HERTSMERE BOROUGH COUNCIL REPORT TO EXECUTIVE

Transcription

1 HERTSMERE BOROUGH COUNCIL REPORT TO EXECUTIVE Item no: 7.4 Document Reference no: EX/13/73 Date of Meeting / Decision: 15 January 2014 This is not a key decision call-in on the grounds of urgency Urgency: The proposals are not exempt from PROCUREMENT OF A REPLACEMENT FRANKING MACHINE PORTFOLIO HOLDER FOR COMMUNICATIONS AND CONSULTATION: COUNCILLOR MORRIS BRIGHT 1. ACTION RECOMMENDED 1.1 That the Executive approves the purchase of the replacement franking machine from the preferred bidder D and approves funding of 14,864 (capital cost excluding maintenance) from surplus 2013/14 Investment Income. 2. EXECUTIVE SUMMARY / PROPOSALS 2.1 The Council's franking machine was purchased by the Council 5 years ago; it contains an accounting device called the Meternet, which allows the franking machine to operate. It is licensed to Preferred bidder D and the Royal Mail and without the licence the machine would not work. The Meternet licence to operate the machine has already expired and the Council has reviewed it for a further 3 months.as explained further in the report, this could be renewed for a longer period (see para 4.7), but this option is not cost effective. 2.2 The Print Services Manager has researched the options for the replacement of this equipment either by purchase or by a lease/rental agreement. Among the factors taken into consideration are the prospective changes to the regulation of the postal services. The Connect is a replacement to the existing DM1000 franking machine, which offers more facilities and functionality; meets the Council s needs and current setup. The Connect is not reliant on the Meternet and the machine does not need to be replaced after 5 years. There will be no licence requirement with this option. 1

2 3. REASON(S) FOR RECOMMENDATION 3.1 The recommendation by the Print Services Manager is for the preferred bidder Model Connect Digital Mailing Machine because it meets both current and future mailing services requirements. It achieves this by:- Not requiring additional Hertsmere Print Services staffing resources to be used. The machine is fully automated and requires the least degree of manual handling of any of the options explored. Due to the efficiency of the new machine (Connect+ 3000) the cost of ongoing maintenance will be reduced by 319 per annum, thus providing a guaranteed minimum saving of 1,595 over a five year period. Efficient and productive use of Hertsmere Postal resources is improved through the speed and versatility of the machine s capabilities (different postal weights, size and thickness, can be run at the same time). The preferred bidder D Intellilink System overcomes manual accounting and reconciliation of charges to individual units. It is able to analyse expenditure and help to highlight potential opportunities to achieve cost reductions. The postal de-regulation requires a postal mailing system to handle multiple postal services providers and charging schemes. The Connect consolidates data from the multiple mailing systems and can track and monitor postal costs for an unlimited number of accounts. Unlike the equipment on offer from the other providers, the preferred bidder D Intellilink System provides this information on-line, thus avoiding the need for manual operation with the attendant risk of human error. Preferred bidder D provides a single invoice facility irrespective of the number of postal service providers used by Hertsmere. 3.2 The preferred bidder D machine is one of the most advanced, efficient and offers more functionality in response to the continual changes taking place in the postal market. Hertsmere has limited time and resource to meet the needs of these changes. The Preferred bidder D machine will add to the postal capabilities of the authority without compromising officers other duties. 4. ALTERNATIVE OPTIONS 4.1 The Council could decide not to replace the franking machine. However this would severely impact of the service delivery regarding postal services. 4.2 The preferred machine could be leased from Preferred bidder D over a five year agreement at a total cost of 28,950 (including the service cover ie maintenance), which is 5,249 above the cost for the Council to purchase the machine outright and pay the maintenance costs over five years. This additional cost in terms of net present value is 3,645 (see para. 7.2 below) Hence it is cheaper to buy rather than lease. 4.3 The franking machine could be replaced with a different model from a different supplier. Four suppliers were considered: Suppliers A, B, C, and D. For reasons of commercial sensitivity only the preferred supplier D, can be identified. 2

3 4.4 A summary of the bids based on whole life costs: Compliant with Specification 5 year maintenance and consumable cost Purchase Supplier Cost Total D Yes 14,864 12,308 27,172 A Yes 21,603 17,620 39,223 B Yes 22,368 14,190 36,558 C No Hence, it is recommended that the Council purchases the Connect high capacity mail processor from preferred bidder D at a cost of 14, The Meternet on the current franking machine could be replaced at a cost of 3,500 and a yearly maintenance cover of 500. The Meternet only works on the specific machine it is located on and cannot be transferred to a different machine or model. As the machine is failing and will exceed its expected operational life, the machine would need to be replaced. However the Council could not recover the cost of the Meternet and would need to buy a new one with the replacement franking machine. 5. PLANNED TIMETABLE FOR IMPLEMENTATION 5.1 The acquisition of the machine would be immediate after the decision to authorise the purchase. The implementation is expected to take a couple of weeks. 6. DELEGATION 6.1 The Head of Finance and Business Services has advised that, in accordance with the financial regulations contained in the Council s Constitution, this is a decision which cannot be delegated to the Portfolio Holder and must be taken by the Executive as a whole. 7. FINANCIAL AND BUDGET FRAMEWORK IMPLICATIONS 7.1 The purchase will be funded from surplus 2013/14 Investment Income as the funding for the machine was not included in the 2013/14 capital budget (due to changes in the market for postal services and soft market testing being carried out). 7.2 The purchase cost of the machine including maintenance cost amounts to 21,823 and the net present value is 19,745. The leasing cost amounts to 28,950 with a net present value of 25,068. Based on the net present value it is cheaper to buy the machine rather than lease it with a saving of 5,323. Total Cost NPV Buying franking machine 21,823 19,745 Leasing franking machine 28,950 25,068 Saving from buying 7,127 5,323 3

4 7.3 If the franking machine is kept and the Meternet is replaced the Council would need to invest an unidentifiable amount into the current franking machine for parts and labour, which could be more expensive. 7.4 The five years maintenance cost and cost of consumables amounting to 12,304 has already been budgeted for as part of the revenue budget and we don t anticipate any increases. 8. LEGAL POWERS RELIED ON AND ANY LEGAL IMPLICATIONS 8.1 The procurement has followed the Council s Contract Procedure Rules. 9. EFFICIENCY GAINS AND VALUE FOR MONEY 9.1 The machine offers more cost effective mailing solutions that the Council can take advantage of. 9.2 Due to the efficiency of the new machine (Connect+ 3000) the on-going revenue maintenance will be reduced by 319 per annum, thus providing a guaranteed minimum saving of 1,595 over a five year period. 10. RISK MANAGEMENT IMPLICATIONS 10.1 There would be no operational impact to the Council and would ensure future postal services are maintained. 11. PERSONNEL IMPLICATIONS 11.1 The proposal to purchase the preferred bidder D franking machine will not result in any changes to the current staffing arrangements in Print Services. Other organisations which have been contacted run a full time postal department with more staff to deal with similar volumes of post. Hertsmere's postal service is run with officers from within Print Services and the Corporate Administration Resources (CAR) who operate flexibly and have many other duties. A slower or lesser machine would require a change to the working practices which would impact not only on Print Services and CAR but also other service operations, due to the staffing level within the department. 12. CORPORATE PLAN & POLICY FRAMEWORK IMPLICATIONS 12.1 The proposal meets the goals of the Council and achieves this by service improvement, increasing the use of electronic data, and reducing time and costs. The machine meets the needs in the changing market situation for postal services enabling the Council to maximise its benefits and obtain best value for money from the open market. 4

5 13. ASSET MANAGEMENT PLAN IMPLICATIONS 13.1 None. 14. HEALTH AND SAFETY IMPLICATIONS 14.1 The machine is quieter and reduces the manual handling and will help minimise health and safety risks. 15. APPENDICES 15.1 None. 16. BACKGROUND PAPERS USED IN PREPARATION OF THIS REPORT 16.1 None. 17. AUTHOR 17.1 Mark Roberts, Print Services Manager. 5