Minutes:
Councillor Michael White, Leader of the Council, introduced the report
The report provided the results of a mini tender exercise undertaken by London Authorities for the supply of Agency workers. The mini tender had been ‘called off’ from the Eastern Shires Purchasing Organisation (ESPO) Managed Service for Temporary Agency Resources (MSTAR) national framework for Agency workers. The framework had a number of different delivery models; including a Vendor Neutral Managed Service (VNMS) and a Managed Service (MS).
The outcome of the evaluation of the mini tender from the ESPO MSTAR agency worker framework was to award Lot 1a (VNMS) to Comensura and Lot 1b (MS) to Adecco.
It was noted that the Council would need to determine which model was most appropriate for its business needs and engage the winning supplier accordingly.
Reasons for the decision:
1. It was essential that the London Borough of Havering had a cost effective and value for money contract in place for agency workers when the current arrangements expires in August 2012.
2. As an organisation, the Council had been operating a VNMS system since 2006. It had delivered significant benefits, however a new contract would benefit from changes in the agency worker market and move to a fixed ‘pence’ mark-up arrangement, rather than a percentage mark-up – which would result in savings over and above current arrangements.
3. It was imperative to build on the benefits the Council had already delivered and looked to make further enhancements. There was an opportunity, to achieve these, by moving to a MS model, which would ‘strip-out’ the VNMS costs and mean that the Council would engage with one single supplier for the vast majority of agency workers and for the hard to fill and specialist type roles the MS provider would work with their chosen partners. With specialists recruited via the chosen partner the Comensura mark up would be replaced by an Adecco mark up. This would give the Council significant savings over the current arrangements.
4. There was a future option to integrate the MS providers system with Oracle R12, i-Procurement system so that agency workers were ‘hired and paid’ via the agreed corporate system. This would not be part of a standard 12 week implementation plan and although it was feasible to integrate with Oracle it had not been undertaken with Oracle R12, which was what the Council used. This bespoke integration was likely to add several months to the implementation timetable and due to the imminent contract expiry, it was suggested that the Council implement the stand alone system from Adecco. An example of an implementation plan was outlined in the Appendices to the report. The Council could schedule a move to an integrated solution at an appropriate juncture once the new system was up and running and delivering benefits subject to a full cost/benefit appraisal and the necessary approvals.
Options considered:
1. That service users source their own Agency Workers in the wider marketplace. This would create a situation whereby the less reputable companies in this market would be provided with an opportunity to sell to the Council. There were a number of companies that approached Councils to provide Agency Workers but past experiences, pre 2006, had shown that overall the true cost of sourcing Agency Workers via this route was more expensive than a corporate contract. This would also mean that there would be no centralised accurate management information, little control of spend, unable to assess quality, VFM or compliance with AWR.
2. Go out to tender alone. This would take around nine months to complete, due to the EU tendering timetable and would not get the best rates due to LBH expenditure being relatively small in comparison to the £100s of millions per annum which would be spent on a national basis from this framework. Hence, the Council would not get the benefit of economies of scale of collaborating with others and using aggregated expenditure when going to market.
3. Join ESPO MSTAR framework. There were two sub-options, Lot 1a - VNMS, which is what LBH has been operating for past 5 – 6 years. Lot 1b - MS, which will mean that we engage directly with an agency that will provide 75 – 80+% of the agency workers directly. In the event of specialist / hard to fill posts the MS provider would use their second tier suppliers. The rates for both models, via the ESPO framework, will mean a reduction on our current rates and therefore provide significant savings. The outcome mini competition exercise undertaken by London Authorities was significantly delayed in deciding which suppliers should be awarded which Lot. A challenge was mooted by an aggrieved supplier over the procurement process and rather than go through a Legal process, which would have added further delay, the procurement process was re-started. This delay in the decision of the mini competition from the ESPO framework has meant that we have been unable to make our decision in a more timely manner. As a result of this unforeseen delay we will be ‘out of contract’ for a matter of months. Interim discussions with the incumbent supplier, Comensura, have taken place and they have agreed in principle to extend the rates and T&Cs of the current contract for up to 3 months. This should allow us enough time to implement an alternative model, as recommended.
4. Join other frameworks that had been set up by other London Authorities. These had been compared to the ESPO framework however; they were not able to compete with them on rates.
Cabinet Agreed:
1. To confirm using the Eastern Shires Purchasing Organisation (ESPO) Managed Service for Temporary Agency Resources (MSTAR) national framework and the subsequent mini-tender exercise undertaken by London Authorities.
2. That the Managed Service option (Lot 1b) was the most economically and operationally advantageous option and accordingly approve the corporate contract for supply of Agency workers be awarded to Adecco from August 2012 to April 2014, with an option to extend until 10 April 2015.