Tender Report 14 February 2007




Portfolio Holder, Resources


    To consider tenders received for the Building Cleaning Services Contracts Numbers 1 and 2 and obtain approval for contract awards under Contract Standing Order 41 to Churchill Contract Services and Wetton Cleaning Services respectively.
    Such awards to be subject to the required notice and ‘standstill’ required under European Procurement rules and subsequent detailed price negotiations and adjustment as may be required to meet individual site budget constraints.
    Approval of contract awards as set out within Recommendation below. .
    3.1Building Cleaning Services for the Borough of Poole are currently provided under a single contract with Regent Cleaning, this contract having commenced in September 2002 for a term of 4 years and subsequently extended until 31st March 2007.
    3.2That contract had originally been tendered as two packages, but was awarded s a single contract to Regent to take advantage of discount offered if granted both packages.
    Difficulties subsequently experienced with that contract demonstrated that their contract had been under-priced and that it would have been easier to manage had there been smaller contracts offering some choice of provider.
    3.3 A number of buildings are cleaned under separate arrangements, the most notable of these being schools (who may make their own cleaning arrangements) and leisure premises.
    Whilst many schools do not currently use this contract, it is necessary to make provisions whereby those schools or other premises might be added to the Contract either at commencement or during the term of the contract.
    3.4 After informal checks with Bournemouth Borough Council and Dorset County Council it was ascertained that there was not scope for collaboration on the timescale required for the new contracts, although there might well be opportunities for such co-operative working in the future.
    The new contracts have therefore each been tendered upon the basis of a three year contract with provision for a maximum of two additional one year extensions. This will allow alignment of contract end dates with those of neighbouring Authorities.
    3.5 The contract is complicated by TUPE regulations, not only in respect of direct transfer between contractors, but also due to historic transfers of Borough of Poole staff to Regent and intended transfers directly from Borough of Poole to the new contractor.
    New TUPE rules and guidance issued in April 2006 caused the need to review our contract strategy to address lack of clarity in the new Code of Practice and financial risks posed by this Code which imposes the need to address parity of working conditions amongst staff ‘who work alongside’ each other.
    In effect this imposes upon contractors the need to normalise contract conditions between any new staff they take on and staff recently transferred from Borough of Poole.
    These issues are covered further in Appendices 1 and 2 below (‘Appendix 1: Evaluation and Options’ and Appendix 2 ‘Key Risks and Issues’)
    3.6 In response to the points in 3.2 and 3.5 above, the work has been advertised and tendered in two separate packages (‘Contract 1’ and ‘Contract 2’) and so arranged that the complex TUPE transfers which involve BoP staff are contained only within Contract 1. This package also includes a range of other buildings in order to provide a commercially attractive package rather than restrict cleaning to school hours. Contract 2 contains a smaller group of buildings catering only for direct TUPE transfers between contractors.
    3.7 Tenders have been sought on an ‘open’ tender basis following advertisement in the Journal of the European Union (OJEU), Bournemouth Echo and Contracts Weekly with a provision that no contractor will be awarded both contracts.

Appendix 1

1. A total of 14 apparently compliant tenders were received for each of these contracts. A further incomplete tender was received and returned to sender as recorded at Tender opening.

Following preliminary checks of tenders received, including assessment of financial soundness, clarification was sought from several of the companies where details provided were inadequate for full evaluation.
It should be noted that Churchills made an error in their pricing of cleaning at Rossmore Community College which they under priced by approximately £30,000. They have written to accommodate this error and stand by their tender figure.
2. A preliminary tender evaluation panel comprising representatives of the Facilities Team, a client representative, Procurement Section, quantity surveyor undertook the evaluation with expert guidance upon HR and legal issues being provided by Personnel Service sand Legal Services respectively. Having assessed the full list of tenders against the published criteria and methodology, the panel arrived at a short list of four contractors who were asked further detailed questions and invited to interview.
Telephone interviews were conducted from a range of customers of each of these four contractors by way of references prior to interview and the UNISON representative participated at the interview stage

3. Following interview these four tenders were evaluated again against the information contained in their respective tenders, having regard to references received, HR and legal advice and findings from the interview process.

The tenders submitted by Wetton Cleaning Services Ltd was awarded the highest score for both contracts by the evaluation panel after interview stage.
This was due to the impressive performance of that contractor in response to interview questions and particularly upon management of TUPE issues.
Had price not played a significant part of the evaluation or had Churchill Contract Services not made an error on pricing the Rossmore Community College site within Contract 1, the evaluation would have favoured award of this contract to Wetton Cleaning Services Ltd.
Churchill Contract Services stand in second place following evaluation of each of the contracts.

Wetton Cleaning services Ltd are however debarred from award of both contracts. The two sets of tenders from these firms have therefore been analysed to see which combination of contract award offered greatest benefit to the Borough Of Poole. These combinations are referred to as Options A and B in the table below.

4. The final scoring, tender price and evaluation comparison with the budget upon which this report is based, is set out in the table below.
From this table it might be seen that ‘Option A’ is most favourable to the Borough of Poole, firstly as this produces a net saving across the two contracts of £37,653 but also because this is the only option which can be contained within the overall budget.

The budget used for this analysis comprises the current year’s total cleaning cost inflated by 2%. It should be noted however that there is some variation in the individual site costs where some premises will be seen to enjoy cheaper prices under the new contract whereas others are more expensive. This aspect will be explored with the successful contractor and discussed with the premises managers concerned.

In consultation with Procurement and Internal Audit advisers it has been agreed that Option A provides best benefit to the Borough of Poole.


Tender Report 14 February 2007



Five key issues were identified as needing to be addressed within the new contract:

1. Quality and reliability
The current contract has been dogged by poor performance which, apart from leaving an unacceptable working environment for our staff, also imposes extra demands upon facilities management staff due to additional monitoring requirements and in investigating complaints. Whilst the issue lies clearly with the incumbent contractor, it is believed to have arisen in part due to the contractor having under priced the contract at the outset. He has been unable to pay the required rate to attract and retain the required staff. The risk of this recurring has been addressed in three ways:

  • Increased quality weighting during tender evaluation (60% quality to 40% price) including scrutiny of staffing proposals, management resource and experience / references.
  • Separation of the work into two contracts so that work might readily be transferred to the other contractor if one contractor defaults.
  • Detailed interview of contractors on quality issues involving an interview panel with diverse specialist skills (FM, Cleaning Monitoring, Personnel, UNISON and client representative) supported by subsequent procurement and legal advice.

2. Legal challenge on TUPE

As described above, recent Government guidance has indicated that employees being recruited to work alongside TUPE transferred staff should be employed on terms with an equal status. UNISON have previously expressed concerns that staff who had transferred to the incumbent contractor (Regent) appear now to have less favourable pension arrangements than before and UNISON have recently written to the Head of Personnel and Training Services raising issues related to the new guidance. This is an area in which care needs to be taken and advice has been sought from both Personnel and Legal Services during the drafting of the contract documents and during subsequent evaluation.
The requirements in terms of parity are quite clear, being designed to establish a single status workforce, what is less clear is the level at which that status is to be established.
Our legal advice is that ‘working alongside’ might be reasonably interpreted as meaning ‘working at the same premises’, although some might argue that the description could apply to the entire contract, or indeed to the entire workforce of the employing contractor. Our legal advice appears to be consistent with the interpretation currently being applied across the industry and by other Local Authorities.

If successfully challenged, the effect might be to require other new employees on a contract to be offered an equivalent employment package (and in particular a similar hourly rate, sick pay, holiday and pension entitlement ) to that of the transferred BoP staff. The pension and sick pay costs in particular would have significant impact upon cost, being estimated as between £50,000 and £100,000 per annum across the Borough. Once adopted, the conditions would transfer to future contracts.
This matter has been explored with the contractors whom we interviewed and they agree with the approach being undertaken in this contract and have priced accordingly. They have all acknowledged that uncertainty exists over interpretation until the matter is explored in a court of law. They have all indicated also that increased costs arising from this matter would need to be met by Borough as it is not a risk that they can control.

By virtue of the affected sites occurring in only one of the two contracts it is believed that BoP exposure to such risk is confined only to Contract 1.

3. Increase in cost

It has been a particular concern that the new contract might cost significantly more than existing budgets could stand.

The tender strategy was devised to minimise this risk and to seek to reduce the specified cleaning standard only if tenders came in above budget.

The tenders being recommended for Contracts 1 and 2 are such that the overall budget has not been exceeded, although some negotiation may be required to satisfy the budgetary requirements of individual premises managers.

4. Legal Challenge during award process

Advice has been sought from Personnel, Legal and Democratic Services and from Procurement section throughout. Care has been taken to undertake evaluation and tender award in accordance with OJEU process and in an open manner such as to minimise risk of successful challenge.

5. Failure to mobilise by 1st April.

Although the contract award programme is very tight, all the contractors interviewed showed great confidence that they can mobilise effectively within the required timeframe. The recommended contractors have indicated a good track record of similar contract mobilisation.

It is important that notification of intended award under OJEU process is not delayed if we are to commence mobilisation on 1st March as programmed.