Subject: CLEANER AND GREENER SERVICE – FUTURE SERVICE DELIVERY – KEY DECISION
1. Purpose of Report
1.1 This report provides an update to Cabinet on progress in investigating the options for outsourcing parts of the Cleaner and Greener service. Cabinet are requested to approve commencing a tendering process for services, and note the proposed scope and approach to future contracting arrangements.
2. Background
2.1 The Corporate Plan 2015-2020 sets out how the Council will operate in the future to fulfill its key role in shaping Worcester’s future. Our aim is to focus on the outcomes we are seeking to achieve and then source the best organisation to provide the services to deliver those outcomes, working with private, public and voluntary bodies as appropriate. Our goals for “Ensuring our city is clean, green and safe” include ensuring our streets are clean and well kept and ensuring our public parks and open spaces are of a high quality and well used. To achieve this, and enable the city council to play its part in the delivery of high quality public realm in Worcester, our strategy includes agreeing detailed specifications for service standards.
2.2 On 9th December 2014, Cabinet received the Cleaner and Greener Service – Future Direction report. The report outlined the extent of the Cleaner and Greener service, its development in the recent past and the need to seek further economies whilst protecting service standards. The service has undertaken far reaching and commendable changes and made substantial savings to modernise and become more efficient. It is clear however, that greater savings are needed. The reports conclusion was that there was a need to explore finding further savings through a variety of actions including joint procurement or shared arrangements with other authorities. The Managing Director wrote to a number of other Local Authorities in the region to understand their appetite for joint procurement arrangements. Firm interest was expressed by the neighbouring authorities of Wychavon and Malvern Hills.
2.3 As a result officers were asked to investigate the outsourcing of Cleaner and Greener Services, including opportunities for working in partnership and to report back on a suggested approach, process and timetable.
3. Scope for Outsourcing
3.1 The areas in scope for procuring as outsourced services are set out in Table 1 below. Parking Services and Bereavement Services have been excluded from this process, as agreed in the December 2014 Cabinet report.
Table 1 – Cleaner and Greener Services in Scope for Outsourcing
Households: Staff (34) Vehicles (14) Gross Spend £(1,421,412) Income £(51,640) Net Spend £(1,369,722);
Trade Waste: Staff (3) Vehicles (1) Gross Spend £(356,150) Income £(549,840) Net Spend £(-193,600);
Garden Waste: Staff (3) Vehicles (2) Gross Spend £(183,191) Income £(279,370) Net Spend £(-96,179);
Street Cleansing: Staff (38.6) Vehicles (30) Gross Spend £(1,469,632) Income £(414,310) Net Spend £(1,055,322);
Grounds Maintenance: Staff (26.2) Vehicles (9) Gross Spend £(932,701) Income £(162,510) Net Spend £(770,191);
Management /Other: Staff (6.6) Vehicles (0) Gross Spend £(210,885) Income £(8,330) Net Spend £(202,555);
Total: Staff (111.4) Vehicles (56) Gross Spend £(4,573,970) Income £(1,466,000) Net Spend £(3,107,970);
4. Service Standards
4.1 The City Council is rightly proud of the Cleaner and Greener Services and the standard to which they are delivered. Any new contractual arrangements will need to protect, sustain and enhance the high standards which we expect for our City.
4.2 The services for household waste and recycling, green waste and trade waste are areas where compatibility of standards with neighbouring authorities are likely to be high and hence there are opportunities for joint contracting in the future. In contrast, street cleanliness standards in Worcester are of particular importance to residents and stakeholders. Similarly, the maintenance of our premier parks, the extent and quality of our play areas, open spaces and grounds maintenance standards are of significant importance in meeting the aims and aspirations of the Corporate Plan, including securing Clean City awards and maintaining Green Flag standards. Consequently, it is appropriate for Worcester to individually contract for these services, to ensure our requirements are not compromised and we have direct control.
4.3 It is important to fully address the standards expected when developing the service specification for the procurement process. In a joint procurement process the service specification must be sufficiently precise to ensure that specific local needs are addressed. There is a considerable amount of work needed to develop the standards for Worcester, prior to commencing any procurement process. It is recommended that external advice on specification writing is obtained, to ensure that specifications for all of the areas in scope are tightly drawn, and appropriate for a joint contract in relation to household waste and recycling, green waste and trade waste and for a Worcester only contract(s) for street cleansing and grounds maintenance.
5. Procurement Advice
5.1 A procurement feasibility study was commissioned by Worcester City Council, Malvern Hills District Council and Wychavon District Council and undertaken by Globe Environment Consultancy Limited (GlobeEC) who provided specialist advice on how bids for refuse collection, street cleansing and grounds maintenance are assessed, evaluated, priced and tendered. Their final report ‘Procurement Assessment Feasibility Study’ was delivered in June 2015.
5.2 GlobeEC considered financial and operational information from the three Councils and evaluated the different strategies available for the procuring of the services. This included considering opportunities that exist for working together, procuring together or separately, the advantages of agglomerated contract arrangements, and savings that may be achievable individually or in partnership.
5.3 GlobeEC advise that the size of the package to be procured is highly likely to impact upon the nature of those interested in tendering for the work. A larger scope and scale of services is likely to be more attractive to the market, and hence procuring in partnership with our neighbouring authorities would be advantageous. The procurement can be split into packages of work based on service and/or authority. This enables us to have flexibility within the process to procure services in a way which best meets our quality requirements for service delivery whilst achieving best value for money. Packaging work for procurement in this way is common practice and enables different operational or contractual arrangements as required, whilst gaining the benefits of a joint procurement process.
5.4 In addition to considering direct outsourcing of services, GlobeEC also looked at the alternative of the creation of a wholly owned company. A wholly owned company, sometimes referred to as a ‘Teckal’ company, is a company set up by the Council(s) for the purposes of delivering a defined range of services. ‘Teckal’ companies are usually wholly owned by the Council(s) for which they do work, although such a company can do work for other authorities and for the private sector. The development of such ‘arms-length’ companies gives the opportunity of introducing a more commercial approach to direct services and at the same time opening up the opportunity for trading externally, with any profits gained available to reinvest back into services. It is understood that a ‘Teckal’ based approach is not an option that either Wychavon District Council or Malvern Hills District Council wish to pursue at this time. Worcester on its own is not considered big enough to create a viable ‘Teckal’ company which could produce the quantum of savings needed, therefore this is not recommended as an option.
6. Available Procurement and Contract Options Worcester only Procurement
6.1 The Council could procure for the services in scope for the City Council area alone. The main advantages in procuring in this way would be that there is simplicity in dealing with an area that is known in detail and there are no partners to the procurement process that would seek to influence the nature, content or style of the exercise. However, all advice indicates that a contract of this size would not be seen as being as attractive as one where there are greater numbers of properties and services to be carried out. Volume of activity and therefore size of contract are very important to the private sector in them determining the level of effort they will put into pursuing a contract. Additionally all the procurement costs would need to be borne solely by the City Council.
6.2 This approach would also limit contract options to Worcester only contract(s). Whilst this is desirable for street cleansing and grounds maintenance services, this does not give the opportunity of testing additional benefits of a joint contract for the household waste, recycling, green waste and trade waste services. Therefore this option is not recommended. Joint procurement process with Wychavon District Council and Malvern District Council
6.3 Entering a joint procurement process with our neighbouring authorities provides a greater scale and scope of activity and services, making the tender more attractive to the private sector. It is the approach that provides the best opportunity of achieving the desired outcome of maximising savings and maintaining the standards that are so important to Members and residents of the City. In addition to being more attractive to the market, the costs of the procurement process can be shared.
6.4 With respect to future contract arrangements, a joint procurement process allows for flexibility. The tender can be presented in packages, as described in 5.3 above. This will enable the procurement process to explore the benefits of a joint contract for household waste, recycling, green waste and trade waste services, maximising the streamlining of services and management overheads and reducing duplication in, for example plant and machinery. In addition, Worcester only packages can be developed for street cleansing and grounds maintenance, services that we wish to procure as Worcester only contracts.
6.5 Working with other Councils inevitably will result in a more complex procurement process and there will need to be appropriate project management arrangements established. For a procurement of this complexity and size, professional advice is that a competitive dialogue procurement process is most appropriate.
6.6 This option is recommended as the best way forward to achieve savings whilst maintaining service delivery standards.
7. Financial Position
7.1 The Council’s Medium Term Financial Plan (MTFP) is based upon an appraisal of the expectations of finances likely to be available over the next 5 years and the plans of the Government. Transformation Plan savings for the whole Council for the 5 years of the MTFP are £2.7million, of which £0.5million is currently attributed to Cleaner and Greener outsourcing arrangements.
7.2 GlobeEC state that the levels of savings achievable will be considerably greater from three Councils working together, in terms of the actual tendering process itself and in terms of final contract. GlobeEC have identified that there are greater savings achievable in some areas of the Councils activities than others, in particular the household waste, recycling, green waste and trade waste services, as the largest spend area, has the opportunity for the greatest savings, and these are maximised from a joint contract approach. Whilst there may be increased savings from a joint contract approach for street cleansing and grounds maintenance, this has to be balanced against the outcome of high standards of service, specific to Worcester. The GlobeEC report identifies that there are still savings to be made from a Worcester only contract for these services.
7.3 To deliver this complex procurement exercise and achieve the desired outcomes for the Council there is a need for additional resource to support the process. Additional support in the areas of project management, specification writing, specialist financial and legal support will be required. Some of these resources may be shared with our partners as part of the joint procurement, while others, such as specification writing, will be specific for Worcester. Overall, based on previous experience and the current market for procuring specialist advice and support, it is estimated that the cost for this additional resource will be circa £200k.
8. Timescales
8.1 There is an imperative for us to commence this procurement process as soon as possible, in order to ensure that efficiencies and savings are delivered to contribute to the budget pressures set out in the Medium Term Financial Plan. Similarly, Wychavon District Council is already in a contractual relationship and they have a deadline against which they need to retender which is compatible with our requirements.
8.2 The GlobeEC report recommends that the process of procurement known as Competitive Dialogue is used. Although it is a lengthy process it is recognised as being a good and open process for a procurement of this size and complexity, where each party has the opportunity to reconsider the options in the light of developing information about how the contracts would operate. It also is more likely to result in a more mutually understood agreement which is more likely to deliver the overall outcomes and less likely to produce disputes.
8.3 An overall timeline for the procurement has been produced. This requires an OJEU notice to be issued in January 2016, shortlisting to commence in May 2016 and the selection of the best tenders in December 2016. Because of the complexity of the procurement and the need to give the new service supplier(s) the opportunity to mobilise, the contract start date is likely to be September 2017. A more detailed timeline will be produced for the management of the project and progress will be reported to Members on a regular basis.
9. Consultation and Communication
9.1 For a change as significant as this it is necessary to ensure that all relevant parties are fully aware of the proposals and having the chance to contribute to their development.
9.2 Members All Members will be provided with an opportunity to engage with this procurement process, and regular communications will be provided as appropriate. In addition, it is proposed that Scrutiny Committee review the standards and contribute to the development of the specification for the procurement process.
9.3 Staff Consultation Although knowledge of the options being considered is high amongst the staff directly affected it is important that as the procurement process progresses these staff and their Trades Unions are kept up to date. Because of the size of this project there will inevitably be other members of staff in other parts of the Council who will be affected for a range of reasons. These will include those whose jobs will change as a result and others whose jobs may no longer be required in other parts of the Council’s workforce. It is essential therefore that communications of the highest order and sensitivity are put in place. Communication with all staff and their Trades Unions is needed but with particular emphasis on those directly affected. Meetings with directly affected staff have been arranged running up to this meeting.
9.4 Public and Other Stakeholders Consultation The Council has a wide range of organisations that it consults with regarding the state of the public realm. These include ‘Friends of’ groups, residents groups and Parish Councils. Communications with the citizens of Worcester is also considered important with opportunities for them to feed in their views about what is important to them. The development of our standards and the writing of specifications is an ideal opportunity to give all of these parties an opportunity to express their views.
9.5 When appropriate contracting out arrangements are being finalised it will be important to have regular updates to residents, informing them of the changes and the continuing commitment to existing levels of service.
9.6 A full consultation and engagement plan will be developed for both internal and external stakeholders. This will be developed and managed by our in-house consultation and communications staff and delivered through a wide variety of channels, as appropriate, including the Council’s own communications channels and the local media.
10. Project Management
10.1 There will be a need for both internal project management arrangements and arrangements with our partners for the joint procurement approach to ensure appropriate decision making and monitoring of this process, in particular agreeing specification, evaluation criteria and assessment. It is proposed that the development of the internal and joint project management arrangements, including Member engagement, is delegated to the Corporate Director Service Delivery in consultation with the Portfolio Holder.
10.2 The service standards and specification will be a critical area to ensure full debate and agreement. It is recommended that following consultation, the specification is presented to Cabinet for approval.
10.3 The contracts resulting from this procurement process will be a key strand of delivery of the Corporate Plan, will impact on all communities in the City, and are a significant element of the Council’s overall budget. It is recommended that following the procurement process, contract(s) award is presented to Cabinet for approval.
11. Equalities, Financial, Health and Safety, HR, Legal, Policy, and Risk Management Implications
11.1 Human Resources: As detailed in the main body of the report this proposal impacts on not only the Cleaner and Greener workforce but potentially other staff who provide corporate support to the service. At this stage detailed and regular communication will be needed, both formally with trade union representatives and informally with the wider workforce.
11.2 It will be necessary to obtain approval from Council for the TUPE transfer of staff to a new service provider.
11.3 Policy: The recommendations in this report support the delivery of the Corporate Plan 2015-2020. The Corporate Plan seeks to focus on the outcomes to improve Worcester as a place, and to source the best organisation to provide the services to deliver those outcomes. One of the five Corporate Plan themes is “ensuring our city is clean, green and safe”. The proposals in this report support the goals to achieve this, in particular ensuring our streets are clean and well kept and ensuring our public parks and open spaces are of a high quality and well used.
11.4 Legal: There are no specific implications arising directly from this report. A project of this scale and complexity will require significant and specialist legal input at all stages of this process. There will be a need to engage external legal advice to assist the Council’s own legal services with a complex set of arrangements.
11.5 Equalities: There are none identified at this stage but equality impact assessments will need to be undertaken as part of the process of tendering, evaluation and awarding of the contracts to ensure that the services are sympathetic with the needs of all citizens. 11.6 Financial: The GlobeEC report identified savings if Worcester has sole contracts for all services identified in scope at £250k p.a. It can be reasonably anticipated that there are financial benefits from entering into a joint tendering process, and the overall financial benefits from a joint contract for household waste, recycling, green waste and trade waste and Worcester only contracts for street cleansing and grounds maintenance are likely to be in excess of £250k p.a. This is supported by Globe EC’s estimate of savings in the order of £1.6million p.a., based on Worcester entering into a joint contract arrangement for all services identified in scope with Wychavon District Council and Malvern District Council. It should be noted that while Worcester would receive a share of this overall figure, it would not be as much as a third. The anticipated saving in excess of £250k p.a. is a substantial contribution to the overall savings identified as required in the MTFP of £2.7million.
11.7 There will be a need for additional and specialist financial capacity to engage in and resource this project. Resource is available from the Change Transformation reserve to fund upto £200k for additional resources to support this procurement process, in particular, project management, specification writing advice, and specialist financial and legal support.
11.8 Risk Management: This report references the challenges of the MTFP. The expectations of citizens are high and the desire of the Council to maintain the level of service is clear. Obtaining a reduced cost, high quality service will help to mitigate a number of risks in the Corporate Risk Register, in particular those relating to delivery of the Mind the Gap programme.
11.9 It must be remembered that this will be a complex and involved exercise that will require the appropriate level of resource and good quality project management to ensure the successful outcome is delivered.
11.10 As the process moves towards implementation we may have to take steps to ensure we can retain key staff in the run up to transfer. Significant HR support will be needed throughout 2017, to run the formal consultation process, support the necessary TUPE transfers, and support consequent restructuring in the rest of the authority
12. Comments of Ruth Mullen, Corporate Director – Service Delivery
12.1 The Cleaner and Greener Service has modernised and improved the service significantly over the last three years with over £1 million having been saved. Great credit needs to be given to all those involved. Using a joint tendering approach provides this authority with the opportunity to secure a quality provider to deliver high quality services into the future, while ensuring value for money. The complexity of this exercise needs to be appreciated and it is necessary to ensure the project is adequately resourced to deliver the savings needed.
13. THE CABINET MEMBER FOR CLEANER, GREENER AND SAFER CITY, COUNCILLOR ANDREW ROBERTS RECOMMENDS THAT CABINET:
13.1 Agree to enter a joint procurement process with Wychavon District Council and Malvern Hills District Council using competitive dialogue, in accordance with the indicative timetable detailed in paragraph 8.3.
13.2 Agree to explore joint contracting arrangements for household waste, recycling, green waste and trade waste within the framework of the joint procurement process.
13.3 Agree to procure Worcester only contract(s) for Street Cleansing and Grounds Maintenance services within the framework of the joint procurement process.
13.4 Note the proposed consultation arrangements as outlined in section 9.
13.5 Ask officers to report back to Cabinet the specifications of the services for approval and, subsequently, the outcome of the procurement exercise for consideration and agreement.
13.6 Delegate to the Corporate Director Service Delivery in consultation with the Portfolio Holder development and agreement of project management arrangements, including member engagement and communications plan for joint procurement. 13.7 Agree the release of up to £200,000 from the Transformation Change Reserve to meet the costs of procurement.
13.8 Note the outcome of discussions with Wychavon District Council and Malvern Hills District Council and professional advice received. Ward(s):
All Wards Contact Officer: Ruth Mullen Tel: 01905 722010, Email: ruth.mullen@worcester.gov.uk Background Papers: GlobeEC report ‘Procurement Assessment Feasibility Study’, June 2015 – Commercially Sensitive