Agenda item

[To be introduced by the Cabinet Member for Housing and Regeneration. Report of the Chief Operating Officer] Cabinet will be asked to agree proposals to award a Total Facilities Management contract for Council buildings.

The Cabinet Member for Housing and Regeneration introduced the report which put forward a preferred delivery option for procuring both hard and soft Facilities Management services in a more efficient and cost effective way through a single contract with an external provider. The staff affected by the proposed change would be transferred to a new operator with their terms and conditions protected through the contract and will be paid at or above the London Living wage and the new contract will deliver apprenticeships to create new employment opportunities.

 

RESOLVED

1. That, subject to paragraph 3.2, to approve the award by way of a call off from the Tri-borough single supplier Framework Agreement to Amey Community Limited (“Amey”) of a Total Facilities Management services contract for a period of 5 years starting in November 2015 with an option to extend for up to a further 3 one-year periods making a potential total of 8 years, for the total estimated all-inclusive price of £29.724M as further detailed in the exempt part of this report.

 

2. That Cabinet delegate authority to the Chief Operating Officer in consultation with the Cabinet Member for Resources and Culture to finalise the detailed payment mechanism, service levels, condition appraisal and other contract terms.

 

Alternative Options considered

Using the detailed work carried out by the Tri-borough authorities as part of their extensive procurement process we have applied that to Haringey’s criteria for determining the optimum delivery solution. To “do nothing” is not a viable option.

The following criteria have been considered in reviewing the delivery model options:

 

•        Flexibility and scalability - Council FM services that are capable of meeting changing service requirements, and economically sustainable as size of the estate reduces.

•        Financial savings - A delivery model with a focus on value for money that meets the pre-agreed, future planned and potential savings.

•        Quality of delivery and performance – Simple (ideally single) access to FM services, demonstrable performance of timing and works quality. Performance measured, managed and reported within the contract management and delivery model.

•        Risk transfer - Service and asset compliance risks and ownership clear, managed effectively in the most appropriate place.

•        Innovation - Best practice delivery, responsive to market developments and technological improvements, incentivised and shared investment.

•        Social and economic value -A service that reflects the makeup of Haringey and recognises the social and economic value of its workforce.

•        Customer perception - An effective, integrated customer interface including a seamless service provision through a customer oriented helpdesk. Demonstrable evidence of customer satisfaction.

Following the Tri-borough feasibility evaluation a further options appraisal carried out by V4 Services Ltd also considered the alternative delivery models and concluded that an Integrated model such as TFM is the most appropriate to deliver the required outcomes for Haringey. The range of four models taken forward and considered for evaluation were; As-Is, Enhanced As-Is, bundled and Integrated

 

Table 1 below summarises the evaluation of each model to meet the required criteria.

 

Table 1- (Source: V4 Services Limited)

 

 

 

 

EXPECTED OUTCOME	As is	Enhanced as is	Bundled, single sourced	Integrated services
Flexibility and scalability	3	3	4	5
Financial savings	1	2	3	5
Quality of delivery and performance	2	3	3	4
Risk transfer	1	2	3	5
Innovation	1	2	4	4
Social and economic value	3	3	4	4
Customer perception	2	2	3	4
Total Score(out  of 35)	13	17	24	31
Ranking	4	3	2	1

 

 

 

The integrated option, such as TFM, scored the highest number of points.

 

A summary of the positive and negative aspects of each option is highlighted in Table 2 below. The table demonstrates where an option has received either a high (4-5) or low (1-2) score.

 

 

 

 

 

 

 

 

 

 

Table 2 (Information source: V4 Services Ltd)

 

 

Delivery model	High scores 4 and 5	Low scores 1 and 2	Total score
1. As-is	·       None	·       Financial savings ·       Quality of delivery and performance ·       Risk Transfer ·       Innovation ·       Customer perception	13
2. Enhanced As-is	·       None	·       Financial savings ·       Risk Transfer ·       Innovation ·       Customer perception	17
3. Bundled, single sourced	·       Flexibility and scalability ·       Innovation ·       Social and economic value	·       None	24
4. Integrated services	·       Flexibility and scalability ·       Financial Savings ·       Quality of delivery and performance ·       Risk transfer ·       Innovation ·       Social and economic value ·       Customer perception	·       None	31

 

 

 

 

Market research of the potential financial savings and cost for the services in scope for each option is highlighted in table 3 below.

 

Table 3 (Information source V4 Services Ltd)

 

 

 

 

 

Overall current annual cost of services in scope				£ 4,112,000
Option	Savings range (%)	Mid-Range (%)	Mid-Range Saving	Mid-Range Cost
AS-IS	0	0	0	£4,112,000
AS-Is enhanced	1-5	2.5	£102,800	£4,009,200
Bundled	5-10	7.5	£308,400	£3,803,600
Integrated	15-20	17.5	£719,600	£3,392,400

 

 

 

 

The analysis undertaken by V4 indicates the model delivering the greatest savings is the integrated services option, including TFM (The Tri-borough- Amey proposal delivers savings within the range of 15-20%)

 

The analysis undertaken by V4 found a clear trend of Local Authorities moving towards integrated/TFM delivery of FM services. It highlighted seven case examples of recently awarded TFM models in Camden (Amey), Brent, Richmond, Lambeth, Kent, Essex, Oxford. Recent awards were based on a minimum 5 year initial term.

Summary- review of options

 

Option 1: As-is, mixed economy – a combination of in-house service provision and external contracts.  Having evolved incrementally over time this is the operating model for FM that exists for the Council with in-house teams providing soft FM whilst cleaning, security, help desk, Hard FM (via a managing agent function) are provided through external suppliers.

 

Consideration: Discounted as it does not offer best value relative to the changing needs of the Council and the current market conditions and trends. This model would continue to deliver minimal savings only, mainly through staff reductions, and be limited in extent of innovation and risk transfer.

 

Option 2: Enhanced As-is – a combination of in-house service provision and external contracts remains, however with greater visibility and control of by the FM team of all spend and enforced compliance with corporate contracts. Enhanced quality and performance management across all areas of delivery. Estimated savings are in the range of 1-5%.

 

Consideration: Discounted as long as the preferred option ensures that the external provider is assured to adopt the London Living Wage (LLW) any advantages of in-house service provision would be negated. This model would require increased investment to achieve internal innovation and future savings. There is minimal scope for risk transfer or externally driven innovation.

 

Option 3: Bundled/Single services: a series of individual contracts for each separate service line (e.g. maintenance, security, cleaning, helpdesk provision etc) or bundling of similar sized contract. Such contracts are generally let for short periods of time (typically two to three, maximum five years) and offer the advantage of regular market appraisal but do not encourage innovation from the supplier. They incur increased procurement costs and do not facilitate a thinner client side operation. Estimated savings are in the range of 5-10%.

 

Consideration: Discounted as although it is considered that the adoption of a bundled/integrated model of FM service delivery could deliver the majority of the Council’s requirements, changes in scale would be more difficult to action without affecting prices due to the lack of economy of scale in each bundle. Achieving consistent quality and savings would require greater management across the bundles. Risk transfer would be possible but limited due to the lower value of each bundle, similarly innovation would be limited to within the scope of the bundle rather than the totality of FM Services. The need for a larger client function would reduce potential savings.

 

Option 4: Integrated/Total Facilities Management (TFM): a ‘one stop shop’ outsourced solution for all facilities services.  Innovation and self management of the account assist the Council in transforming the client model to that of an intelligent client function. As such the TFM provides an economic and flexible platform for the provision of FM services. Estimated savings are in the range of 15-20%.

 

Consideration: This option offers the best value relative to the changing needs of the Council. It meets all evaluation criteria.

                       

Summary of TFM

 

Implementing and promoting the TFM model offers greater benefits to the Council with least risk.  This model maximises the opportunity for integrated innovative delivery and savings through a single provider. Risk can be transferred to and managed by the most appropriate partner across the whole FM service which provides greater cost certainty. This option offers considerable flexibility to accommodate changes in the size and scope of the managed estate. It is expected that the LBH estate will reduce in size significantly over the coming years and this option allows the Council to remove buildings and reduce its FM spend accordingly. Therefore Option 4, the Integrated/TFM model, is recommended.

 

The Tri-borough FA provides a delivery option that fulfils the Council’s requirements whilst providing a scope of services whereby new and innovative ways of working will be available to the Council during the life of the contract. The ability to call-off from this existing FA provides for a cost effective and time efficient procurement route to the Council.

 

Alternative frameworks

 

The Crown Commercial Services framework has been considered, however it is currently being re-procured and is unlikely to be available before November 2015. Following this a further period of mini competition tendering would be required.

 

The new Scape Group framework has also been considered and is available from May 2015; this would require a further period of procurement to establish an indicative price. The benefits of this have not been fully established and there is no proven record or current users.

 

Reasons for decision

 

The Council’s is required to ensure its buildings remain fit for purpose and are supported by value for money facilities services. Paragraphs 4.2 to 4.7 set out the delivery criteria and appraisal of options which confirms an Integrated Facilities Management framework best meets the Councils requirements. The recommended model will provide savings in line with the Councils medium term financial plan, whilst remaining flexible to meet the Council’s changing needs.