Corporate and Resources Committee

30 September 2021

Facilities Management Procurement Strategy

Report by the Executive Director of Place

Relevant Portfolio Holder Councillor Kirsch

Purpose

This report is seeking approval to commence a procurement exercise for FacilitiesManagement Services, subsequent to the Gateway 0 report in April 2021 whichagreed the route forward.

Recommendation (s)The Committee is asked to RESOLVE that:

1. Approval be given to go to market for new FM Bundled Services throughthe outlined procurement strategy.

2. That contract award will be subject to a Gateway 2 report in February 2022.

Key Points

A. The committee is being asked to decide on the best delivery model for RBK’sFacilities Management requirements, route to market, timetable of activity andthe way this moving from one major contract to several will support widerCouncil objectives, including social, environmental and economic outcomes, inaddition to supporting financial sustainability.

B. FM is currently delivered by a single, integrated contract at a fixed cost ofc£3.5m pa with a variable cost of c£500k pa. This contract is due to reach theend of its initial term in September 2022. The Council is expecting potentialchange in its asset base, driven by the Future Workplace programme, AssetChallenge and the Climate Emergency and as such a flexible, outcomefocused model is required. This recommissioning activity presents the Councilwith the opportunity to reposition FM as a more strategic resource, enablingwider priorities and value, especially in relation to social outcomes.

C. Council officers have explored a wide range of options, including:

1. Delivery model - options ranging from in house to full outsource, and allthe options in between.

2. Route to market - including single contracts, using national or regionalframeworks or traditional competitive procurement routes.

3. Added value - including how FM can drive social outcomes such aspaying living wage, targeted apprenticeships and supporting D&I,economic outcomes including how this procurement can support localSMEs and startups, financial outcomes including how FM can enableand drive sustainable savings and environmental outcomes, includinghow FM can support the Council's response to the climate emergencyand wider sustainability.

D. The recommendation is to:

1. Use the nationally recognised Crown Commercial Service collaborativeFM framework for the majority of FM requirements, running a furthercompetition amongst already well qualified suppliers, giving them theopportunity to further improve commercial offer, resulting in betterinnovation and wider value. This approach uses a standardisedcontract, with clear roles and responsibilities and removes the risk andcomplexity of using a bespoke contract.

2. To issue our requirements using a “bundled services” approach, withservice requirements organised in various lots, to reduce risk, improvesupply chain resilience and to open up the opportunity to SMEs.

3. To issue the Building Services contract (lot 1a and 1b) on a “SemiComprehensive Fixed Price Model”, where suppliers take the risk forthe first £1,000 of any work within their fixed fee. This helps toincentivise good, preventative maintenance, improves response times,reduces administrative burden and places risk with the party best ableto manage said risk.

4. To commission an outcomes based approach, rather than inputs,incentivising continuous improvement, strategic management and afocus on what matters most, for example the requirement to keep anarea free of litter, rather than specifying how many hours litter pickingneeds to be done a day.

5. In addition to these core services, to offer several low value contracts(under £150k) for services such as window cleaning to enable microfirms and family businesses to do business with the Council.

6. To embed social outcomes throughout the contract, supporting £1 in £3being spent with SMEs, ensuring our supply chain pays a living wage,supports an increasingly skilled workforce and targeting recruitment atboth a local level, but also to support equality and diversity outcomes.

7. To embed environmental outcomes, especially in relation to the climateemergency.

8. All suppliers will work in partnership with the Council, using a balancedscorecard and focused KPIs to promote the outcomes that are

important to RBK and our residents. This will be underpinned by anincentivisation model and wider continuous improvement objectives.

9. Agree the financial implications of this procurement activity, with aprojected spend under the FM contract of ~£3.4m pa against aprojected budget of £4.4m in the first full year of the contract. Additionalstaff costs will need to be considered as part of the budget settingprocess.

E. Finally, for the committee to recognise the significant shift in operating modelfor FM as part of an integrated corporate landlord under Property services thatis enabling the delivery of this more strategically aligned and outcomefocussed service.

Context

1.1. RBK’s Property Services are going through a period of transformation. Theshift will see the service become a more proactive, value adding part of theorganisation, helping the Council to achieve its corporate priorities.

1.2. The emerging Property strategy focuses on supporting the wider corporatepriorities through:

● Improving Customer and Workforce Experience – by providing inspiringplaces to work and access Council services.

● Enterprising Borough – supporting growth of the local economy throughcreating opportunities for local business.

● Financial Sustainability – by reducing the amount we spend on ourbuildings, allowing us to invest in other priorities, generating income throughour assets and more effective risk management to improve cost certainty.

● Social Value – using the large external spend to create local social value,through targeted recruitment and moving to a living wage with our supplychain partners.

● Climate Emergency – moving towards a more sustainable estate, reducingour emissions and achieving carbon neutrality.

1.3. Effective property management requires the coordination and integration ofmultiple moving parts. A core aspect to an effective property strategy ishaving fit-for-purpose Facilities Management (FM) arrangements. A proactiveFM service can act as a value enabler and catalyst for change, far bettersupporting corporate objectives.

1.4. The Council owns and leases over 750 assets which support service deliveryfor the local community. Of this estate, approximately 86 buildings have beencurrently identified as core operational facilities for which the Council mayneed to provide Facilities Management (FM) services to ensure a safe,pleasant and compliant environment for building users, and continuity ofservice delivery.

1.5. Facilities management covers the day-to-day running of our buildings andcovers a wide range of services required to keep the building operatingeffectively. Facilities management is broadly split into two deliverycategories:

● Hard Services - Services which ensure operational availability and statutorycompliance, and prevent deterioration of assets whilst enhancing theirsustainability (e.g. mechanical and electrical services, structural maintenanceand statutory obligations such as fire safety).

● Soft Services - Services which ensure a productive, sanitary and secureenvironment for service users (e.g. cleaning, porterage, pest control).

1.6. Within Hard Services, there is also the need for delivery of Projects or MinorCapital Works. Projects sit alongside FM, with many synergies, and it is therequirement for minor works and capital construction with associatedprofessional services such as design. An example of Minor Capital Workswould be installing solar to a roof.

1.7. Sitting across both delivery categories, there is the need for ManagementServices which includes the provision of an FM Helpdesk for customers toraise queries, the management of providers and the provision of data,systems and reporting.

1.8. FM and Property Management is currently delivered by a single providerthrough a Total Facilities and Property Management (TFPM) contract. Theinitial 7-year period of the current TFPM contract will end in September 2022.Following a review of service provision initiated as part of The BetterContracting review, it was agreed that the option to extend the TFPMcontract was not considered viable and so a replacement delivery model isrequired.

1.9. With FM procurement taking around 12-18 months, the upcoming expiry ofthe initial term of the current contract has triggered a review and optionsappraisal for the future delivery of Facilities and Property Management.

1.10. The options appraisal has coincided with a number of major changes,including the creation of the Council’s “Future Workplace” programme; thecommencement of Asset Rationalisation where the Council is reviewing theassets it has; and a redesign of the Council’s Property Services to centraliseproperty management and facilities management under the PlaceDirectorate. It has also coincided with COVID-19, changing how we operatebuildings and the need to support recovery of our local economy; BREXIT,creating labour challenges and the Council declaring a climate emergency,recognising our assets are our biggest contributor to our carbon footprint andwill likely require major investment.

1.11. Whilst basic facilities management is an integral part of operating an asset,and a mandatory service linked to a number of statutory obligations, theapproach to FM delivery can bring significant additive value and supportwider organisational objectives and policy. We have seen significant changes

since this contract was let in 2015, including Brexit, rapid digitalisation andthe impacts of COVID-19. These have combined to completely change whata Council requires from its assets, and how this service can support widercouncil priorities, including the Carbon Neutral Agenda, improving socialvalue and supporting local businesses in the wake of COVID-19. We havethe opportunity to transform how FM is delivered across Kingston, to bettersupport our workforce, partners and service users whilst also balancingfinancial pressures.

1.12. Progress to date

Since May 2021, the below listed activities have been carried out to supportthe FM procurement. Please see detail on progress to date against eachwithin Annex 9 - ‘Detail on Activity and Decisions to date’:

● Commissioning Intentions and Strategy report - Gateway 0● FM Strategy & Vision● Options Appraisal on preferred route to market and key contracting

models● Review on pricing and commercial models● Scope of Assets and Service Line Modelling● Demand Modelling● Financial Cost Modelling and Budget Mapping● Development of KPI Suite● High level climate change strategy● Property Services Redesign

1.13. Recommendations to date

The project board was initially set up in November 2020. Recommendationson this phase of work started in July 2021. The project board was led byProperty with representatives from Property, Commissioning and enablingrelated services including Finance and HR. A number of relevantrecommendations have been made by this board, outlined below. Please seefurther information against each decision within Annex 9 - ‘Detail on Activityand Recommendations to date’:

● Preferred Route to Market including Framework Selection, contractingand commercials

● Scope of Assets and Services● Pricing and Commercial Model

The key recommendations made prior to July 2021 for context include:

● Mandate● Scope● Strategic Objectives

● Options Appraisal

2. Benefits, Objectives and Strategic Alignment

2.1. Through this transformation, RBK has the opportunity to reposition FM as a truevalue enabler, contributing to wider organisational objectives and deliveringreal, tangible benefits for residents, staff and partners.

The commissioning of FM services will positively impact the below CouncilPriorities:

● Actively manage our property portfolio to drive up value, increase incomewhere desirable and improve services for our residents.

● Invest in the borough’s essential infrastructure to support our growingpopulation - schools; health, community and leisure facilities; roads andtransport - with developers paying their fair share.

● Protect Kingston's parks, green open spaces, and biodiversity, for currentand future generations to enjoy, and for its benefits for our health andwell-being.

● Create the environment for thriving local businesses across a range ofsectors around the borough.

● Work with local partners and neighbouring boroughs to support people todevelop the skills they need to enter employment.

● Supporting the Council to achieve its ambition of becoming Carbon Net Zeroin response to the Climate Change Emergency.

● Improving our financial resilience and delivering savings withoutcompromising service delivery.

2.2. The benefits of this approach will impact five key areas:

EconomicOutcomes

This procurement has been designed in a way to not only ensureit is open and accessible to small businesses, but to activelyencourage their participation. Instead of one large contract, theservices have been “bundled”, making them more accessible tolocal firms. We have separated out two even smaller bundles toallow access by micro firms. The Pest Control contract and

Window Cleaning Contracts have been designed in a simple andtransparent way, making them accessible to even the smallestfamily run provider, without increasing risk to the Council. Wheremore integrated contracts are required for economies of scale,deliverability and risk reasons, such as building maintenance andstatutory compliance, economic outcomes have still been inbuilt.The larger contracts are designed in a way to support at least £1in £3 using local providers or SME’s through the principalproviders’ supply chain, and in a fair way, with favourablepayment terms and transparent ways of working. Thesemeasures will help local firms to grow, employ more people andincrease the resilience of Kingston’s supply chain.

FinancialOutcomes

Financial sustainability is critical for RBK. FM is a largeexpenditure area for the Council in its own right, but it also playsa major influencing role on other costs, including property, frontline services and the capital programme. The impacts of poor FMtake a long time to materialise and be noticed, and typicallymanifest themselves in reduced quality and condition of theestate, and a knock-on impact to backlog maintenance, assetvalues and future capital requirements. This FM procurement hasbeen designed in a way to provide the Council with a high degreeof cost certainty, much improved data for predicting futuredemand requirements and a more planned, proactive approach tomaintenance, helping to avoid future costs. This is in addition toboth delivering, and enabling significant cashable savings asoutlined in the financial impacts section of this document.

SocialOutcomes

A large portion of FM expenditure is spent on labour. Targetingthis spend wisely can have major, positive impacts on socialvalue. This is being done through a number of measures.Keymeasures include: ensuring all people employed to deliverservices on behalf of RBK are earning at least the London LivingWage (LLW). Through the LLW we can improve living standardsand outcomes for dozens of RBK residents, as the majority of ourcleaners live in the borough. Through the contract we will improveoutcomes for dozens of disadvantaged residents, by providingtargeted training and employment opportunities e.g. forex-offenders, NEETs and people with disabilities and by providingflexible work for those with caring responsibility. We will alsotarget opportunities to help improve our diversity andinclusiveness. This will be done both through the social valueaspects of contract award, but also through our financiallyincentivised key performance indicators throughout the life of thecontract, ensuring continuous improvement.

EnvironmentalOutcomes

Kingston has declared a climate emergency, and its estate is thecore source of direct emissions for the Council. The buildings in

scope of the FM procurement alone produce in excess of 3,000tonnes of CO2 per annum. Significantly more emissions comefrom our suppliers and travel to assets, and through theembodied carbon in our work and the materials we use. From awider sustainability viewpoint, FM plays a key role in reducing theuse of plastics, waste and recycling, avoiding the use of harmfulchemicals and ensuring ethical sourcing of materials.Environmental sustainability is a core aspect of this contract, bothat award stage and throughout its life driven by continuousimprovement KPIs linked in the Council wider climate changestrategy. The aspiration is that this FM contract will enable us toachieve net zero carbon on our estate by 2030.

OperationalExcellence

In addition to the above strategic outcomes, there is a need to getFM “Match Fit'' and improve operational delivery. This includesworking in partnership with suppliers, improving our data maturity,digitalising service delivery, taking a more sustainable, long termview and improving customer service. We will adopt a moredynamic, preventative and outcome focused regime. This willprovide far better insights and data on our estate to aid effectivedecision making and allow the Council to reduce backlogmaintenance, improving the value of the estate. The preventivenature of works will also reduce consequential loss and the needfor capital expenditure by prolonging the life of building elements.

2.3. FM is a core support service and will need to work closely with other servicesand enable the Council’s change agenda. This contract will need to be flexible.The procurement has been designed with robust change control and variationprocesses in place, allowing change in a transparent and fair manner. Threekey initiatives have been identified:

● Future Workplace - The Council's ambitious Future Workplace Programme(FWP) will transform how our employees work. This will likely result in theredevelopment of our key corporate assets from an FM perspective and amaterial part of the FM contract. We have incorporated various futurescenarios into our modelling, in consultation with the FWP team. When adecision is made on the future of key assets and associated impacts, we willrefine our requirements. These developments will result in more intensive useof remaining assets and again this has been built into our specifications.Finally, FWP will change how employees, visitors and partners interact withour space, with more time spent collaborating and teaming, and less timespent sitting at a desk. Where desks are used, they will require an enhancedcleaning regime to take into account hotdesking.

● Asset Rationalisation - with the Council’s MTFS requirements, and the shiftto delivering services in the community, rather than from Council assets, this

will likely result in a reduced asset base over the next few years. This hasbeen built into the specification which includes both means to vary thecontract, remove and dispose of assets when required, minor works torefurbish assets where needed and a focus on improving data to informreliable decision making and accurate business cases.

● Climate Emergency - The aim to achieve net zero by 2038, or earlier wherepossible will require significant changes to our largest source of emissions, theestate. The specification includes the technical skill sets requirements to dothis, including the maintenance of heat pumps, renewable energy such asSolar PV and a programme of retrofit to e.g. install LED lighting in a costeffective and joined up way. FM delivery is a core, integral part of the widerProperty Net Zero Carbon Strategy.

2.4. Achieving Outcomes - Contract Design and Management

For benefits to be effectively realised, it’s essential that they are well defined,understood and tracked. A core aspect of this commissioning activity is thelining up of benefits and risks between the Council and the supply chain,placing responsibility with the party best able to effect change, ensuring clarityof roles and responsibilities, appropriate risk apportionment and ultimatelyensuring outcomes are aligned; what each party is trying to achieve, whensuccessful, the other party benefits to. This facilitates effective partnershipworking, rather than adversarial contract management. This is critical inensuring long term value and avoiding value leakage over time.

We will maintain value and ensure benefit delivery through three keymechanisms. Further detail on each can be found in Annex 10 - ‘Detail onAchieving Outcomes through Contract Management and Design’:

● Service Design● Contract Award & Mobilisation● Contract Management

3. Proposal and Options

3.1. Preferred Model for Service Delivery - Bundled Model

3.1.1. Multiple options have been explored for future service delivery. It wasagreed as part of Gateway 0 that a Bundled Services model would bethe preferred option for service delivery. For further detail on the optionsappraisal please see Annex 2 - ‘Detail on Options Appraisal: PreferredModel for Service Delivery’.

3.1.2. The Bundled Services model groups services according to similarcharacteristics into separate contracts. The model is sometimesreferred to as the “best-in-class” delivery model as it allows for each

bundle to be delivered by a provider that specialises in the delivery ofFM services within that bundle.

3.1.3. The preferred option was chosen based on the balance of risk amongstmultiple providers and ability to support SMEs through separating outservices.

3.1.4. Although a Bundled Services model can result in a greater level ofinternal management and administration, investing in a strong internalclient function can mitigate this alongside a well-managed helpdeskservice.

3.1.5. Following the Gateway 0 report, additional analysis and discussionshave taken place to determine the preferred bundles which are:

Bundle/Lot Name Description

Building Services (Lot 1a and 1b) This bundle covers Hard FMservices including reactive, cyclicaland planned maintenance.Integrating these services shouldreduce management burdeninternally and reduce risk allowingthe Council to client effectively due tothe synergies it provides. MinorCapital Works will come under this.This will be the largest contract dueto the synergies it provides.

Facilities Management (Lot 2) This bundle primarily covers soft FMservices including cleaning, wastemanagement and workplace FMservices such as porterage that arenot already delivered in-house or viaother contracts.

Window Cleaning (Lot 3) Small contract for window cleaningthat has been split separately fromother soft FM services to allow localSMEs to bid separately.

Pest Control Services (Lot 4) Small contract for pest controlservices that has been splitseparately from other soft FMservices to allow local SMEs to bidseparately.

Security Services (Lot 5) This bundle covers Security Services

such as key holding and guarding.

Minor Capital Works This will primarily sit within BuildingServices to be delivered whereneeded alongside the bundlesoutlined above.

3.1.6. Please note: Management, OHP and Other Costs will also apply acrossbundles.

3.2. Contracting and Preferred Route to Market

3.2.1. The agreement on the preferred procurement approach (BundledServices) informs the preferred contracting approach and route tomarket.

3.2.2. In Gateway 0, it was recommended that the Council uses an industryrecognised contract rather than developing a complex, bespokecontract in-house. This approach reduces risk for all parties involvedand allows the Council to share best practice and knowledge with itspeers.

3.2.3. Following Gateway 0, a further options appraisal on contracting wasundertaken. For Building Services, Facilities Management and SecurityServices lots, the following routes to market were considered:

a) Framework Agreement (with framework Terms and Conditions)b) Individual Agreements (with Council Terms and Conditions)c) Individual Agreement with NEC4 Contract - FM Services

3.2.4. Please see Confidential Annex 3 - ‘Detail on Contracting andPreferred Route to Market’ for further explanation on procurementframeworks

3.2.5. Although individual agreements can support suppliers through tailoredrequirements, there is a lack of overall management activity to tietogether the individual agreements making it a complicated and riskydelivery model. It was determined that procuring all FM servicesthrough individual agreements might be difficult to achieve given thetimescale for procurement. Additional risk due to size and value of theBuilding Services, Facilities Management and Security Services lotswas also identified and so it was agreed that using a nationallyrecognised and compliant framework would be the preferred route tomarket. This also allows the Council to leverage existing industryrecognised contracts as noted earlier. Additionally, due to the nature ofthe bundled services, the Council can allow 3 different suppliers to

deliver services, in contrast to the single provider used at present,creating more flexibility.

3.2.6. An options appraisal was completed to evaluate existing frameworksand determine which would be the preferred option for the Council. Thepreferred option was determined as the Crown Commercial Service(CCS) RM3830 Facilities Management Marketplace Framework.Further detail on the options appraisal and how the frameworks werenarrowed down is available in Annex 3 - ‘Detail on Contracting andPreferred Route to Market’.

3.2.7. The CCS Framework was selected as the preferred route following afull options appraisal, stakeholder engagement and was approved atFM project board. This framework is used extensively across the publicsector and has a wide range of suppliers familiar with working to bothCCS terms and managing public sector estates. It is based on thePublic Sector Model Services Contract, widely regarded as bestpractice for public sector purchasing organisations. Suppliers havebeen evaluated and screened to secure a place on the framework, andall are able to meet the core requirements. The framework is designedin a way to support social outcomes, including the government'sagenda of achieving £1 in every £3 with SMEs. The procurementprocess is simple and accelerated, with a range of standard schedulesand documents that can be used. Due to Window Cleaning and PestControl Services being bundles of smaller value and less complex,there is opportunity to procure these services through individualagreements under the Council’s low value procurement procedure. Thiswas deemed to be the preferred way forward as it encourages localSMEs to tender for the contracts as outlined under Economic Outcomesearlier in this report.

3.2.8. It was also recommended that Window Cleaning and Pest ControlServices should be contracted using a simple to understand contract,either an industry recognised contract, NEC4 Short form, to reduce riskand allow the Council to share best practices, or alternatively using theCouncil standard T&Cs for purchasing of goods and services. This issubject to legal review and advice.

3.3. Assets and Services in Scope

3.3.1. Following the Gateway 0 Report where scope of assets was outlined,further work has been undertaken to review core buildings in scope forfuture FM services. Further detail on assets and services in scope isavailable in Annex 4 - ‘Detail on Assets and Services in Scope’. Thereare approximately 86 buildings that are currently deemed to be inscope.

3.3.2. Data Accuracy and Verification: The Council does not hold acomprehensive dataset for its estate. This is by no means unusual, but

the poorer the clarity for organisations bidding, the greater therisk-based pricing they will build in. As such, it’s in the Council's interestto be as accurate as possible. Prior to the ITT being released, theCouncil’s property services team is validating and verifying the data wehold and improving accuracy where possible. In addition to this,suppliers are invited to undertake site visits as part of the tenderprocess, allowing them to see the type and condition of assets we hold,to inform their risk-based pricing. To further mitigate this risk for both theCouncil and our supply chain partners, an asset verification period isbuilt into the contract. Following the contract award, a mobilisationperiod has been built in. During this mobilisation period, suppliers haveup to six months to undertake asset verification. This is where they willvisit our assets and confirm our requirements. For example, if we said abuilding had one boiler, but it actually had two, this is the supplier'sopportunity to amend their price - rather than them having to build insignificant risk premiums. This will be underpinned by an agreedschedule of rates, so that the calculation of any changes in theirtendered price is objective and transparent.

3.3.3. Even with this mitigation, it should be noted that a lack of accurate datawill introduce risk to the procurement process. Any ambiguity relating todata will result in “risk pricing” being deployed by bidders, where theymake an assumption, typically on the more risk averse side of thescale. Even if they do not take a risk averse approach, it introduces anew risk that they underprice the contract, then struggle to deliver,impacting contract sustainability. In addition to the data ambiguity risk,there are a number of market factors at play, including the majorimpact of COVID-19 on the FM industry, surging material prices,reduced risk tolerance and labour shortages somewhat driven byBREXIT. These uncertainties combined with the other factors outlinedabove, mean the cost modelling undertaken as part of this project maynot be as accurate as usual and an optimism bias/contingency of up to20% may want to be assumed for budget planning purposes.

3.4. Pricing & Commercial Model

3.4.1. As noted, the preferred model is bundled services with:

● 3 lots (Building Services, Facilities Management and Security Services) to beprocured via the CCS framework.

● 2 lots (Pest Control Services and Window Cleaning) to be procured using a“quick quote” process under the Council’s low value procurement eligibility toencourage local SME suppliers to bid for these contracts.

3.4.2. Analysis on pricing strategy was completed with the key driversunderpinning analysis as:

● Price certainty● Value for Money

● Encouraging innovation and improvement reflected in the prices paid● Flexibility for changes in service scope or standards● Minimising payment administration● Simplicity of contract● Ease of procurement process

3.4.3. Explanations for the different pricing models evaluated are available inConfidential Annex 5 - ‘Detail on Pricing & Commercial Model’.

3.4.4. For building maintenance, the preferred option is aSemi-Comprehensive Fixed Price, with a variable element based on aschedule of rates. This means that the Council will pay a fixed price forthe majority of its planned and predictable works and for the variableelement, will have cost transparency.

3.4.5. Additionally, reactive repair works up to a price threshold of £1,000 willbe included in the fixed price. The Council would agree and pay for anyreactive repair works deemed to be above £1,000, by mutualagreement, allowing a balance between supplier and client risk.

3.4.6. The fixed price would vary by 5% based on performance, withperformance deductions for under achievement and good performanceattracting earn back. This model puts risk with the best party andincentivises suppliers to invest in planned preventative maintenance toprevent reactive failures and drive performance.

3.4.7. The variable element is driven by a schedule of rates, for works that arenot predictable at contract start - this would include variations and newprojects.

3.4.8. Building services will form a large portion of the cost of future FMprovision. Although there are some advantages to using Fixed PriceServices, there are also some risks. Detail on the identified risks andassociated mitigations are available in Confidential Annex 5 - ‘Detailon Pricing & Commercial Model’.

3.4.9. For the Facilities Management and Security Services lots, the preferredoption is a Fixed Price model due to predictability of demand and due tothe specification working to an outcome, rather than an input basedmodel. This incentivises efficiency whilst maintaining or exceeding therequired standards.

3.4.10. For Pest Control Services and Window Cleaning, the preferred option isa planned regime based on a Schedule of Rates. Due to the likelynature of suppliers being local micro businesses, we need to take aclear approach to pricing. Suppliers will be asked to respond to a quickquote process, setting out their charges for the core items of servicedelivery, e.g. per pest control call out, by treatment type etc. To easethe admin burden, at the start of the contract the suppliers will agree aplanned regime of work, with the price being calculated based on theagreed schedule of rates as part of the quick quote process.

3.4.11. As part of the Property Services Redesign to effectively manage capitalworks projects, it is recommended that minor capital works below£5,000 should be delivered as part of the future FM contract. Anyprojects between £5,000 and up to £100,000 will be triaged by theProjects team to understand if they can be delivered within FM orseparately with specific project management.

3.5. Key Performance Indicators (KPIs)

3.5.1. To allow the Council to work in partnership with a future provider, thereneeds to be alignment of objectives and incentives. Setting keyperformance indicators can support this. Approximately 40 KPIs will bedeveloped, covering the following 8 areas:

3.5.2. Some examples of KPIs being considered and developed for future FMdelivery are:

● Tickets and issues raised to the helpdesk to be responded to on the sameworking day with an agreed course of action

● Proportion of overall framework expenditure that has passed to local SMEsand Social Enterprises

● Level of improvement in the average EPC rating of buildings in scope● Improvement in the average value of user satisfaction

3.5.3. The payment mechanism will be linked to the KPIs. Service delivery willmeet or exceed the KPI Performance Measure for each KPI. Any KPIfailure will allow the Council the right to KPI credit (recognised as aprice adjustment and not an estimate of the Loss), up to 5% of thevalue of that month's fee. The KPI credit will ratchet up with persistentfailure, multiplying by 1.5 times for each subsequent failure. Toincentivise performance improvement, suppliers have the opportunity to“earn back” a KPI credit the following month. This carrot and stickapproach helps to incentivise performance improvement. The PaymentMechanism (or Paymech) is driven by an objective, formula drivencalculation each month based on KPI data and adjusts the payment tothe supplier accordingly. Integrating this as a core part of servicedelivery and payment calculation embeds it operationally, rather thanhaving a periodic negotiation for poor performance.

4. Award Criteria

4.1. To ensure an appropriate balance between price and quality, it has been agreedthat prospective bidders will need to submit their bid based on a price-to-qualityratio of 35:65. The standard weighting within the CCS framework is 50% quality50% price, but the council has the ability to amend this, which we have donebased on feedback and engagement. This change has predominantly beenmade to allow for increased focus on social and environmental outcomes. It isimportant to note that as we are using a framework, suppliers have already beenqualified through a rigorous selection process, including their financial standing,track record, compliance, standards and approach to quality management. Assuch the further competition criteria need to focus on differentiating an alreadywell qualified field of suppliers.

4.2. Summary of Award Criteria - it is proposed that this contract is awarded on a splitof 45% Service Quality, 35% Price and 20% Social Value (split 10% social value -people/resident outcomes, and 10% social value - environment and combatingclimate change). This reflects a slight priority to quality over price, and gives agood weighting to wider strategic and social outcomes. Any reduction to theproposed weighting would mean that the competition is focused on cost, whichwould not be in line with the agreed commissioning strategy or wider councilapproach - this is summarised in the below table:

4.3.

Option 1: 50/50 Option 2: 60/40 Option 3: 65/35

Price 50% 40% 45%

Quality of Service 40% 40% 35%

Social andEnvironmentalValue

10% 20% 20%

4.4. Evaluation criteria

The evaluation consists of a quality evaluation and a price evaluation.

The award of this Call-Off Contract will be on the basis of the ‘Most EconomicallyAdvantageous Tender’ (MEAT).

The weighting for the quality evaluation is 65; and, the price evaluation is worth35.

Further detail on evaluation criteria is available in Confidential Annex 6 - ‘Detailon Award Criteria’.

5. Consultations

5.1. Stakeholder Engagement and Analysis

Stakeholder Comments

Service /Building Users

Earlier in the year, a survey was distributed to service / buildingusers with results collated. The key findings were considered aspart of KPI and specification development.

Further engagement with Council services has been conductedwith Housing, Leisure, Bereavement Services, Achieving forChildren, Future Workplace and the team which manages greenspaces to help inform service requirements.

SeniorLeadershipTeam

Briefings at senior leadership team (SLT).

Project Boards Engagement with project team and stakeholders in Property,Commissioning and related enabling services (HR, Finance) inproject board meetings.

FutureWorkplace Team/ TransformationTeam

Engaging with the Transformation team and Future Workplaceteam to consider the impact of change on the estate.

ClimateEmergencyTeam

Engaging with the team leading on Climate Emergency tounderstand how the new FM commissioning can support widerstrategic priorities within the Council.

Enabling and Including Property, FM, Commissioning, Finance, IT and Legal.

related services

Soft MarketTesting

Soft Market Testing was conducted with prospective suppliers onthe CCS framework. The Council’s strategic aims were highlightedto suppliers and there was an opportunity for them to ask questionson key areas such as the proposed bundles, pricing andcommercial model and procurement timelines.

Additional Soft Market Testing sessions for Pest Control Servicesand Window Cleaning lots to be conducted.

6. Timescale

Assuming a decision is taken in Corporate & Resources Committee on 30th

September, we will look to commence the following indicative timeline:

Task Timeline

Issue ITT 15th October 2021

Tender Period 15th October- 3rd December 2021

Site Visits October to November 2021

Evaluation Period 3rd December 2021 to 7th January2022

Draft GW2 Award Report 7th-21st January 2022

Submit final GW2 Award Report to CGB 21st-28th January 2022

CGB Meeting 3rd February 2022

(If award of total contract exceeds £1m)

Corporate & Resources Committee(Draft Report due and draft agendacirculated)

27th January 2022

Pre-Agenda Meeting 1st February 2022

Final Reports Due 7th February 2022

Committee Meeting 17th February 2022

Call in Deadline 3rd March 2022

Successful and Unsuccessful Lettersreleased

4th March 2022

Standstill Period 4th - 15th March 2022

Contract Award (Terms and Conditions)submitted for signature.

15th-31st March 2022

Contract Mobilisation 1st April to 30th September 2022

Service Commencement 1st October 2022

7. Resource Implications

7.1. Financial Implications

7.1.1. The new service will deliver future requirements in an affordable manner,providing savings, whilst also investing in areas of importance. Afteraccounting for changes in the estate, the new contract still provides alike-for-like saving on the service delivered. The genuine saving from thisactivity is hard to model, due to the significant demand based changes,estate rationalisation, public realm CCTV transformation and additionalcosts from buildings without sufficient budget to cover demand and theimpacts of inflation and the living wage. Due to the nature of competitivetendering on the market, the actual cost implications of this commissioningprocess will not be known until tender prices are returned; these will beset out in full detail as part of the Gateway 2 award report.

7.1.2. Based on industry benchmarks for a quality service, Council costmodelling shows the new FM contract, based on reduced estate size, willcost ~£3.4m per annum, and this increases slightly annually with inflationand uplifts. Note that there is estimated to be net £0.5m required foradditional resources to ensure robust delivery of the new contract (see7.2.1). Therefore, the total cost for the service will be in the region of£3.9m, subject to the staffing growth being agreed as part of the budgetsetting process.

7.1.3. This cost of service is deemed affordable based on comparisonagainst budgets. The budget, adjusted for inflation, in the first full year ofthe contract (2023/24) is £4.4m (Property budget for FacilitiesManagement), and the total FM contract cost is £3.4m. If the additionalgrowth for staffing of £0.5m is agreed, this would deliver a £0.5mreduction in cost. Additionally, some of this cost can be recharged totenants as appropriate, potentially increasing the savings possible. Thissaving will contribute to existing savings in the Medium Term FinancialStrategy, and will need to be aligned with other programmes, such as theFuture Workplace Programme, for clarity. Note that this reduction in spendis broadly static on an annual basis, after the initial period. Further detailon financial implications is available in Confidential Annex 1- ‘Detail ofFinancial Implications’.

7.2. Additional Resource Implications

7.2.1. A separate growth bid is being made to strengthen the FM team andintroduce an “intelligent client function” to enable the delivery of savingsand performance improvements, and to prevent value leakage over time.This is subject to its own business case process. Whilst costs are notdirectly related to the FM commissioning project, having a strong clientfunction is a critical enabler for this model to be successful, especially inrelation to helpdesk and contract management functions. The indicativecost of a new permanent FM team is ~£576k pa. The current cost for FMstaff is £107k pa so the net additional cost will be £469k pa. This growth willbe subject to agreement through the budget setting process. This new FMteam will provide a strong client function, ensuring enhanced managementof FM services and rigorous control of the contracts. Further details are inAnnex 10 - Detail on Achieving Outcomes through Contract Management.Formal consultation will be required with staff in scope of the client functionbefore any structure can be finalised

7.2.2. Additional external specialist resource may be required for procurement ,with extra support from Internal support functions such as HR, Finance, ITand Digital and Procurement in addition to Project Management resourcearound mobilisation of contracts

7.3. Capital implications

7.3.1. Property Services holds a budget of £400k for minor capital works. Thiscovers aspects of the planned maintenance regime and are typically forworks under £25k. Under the new contract, FM can undertake works up to£100k. Any work with an estimated value exceeding £5k will go to thecapital projects team for triage. If it is decided that works are best placedwith the FM provider, they will quote for these works and if value for moneyis demonstrated, they will be asked to deliver these works. The FM contractwill build in headroom so we do not exceed the contract value if we take onadditional Capital Works. Work is not guaranteed, and the Council reservesthe right not to use FM providers in its delivery. Core likely sources for thiswork will be delivering minor refurbishments and alterations as driven by theFuture Workplace Programme and net zero interventions driven by theclimate change strategy, installing new building plant and life expiredassets.

8. Legal Implications

It is proposed to use the CCS (Crown Commercial Services) framework agreement(RM3830) to procure Building Maintenance, Facilities Management and SecurityServices, and the Council’s own low value procurement process to procure PestControl and Window Cleaning services.

This framework is a compliantly procured multi-supplier framework, it is current, theservices offered are within scope of the Council’s requirements, and the Councilidentified as a potential awarding authority. The Council will have the option of eitherdirectly awarding or conducting a further competition. The terms and conditionsprescribed for use with the framework is the Public Sector Contract (PSC) terms andconditions (PSC) which may be amended where appropriate to supplement theCouncil’s requirements under a further competition.

To avoid the risk of challenge, the Council must ensure that it follows the procedurelaid down in the framework agreement for conducting a mini-competition or directlyawarding.

With regard to the services which will be procured using the Council’s low value RfQ(Request for Quotation) process, the Responsible officers must ensure that thoseservices are procured in full compliance with the procedures and approval processfor E-Tendering detailed in the Council’s Contract Regulations (No.3).

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)will likely be applicable, therefore the Council must ensure that it engages with itsHuman Resources department to determine the scope of any staff transfers toenable it to comply with any statutory obligations it would have towards transferringstaff. There will also be a requirement for the current provider to work with any newproviders in considering TUPE implications

Risk Assessment

9.1. Strategic Risks

Please see Confidential Annex 8 - ‘Detail on Strategic Risks’ for list of strategicrisks identified and associated mitigations.

9.2. Interdependencies

The following interdependencies have been identified and considered as part of thework completed to understand the future FM delivery model:

● The Corporate Plan● Climate Change Programme● Asset Management Review● Living Wage Employer● Capital Delivery Review● Medium Term Financial Plan (MTFP)● Energy Procurement and Management● CCTV in the Public Realm● Future Workplace● Property Services Redesign● Grounds Maintenance / Green Spaces Commissioning

10. Equalities Impact Assessment

10.1. If it is determined that an Equalities Impact Assessment is required, this will becompleted as needed. There is no change in policy, and the services providedin the new contract are similar to the current services provided with nosignificant change. As outlined in the report, we have considered socialoutcomes as part of future FM Procurement to align with the Council’s widerstrategies. We also plan to share the Council’s Equalities Strategy withprospective bidders during the tendering process so they can align with theCouncil and their key objectives:

● Listen to, and learn from, the diverse communities we service● Celebrate the diversity of our borough and champion communities,

making sure that Kingston is a safe borough for all● Deliver accessible and inclusive policies and services that meet the

diverse needs of communities● Be the best employer for people of all backgrounds

11. Health Implications

11.1. There are no direct Health implications. However, an improved cyclicalmaintenance and testing regime as outlined in this document will helpreduce risks associated with e.g. fire, asbestos and legionella.

12. Road Network Implications

12.1. There are no Road Network implications. As Facilities Management isto do with maintaining in and around existing buildings, this does notchange the amount of traffic or parking required.

13. Environmental and Air Quality Implications

13.1. We are using KPIs in the new contract to improve environmental sustainability withinthe assets in scope of the new service. A sustainable decision wheel was populatedto understand the impact of this procurement on the environment. Green indicates apositive impact, yellow and red a negative impact, and grey no change/no knownimpact.

13.2. Air Quality: This contract is a continuation of Facilities Management serviceprovision that is existing already, and therefore there is no change on the air qualityimplications.

Background papers - GW0 report - FM Recommissioning (EXEMPT)

Author of report – Jessica Haines, Assistant Director for Property, Development &Investment. jessica.haines@kingston.gov.uk