Agenda item

[Report of the Chief Operating Officer. To be introduced by the Cabinet Member for Corporate Resources.]To seek approval to award a new contract for the supply of Permanent and Temporary Agency Workers.  The award is made under the Eastern Shires Purchasing Organisation (ESPO) EU procurement compliant framework called MSTAR2 - Managed Service for Temporary and Agency Resources.

 

In the absence of the Cabinet Member for Corporate Resources, the Leader introduced the report which proposed awarding a new contract for the supply of Permanent and Temporary Agency Workers to Hays Specialist Recruitment Limited (‘Hays’) for a period of 3 years from 1 February 2017 with the option to extend the contract for a further period of one year.

 

The award was proposed under the Eastern Shires Purchasing Organisation (ESPO) EU Procurement Compliant Framework ‘MSTAR2 - Managed Service for Temporary and Agency Resources’.

 

In response to a question from Councillor Morris, temporary staff would not be replacing permanent staff as part of the budget proposals.

 

RESOLVED

 

1.    To approve the award of a Master Vendor contract under the Eastern Shires Purchasing Organisation (ESPO) EU Procurement Compliant Framework ‘MSTAR2 - Managed Service for Temporary and Agency Resources’ to Hays Specialist Recruitment Limited (‘Hays’) for a three year period with effect from 1 February 2017 with an option to extend for a further period of one year, for the supply of temporary agency workers and to administer the recruitment of all permanent Council staff at Tier 4 and below (below Head of Service level), and optionally to administer recruitment above Tier 4.

 

2.    The total value for the management fees payable for the temporary and permanent staff resource centre is on average £860k per annum and a total of £3.49m over the period of the contract (including the option to extend for one year).

 

Reasons for Decision

 

Hays have successfully supplied temporary agency workers to the Council since 2006 when they were awarded a seven year contract and in 2013, were again appointed as the preferred supplier following a mini tender competition using the ‘MSTAR1’ framework.

 

The Council awarded Hays the contract in 2013 primarily due to value, where on average, Hays were 10% more cost effective than other bidders. Hays have continued to offer competitive rates which is demonstrated as they were the highest scoring bidder in ‘Quality’ and ‘Price’ in the MSTAR2 framework.

 

The MSTAR framework was established following an EU procurement process and is supported by the Government Procurement Service (GPS) and Local Government Association (LGA). It is recommended to directly award with a Master Vendor model of delivery as this provides the optimum value for money that includes a mixture of large organisations and SMEs to deliver the resources the Council requires.

 

Over 30 local authorities were involved in developing the scope, specification and evaluation of the MSTAR2 framework to meet a broad range of user requirements. As the framework will be managed by ESPO at a national level, this will help drive performance on an ongoing basis and build strategic relationships with suppliers to gain better value for money, cashable savings and improve performance. Furthermore, having access to a national framework will enable the Council to share commercial knowledge, including supplier and market intelligence and expert advice.

 

Significant cost savings and efficiency gains have been made through the on-going relationship between the Council and Hays, including a reduction in average charge rates by £3.40 per hour in five years, providing a saving on the rates charged equivalent to over £2.6m and a reduction in the cost of long term engagement of temporary workers by 39%. Following the award of the 2013 contract a further £1.1m savings were achieved in the first year of the contract.

 

After nearly 10 years of delivering the service with staff who are not professional recruiters, the Council is seeking to build a ‘Recruitment Partnership’ with Hays in order to provide a single point of contact for all staff recruitment.

 

A single point of contact will enable the Council to better control recruitment activity by channelling all recruitment requirements through a single process, thus enabling Hays to have a single view of the Councils staffing requirements and using their existing market experience, recruitment expertise and multiple sourcing channels, will improve permanent recruitment attraction or placement of temporary workers by ensuring the right resources are matched to the Councils requirements. Maximising the economic benefits of sourcing temporary agency workers through a move to a Master Vendor Contract and moving to an online recruitment system to significantly streamline recruitment processes and procedures, enabling a better candidate experience and shorter recruitment timescales.

 

The new business model for recruitment introduces both on-site and off-site service delivery. The on-site team will include Recruitment Partners who are professional and experienced recruiters that will work directly with senior leaders in each directorate to better manage their workforce requirements, and Sourcing and Compliance Partners who will ensure internal management and compliance with recruitment policies and procedures. Off-site services will include Talent Sourcing, Engagement and Management specialists who will manage talent mapping, and contract co-ordinators that will ensure efficient administration of all stages of the recruitment process.

 

Spend Fees and Savings:

 

Hays will continue to charge a fixed management fee to administer around £20m of temporary worker spend per year through its existing Resource Centre. The fees are £146,900 per annum. The £20m projected spend in temporary workers includes the wages paid to the workers that are capped to a maximum hourly rate as well as a mark up fee. The mark up pricing for each role is consistent whether sourced by Hays or an alternate supplier partner. The total expenditure will vary year-on-year dependent on the number of temporary agency workers engaged by the Council. The new Master Vendor Contract for the provision of temporary agency workers is expected to reduce the level of fees payable by the Council by approximately 5%.

 

Other additional fees are £110,399 for the cost (over four years) to implement and manage a new eRecruitment system delivered through an existing eRecruitment technology contract. This supplier was selected following a tender process earlier this year. The service has waited for the new contractual arrangements to be in place and will provide the platform to support significantly improved permanent and fixed term contract recruitment. Hays have negotiated further system enhancements to the software at no extra cost to the Council. In the event that Hays can secure an enhanced commercial offer for the provision of the technology with other customers, such benefit will also be passed back to the Council.

 

The contract will also include the on-going provision of the HAYS online Careers Transition Portal. The HAYS portal was purchased in 2015 to help deliver some of the commitments made in the Council’s Workforce Plan around better supporting staff with their personal development and careers. In light of the continued budgetary savings which the Council is required to make, there is an ongoing need to continue to provide staff with a wider range of career tools and support to apply for new roles in and outside of the organisation. The cost is £7,000 per year, which equates to approximately £16 per person. This represents excellent value for money and offers continued support for those within the organisation.

 

The Council recruited 200 permanent roles externally and 76 internally in the last year. Hays have offered extremely competitive fees for both permanent recruitment and internal placements. These fees are fully inclusive and include any costs incurred from advertising vacancies in the marketplace. Using data based on recruitment activity last year for permanent recruitment, the total cost of recruitment is in the region of £690,000 per annum.

 

A target for savings on permanent staff recruitment is more difficult to ascertain as the total costs involved of recruiting permanent staff is not captured. It has been established that the mark up rates offered by the recommended provider are 4-10% lower than standard agency and recruitment framework rates. This equates to a reduction of around 30–50% in total fees payable under the current arrangements. The new recruitment arrangements gives the Council much more effective control on permanent recruitment spend. Ad hoc off-contract spend; especially around advertising spend, will be stopped as all recruitment will need to follow a single process via Hays in the first instance. All other spend will be blocked giving the Council much firmer control and grip on spending, which will support the Councils need to reduce spend.

 

Summary of Fees:

 

 

* Note: the above permanent recruitment fees are based upon activity during the last 12 months and will fluctuate year on year

 

It is anticipated the migration to these revised commercial structures will deliver in excess of £1m of cumulative contractual related savings over the initial 3 year term of the contract. These savings will be delivered through lower mark up rates in relation to temporary staff, significantly reduced permanent recruitment fees and minimal advertising fees and will contribute to the planned savings from Supplier Engagement Programme.

 

Benefits:

 

Directly awarding the contract to Hays for the provision of temporary agency workers and to administer the recruitment of all permanent Council staff offers a number of benefits:

·      Direct award provides significant savings in resources by eliminating the need to carry out a tender or mini competition exercise. The cost of undertaking a full tender exercise with the market could have exceeded £100k and taken up to 12 months to complete when considering the following complexities:

Delivery and implementation of a new service operating model,

an eRecruitment system, and

transfer of all existing temporary agency workers to the new provider

·      An innovative and flexible delivery model with a single point of contact for all recruitment activity will be established. A tiered service delivery model will include both on and off-site teams managing all aspects of the recruitment process, from face-to-face Recruitment Partners working with senior leaders on all aspects of workforce planning and recruitment, to off-site teams managing sourcing and attraction, talent mapping, supplier engagement, contract co-ordinators and administrators.

·      The single point of contact offers substantial efficiency improvements in processes (typical 35 percent improvement in time to hire) and procedures as well as using the latest online eRecruitment systems. A single point of contact will enable Hays to have a single view of the Councils staffing requirements and using their existing market experience, recruitment expertise and multiple sourcing channels, will improve permanent recruitment attraction or placement of temporary workers by ensuring the right resources are matched to the Councils requirements.

·      Through the new contract arrangements, the provider has greater incentive to fulfil vacant positions (paid by performance), fulfilment rates form part of the service level agreement and simplified all inclusive fee structures for recruitment (no additional advertising costs). If Hays fail to provide the right candidates, the Council will not pay a fee

·      The overall recruitment experience will be enhanced at every stage of the process:

·      Awareness – support and understand the Council’s workforce strategy and headcount changes, develop forward planning of resourcing demands and providing information to Council on market changes

·      Understanding Needs – continuous engagement with recruiting managers, ensuring needs are fully understood

·      Supporting Requirements – providing quality candidates, talent mapping and sourcing and assisting recruiting managers with recruitment decisions

·      On-boarding Staff – supporting candidates through the recruitment process, maintaining engagement and candidate feedback

·      Giving Council access to Hays’ extensive recruitment channels within the marketplace including an extensive network of offices, talent pools, specialist online and employer brand presence and extensive online social media channels e.g. LinkedIn, job boards, microsites and social media outlets.

·      Investment in real time management information on recruitment activity including real-time recruitment progress updates, tracking of candidate progress, monitoring of inclusion and diversity information and access to a fully auditable recruitment process

·      Creation of a Social Value Fund to support employment and career initiatives to support local recruitment initiatives within the borough

KPIs & SLA:

 

The Council will implement all Key Performance Indicators and Service Level Agreements specified under the ESPO EU Procurement Compliant Framework ‘MSTAR2 - Managed Service for Temporary and Agency Resources’ will form part of the Council’s contract with Hays.

 

Incorporated in the Hays contract are provisions to deduct up to 20% of the managed service fee for non-performance in relation to not meeting the fulfilment threshold.

 

HR will contract manage the performance of Hays ensuring they comply with the SLAs and KPIs stated in the contract. This approach will assist the Council in delivering its business needs and strategic objectives, whilst offering the best opportunity to achieve further significant savings in both temporary agency and permanent recruitment activity via a recruitment partnership

 

Robust contract governance and management overview will be implemented to ensure Hays deliver the services to the agreed Service Level Agreements and Key Performance Indicators. Quarterly contract meetings; led by Strategic Procurement, will be held to ensure high-level compliance with all agreed contractual arrangements through monitoring of key performance reports, and where appropriate, service credits will be levied on Hays for any service non-performance. Monthly operational meetings; led by Shared Service Centre, will monitor ‘in play’ recruitment, address any immediate shortfalls in performance, ensure Hays are meeting the needs of recruiting managers and where necessary, consider alternative recruitment activity to meet hard to fill roles.

 

Alternative options considered

 

Do Nothing - the Council is required to ensure that its temporary agency workforce continues to be engaged using an EU procurement compliant approach. The current contract expires in January 2017. Ending the contract without alternative provision would undermine the ability of the Council to flexibly manage its workforce and breach EU Procurement Regulations; therefore this is not an option.

 

Extend the current contract for a further year - the contract was awarded in January 2014 with the option to extend for a further one year. The Vendor Neutral model is not currently fulfilling the Council’s recruitment needs and does not facilitate the provision of permanent recruitment services. In addition the contractual rates under the existing arrangements are not as favourable as the new arrangements under the Master vendor arrangement.

 

Carry out an EU tender exercise - this option involves the highest demand of time and resources, with an estimated cost in excess of £100k, and is unlikely to achieve the best value for the Council. It is also likely that the suppliers that would be shortlisted will be very similar to those on existing national and regional frameworks. The MSTAR2 framework was created nationally in 2015 to enable Councils to engage quickly and cost effectively with temporary agency Managed Service Providers.

 

Utilise another direct call off Framework - procurement has explored other frameworks; many of the alternate frameworks contain the same supplier choice, with the selected provider also being a supplier on those frameworks. The MSTAR2 Framework is one of the most up to date and most recently tendered frameworks involving consultation with over 30 local authorities. The MSTAR2 Framework provides a quick route to market, together with greater clarity on the pricing to be charged and terms of the contract compared with alternate framework options.

 

Run a mini competition via a framework - the Council previously ran a mini-competition using the MSTAR framework involving all suppliers. This would not be considered best value for money, since it still involves significant resources to run the tender and evaluation process, with the likelihood of the same outcome. Currently Hays fees are 20% - 50% less than other providers on frameworks, something other providers would struggle to compensate for when being evaluated. In addition to the fees provided by the suppliers, the Council would need to consider the cost of transition from the current provider to an alternate provider. Therefore this option is not regarded as the most cost effective use of the Council’s resources.