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Basic Report Template Report for: ACTION Contains Confidential No or Exempt Information Title CEX184 Parks Service Transfer to Lampton 360 Member Reporting Councillor Samia Chaudhury Cabinet Member for Green Policy and Leisure Contact Details [email protected] Director of Public Health and Leisure For Consideration By Cabinet Date to be Considered 21 November 2017 Implementation Date if 4 December 2017 Not Called In Affected Wards All Keywords/Index Parks 1. Details of Recommendations This report asks Cabinet to: Note and ratify the decision to agree the early termination of the Carillion contract in April 2018. Confirm the transfer of the Parks Service to Lampton 360 (or a subsidiary of Lampton 360) following the expiry of the existing Carillion contract in April 2018; Delegate authority to the Chief Executive, in consultation with the Cabinet member for Leisure, the Director of Finance and Corporate Services and the Head of Governance to evaluate the Lampton 360 business plan and formalise a contractual agreement; Delegate authority to the Chief Executive, in consultation with the Director of Finance and Corporate Services to approve the purchase of necessary vehicles & equipment; Delegate authority to the Chief Executive, in consultation with the Director of Finance and Corporate Services to approve the development of a short, medium & long term asset replacement strategy and creation of a separate lifecycle budget. If the recommendations are adopted, how will residents benefit? 1. Quality The service will be delivered to the same specification but with investment in additional resources and vehicles/equipment to provide improved levels of service that meet existing requirements. 2. A clean, green & safe Amenities that are maintained to a high borough standard will build strong, attractive neighbourhoods and improve the environment for residents and visitors. 3. Innovation Through increased direct control of service delivery, the Council is able to adopt current best practise and innovation, and continue to do so without being constrained by more complex commercial agreements with service providers. 4. Flexibility The Council, less constrained by complex commercial contractual obligations, will be more able to negotiate changes to adapt, modify and improve the service in response to events, budget constraints, and changing circumstances. This has the potential to allow the Council to deliver a far more responsive and flexible service and to invest in assets, plant and equipment and most importantly staff. 2. Report Summary This report sets out the case for the transfer of the Parks Service to the Council’s wholly owned trading company Lampton 360, or a subsidiary. The drivers behind this transfer include value for money, improving the quality of service being delivered within existing specification and the council’s commitment to providing solutions that will deliver current budget requirements through to 18/19. It is important to note that there will be no change to the ownership of the parks which will all continue to be owned, as now, by the Council. Lampton 360 will be contracted to undertake the operational services required in our parks on behalf of the Council. On 11th July 2017 Cabinet & Lampton’s Board agreed in principle the transfer of the Parks Service contract from Carillion to Lampton 360 with a review of the Carillion contract and business case undertaken to identify: Current service performance Estimated profitability of service Total cost of service being delivered by Carillion Ways of achieving the necessary savings Scope of services to be transferred Future financial model Financial implications associated with the transfer Staffing implications That review is now complete and the key findings were: Carillion’s estimated profit and overhead charges is circa £1.4 million per annum taken from the aggregate cost of the core contract plus additional payments made to Carillion for provision of services that are out of scope. This level of profit is far above the market rate. Shortfalls in service delivery also evidenced through contract monitoring. Under invested service which is managed on a reactive basis rather than robustly planned. The location of the depot (based in the west of the borough) potentially affecting productivity due to time spent travelling to the east of the borough. The contract was tendered on an ‘open book’ basis but financial information has not been forthcoming despite LBH challenging the level of transparency, leading to a lack of understanding of actual service spend and income. Overspend against contract budget. There is opportunity to significantly reduce costs to meet the Council’s budgetary requirements of £1.1m and improve quality of service by transferring the Parks Service to Lampton 360. Additionally, based on the findings from the contract review, given the level of estimated profits and existing shortfalls in service delivery the Council would no doubt benefit from an early termination of the Carillion contract. 3. Reason for Decision 3.1 On 11th July 2017 Cabinet & Lampton’s Board gave an agreement in principle to transfer the contract to Lampton 360 upon its expiry on 30th November 2018 and authorised preparatory work by officers. This included an external review of the existing Carillion contract and production of a business case for the service transfer (Appendix 1). 3.2 The review is now complete and key findings were: Carillion’s estimated profit and overhead charges is circa £1.4 million per annum (34%) on the core contract plus any additional payments made for provision of services that are out of scope. Contracts of this nature would typically achieve profits on average of between 5% and 10% suggesting a contract that is heavily biased towards Carillion at the expense of the Council. Shortfalls in service delivery including: o Cemetery grass cutting schedules not being met to maintain the height of the grass as required in the specification. o Memorial safety inspections are behind schedule and should have been completed at all cemeteries in the borough by summer 2016. Only Hatton & Bedfont cemeteries have been completed. o Other shortfalls in the service not being delivered to an acceptable standard with complaints/incidents identified. Management of the service is reactive rather than robustly planned. This reflects on both how Carillion deliver the works and how the works are issued by the Council. The Carillion service is typical of a service that has not looked after the infrastructure with several comments raised that imply this approach has been consistent over the life of the contract. Currently the service operates from a depot based in the West of the borough. Due to its geographical location travelling times to the East of the borough substantially reduce the productive working hours of the operations teams. Income is generated and retained by Carillion and used to net off the contract cost. Carillion’s projected income for 2017/18 is £731k, however it is our understanding that this falls below what comparable services generate. The contract was agreed on an ‘open book’ basis but financial information has not been forthcoming despite LBH challenging the level of transparency, leading to difficulties in assessing Carillion’s performance and adherence to agreed contract profitability/income positions. 3.3 The contract has its challenges, with the Council overspending its budget by £280k in 2016/17 and with projected overspend of £328k in 2017/18. 3.4 In view of the review findings, discussions and negotiations took place with Carillion to explore early termination and both organisations reached a mutual agreement. 4. Benefits of Transfer to Lampton 360 4.1 The current parks and open spaces portfolio includes parks, allotments, cemeteries, play areas, trees and a number of countryside and conservation sites including a number of nature reserves. The management of these areas includes the following functions: Grounds maintenance and litter picking Management of trees and trees client function Maintenance of play areas Enforcement of bylaws (not currently included in the Carillion contract) Management of Heritage sites Events management Community engagement Management of countryside sites and parks ranger service Parks development Facilities Management Cemeteries service Coroners and mortuaries (not currently included in the Carillion contract) Allotment services Sport pitches bookings 4.2 A process of evaluating the most beneficial option for delivering the service is under way which will include assessing the benefits of delivery under a Lampton 360 model compared with other potential operating models. 4.3 The criteria we will use to evaluate these options will include ensuring the future delivery model achieves value for money to the Council, provides an effective and efficient service to residents within future budgetary envelopes taking into account all MTFS savings commitments, provides a stable and thriving working environment for staff to operate within and ensures the continued maintenance and upkeep of the Council’s parks. 4.4 Within this analysis, there will be a need to investigate and evaluate future income earning opportunities thereby ensuring the future model is able to optimise these opportunities for the Council whilst maintaining flexibility to react to changes in the economic environment. 4.5 Consideration will also be given to the TUPE implications of each delivery model and the potential liabilities
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