Councillors Nick Emmerson, Neil Garratt, Nighat Piracha, Marian Radford, Tony Shields

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1 LONDON BOROUGH OF SUTTON STRATEGY AND RESOURCES COMMITTEE MONDAY, 15TH DECEMBER, 2014 Second Dispatch efg 7.30 pm at the Civic Offices, St Nicholas Way, Sutton SM1 1EA To all members of the Strategy and Resources Committee:- Chair: Vice-Chair Councillors: Councillor Ruth Dombey Councillor Colin Hall David Bartolucci, Richard Broadbent, Richard Clifton, Tim Crowley, Marlene Heron, David Hicks, Jayne McCoy, Wendy Mathys, Steve Penneck, Colin Stears, Simon Wales, Jill Whitehead and Graham Whitham Substitute Councillors Councillors Nick Emmerson, Neil Garratt, Nighat Piracha, Marian Radford, Tony Shields This meeting will be recorded and made available on the Council s web site. Niall Bolger Chief Executive Civic Offices St Nicholas Way SUTTON SM1 1EA 10 December 2014 Enquiries to: Alexa Coates, Committee and Management Support Services Manager Copies of reports are available in large print on request

2 Second Dispatch Report 7. NEW CONTRACT FOR THE LONDON BOROUGHS RECRUITMENT PARTNERSHIP (Pages 1-8) 2

3 Page 1 Agenda Item 7 Report to: Strategy & Resources Committee Date: 15 December 2014 Report title: Report from: Local Government Recruitment Partnership contract award Executive Head of Human Resources Dean Shoesmith Ward/Areas affected: Borough-wide Chair of Committee/Lead Cllr Ruth Dombey and Cllr Colin Hall Member: Author(s)/Contact Dean Shoesmith, Number(s): Corporate Plan Priorities: A Smart Council Open/Exempt: Open/Exempt Appendices A- E are exempt on the basis of Paragraph 3, Schedule 12A of the Local Government Act 1972 Signed: Date: 10 December Summary 1.1 This report provides an update on the Council s role as the lead partner of the Local Government Recruitment Partnership (LGRP), originally known as the London Borough Recruitment Partnership, and the associated letting of four contracts for recruitment, resourcing and HR consultancy services. The strategic recruitment partnership (through a national commissioning framework) aims to provide services to 171 potential local authority partners, seeking to maximise economies of scale in the market and providing HR services fit for future purpose as local government continues to face significant change and financial challenge. Key benefits of the partnership include: (i) achievement of savings from large economies of scale, (ii) modernisation of recruitment and resourcing to ensure the Council and its partners can business process re-engineer their approaches for efficiency, savings, and optimisation of people resource (iii) commission services that support the transformation of the local government workforce. 2. Recommendations 2.1 To approve the letting of four contracts (detailed in the main body of this report) on behalf of the 171 local authority partners to the suppliers set out in confidential appendix 5 of the report. 2.2 To note each local authority will undertake their own procurement through individual legal access agreements drawn down from the main framework contract. Flexibilities have been designed across the framework for partner Councils to select those Lots (services) that best meet specific, local business needs and can select whatever combination is required. 3. Background 3.1 Sutton originally led a strategic procurement partnership (known as the London Borough Recruitment Partnership) comprising eight London Boroughs from inception in 2006, letting recruitment and resourcing services. It was recognised that through collaboration, economies of scale together with opportunities for business process re-engineering could be achieved for the

4 Agenda Item 7 Page 2 benefit of the Council and its partners. This will be the third such framework let under these progressive partnership arrangements. 3.2 The partnership grew to 30 members for the 2011 contractual framework and notable financial savings have been achieved as a result approximately 1.5 million per annum shared amongst those partners. 3.3 As a result of the success of the partnership and level of savings achieved, marked interest has been expressed from local authorities outside London. Changes have been made to the eligibility criteria applicable to the London Contracts Supplies Group (the procurement body through which the contracts are let) to enable other Local Authorities to join the framework most recently including Buckinghamshire County Council in In light of these developments partners were consulted about the possibility of letting contracts on a national basis to local government, and by agreement with partners, 171 Local Authorities have expressed interest in joining the new framework to commence 1st April To reflect these changes the partnership name has been changed to Local Government Recruitment Partnership (LGRP). 4. Issues 4.1 Recruitment and resourcing services have undergone extensive change and development since With the emergence of digital recruitment solutions there has been considerable reduction in hard copy press and journal advertising, replaced by the rapid emergence of online jobs boards and social media as an alternate means of advertising. 4.2 Research has been undertaken across a spectrum of advertising media sources, ranging from social media, online jobs boards, national press, and specialist journals apropos the future direction of recruitment advertising and the role of the recruitment advertising agent. It is clear in the medium term (likely to be within the life-cycle of these contracted services) that traditional recruitment advertising agencies will cease to operate in the same way, or at all. In the past the advertising agent held a pivotal role between client hiring managers and the media, in terms of preparing advertisements for the media including typesetting and production. The advertising agent has charged the client a rate for this service (including profit margin) whilst also charging the media a commission for the advertising placement. 4.3 Increasingly, partners across the current LBRP have migrated to direct business relationship deals with the media as the costs provided are lower through elimination of the middle agent. A number of current partners have some form of direct media arrangement and the trend has been growing over the past two years. With cost receiving a high priority Councils are decreasing the use of expensive creative advertising approaches and over 90% of advertising is in a standard format, requiring transactional processing only - in the form of linage advertisements. After extensive consultation with current LBRP members, London Heads of HR and potential new partners (including the Association of Greater Manchester Authorities and the Confederation of Scottish Local Authorities) it was agreed to take a future-proof approach to recruitment advertising with further details of the new approach at 6.5 of the report. Lot As many of the partners face substantial organisational change over the next four years, through consultation, they have indicated the need for HR consultancy services that can be drawn upon to support service and workforce transformation including: organisational development, organisational re-design, developing employer value proposition, employer brand, and outplacement. This forms Lot 1 of the new service specification. Lot 2

5 Page 3 Agenda Item The partners need for senior managers on a permanent or interim basis remains a key business issue. The use of executive search consultants (who have specialist market knowledge and influence) remains a feature of the local government recruitment market and with the scale and pace of change across the sector for the next four to five years this aspect of the contract is highly unlikely to change. Skills requirements and the ability to source niche talent for the sector is if anything likely to increase. This forms Lot 2 of the new service specification. Lot London Chief Executives through the CELC Group have expressed keen interest in improving the redeployment opportunities for staff displaced as a result of the severe financial challenges many Councils face. London Boroughs, through the Heads of HR network, asked that Sutton includes proposals to address this issue and for a service specification to be developed. In order to ensure a modern, dynamic and sustainable approach a specification has been developed for a Talent Wave comprising of key elements including: a redeployment site, candidates profiles (akin to LinkedIn rather than traditional CV s) as well as jobs boards for hiring Councils to promote job opportunities. The successful placement of otherwise redundant staff will reduce the associated redundancy costs as well as having wider socio-economic benefits. Staff redeployees and other job seekers will be connected through hyperlinks into Council s job sites, and/or applicant tracking systems. This forms Lot 3 of the new service specification. Lot As covered earlier in this report, recruitment advertising has undergone significant change over the last five years. The emergence of social media has replaced much of traditional advertising (press and journals) and even online jobs boards to some degree. Candidates are often sourced directly through online CV libraries in particular hard to fill occupations. Research into future recruitment industry trends confirms that traditional advertising agents are either no longer in business, or moving into strategic consultancy services, such as Lot 1. In the event that the partners continue with a traditional advertising agent there is significant risk that they will cease to operate, or partners will not require such services, or both. 4.8 In order to address future needs extensive research and soft market testing (including consultation with partners) was undertaken. In recent years intelligent software has been developed to provide a direct interface between hiring organisations and the media. The software can undertake most of the work previously executed by the recruitment advertising agent including: some creative design, formatting, typesetting and branding. This, in effect, cuts out the middle agent. Early, soft market testing with the major media houses suggests that through direct business relationships with the media an average 15% saving on all recruitment advertising can be achieved. Moreover, the software takes an average 10 minutes to produce an advertisement for media a time saving of approximately hours compared with the traditional advertising agent. This solution should provide partners with much improved business efficiency. Through consultation the partners have selected the option of appointing a small inhouse team to operate the software system. A legal inter-authority agreement has been drafted to ensure such a team will be paid for by the partners using the service on a proportionate basis. The costs of the transactional team is estimated to be 95,000 inclusive of on-costs (three FTE administration roles) and payment for the Sutton in-house team to operate the recruitment advertising software will be secured through an appropriate memorandum of understanding amongst the partners. At present 86 partners have expressed written interest in this service and the cost per partner would be 1,104 on this basis. This option is more cost effective than each partner having to undertake the transactions involved and the collaboration will yield efficiency savings. The system selected is highly intuitive and requires only one hour s training to ensure operator competency. This forms Lot 4 of the contract with separate media negotiations being conducted outside of the Lots in accordance with procurement guidance received.

6 Agenda Item 7 Page 4 Contract award 4.9 Extensive contract evaluation has been completed by representatives from partner Councils and use of the Pro-Contract procurement evaluation system. An evaluation criteria of cost (40%) and quality (60%) has been applied under the guidance of the corporate procurement team and detailed questions and analysis of responses to the service specifications and has been completed. As well as service specification analysis standard procurement requirements of potential suppliers has been applied, such as assessment of environmental equality and health and safety policies of the potential providers. The award of contracts for each of the four Lots is dealt with in Appendix 5 as exempt information as this matter is commercially sensitive and confidential. 5. Options Considered 5.1. A range of contract options were discussed at length with LGRP partners and the London Heads of HR network group. In particular for Lot 4 (the advertising software solution) a range of options were considered including: remaining with an advertising agent, and each partner having an advertising team. These options were considered but discounted on grounds of cost and efficiency. 6. Impacts and Implications Core impacts Financial 6.1. The financial implications for each of the four Lots are set out below Lot 1 This lot provides HR consultancy services on a pay as you go basis. As such it is modular with different elements available to address a range of business needs. Detailed pricing is attached in commercially confidential Appendix 1. A number of the modular elements are completely new to reflect the strategic direction of local government and the need for workforce modernisation. Precise costings cannot be predicted at this stage as it is dependent upon the volume of use given the pay as you go approach. 92 partners have provided written expression of interest in this Lot 6.3 Lot 2 This lot provides consultancy services for executive search and selection covering permanent and interim appointments. The pricing for this lot is based upon a percentage rate of the annual salary cost of the executive manager placement. The average percentage rate has reduced to the partners benefit; with such rates reducing on average by 5%. In terms of interim placement there are additional suppliers and whilst the existing providers rates have not decreased, new suppliers rates are more competitive (see Appendix 2 for price comparison). Competition between suppliers will also tend to reduce overall costs to the partners.

7 Page 5 Agenda Item 7 This lot will be let to six suppliers, currently there are four and this increase reflects the expansion of the partnership. Detailed pricing is attached in commercially confidential Appendix partners have provided written expression of interest in this Lot 6.4 Lot 3 The Talent Wave is a new innovation and concept and therefore there is no previous price comparison. As the main body of this report outlines the aim is to reduce the cost of redundancy to the partners by enabling increased transfer of employment between the partners. As an indication the average cost of redundancy per employee is 20,000 and the average cost of licence fee per annum is 1,704 (based on the number of partners who have expressed an interest in this lot, i.e. 87), i.e. yielding a saving of 18,000 assuming one employee is successfully placed. At present, 87 partners have expressed written interest in the Talent Wave. There is clear expectation from the Chief Executives London Committee (CELC) that London Boroughs (32) will join this solution and active interest expressed from other partners. Commercially confidential Appendix 3 provides a sliding scale of partners costs depending on the number of partners who use the Talent Wave. 6.5 Lot 4 This lot provides a software advertising solution to replace the traditional recruitment advertising agent. Currently LBRP partners paid the advertising agent 364,273 (most recent cost analysis) for non-media advertising costs. These charges include production, typesetting, creative work and posting (i.e. distribution) costs. As an indication based on Sutton s latest cost, the Council paid the current advertising agent 17,384 for these services and the new service cost will be 1,716 per annum to be payable to the new software supplier. Building in the cost of the Sutton in-house team to operate the software solution (based on 3 FTE) this would add a 1,104 per annum cost. Therefore the new combined cost of the payment to the software provider for the annual operating licence and the in-house transactional team to operate the software would be 2,820 per annum. Therefore the net saving is estimated to be 14,564 to the Council. In addition there are partner cost savings to be gleaned from direct negotiations and deals with the media rather than via the advertising agent. These negotiations have yet to be concluded however early indications from soft market testing show an average of 15% reduction in advertising costs. As an indication, Sutton spent 145,939 last year on recruitment advertising / media costs and a 15% reduction would yield a 21,890 saving. A sliding scale of costs is attached in commercially confidential Appendix partners have provided written expression of interest in this Lot. Procurement 6.6. Detailed procurement advice has been given throughout this contract-letting, including the application of the OJEU process, contract standing orders and procurement procedures. Dedicated procurement support and advice has been assigned to the project to ensure correct compliance with contract standing orders and evaluation of the tender submissions. Legal 6.7. It is very likely that TUPE will apply to those employees employed by the advertising agent who have undertaken transactional activities associated with the preparation of recruitment advertisement for the media. Early indications from the current provider, Penna, show that 2.4

8 Agenda Item 7 Page 6 FTE are likely to meet the legal test of assignment and transfer to the newly proposed in-house (to be based at Sutton) LGRP team effective from 1 April Further TUPE issues will be worked through up to the date of transfer of 1 April 2015, including the test of assignment, TUPE measures, and due diligence. Dedicated legal support and advice has been provided regarding the development of terms and conditions for contractors to follow, advice on the development of the specifications, as well as the tender submission process. Health, including public health 6.8 There are no specific health or public health issues arising from this report. Community (including safety, localism) 6.9 There are no specific issues arising from this report One Planet Living 6.10 The use of electronic systems such as Lots 3 and 4 will reduce the use of paper-based approaches by the Council and its partners Integrated Impact Assessment 6.11 There are no specific equalities or other impacts arising Risk 6.12 Risks and issues have been identified and mitigated through the use of legal and procurement advice throughout the project. The use of an inter-authority agreement and draw down access agreements will ensure partners correctly sign up and pay for the services to be provided. Whilst Sutton has led this nationwide procurement project the Council will not be out of pocket as the partners have agreed to pay on a proportionate basis the backfilled roles where appropriate to do so. The cost and charges of accessing the framework will not be through Sutton but will be progressed directly between the partner and the provider concerned. Staffing 6.10 The staffing implications arising are covered under legal above Consultation 6.11 Extensive consultation to shape the Lots and associated service specifications (including wide distribution of draft specification documents) was undertaken to ensure partner s business needs were met. Regular updates have been provided to the London Heads of HR network as well as consultation with other prominent partners such as AGMA (Association of Greater Manchester Authorities) and COSLA (Confederation of Scottish Local Authorities). Timetable for Implementation 6.12 Key milestones in the contract-letting process are: Contract award approval 15 December 2014 Contract award notification 16 December 2014

9 Page 7 Agenda Item 7 Alcatel period 15 December to 26 December 2014 Implementation, design development and user acceptance testing (Lots 3 and 4) 2 January 2015 to 31 March 2015 Go live1 April Reasons for Lateness and Urgency 7.1 This report is late and urgent as the procurement timetable and evaluation process was outside of the Committee timetable. The procurement framework needs to be in place for the 1 April 2015 and therefore, with the mobilisation process timescale, this report cannot be considered at a later meeting of the Strategy and Resources Committee. 8. Appendices and Background Documents Appendix Title A Pricing schedule for Strategic HR Management Lot 1 B Pricing schedule for Executive Search and Selection Lot 2 C Pricing schedule for Talent Wave Lot 3 D Pricing schedule for recruitment advertising software Lot 4 E Suppliers to be awarded contracts Background Documents London Borough Recruitment Partnership report, Executive Committee, November Audit Trail Version Final Date: 10 December 2014 Consultation with other officers Officer Comments Sought Comments checked by Finance Yes Funmi Kunle-Toyinbo Legal Yes Rachel Murray, John Cheetham and Tracy Swan Other Officers: Procurement Yes Mark Brewer and Tess Nowlan

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