to Queensland's Dairy Farmers, which is owned by Japanese brewer Kirin Holdings.

The decision to dump the local co-operative came under fire from local farmers, the Health Services Union and patients.

The original decision also had a strong reaction on social media.

At the time, the State Government defended its actions with the Minister stating Norco "did not offer the most economical price for taxpayers".

But now Mr Hazzard has issued a statement saying the Government has changed its mind.

"In light of the impact on the community, which only came to light after the tender, I asked HealthShare NSW to review its decision," he said.

"Accordingly, the contract will be reinstated and the benefits of providing local milk to local hospitals have been given priority."

The dairy co-op's general manager Andrew Burns said he was delighted by the announcement.

"We're very appreciative of all the support from the broader community, it's been wonderful," he said.

Norco chairman Greg McNamara said it will be a popular move.

"The comment that I was receiving back from people phoning and on email was that this was not just about Norco milk," he said.

"This was about governments making sure that they're purchasing from their local communities and supporting their local businesses."

Milk suppliers have questions for management

A dairy farmer from Barrington on the mid-north coast, Graham Forbes, said he was concerned about the role of management acting on Norco's behalf.

"What was the role of management in losing that agreement [in the first place] as a supplier and shareholder of Norco?" he said.

Milk from these dairy cows in northern New South Wales are supplied to the Norco dairy co-operative. ( ABC Rural: Kim Honan )

"I was more concerned about the processes it had taken. And was management to blame for losing the contract in that process?

Mr Forbes said he was also concerned about the political actions going on behind the scenes.

"It is a concern if government agencies go out for tender for something and then the politicians step in and overturn those decisions," he said.

"I think it's the sort of thing the community should be concerned about."

The Health Service Union, which first raised the issue publicly, said the decision was a win for people power and the fiasco highlighted that local suppliers should not have to compete against international companies for tenders.

"I think you've got to look at more than just dollar value, at times," HSU NSW secretary Gerard Hayes said.

"When you take jobs out of a community you start to contract that community.

"Making an investment slightly higher than other people have tended for is an opportunity for that community to grow."