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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 08/01/2008
CRANLEIGH LEISURE CENTRE CONTRACT ASSIGNMENT



Summary & Purpose
The purpose of this report is to seek the necessary approvals to assign the contract for the operation of the Cranleigh Leisure Centre from SERCO Leisure Ltd to DC Leisure Ltd for the period April to June 2008.

APPENDIX E
Waverley Borough Council

Executive - 8th January 2008

Title:
CRANLEIGH LEISURE CENTRE CONTRACT ASSIGNMENT
[Portfolio Holder for Leisure: Cllr R J Steel]
[Wards Affected: All Cranleigh Wards]

Summary and purpose:

The purpose of this report is to seek the necessary approvals to assign the contract for the operation of the Cranleigh Leisure Centre from SERCO Leisure Ltd to DC Leisure Ltd for the period April to June 2008.

Environmental implications:

There are no environmental implications arising directly from this report.

Social / community implications:

The services offered at Cranleigh Leisure Centre contribute to improving the health and well being of the people it serves. Assigning the management contract early will ensure that service standards are maintained and reassure customers that the change in management will not impact on the services they receive.

E-Government implications:

If DC Leisure takes over the operation of the centre a new website will be established to provide information to customers.

Resource and legal implications:

Given the other pressures on Waverley’s budget, and the fact that the cost of the new leisure contract is significantly higher than in previous years, it is necessary that any proposal to assign the last few months of the current Cranleigh contract to DC leisure is on at least a cost-neutral basis for Waverley.

As reported in July, the future management fee that the Council will have to pay the operator at the Cranleigh facility is significantly higher than the current level. It is clear, therefore, that DCL would need to cover these costs for the 3-month period April to June 2008. Officers are currently examining DCL’s figures.

It is possible that Waverley could generate a saving in the business rates payable on the leisure facilities for the period April to June 2008 that could be used to help fund the additional costs of assigning the contract. In October the Council agreed to extend its discretionary rate relief policy to include the five leisure facilities on the basis that they are operated under a Leisure Community Partnership model. DCL will be required to operate this model and apply for discretionary relief, as they are the rate-paying occupier of the buildings. This saving of rates is estimated to be around 250,000pa and DCL would be required to pass this saving to the Council through a reduced management fee.

Waverley is required to pay 25% of the rate reduction to the Government and DCL would incur some minor costs operating the partnership model. The net result should be a net saving to Waverley of around 200,000pa. The 2008/09 budget includes a saving of 150,000, being 9 months from 1st July 2008. Members have been advised of the risks of a potential change in government policy in the future that could prevent Councils from achieving a rates saving in this way and this is referred to in the budget strategy.

If the Council agreed to DCL operating the Leisure Community Partnership model at all leisure facilities from 1st April 2008, 3 months earlier than anticipated, an additional one-off net saving of around 50,000 could be generated in 2008/09. Subject to negotiations with SERCO and DCL, this saving could be used to fund the costs of the assignment of the Cranleigh contract from 1st April 2008. Mindful of the pressures on the Council’s budget, officers will endeavour to retain an element of this saving as a contingency for unforeseen costs that could arise in the contract transition period. If no such costs arise, any saving will return to the General Fund budget.

Currently, the contract with SERCO for the operation of the Cranleigh Leisure Centre ends on 30th June 2009. The Council has agreed that this contract should be terminated a year early to bring the start date coterminous with the other centres in order for one contact to be awarded for the future. SERCO has agreed to this. If agreed, the proposals in this report will require the current contract to be assigned to DCL for the period April to June 2008. This would be a separate transaction from the main 15-year contract with DCL. Officers would ensure that the terms require SERCO to continue to meet all of their obligations under the contract up to the point of termination, and that DCL must apply for discretionary relief for all leisure centres with effect from 1st April 2008.

Background

1. The current management contract at Cranleigh Leisure Centre is with Serco Leisure Ltd and was originally due to end in July 2009. In July the Council agreed, as part of its Leisure Facilities Procurement Strategy, to bring all of the leisure centre management contracts together into one single contract to be operated by DC Leisure Ltd (DCL) from July 2008. SERCO agreed to an early surrender in line with this decision.

2. Throughout development of the leisure strategy, a number of Members have indicated a wish to bring DCL in as early as possible. There are a number of operational advantages to transferring the contract as soon as practicable now that the decision to award the 15 year contract to DC Leisure has been taken. Both the staff and the public would feel reassured if an early transfer could be achieved. Whilst both the public and the staff have been informed that there will be no operational differences to the service customers receive, there is a risk that perceptions will impact on the operation. Past experience has demonstrated that the prospect of change can create a perception of uncertainty and this can have a direct impact on the business in relation to attendances and membership.

3. Given that the contract with Serco will be terminating, it is inevitable that in the period on the lead up to the transfer there will be little incentive for Serco to maintain the same level of activity in relation to sales and marketing. This will have a detrimental impact on the business and it is in both the Council and DCL's interests to minimise this. The timing is also an important factor; if DCL commence the contract in April rather than July they will have a longer period in which to prepare marketing literature and programming schedules for the period commencing in September. September is a key period for courses and contributes significantly to the performance of the overall contract.

4. With regards to staff, all Serco staff at Cranleigh have now been briefed about the changes and the regulations relating to their transfer to DCL. Experience has shown that in situations where transfers occur it is preferable to carry out the transfer as quickly as possible so staff can be reassured about the outcomes.

Conclusion

5. As this report sets out there are both operational and financial benefits to bringing the transfer of the Cranleigh Leisure Centre Management contract to DCL forward. With the opportunity for DCL to operate the Leisure Community Partnership model at all leisure facilities, the transfer could be undertaken at no cost to the Council and with the possibility that some savings could be achieved.

Recommendation

It is recommended that

1. (a) the assignment of the contract for the operation of the Cranleigh Leisure Centre from SERCO to DC Leisure for the period April to June 2008 be agreed, subject to:

- the financial position being at least cost-neutral for the Council; and
- DC Leisure implementing the Leisure Community Partnership Trust model for operating all Waverley leisure facilities within their current contract with effect from 1st April 2008, and passing the saving from discretionary rate relief to the Council; and


2. the Strategic Director (Leisure and Regulation), in conjunction with the Deputy Chief Executive and the Head of Legal and Property Services, be authorised to conclude the necessary negotiations and legal matters to achieve recommendation 1 above.

Background Papers (DoLR)

There are no background papers (as defined by Section 100D(5) of the Local Government Act 1972) relating to this report.

CONTACT OFFICERS:

Name: Julie Maskery Telephone: 01483 523432
E-mail: jmaskery@waverley.gov.uk

Name: Graeme Clark Telephone 01483 523236
E-mail grclark@waverley.gov.uk

Comms/exec/2007-08/202