Meeting documents

1 THE ISSUE

Full Council on 24 January 2002 agreed that three companies should be invited to make proposals to help the Council meet its objectives through the development of a strategic partnership around agreed principles.

1.2 Three proposals have been received. This report considers the options and implications for the Council in going forward.

2 RECOMMENDATION

The Council Executive

2.1Appoints bidder A as Preferred Partner.

2.2 Authorises

the Resources Director to negotiate a draft contract and Partnership agreement with the Preferred Partner, subject to

2.2.1 It being in line with the objectives and principles set out by The Council in January 2002.

2.2.2 Further movement and clarification on the key areas identified in 7.3 prior to any contract signature

2.2.3 A further review of the preferred partners financial standing prior to contract signature

2.2.4 Keeping the option to calling bidder C in for discussions as a reserve bidder, should it become clear that the negotiations are proving unproductive.

2.3 Delegates the Resources Director, in consultation with the Executive portfolio holder for Resources, to appoint a shadow board and to work with that board to define a programme of prioritised projects against which the contract will be negotiated.

.2.4 Requires that the draft agreement be reported back to the Council Executive following these negotiations.

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3 FINANCIAL IMPLICATIONS

3.1 The proposed partner has sought to base their bid price on the Council's current budgeted Information Development Services (IDS); Human Resource (HR) administration and Payroll spend. This is still subject to negotiation at the next stage and it is therefore assumed that the contract price will be within existing budgets.

3.2 There are a number of projects that the bidder will also include within this core price. Bidder A has valued these as £2.087m over the life of the partnership. A full evaluation has not yet been made of the potential savings to the Council in not spending on projects that the company has included in their core price.

3.3 No allowance was made in the proposal for the Council's own client costs. Such costs have yet to be assessed but will need to be funded by the Council over and above the proposed bid price. This assessment is part of the process described at section 6 in the next stage.

3.4 The Company have also proposed a number of non-core projects which would be funded outside of the core price but by doing so the Council would benefit financially by £2.25m over the life of the partnership.

3.5 The company have estimated further savings in Business Process Re-engineering (BPR) to the Council of £22.5m over ten years and £32.4m through procurement. These estimates will be verified through due diligence and should be treated with a degree of caution at this stage.

4 STAFF IMPLICATIONS

4.1 Under the proposed preferred partners submission, Information Development Services and Payroll posts would be subject to transfer under the TUPE regulations. Further clarification would be required in any next stage over the transfer of any posts in Human Resource Administration.

4.2 The TUPE regulations protect employment terms and conditions upon transfer of the employees. The proposed preferred partner has made the commitment that they will honour this for the duration of the Partnership. Staff applying for and obtaining promotion would be required to move to company terms but staff changing role as a result of an organisational review would not. It was a requirement of the process that all the bidders offered staff a Pension in a broadly comparable scheme or undertook to apply for admitted body status in the Avon scheme. The proposed preferred bidder has met this requirement. The ultimate decision on which option will be one for the Council and the company to agree at the next stage.

4.3 No redundancies are anticipated as a result of this process.

5 THE REPORT

5.1 The Council on January 24^th 2002 resolved to invite three bidders to make proposals with a view to establishing a long-term strategic partnership. The Council set a clear set of objectives for the process and set out the principles around the sort of Partnership it would seek.

5.2 The partnership evaluation process that followed recognised that there could be three different scale of bids but that the service transfer scope was not the key determinant and that all bids should be measured against the same objectives and principles.

(1) The objectives recognised that the Council wished to continue to improve service provision to its customers equip itself to deal with change, manage and mitigate risk and improve its information systems. It also sought proposals that would add value to any transferring services but crucially increase the efficiency and effectiveness of all services.

(2) The Partnership Principles set out that in a long term partnership the partner and the Council would need to be able to resolve issues together, deliver seamless services and develop a Partnership in which, the company, the staff and the members could be confident

5.3 On 31 May 2002 an Invitation to Negotiate was issued to the three shortlisted bidders. This document set out the Council requirements and how the process would be conducted. It included the following:

(1) The Invitation Document.

(2) A draft Risk Allocation Matrix

(3) A draft Heads of Terms Document

(4) The Evaluation Process

(5) The Financial Model

(6) The Access Period Protocols

(7) A database of baseline information about the Council

Each of these papers had a key role in communicating as much about the Council and its plans to the bidders as possible. The bidders were then given three months open access to the Council to test the information and exercise "due diligence" so that their bids could be as close to the Council's requirements as possible. We also wanted to remove the risk, as far as is possible, of the bidders coming back at later stages with issues due to not having had the necessary information.

5.4 Because of the variant bids and the need to find an organisation that the Council could feel confident about working with in the long term we needed to develop an evaluation process that would test the bidders in a range of ways but also engage the whole Council in the discussions with the bidders. The process can be split into four stages. Three of the stages used the European Foundation for Quality Management (EFQM) Excellence model as a tool. More detail on the process can be found in Appendix A. The phases were

(1) A self assessment by all the Council services

(2) A self assessment by each of the bidders

(3) A submission by the bidders of their Partnership Proposal using the Excellence Model

(4) A submission of the proposals based around the following criteria

a) Finance

b) ICT technical

c) Human Resource Issues

d) Property and Premises

e) Deliverability

The EFQM assessments were carried out by Council staff trained in the process and from all parts of the organisation. The Project team carried out the detailed submissions in 4 above with advice from lead Internal advisers (Heads of Service) with External advisers in the areas of Finance and ICT. The Legal Advisers have also advised throughout the Evaluation Process. All proposals were considered against the Council's baseline position and the improvements the Councils own services could reasonably be expected to make (The In-House comparator).

5.5 The Results of the Evaluation Process are detailed at Appendix A and Appendix B. This details the benefits and risks to the Council of proceeding with the decision as set out. The Evaluation process supports the appointment of Bidder A as the Preferred partner with whom to negotiate. This is a crucial stage and more detail is given in section 7 of what this means for the Council. In order to protect the Council's position it is advisable that the Council maintains the option of entering discussions with an alternative provider. In this case it is recommended that this be bidder C.

5.6 Throughout the process the Project has been managed using the Prince 2 methodology. The Project team has been recruited from within the Council, utilising the skills and knowledge of existing staff. The Project Manager has reported to a Project Board made up of the Director of Resources and two service-based senior managers (Head of Customer Access and Libraries, and Building Control Manager). The board has received ongoing advice from the Head of Strategic Resource Planning (as IT client steering group Chair); the Interim Head of IDS and the Corporate Law Team Manager. In addition the project has taken an active approach to risk management with the support and scrutiny of the Corporate Risk Group. External advice has been utilised as detailed in 5.4 above.

6 THE NEXT STAGE -PREFERRED BIDDER TO CONTRACT SIGNATURE

6.1 Negotiations will take place with Bidder A, if chosen as Preferred Bidder, in a number of key areas. The Preferred Bidder will be required to take financial and operational risk against the achievement of as well as identification of cost savings and/or service enhancements within the Council. It will be necessary to give comfort to the bidder of the Council's commitment to the process and ability to act in a joined up and effective manner to achieve internal change.

6.2 It is the Project Team's intention to capture as much detail of the ongoing benefits of the partnership within the contract as is practical and appropriate. There are a number of issues that fall out of this, and a number of ramifications for the wider Council during the period between preferred bidder announcement and contractual close.

6.3 The key areas of negotiation have been identified as follows:

(1) Agreement on `core price' for ICT transfer and payment mechanism to reflect both quality of service and changes to demand

(2) Preferred Bidder commitment to, and investment in, the delivery of as well as identification of potential savings and service improvements within both the ICT and wider Council service delivery

(3) Preferred Bidder commitment to the delivery of an agreed programme of short to medium term projects designed to `kick-start' the Council service improvement programme

6.4 To achieve a successful conclusion on the points set out above it will be necessary for the Council to put in place an internal structure to ensure a joined up response to these issues and bridge the gap between contract negotiation and ongoing contract management. Put another way, the ability of the Preferred Bidder to sign up to a series of commitments that involve exposure to risk based on mutual undertakings between the Council and its partner will be dependant on the confidence within the Preferred Bidder that the Council has in place the resourced processes necessary to deliver its side of the Partnership. As a result, the ability of the Resources Director to negotiate and complete a contract and partnership agreement with the Preferred Bidder that meets the Council's objectives will depend on the active participation and goodwill of individuals and departments across the wider Council.

6.5 In order to manage a model of joint working in such a way as to encourage both planning and delivery to have optimal results it will be vital to ensure that a form of Partnership Board is in place in advance of the formal partnership being agreed, a model of the Partnership is included at Appendix C which would form the basis for development. This is because the negotiation process that will lead to an agreed set of prioritised projects is effectively a partnership process that has Council-wide implications. As such, negotiation must be taken as seriously as post-contract partnership work and this requires Council involvement beyond the core project team in order for project prioritisation to be meaningful and to have the support of the effected departments at implementation stage.

6.6 The creation of a working pre-contract partnership board tasked with agreeing a list of initial projects for the Preferred Bidder to deliver in addition to core ICT outsourcing could help to achieve three key objectives for the Council. These are as follows:

· Implement a way of working on the Council's side of the Partnership Board that will accelerate development of an effective board in conjunction with the Partner during the implementation stage of the contract

· Give comfort to the Preferred Bidder that the Council is undertaking its responsibilities seriously and thus support the Project Team objectives of securing best value for the Council during the negotiation process

· Create a list of projects captured within the contract that should create the greatest theoretical benefit to the Council and have the appropriate level and extent of buy-in within the Council to ensure delivery of those benefits

A Project plan is attached at Appendix D ----- which shows the activity and how this could be structured to deliver a Partnership by 1 June 2003. The Project was financed by Council until April 2003 the extension to June can be financed from the existing

6.8budget.

7 OVERVIEW AND SCRUTINY

7.1 The Resources and Customer Services Overview and Scrutiny Panel met on 11^th December 2002, specifically to look at this Project. The draft papers are as attached http://intrasrv/intranet/Committee_Papers/O&SRes/DraftRCS021211/021211Draft.htm

7.2 The recommendations from the Panel are as follows; these are repeated with a commentary highlighting where the recommendation sits within the report and the process.

· The Panel supported the project in principle and the significant benefits, which could arise from the partnership, especially with regard to customer services. The Panel recognised that it would be highly improbable that the Council will be able to make the required transition to complex IT and service delivery mechanisms without some form of partnership. Comment- This is supported by the results of the evaluation process

· The Panel feels that information about other Local Authorities who have gone down this path should be made available to the Executive before it comes to a decision. Comment -Site visits were made to bidder sites as part of the Phase 1 and the ability of the bidder to deliver was a key part of the evaluation process. Site visits to other authorities could form part of the next stage.

8 CONSULTATION

8.1 Staff consultation has always been a key element of this Process, recognising the Principle of staff confidence. Appendix E, details the extent of what has thus far been done but also the consultation plan and transition plan to back up the recommended decision. The Appendix evidences an extensive programme of consultation and communication already carried out, it has been a Principle agreed by the Council that all stakeholders including staff have confidence in the Partnership. This work will be intensified should the decision to go ahead as described above be made, and staff know who the preferred bidder is.

This version was printed 06-Jan-03 10:45 a45/p4503-Jan-03 2:49 PM30-Aug-01 9:23 AM