1 Page 97 Agenda Item 7 Report to: Strategy and Resources Committee Date: 16 December 2013 Report of: Executive Head of Asset Planning, Management and Capital Delivery Ward Location: Not applicable Author and Contact Phone Number Tony Edmonds, Ext 4926 Area Served: Borough-wide Chair of the Committee Cllr. Ruth Dombey Lead Member: Cllr Simon Wales Report Title: Procurement of Corporate Facilities Management Services Award of contract Summary On 17 December 2012 the Strategy and Resources Committee approved the recommendation for the Executive Head of Asset Planning, Management and Capital Delivery to proceed with arrangements to procure Facilities Management Services and that a decision on contract award to be brought back to the Strategy and Resources Committee. This report details the procurement process undertaken for the Facilities Management Services and makes recommendations on contract award following an EU compliant tender procurement process. There was significant interest in tendering for the services and this is reflected in the savings anticipated from letting the contracts which is assessed at 287,000 in the first year, rising to 335,000 per year from the second year. Implementation of the recommendations will involve the transfer of the existing staff who provide the service to the new service providers under the Transfer of Undertakings Protection of Employment Regulations (TUPE).
2 Agenda Item 7 Page 98 Recommendations It is recommended that the Strategy and Resources Committee agree a) The appointment of Contractor B in the sum of 767, ( 822, Less 6.75%) to undertake Lot 1 Repairs and Maintenance Service, for a term of seven years commencing 1April 2014, renewable for one further term of three years, giving a total term, subject to achievement of key performance indicators of ten years b) The appointment of Contractor A in the sum of 1,365, to undertake Lot 2, Building Cleaning Service for a term of seven years commencing 1 April 2014, renewable for one further term of three years giving a total term, subject to achievement of key performance indicators of ten years. c) The appointment of Contractor B in the sum of 874, ( 937, less 6.75%) to undertake Lot 3, Facilities Services for a term of seven years commencing 1 April 2014, renewable for one further term of three years giving a total term, subject to achievement of key performance indicators of ten years d) That Legal Services are instructed to draw up formal contracts for signing by Contractor A and Contractor B. e) To the formation of a client side FM Team to monitor contract performance and manage the service providers Background Documents 1. Strategy and Resources Committee Report dated 17 December 2012 Signed: Strategic Director Dated: 5 th December 2013
3 Page 99 Agenda Item 7 1. Background 1.1 One of the options in the Property and Asset Management (P&AM) Smarter Services Sutton of all existing FM and repairs contracts This option looked at the cost benefit analysis of consolidating into one single contract all of the various facilities management services currently provided either in house or via external service providers across me buy back schools. Market research indicated centralising all FM services and rationalising the various contracts currently procured individually into one integrated FM contract would bring about economies of scale. Market research suggested savings between 5% and 10% would be achieved. 1.2 At the Strategy and Resources Committee of 17 December 2012, it was reported that the Procurement Board had proposed packaged services should be developed as the preferred procurement option, given the mixed experience of authorities who have chosen the total FM route, with significant failures experienced by some and that joint procurement arrangements sought with neighbouring local authorities. It was agreed three work packages (lots) be put together, Lot 1 - Repairs and Maintenance, Lot 2 - Building Cleaning and Lot 3 - Facilities Services (Security, Caretaking and Post Services). It was also agreed if a service provider was interested in more than one work stream, they should be offered the opportunity to tender for more than one as this may offer additional efficiencies. The Committee resolved that the Executive Head of Asset Planning, Management and Capital Delivery be authorised to proceed with arrangements to procure new facilities management contracts, which would be for a contract term of seven years, plus one, three-year extension, giving a total term of 10 years. 2. Issues 2.1 The current budgets for all the hard and soft FM services currently let under formal contracts, agreements or undertaken via the in house teams is 3.7m. 2.2 The current services are provided by a combination of in-house teams and external service providers. All services under the new contract arrangements will be fully outsourced. The in-house staff currently providing these services will transfer over to the new service providers under TUPE (Transfer of Undertakings (Protection of Employment)) legislation. A small client team will remain to manage and monitor the new contract arrangements. Initially the client team will consist of seven reducing after a period of six months to five; this is to allow for the transition period from the old to new contract arrangements and to close down existing contracts. 2.3 The service providers will be monitored by the client team against a suite of key performance indicators, which if not achieved will impact on the service providers profit element. 2.4 A client team budget will be set up to cover staff costs. The budget from 1 st April 2014 will be 338,000 reducing in year 2 to 290,000, due to the reduction of staff in the client side team.
4 Agenda Item 7 Page A repairs and maintenance budget will be required to cover any repairs falling the new contract arrangements. The new arrangements make the service provider responsible for all repairs up to the value of 5,000. Between 5,001 and 25k the service provider and Council contribute equally (50/50). A budget of 40,000 is required for th and maintenance liability. This figure is based on average spend over the last three financial years, on repairs between 5,001 and 25k. 2.6 The new arrangements for responsive repairs are different to the current arrangements. The risk for most repairs transfers from the Council to the service provider under the new contract and has allowed the Council to submit a single annual price for repai The tenderers were provided with the extensive historical information on the responsive repairs undertaken annually over the last three years. This has enabled the tendering service providers to submit bids for the service knowing the risks. 2.7 These arrangements are beneficial to the Council as they provide a cap on repair costs and significantly reduce the transaction costs involved with verifying, certifying and processing invoices for works carried out. The Council introduced similar arrangements for the new Leisure management contract which started in 2010 and it has operated successfully without any noticeable off-loading of costs back to the Council. The relative length of the new FM contracts also makes i interest to ensure that repairs are properly carried out. 2.8 Any work over 25k would be funded, as with current practice, from the capital which would remain with the Council. 2.9 The annual values of the three contract lots required the procurement exercise to be fully compliant with EU procurement legislation. The Council therefore issued a notice in the journal of the European Union advertising the three (lots) work streams. Companies interested were requested to complete a pre qualification questionnaire (PQQ). 52 completed PQQs were received which, following evaluation, technical references and site visits was reduced to a final short list of 8 service providers Tenders packages, which comprised over 270 documents across the three work streams, were dispatched to the eight shortlisted service providers, week commencing 29 July. Out of the 8 service providers who were invited to tender, 6 submitted bona fide tenders through Pro Contract, the Council s electronic tendering portal, by the closing date for receipt of tenders on 9 September During the tender period, Sutton Chamber of Commerce held an information day for the eight shortlisted contractors and local small medium enterprises ( ). Over a forum to network and discuss opportunities for collaborative working The six tenders received by the closing date and time are detailed in table 1.
5 Page 101 Agenda Item 7 Table 1 - Tender Returns LOT Contractor A Contractor B Contractor C Contractor D Contractor E Contractor F Lot 1 R&M N/A 814, N/A 1,166, ,848, N/A Lot 2 Cleaning 1,327, ,395, ,426, ,607, ,690, ,100, Lot 3 Facilities 1,262, , N/A 1,138, ,092, N/A 2.13 The tender documents returned by service providers were checked to ensure they had confirmed they had read and understood the requirements, terms and conditions of contract, were complete, individual prices inserted into the relevant boxes in the pricing schedule, consistently priced and comparable to other bids Clarification interviews were held, resulting in three service providers amending their tender bids in accordance with Council standing orders. The revised tender submissions are shown below in the table 2 with those that changed highlighted. Table 2 - Amended tenders LOT Contractor A Contractor B Contractor C Contractor D Contractor E Contractor F Lot 1 R&M N/A 822, N/A 1,166, ,848, N/A Lot 2 Cleaning 1,365, ,395, ,426, ,607, ,690, ,100, Lot 3 Facilities 1,413, , N/A 1,060, ,092, N/A 2.15 A formal evaluation model on Pro Contract was used to evaluate the tenders, ensuring consistency, transparency and a robust audit trail in the event of any challenge from an unsuccessful bidder. The agreed evaluation was on the basis of quality and price with 60% of the score on quality and 40% on price. The quality evaluation was undertaken by a team of evaluators from the Environment & Neighbourhoods and the Resources Directorates. Method statements submitted by the service providers were assessed and scored to give an aggregated percentage score. The method statements covered eleven key service delivery areas: resources and resource allocation, communication, contract monitoring and reporting, quality assurance, information technology, improvements and innovation, environmental sustainability, equality and diversity, corporate social responsibility, mobilisation and implementation and business continuity.
6 Agenda Item 7 Page The following two tables provide a summary of the tender evaluation percentage scores. Table 3 sets out the percentage score for the quality assessment and Table 4 the combined percentage for quality and cost. Table 3 - Quality Percentage Scores LOT Contractor A Contractor B Contractor C Contractor D Contractor E Contractor F Lot 1 R&M N/A 73% - 1 st N/A 64% - 3 rd 71% - 2 nd N/A Lot 2 Cleaning 77% - 1 st 73% - 3 rd 69% - 5 th 72% - 4 th 75% - 2 nd 60% - 6 th Lot 3 Facilities 72% - 4 th 80% = 1 st N/A 80% = 1 st 78% -3 rd N/A Table 4 - Quality & Cost Percentage Scores LOT Contractor A Contractor B Contractor C Contractor D Contractor E Contractor F Lot 1 R&M N/A 84% - 1 st N/A 61% - 2 nd 42% - 3 rd N/A Lot 2 Cleaning 78% - 1 st 73% - 3 rd 70% - 4 th 65% - 5 th 64% - 6 th 76% - 2 nd Lot 3 Facilities 77% - 4 th 88% - 1 st N/A 80% = 2 nd 80% = 2 nd N/A 2.17 Service providers who expressed an interest and tendered for more than one lot were asked if applicable, to state any percentage discount they would be prepared to offer, if appointed for more than one lot. Four service providers tendered for multiple lots and all four opted to offer a percentage discount. Table 5 shows the percentage discounts offered. Table 6 which is for information, shows the value of bid with discounts applied, where applicable. This table provides a useful benchmark to compare the lowest cost against the agreed evaluation basis of quality and cost. Table 5 Percentage Discounts Lots 1 & 2 Lots 1 & 3 Lots 2 & 3 Lots 1, 2 & 3 Contractor A N/A N/A 3.0% N/A Contractor B 1.50% 6.75% 1.80% 5.10% Contractor D 0% 2.29% 1.77% 2.08% Contractor E 1.45% 2.72% 4.14% 5.60%
7 Page 103 Agenda Item 7 Table 6 Costs with Discounts Lots 1 & 2 Lots 1 & 3 Lots 2 & 3 Lots 1, 2 & 3 Contractor A N/A N/A 2,694,889 N/A Contractor B 2,185,404 1,641,575 2,291,616 2,995,371 Contractor D 2,773,488 2,175,611 2,620,695 3,754,256 Contractor E 3,487,090 2,860,809 2,667,687 4, Lot 1 - The tender submitted by Contractor B for Lot 1 is the most competitive at 822, and when combined with their quality score the preferred bidder for Lot The current budget for responsive repairs and planned maintenance is 896, The service specification for Lot 1 requires a fixed cost per building for responsive repairs up to 5,000 and a fixed cost for planned maintenance per building. The service specification also includes professional services currently undertaken by the Repairs and Maintenance (R&M) team. Staff currently within the R&M team will transfer over to the service provider under TUPE. Contractor B provided the most economically advantageous tender and demonstrated in their tender they are able to deliver the service Lot 2 - for Lot 2 is the most competitive on price. However when combined with their quality score they are not the preferred bidder. The combined quality and cost score awarded to Contractor A makes them the preferred bidder for Lot 2. The tender submission of Contractor A has been evaluated and compared to the other bids. Contractor A provided the most economically advantageous tender and demonstrated their ability to deliver the service in their tender Lot 3 - The tender submitted by contractor B for Lot 3 is the most competitive and when combined with their quality score the preferred bidder for Lot 3. Contractor B submission includes their service delivery model. This details their proposal for managing the service which is different to the current service model and includes: a) A logistics hub focusing on movement of goods around the borough (post, furniture, stationery, mechanical and electrical materials and cleaning consumables) using their work flow mobile system to ensure the most efficient and effective travel plan for the couriers across the borough. b) Utilisation of their national monitoring centre for monitoring out of hours officers and deployment of response drivers. The centre is also capable of handling out of hours calls, alarm and CCTV monitoring. c) Up skilling of the caretakers role to Facilities Assistants and increasing the size of the relief caretaking team to provide resilience across the service.
8 Agenda Item 7 Page 104 Contractor B submitted the most economically advantageous tender and they have demonstrated in their tender they are able to deliver the service. Details of the impact of their service delivery model are outlined in appendix A Schools currently buy back into the above three lots to varying degrees. The option for them to continue to buy back into these services is included in the new contract arrangements. 3. Options Considered 3.1 At an early stage in the procurement process, discussions were held with three neighbouring boroughs - LB Merton, LB Kingston and LB Richmond - and also with the Tri-Borough Councils (Westminster, Kensington & Chelsea, Hammersmith and Fulham). There was interest and acceptance by the three neighbouring Councils of however, they were unable to commit to a joint procurement process. Although at an advanced stage, the Tri- Borough arrangements did not go live until 1 October 2013 which was too late for the Council. Although the framework allows other London boroughs to procure any combination of FM services, the process involves the services required to be defined and costed, and for an options appraisal and benchmarking exercise to be undertaken, which could take up to 3 months to complete. As the framework was not available for other boroughs to join until late 2013, it would have meant that the and costs could be ascertained would have been around February 2014 which was contract timetable. 3.2 The current repairs and maintenance service provider is co-located with the Council at Denmark Road. The reconfiguration of accommodation at Denmark Road will mean space for co-location is no longer available there. Service providers were therefore asked to provide options in their method statements how they would operate the services. All service providers expressed an interest in colocation and occupying office space at Civic. Details of the areas that could be made available along with guideline rents were included with the tender documentation together with a draft occupation license that service providers would be required to sign. All service providers confirmed that the rent required has been included in their tenders. 4 Recommendation 4.1 Based on the above and applying the discounts offered by the service providers it is recommended a) The appointment of Contractor B in the sum of 767, ( 822, Less 6.75%) to undertake Lot 1 Repairs and Maintenance Service, for a term of seven years commencing 1April 2014, renewable for one further term of three years, giving a total term, subject to achievement of key performance indicators of ten years b) The appointment of Contractor A in the sum of 1,365, to undertake Lot 2, Building Cleaning Service for a term of seven years commencing 1 April
9 2014, renewable for one further term of three years giving a total term, subject to achievement of key performance indicators of ten years c) The appointment of Contractor B in the sum of 874, ( 937, less 6.75%) to undertake Lot 3, Facilities Services for a term of seven years commencing 1 April 2014, renewable for one further term of three years giving a total term, subject to achievement of key performance indicators of ten years d) That Legal Services are instructed to draw up formal contracts for signing by Contractor A and Contractor B e) To the formation of a client side FM Team to monitor contract performance and manage the service providers 5. Impacts and Implications Financial Implications Page The existing budgets for Facilities management, building cleaning and repairs and maintenance costs amount to 3.7m 13/14 Budget Corporate Facilities (salary and on costs) 1,367,800 Building cleaning - corporate buildings 561,400 Building Cleaning - Schools 768,100 Cleaning consumables 63,000 Window Cleaning 15,000 Repairs and planned maintenance 896,200 Total 3,671, buildings. Budgets for National Non Domestic Rates (NNDR), utility costs, corporate support charges and depreciation costs have been excluded as these will remain Council costs under the new contract and will be managed by the client team. 5.3 The costs under the new contract are as follows Costs Lot 1- Repairs and maintenance 767,200 Lot 2 Building Cleaning 1,365,000 Lot 3 - Facilities services 874,400 Client team (yr 1) 338,000 Repairs and Maintenance budget for 40,000 costs between 5k & 25k Total 3,384,600 Agenda Item This demonstrates a saving of 287k in the first year of the contract. This saving will increase to 335k per annum from year two as the number of staff in the client team will reduce from this point.
10 Agenda Item 7 Page The current cost of the schools cleaning contract is 768, tender bid for schools cleaning is 880, including main office and contract overheads and profit. Therefore none of the savings identified above are attributable to schools. Legal Implications 5.6 The legal advice is that TUPE applies, all the existing staff should transfer to the new contractor and any new service model would require a post transfer restructure by the new contractor following their relevant procedures. Should any of the new models require reduced staffing and or different skill requirements post transfer it is possible that redundancies may follow. Any employer progressing a restructure which results in redundancies is placed under a duty to offer to any staff placed at risk of redundancy any redeployment opportunities which may exist within their organisation by way of suitable alternative employment. Procurement Implications 5.7 The project has been through a full and appropriate procurement process with the outcomes achieved following thorough evaluation of the tender bids received. The Council s pro-contract e-tendering tool has been used and as such contains a full audit trail of actions taken and decisions made at key stages through the process. This demonstrates a transparent process has been undertaken which is open to scrutiny. The corporate procurement unit has been involved and guided the project management team where necessary. HR Implications 5.8 Consultation with all affected staff and their trades unions commenced in December 2012, and regular communication has been provided throughout the process up to now, and will continue. Staff have been advised that TUPE (Transfer of Undertakings Protection of Employment 2006 Regulations) may apply, with current staff transferring to any new employer on their existing contractual terms and conditions. The work towards the creation of a Client Side has commenced and positions will be offered to existing FM employees on a ring-fenced basis initially, with the aim of retaining in-house existing expertise. 5.9 Further consultation will be held with staff and their representatives to ensure meaningful engagement, and to enable a smooth transfer to the new employer(s) on 1 April One Planet Living 5.10 A question on environmental requirements was included within the method statements. Contractor A and Contractor B submitted comprehensive responses detailing how they will manage the environmental impacts particularly around transportation, use of materials and waste. Equality Impact Assessment
11 5.11 The scope of services included in these new contract arrangements will impact across all staff who work buildings and all users of the buildings The contracts should not have any detrimental impact on any group or users and the enhanced arrangements for reporting a facility issue through the use of a single one stop shop point of contact should be beneficial in the long term to all groups. Risks 5.13 The highest risk is not having contracts in place by 1 April 2014 particularly Lot 2 Building cleaning. There is no further option to extend this contract and therefore the Council could be challenged if a contract award is not made There are significant risks associated with the transfer of staff under TUPE and any potential re structure post transfer. However, all staff and their representatives have been and will continue to be consulted up to transfer on 1 April Social Inclusion 5.15 Both Contractor A and B confirmed in their tender method statements commitment to employing local labour and using local suppliers, both provided evidence to support their statement. Contractor A indicated that on one local contract, 86% of their workforce live within three miles of Sutton. Contractor B has included in their method statement the names of local companies who they have agreed partnerships arrangements if successful. 6. Consultation Page 107 Agenda Item Consultation with staff and the trade unions commenced in December 2012, with a series of staff meetings. All staff were able to attend one of these meetings. The new contract arrangements has been a standing agenda item for discussion at the various teams meetings and a staff newsletter has been issued on a monthly basis to keep staff informed of progress in respect of the procurement exercise and formation of the client side team. 6.2 All schools in Sutton, irrespective of whether they buy back into any of the various services provided by Corporate Facilities have been contacted, to inform them of the the services and to update them following receipt of tenders. In response to the communications, one school advised wait to hear in the New Year of the company and price for the contract cleaning, as the school and governors would like to make their own decision about whether to stay. More recently after careful building cleaning we have joined together and appointed consultants to tender our. This potential reduction will not have any impact on the rest of the contract as the terms allow the Council to remove or add buildings without any financial penalty.. 7. Timetable for Implementation
12 Agenda Item 7 Page The new arrangements would be operational from 1 April Appendices 8.1 Appendix A - Contractor B Service Delivery Model for Lot 3 (Restricted) 8.2 Appendix B List of Tenderers (Restricted)