Hampshire Fire and Rescue Authority Item

15/03/200526 September 2007

Service Level Agreements with Hampshire County Council

Report by the Chief Officer and Clerk

Contacts: David Howells Director of Corporate Services T: 023 8062 683

Jeff Pattison Clerk T: 01962 847321

1

Summary

1.1

The best value review of service level agreements with Hampshire County Council (undertaken in 2006) concluded that they generally work well and appear to offer the Authority good value for money as a result of the economies of scale that can be achieved. Recommendations were made to improve their day-to-day management and these are gradually being implemented as the individual agreements are reviewed. The review did not examine in detail compliance with current procurement regulations and it was recommended that this be undertaken.

1.2

This report sets out the values of the various main components of the agreements and considers whether or not they fall within the scope of the Public Contracts Regulations 2006. It is considered that the agreements can be said to satisfy one or more of the exclusion provisions. Nevertheless, it is considered prudent to undertake occasional market-testing of the arrangements in future; and to explore further the potential for an arrangement under Section 113 of the Local Government Act 1972 which allows for the formal sharing of services between local authorities

2

RecommendationError! Bookmark not defined.

2.1

That notwithstanding the conclusion that the various service level agreements with Hampshire County Council appear to satisfy one or more of the exclusions under the relevant procurement regulations; the opportunity be taken to occasionally expose some of those services to market-testing and/or full competitive tendering as a means of ensuring and demonstrating that they continue to offer best value.

2.2

That the Clerk be asked to consider whether it would be in the Authority's best interests to seek an arrangement under Section 113 of the Local Government Act 1972 to recognise and regularise the extent and benefits of services provided to the Authority under the current service level agreements.

3

Introduction and Background

3.1

The best value review of service level agreements for various support services provided by Hampshire County Council included a recommendation:

"That further advice be obtained as to the extent to which the Public Contracts Regulations 2006 oblige the Authority to undertake a full tendering exercise ..."

3.2

The Regulations implement the European Directive 2004/18/EC on the co-ordination of procedures for the award of public works contracts, public supply contracts and public service contracts. The Directive binds only the public sector. It sets out the procedures to follow for public procurements above certain thresholds. As with the previous procurement Directives, its aim is to facilitate greater competition by opening up markets and to ensure that public sector bodies award contracts in an efficient and non-discriminatory manner. The relevant threshold in this context is £144,371 for supplies and services.

3.3

The Regulations contain certain exclusions which provide exemption from the need to undertake a full European-wide procurement and tendering exercises. The relevant exclusions in this context are:

_ Purchases through framework arrangements advertised by Hampshire County Council, the OGC, Central Buying Consortium and others

_ Hotel and restaurant services

_ Legal Services

_ Personnel placement and supply services

_ Security services

_ Education and vocational health services

_ Health and social services

_ Recreational, cultural and sporting services

_ Services where because of technical grounds or in order to protect exclusive rights the contract can only be let to that particular contractor

_ Contracts for goods (e.g. software) as a partial replacement for or in addition to existing goods or installation and to change contractor would result in incompatibility with existing goods/installation and/or disproportionate technical difficulties

3.4

The Authority has service level agreements for a number of support services with Hampshire County Council estimated to total in excess of £1.5m in 2007/08. Typical annual expenditure for services provided by the relevant County Council department is as follows:

£'000s

Treasury and financial services

293

Property, Business and Regulatory Services

127

Information and Communication Technology Services

1,090

Legal and Committee Services

42

Total

1,552

3.5

On face value each of these broad service level agreements (SLAs) with the different departments of the County Council would appear to be subject to the Regulations. However, each SLA comprises a number of discrete support functions and some are considered exempt. The next section examines each in turn.

4

The services provided under each Service Level Agreement

4.1

Treasury and financial services

These include the following eight services:

£'000s

Payments & income processing

49

Payroll services

4

Pension services

40

Corporate finance (accountancy) services

115

Internal audit services

65

Consultancy services

4

Services of the Treasurer

16

Total

293

It would be potentially possible for each of these services to be procured separately and from potentially different suppliers. However, there are obvious effectiveness and efficiency gains from using a common computer (software) financial application platform (SAP is currently used) which leads to a view that it makes sense to combine the services under a single SLA. A further consideration is the contention that it makes practical sense for certain of the services to be provided by the County Council as a direct consequence of the appointment of Hampshire County Council's Treasurer as the HFRA's own Treasurer and `Section 151 Officer'. These would include the corporate finance (accountancy) services, payments & income processing and internal audit services - totalling £245,000. As such it is considered that the provision of those services can be excluded from the procurement provisions of the 2006 Regulations.

4.2

Property, Business and Regulatory Services

£'000s

Various professional fees for service provided by HCC's Property, Business and Regulatory Services Department

Total

126

This SLA is essentially for the provision of specialist professional advice and support relating to property management (including estates advice), scientific services and the `client services' role for contracts let for building cleaning services and grounds maintenance. The fees in any one year will vary dependent on the scale and complexity of both the Authority's capital building programme and its repairs and maintenance programme and are commonly associated with the commissioning of specific projects or reviews (e.g. asset valuations, condition surveys). So far as major (capital) schemes are concerned, contracts are let under the provisions of the South East Centre of Excellence (SECE) framework.

4.3

Information and Communication Technology Services

This SLA has the highest value and there are three discrete elements:

£'000s

Managed service (office ICT hardware and software)

850

Consultancy (development and support)

90

SAP charges [estimate]

150

Total

1,090

The `managed service' provides basic office information and communications technology hardware and software essentially for `back office' systems and applications. It does not include the provision of hardware, software and support for the command, communication and control mobilising system which is covered by a separate contract with a private sector company. The County Council offered this service to the Authority on the basis that its own contracts with third party suppliers (awarded via competitive tendering) includes the opportunity to supply other partner organisations including HFRA. Similarly, the SLA for SAP (licensing and support costs) is offered on the basis that the County Council's overarching contract with SAP included the potential to supply other partners and this SLA is effectively HFRA's contribution to those contract costs. Consultancy fees for development and support are negotiated annually with the County Council's IT Services Department on the basis of anticipated need for the year ahead. Although the current and anticipated level of fees are below the Regulation threshold this SLA is let on the basis that it makes sense to utilise the County Council's in-house expertise on SAP applications which we share. It is considered that this service would satisfy the exclusion that: "... to change the existing contractor would result in incompatibility with existing goods [e.g. software supply and subsequent development of it] and disproportionate technical difficulties.

4.4

Legal and Committee Services

£'000s

Services of Clerk and Monitoring Officer

17

Democratic services (secretariat) support

20

Southern England Local Partners - Brussels Office

5

Total

42

In value terms, this is the lowest of the SLAs. Given the appointment of the County Council's Chief Executive as the Authority's Clerk and Monitoring Officer, it makes sense to utilise the County Council's democratic services support team. Legal advice is provided on an ad hoc basis and fees are based on time spent and would in any event satisfy one of the Regulations exclusions.

5

Contribution to corporate aims and objectives

5.1

The support services provided by these SLAs are not the Authority's core business, but they are essential resources required for the successful and cost-effective delivery of our corporate aims an objectives. The best value review undertaken by an external consultant last year concluded that the SLAs are tantamount to a strategic level partnership which was built on a long-standing relationship of trust and flexibility which was delivering real benefits for the Authority from economies of scale. However, there was scope to improve on the management of the SLAs through improved documentation and regular quality review processes. The successful management of the SLAs contribute to how well the Authority is judged be making best use of its resources.

6

Resource implications

6.1

There are no specific resource implications arising from the recommendations of this report, but fees (charged via the SLA for legal services) have been incurred in assessing compliance with the Public Contracts Regulations.

7

Risk analysis

7.1

Failure to comply with the Public Contracts Regulations 2006 could lead to legal challenge and reputational damage.

8

Equality impact assessment

8.1

The proposals within this report are considered compatible with the provisions of the European Convention on Human Rights, the Human Rights Act 1998, and the Race Relations (Amendment) Act 2000.

9

Conclusion

9.1

Although the advice received suggests that most of the SLAs are excluded from the need to follow a full competitive procurement process in accordance with the European Directive 2004/18/EC, it is still open to the Authority to undertake a full competitive tendering process of any or all of the service outlined in this report. The Authority would, however, need to engage specialist external consultants to prepare tender specifications - clearly the County Council could not prepare these because there would be a conflict of interests. The cost of such an exercise (particularly in the case of ICT support) would be likely to make this prohibitively expensive. However, it is recommended that the opportunity be taken to occasionally expose some of the services to market-testing and/or full competitive tendering as a means of ensuring and demonstrating that the SLAs continue to offer best value.

9.2

Recognising the Government's support for shared services between local authorities it might also be worth considering formalising the current arrangements by an arrangement under Section 113 of the Local Government Act 1972 which allows for one authority to provide services on behalf of another.

Background Information (Section 100D of Local Government Act 1972)

The following documents disclose the facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of the report:

None

Excludes: (1) published works (including statutes and regulations referred to in the report); and (2) documents that disclose exempt or confidential information defined in the Act.