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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 10/07/2007
Leisure Procurement Strategy Implementation



APPENDIX C
WAVERLEY BOROUGH COUNCIL

EXECUTIVE – 10TH JULY 2007

Title:

LEISURE PROCUREMENT STRATEGY IMPLEMENTATION
[Wards Affected: All]

Note pursuant to Section 100B(5) of the Local Government Act 1972

This report contains exempt information by virtue of which the public is likely to be excluded during this item to which the report relates, as specified in the revised Part I of Schedule 12A to the Local Government Act 1972, namely:
Summary and purpose:

The purpose of this report is to inform members of the outcome of negotiations with DC Leisure Ltd (DCL) for the management contract of the Council’s Leisure Facilities. The report includes a summary of the proposals submitted by DCL in response to the Council’s service specification for the refurbishment and management of the facilities as well as a detailed evaluation of DCL’s proposals and the results of the associated benchmarking.

Environmental Implications

The Leisure Strategy will deliver improvements to the existing leisure facilities including updating the plant and machinery, which will have a positive impact on the environment.

Social/Community Implications

Improvements to the sport and leisure facilities will enhance the quality of experience that visitors will have. Increasing participation in physical activity is a key aim and one, which will have a positive impact of improving the health and well being of people in Waverley.

E-Government implications:

There are no direct e-government implications arising from this report. However, DCL’s proposals include improvements to the way in which the leisure centres utilise IT systems to collect management information and marketing systems (as set out in the service specification).

Resource and legal implications:

The resource implications arising from the Leisure Strategy are significant. A full and detailed financial appraisal was conducted as part of the Strategy formation based on the estimated impact of the factors known at that time that were likely to increase the cost of running the leisure facilities under the new contract. This is explained in more detail later in the report. The Medium Term Financial Strategy was updated to reflect the estimated potential additional costs of running and maintaining the Council’s leisure facilities, as reported in December. Whilst these were best estimates, they were based on limited information and Members were informed of the risk that the actual cost of the bid could be materially different to these estimates. This was particularly the case with Cranleigh Leisure Centre, which DCL does not currently operate, and with Godalming Leisure Centre, which DCL had taken over at short notice in July 2006.

The Council’s 2007-08 Budget includes 540,000 for the management fees of the five leisure facilities. This is subject to an annual price uplift, which is linked to the Retail Price Index (RPI). The Capital Programme includes 1.8 million for a basic refurbishment of Farnham Leisure Centre and 0.8 million for Godalming. Approximately 0.2 million has been spent or committed already to deal with urgent works. Decisions taken by Members on any additional revenue or capital costs will have to be balanced against Waverley’s other priorities and financial pressures.

Given the nature of the information contained in the Strategy and the fact that officers are still in negotiation with the leisure contractor, most of the financial details are included in the Exempt part of this report. If Members wish to discuss detailed figures, it may be necessary for the meeting to move to exempt session.

Waverley owns the Godalming, Cranleigh and Farnham leisure centres. The Herons in Haslemere is owned by the Shottermill Recreation Ground Trust for which the Council is the sole trustee and makes decisions on its behalf. The Edge at Haslemere is owned by Surrey County Council and occupied by Waverley under a licence, with a management agreement for DCL to operate. Any capital works proposed for the Edge would be subject to the agreement of Surrey County Council. When the Council has agreed on the new contract, it is proposed to re-negotiate the terms of the licence with SCC.

Introduction and Background

1. The Council currently operates five leisure centres that, between them, provide a wide range of facilities. Currently, the centres are managed under separate contracts by two private sector leisure management operators. The centres have differing contractual terms and are in various states of condition. These arrangements have arisen historically as a result of Compulsory Competitive Tendering and the takeover of two of the facilities from external trusts.

2. Given the significant cost implications of providing good quality leisure facilities and the identified need to carry out major refurbishments of the facilities, the Council took the decision in April 2006 to consolidate the leisure management contracts into a single contract by July 2008 and to undertake a review of leisure centre provision with the formation of a long term Leisure Centre Procurement Strategy. The Strategy focused on:

the management of leisure facilities in the future
the level of leisure facility provision that should be provided in the future
procurement issues associated with management and facility options.

3. At its meeting on 12 December 2006, the Council adopted the recommendations set out in the Leisure Facilities Strategy, which was developed with specialist leisure consultants from Capita Symonds, and resolved to instruct officers to start developing detailed proposals for facility options for Waverley’s five leisure centres with DCL. A copy of the Council resolution is set out in Annexe 1.

4. It was agreed that:

the contract would be for a period of 15 years, commencing in July 2008 or before if contract terms could be negotiated
subject to the Council approval, the procurement should be negotiated on the basis of a Design, Build, Operate and Maintain (DBOM) structure
the Council’s Contract Procedure Rules be waived to allow the Director of Environment and Leisure, in conjunction with the Director of Finance and the Solicitor to the Council, to negotiate with DCL and work up draft contract terms if deemed acceptable.

5. Officers were instructed to demonstrate that negotiations achieve good value for money by undertaking a benchmarking exercise of all the proposals, to include references to DLO’s Charitable Trusts and the private sector.

6. At its meeting on 12th June 2007 the Executive considered the current position on the Godalming Rugby Club talks and due to the lack of progress and increased risk, instructed officers to focus resources on progressing discussions with DCL to work up proposals to develop and operate improved leisure facilities in Godalming. This report therefore does not include any proposals on the option to provide new facilities in Godalming in conjunction with Guildford Rugby Club and a commercial operator. If Members agree to enter into a contract with DCL for the Godalming facility, this will bring a close to the talks with the Rugby Club and the commercial operator.

7. This strategy aims to deal with the long-term management and investment proposals for the Council’s leisure centres over the next 15 years. This is the first time the Council has taken an overall strategic assessment and proactive approach to the asset management of these facilities. The Leisure Facilities Strategy should give the Council a greater degree of certainty with regards to the longer term financial planning for these leisure services. It is anticipated that a major review of the strategy will be undertaken again towards the end of the contract in order allow sufficient time to identify subsequent service and procurement requirements.

Scope of the Leisure Contract

8. The scope of the leisure contract covers the management of the Council’s five leisure centres, which are:

Farnham Sports Centre
Cranleigh Leisure Centre
The Herons, Haslemere
The Edge Sports Centre, Haslemere
Godalming Leisure Centre. 9. Following approval from Members, the Council has taken a flexible approach to the procurement of its preferred partner to manage these facilities through a solo negotiation process with DCL, who currently manage the facilities at Farnham, Haslemere and Godalming. There are a range of benefits associated with this route of procurement, which are set out below and formed the basis of the Council’s decision. The key benefits include: - Continuing relationship with existing management contractor
- Continuity of service for users
- Ability to negotiate with contractor from a strong position (DC keen to operate all facilities)
- Opportunity to establish longer term relationship with trusted partner
- Less expensive process in terms of procurement costs
- Open Book approach where WBC can interrogate in detail the submission figures and negotiate to gain best advantage
- Possibly reduced tender price from contractors due to lower risk
- More flexibility than other options in terms of negotiating timescales for implementation and levels of investment over the term of the contract. 10. Through the partnership, DCL will:

contribute to delivering the Council’s priorities for sport and community development
contribute to delivering Waverley’s Strategy for Sport and Leisure facilities, which includes the Vision ‘to support and encourage all residents to pursue an enjoyable, active and healthy lifestyle’
support the work of the emerging Waverley Community Sports Network and Waverley Local Strategic Partnership

11. The Council expects DCL to have some degree of flexibility to operate the facilities commercially, whilst ensuring the ongoing delivery of certain targeted requirements such as equality of access, pricing structures and delivering the Council’s stated objectives.

12. In addition to the management of the leisure centres, DCL was also required to submit the following capital proposals for the five centres:

Basic Refurbishment Programme – these are essential works required at Farnham and Godalming and to which the Council has committed capital funding Additional Capital Improvement Works - these items have been identified by the Council as desirable, but funding has not yet been identified. 13. DCL was required to submit a management fee proposal for the five leisure centres assuming completion of the basic refurbishment proposals and the additional capital improvement works.

14. The solo negotiations have been on the basis of DCL managing the five facilities on behalf of the Council from 1 July 2008 for 15 years, with the opportunity of reviews every five years for some elements of the income and expenditure.

15. This report presents the evaluation of DCL’s Best and Final Offer submission. Subject to Members’ recommendation, DCL may be required to refine their proposals, particularly around the scope of the capital works proposed.

Evaluation

16. In order to evaluate DCL’s submission, a matrix was developed, which covered the following areas:

Financial Criteria (50% Overall Weighting)
a. financially sustainability of DCL’s proposals
b. demonstration of value for money for the Council in DCL’s proposals
c. demonstration that DCL’s proposals represent the market price Service and Quality Criteria (50% Overall Weighting)
a. delivery of the Council’s service objectives
b. demonstration of innovation and service improvements by DCL
c. demonstration of a high quality of service.

17. In accordance with Waverley’s Contract Procedure Rules this matrix was approved by the Council’s Management Team in April 2007 and provided the structure for the evaluation of DCL’s submission.

Financial safeguards

18. It is normal practice for officers to undertake an evaluation of contractor’s financial position prior to entering into major contracts. As the Council is proposing to enter into a 15-year contract with DCL it is critical that their financial position is robust. In order to review and understand this, the following exercises were undertaken in parallel to the detailed evaluation of DCL’s submission:

assessment of DCL’s financial strength through a review of their accounts for the past three financial years
comparison of DCL’s financial strength with other leisure management contractors
review of DCL’s surety proposals (performance bond).

DCL Financial Strength

19. An initial review of the financial standing was undertaken by the Council in January 2007. This was then reviewed in June 2007.

20. The results of this second analysis showed that the financial standing of DCL is still good (as at 31 March 2006). However, the results overall are slightly worse than those for 2005. DCL’s draft accounts for the year ended 31st March 2007 show an improved position. Officers will keep monitoring the financial position of DCL and its parent company during the negotiation of contract terms and throughout the period of the contract.

Comparison of DCL’s Financial Strength

21. A comparison of DCL’s financial strength with other similar leisure management contractors was undertaken. The purpose of this was to gain an understanding of DCL’s relative stability in the leisure market. Comparison was undertaken with:

Leisure Connection
Parkwood Leisure
SLM
Greenwich Leisure.

22. The first three of these are the three other biggest private leisure contractors and Greenwich Leisure is the largest not-for-profit trust managing public leisure facilities.

23. The review of the four companies was undertaken using the an industry standard financial report and covered, amongst other things, the following areas:

balance sheet strength
profitability
risk
liquidity
credit rating.

24. The matrix used to undertake the evaluation was based on the one developed for pre-qualification questionnaire assessment in the standard leisure contract procurement documentation. Detailed results can be found in (Exempt) Annexe 2. In summary, the overall results are as follows:

DCL – 70% rating against specified indices
Parkwood Leisure – 70% rating
SLM – 70% rating
Leisure Connection – 41% rating
Greenwich Leisure – 33%.rating 25. These results reflect the outcome of the earlier evaluation of DCL’s financial stability and show that it is one of the strongest leisure management contractors in the market. This should give the Council comfort that, based on current financial performance, DCL is an appropriate company with which to contract for 15 years.

Surety

26. With any contract of this value, length, duration and profile, the Council would normally require there to be a performance bond, or alternatively, a parent company guarantee (if appropriate). The purpose of such a form of surety is to pay for any additional costs, up to the value of the Bond, of ensuring the continued provision of the services delivered under the contract, should DCL cease to trade (for whatever cause but most obviously the company being placed in liquidation).

27. Contract Procedure Rules state that financial security (surety) shall be sought unless the Director of Finance is satisfied that, upon completion of a risk assessment, there is no need to have a bond (or other form of surety). The form of bond must meet the requirements of the Solicitor to the Council.

28. Officers have agreed that, as service continuity is critical in this contract, a bond should be obtained from DCL to cover the costs that Waverley would incur should the company cease to trade. It is envisaged that such an eventuality would be overcome through appointment of an interim manager (whether that be an individual, company or other form of organisation) until a new long-term contractor can be appointed.

29. The costs will need to be quantified over the coming months up to finalisation of contract terms and conditions. Officers would negotiate on the form and content of the bond to ensure that the necessary financial safeguards were in place.

Commercial Trust Model - Leisure & Community Partnership (LCP)

30. The Council has agreed that the preferred management option is a commercial trust operation. This method of operating the leisure facilities helps the operator to focus on the community-based facilities by separating the profit-making part of the business. One financial benefit of that arrangement over the more usual commercial operation is the potential to avoid a large proportion of NNDR costs, which trust status makes possible. A commercial trust operation is not eligible for mandatory NNDR relief but Waverley’s current policy enables certain types of community organisations to receive up to 80% discretionary NNDR relief (part of which Waverley bears). Any proposed trust model would have to satisfy both the legislative requirements and Waverley’s policy objectives in order to receive discretionary NNDR relief. Waverley will be reviewing its policy in the Autumn and, as neighbouring authorities have done, Members will be asked to consider extending the policy to cover the community-focussed model proposed to operate the Council’s five leisure facilities.

31. None of the costs reported to Members take account of any NNDR savings as they cannot be guaranteed in the long-term. As more and more local authorities adopt this model, the Government could change the legislation in the future to prevent them from benefiting from these savings. The current level of NNDR for the five centres is 349,000 per annum, which the leisure operator pays and passes on to the Council as part of the management fee. If this saving opportunity is withdrawn, the Council would need to revert to paying DCL the higher management fee to cover the full NNDR cost. If discretionary rate relief was granted for all five of Waverley’s leisure facilities, the Council could save up to 200,000 per annum. Whilst these savings would reduce the cost of the leisure contract in the short-term, the saving cannot be guaranteed in the future.

FINANCIAL ANALYSIS

Explanation of Financial Arrangements

32. The Council pays the operator a management fee, which is the deficit of expenditure over income of running each leisure centre. This management fee is increased each year by an RPI-based uplift. The current contract requires the operator to take all of the risk for price increases and any legislative changes that have a financial implication.

33. The division of responsibilities for maintenance and repair of the facilities is defined in the current contracts with DCL. Broadly, the Council is responsible for the structure of the building and plant and the contractor for internal maintenance, decoration and equipment. The new contracts follow the same division of responsibilities.

Key Financial Issues

34. A number of national factors have changed significantly during the life of the current contracts and the fixed management fees have ‘protected’ Waverley from the impact of these factors in recent years. The report to Members in December detailed those known issues that were likely to result in an increased management fee under the new contract and these are summarised below:

- Leisure Market – Competition from private and other public leisure facilities has increased significantly. This has led to the tightening of contract terms and a shift in risk to the client.
- Significant cost increases have had a major impact on leisure providers, particularly for energy, insurance and pensions.
- The age and condition of Waverley’s centres has been a key factor in the decline in the number of users of Waverley’s facilities in recent years, and consequently income. The Council has a relatively small ongoing maintenance budget and has not undertaken major improvements to the centres for many years. Waverley needs to review the way that it plans, finances and delivers its repair and replacement obligations.

Current Budget Position

Table 1 – The 2007/8 revenue budget for the operation of the leisure centres.
2007/2008
Revenue Budget
Farnham
000
Herons
000
Edge
000
Cranleigh
000
Godlm’g
000
Total
000
Management Fee (net)
19
68
117
78
256
538
Borrowing costs
0
0
0
0
30
30
Total Revenue
19
68
117
78
286
568

Table 2- Budget included in Capital Programme for operating leisure facilities.
Capital Budget
Farnham
000
Herons
000
Edge
000
Cranleigh
000
Godlm’g
000
Total
000
Basic Refurbishment
1,800
0
0
0
820
2,620
Capital – annual maintenance
45
30
0
30
0
105
Total Capital
1,845
30
0
30
820
2,725
*620,000 is financed from Waverley’s resources, 200,000 identified from borrowing.

DCL’s Financial Proposal

35. This is a long term, 15-year, contract and the Council needs to ensure that it has achieved a competitive price from DCL through the negotiated route, which gives the Council good value for money and is both profitable and sustainable for the operator. The independent benchmarking is critical in making this assessment (see later in the report).

36. Generally, the operator will take the Business Plan risk over the period of the contract. However, recognising the need for a sustainable contract and the fact that there are many unforeseen factors that could impact on the business plan during a 15-year period which are outside of the control of the Council and the operator, it is proposed to have 5-yearly price reviews included in the contract. This will enable either party to realign certain external, unforeseeable elements of the management fee.

37. Currently, Waverley has an income share agreement for the Farnham and Herons contracts. Officers have negotiated a profit-share arrangement under the new draft contract terms, which means that the Council will benefit from both improved income position and from DCL achieving cost efficiencies. This requirement is coupled with the condition that DCL fix the level of support costs upfront in their business plan. The profit share will be activated if DCL exceed an agreed profit level included in the business plan. This will trigger a 50/50 split of any additional profit. No allowance has been made for profit share in the comparisons included in this report as it cannot be guaranteed.

38. It is important to Waverley for planning purposes and setting the annual council tax that the costs of its large contracts do not cause major fluctuations in the revenue budget each year. Officers have worked with DCL to ‘smooth’ their management fees as much as possible over the contract. Officers intend to negotiate a payment profile, which pays the operator a fixed amount based on the year 1 to 5 average figure in each of the first 5 years.

39. In view of the fact that this contract is still in the process of negotiation, it is prudent that detailed financial information is set out in the (Exempt) Annexe to this report. Such information is currently commercially sensitive and is excluded from the body of the report in accordance with Paragraph 3 of Schedule 12A to the Local Government Act 1972.

Provision for Waverley’s Repair, Replacement and Maintenance Costs

40. The report to Council in December 2006 alerted Members to the fact that the current annual capital budget of 105,000 is insufficient to meet Waverley’s landlord obligations for the leisure centres in the medium to long term. In response, an amount of 100,000pa was identified as an additional future pressure within the Medium Term Financial Strategy. The funding issue identified in the (Exempt) Annexe also applies to this amount.

41. (Exempt) Annexe 4 shows the Council’s estimated repairs, replacement and maintenance requirements over the 15-year contract period. The table shows that the average provision required is 200,000pa, including estimated capitalised staff costs. The Annexe also shows that the peaks of expenditure fall in the latter years of the contract. Waverley needs to make proper provision for these works and it is proposed that a contribution of 200,000 is made each year to a leisure centre repairs and renewals fund which will be used to fund Waverley’s schedules of work in the capital programme over the next fifteen years. This will reduce the annual contributions from the General Fund to the Revenue Reserve Fund by 105,000, thus making an additional annual charge to the General Fund of 95,000.

Benchmarking Review of DCL’s submission

42. As part of a major leisure management contractor procurement, it is best practice for the Council to undertake a benchmarking exercise of the business plans provided by all bidders to ensure that they represent value for money. As Waverley is following a solo negotiation route in this instance, this benchmarking process assumes greater importance because the Council does not have a range of submissions to compare.

43. The benchmarking analysis was undertaken by the Council’s leisure procurement advisors, Capita Symonds. A range of key performance indicators (KPIs) were calculated for the Council’s leisure centres and data was used from Trusts and Direct Service Organisations (DSO’s) as part of the benchmarking comparison. Three sets of KPIs were calculated for each facility based on the following:

current financial performance of the centres
projected financial performance of the centres in DCL’s basic refurbishment proposals
projected financial performance of the centres in DCL’s additional capital improvements proposals.

44. These KPIs were then compared to national benchmarks to ascertain whether DCL’s proposals represented good value. These national benchmarks came from two sources:

Sport England’s national benchmarks for leisure centre performance
Capita Symonds’ operational database of leisure centre performance.


45. Sport England’s benchmarks are based on a survey that was carried out in 1999-2000 and, therefore, are somewhat dated. However, Capita Symonds maintains its operational database continuously and, therefore, comparison with these benchmarks was accorded greater importance.

46. Capita Symonds has produced a detailed report of the results of its benchmarking analysis and this can be found in (Exempt) Annexe 2. 47. Overall, DCL’s operational proposals represent good value for the Council and will bring together all of the Council’s facilities under one management. There are a few areas where projected performance is relatively prudent, mainly reflecting the existing performance level of the facilities in question. However, DCL has proposed an improvement in performance and income generation in most cases and if the centres perform substantially better than projected, the Council will benefit through the profit share mechanism.

Design and technical analysis

48. As outlined in the introduction, the Council’s requirements for capital works was as follows:

Basic Refurbishment Programme
Additional Capital Improvement Works 49. In terms of the Additional Capital Improvement Works, as part of the Leisure Facility Strategy work, the Council developed a list of preferred requirements that were approved by Members.

50. DCL was required to provide cost estimates for these requirements in their submission so that the Council can undertake an affordability analysis prior to confirming its commitment to implement all or part of these schemes as part of the contract. In addition, they were required to present any additional proposals that they thought would be of benefit to the Council and Customers. Annexe 7 summarises the Council’s capital improvement requirements and the additional items included in DCL’s proposals. An initial analysis of DCL’s capital proposals was undertaken by the Council’s technical advisors, Michael Edwards Associates and Scott Wilson. In overall terms, subject to the adjustments listed below, the costs and outline drawings appear realistic and will form a satisfactory basis to progress negotiations. Exempt Annexe 5 includes adjustments to DCL's figures as follows:

Planning & Building Control fees
works not included in figures as noted

51. In order to take the capital proposals forward, MEA and Scott Wilson recommend the following actions:

finalise brief for scope of works to each centre (to be dictated by affordability assumptions)
meet with DCL design and cost consultants to clarify design, layouts and cost issues
consultation with the planners to confirm acceptability of proposals
consultation with Building Control with regard to Part L, DDA, etc
detailed review of overall programme of implementation
confirm extent of Fixtures, Fittings and Equipment and specialist services
finalise budget estimates for refurbishment and capital improvement works
agree strategy and method statement to maintain service at the centres operational during works.

Service delivery analysis

52. A comprehensive summary and evaluation of the DCL submission in respect of the service to be provided in the leisure centres is provided in Annexe 8. DCL is a proven management operator of local authority leisure centres. They presently operate 122 leisure facilities on behalf of 30 different local authorities and have actively been involved in the management of Waverley’s leisure centres for over eleven years. Besides the content of their submission, this relationship and the Council’s experiences of DCL have helped to put into context, and shape our understanding of, the proposals submitted by DCL.

53. Although there is some further work required with DCL in respect of producing method statements and performance standards for elements of their proposals, on the whole, every key heading of the evaluation process scored well in terms of the delivery of the service.

54. The key features of DCL’s submission include:

the appointment of a Facilities Partnership Manager to ensure that the Council’s objectives in terms of key target groups and health promotion are achieved. This postholder will also seek to secure external funding to support the Council deliver additional sports development programmes. The provision for a 10 hours per week Disability Sports Coordinator based at The Edge Leisure Centre with the responsibility of promoting sports activities for people with disabilities (Additional 5,000 per annum cost to contract) the provision of a standardised IT and Finance system across all the sites to give better financial and management information and improve marketing opportunities and the facility to book activities on line the development of links by DCL to national and regional sports and physical activity bodies to enhance the partnership working opportunities in the borough including representation at the Waverley Community Sports Network, Active Surrey, the local Waverley Sports Councils and the Local Strategic Partnership Health and Social Inclusion Sub Group the upgrading of the Council’s IN2 scheme, which will allow those members of the local community, who qualify for the subsidy, to access more of each leisure centre’s facilities at a 50% discount the introduction of the National Benchmarking Service to the new contract. This is a relatively new scheme for leisure centres in the UK to benchmark their facilities and carry out vital annual surveys of centre users, this will improve the Council’s current performance management process in respect of leisure (Additional 20,000 per annum cost to contract) the inclusion of a valuable, non-user survey, to be carried out every two years to find out what the barriers or reasons for non-participation are. These will not only be carried out in the main towns, but also the main villages in Waverley to get the widest possible understanding of our communities the continued development of QUEST, the UK’s national quality accreditation for the sport and leisure industry, in all of the Council’s leisure centres extensive staff, training and induction procedures. DCL has secured Investors in People accreditation. In addition DCL as an organisation has been given approved training centre status by the Royal Life Saving Society covering the transfer of staff and the centre programme at Cranleigh Leisure Centre. This facility is currently the only Council leisure centre in the borough not being operated by DCL and the transition to DCL management will be smooth a high level of attention to the building maintenance and health and safety management of the council’s leisure centres DCL will actively participate in partnership working initiatives and support the Council in all forms of best value and other assessment initiatives 55. The new contract includes a detailed and comprehensive performance management framework, which will enable the Council to monitor closely all aspects of performance against the service specification. This framework will provide the Council with the security that over the period of the contract should DCL under perform in any aspect, procedures are in place to rectify the issues swiftly and effectively. Whilst giving assurances to the Council the process of monitoring is much more detailed and robust and does require more input from the client than the current system. If members are minded to approve the officer recommendation to introduce this performance management framework it will be necessary to strengthen the client team with a part time (20hours per week) additional monitoring officer post. The annual cost of this will be 20,092 p.a. and is set out in detail in the financial implications section of the report.

Overall evaluation

56. As outlined in the introduction, an evaluation matrix was developed to assess DCL’s submission. It was approved by the Council’s Management Team. A summary of the matrix and the results can be found in Table 9.

Table 9 - Evaluation summary of DCL’s submission
Category
Sub-criteria
Score
Financial Criteria (50% Overall Weighting)Financially sustainability of DCL’s proposals
73%
Demonstration of value for money for the Council in DCL’s proposals
74%
Demonstration that DCL’s proposals represent the market price
75%
Category score
74%
Category weighted score
37%
Service and Quality Criteria (50% Overall Weighting)Delivery of the Council’s service objectives
83%
Demonstration of innovation and service improvements by DCL
83%
Demonstration of a high quality of service.
79%
Category score
81%
Category weighted score
40%
Overall score
77%

Risk assessment

57. A detailed analysis of the key risk associated with the strategy is included in (Exempt) Annexe 9.

Observations from Environment and Leisure Overview and Scrutiny Committee – 19th June 2007

58. The Leisure Strategy is a major project for Waverley and officers prepared a detailed report which was presented on 19th June at the Environment and Leisure Overview and Scrutiny (ELOS) Committee. This was mainly aimed at bringing new Members up to speed on the subject - all Members were invited to attend the meeting where officers provided an overview of the Leisure Facilities Strategy and explained the key issues.

59. The Committee agreed to pass the following observations to the Executive:

Conclusion

60. The report highlights the financial benefits to be gained by including the leisure centres in the Council’s future Discretionary Rates policy which is to be reviewed later in 2007. 61. The report clearly identifies that if the Council were not prepared to finance the additional costs for the management of the centres following the basic refurbishment the Council would need to reduce the scope of the current leisure provision significantly to keep the new contract costs within existing budgets. Officers will endeavour to ensure that the contract enables the flexibility for the Council to vary its policy on leisure provision during the life of the contract.

62. DCL has submitted costed schedules for the basic refurbishment requirements and whilst the total capital cost of these is greater than the original estimated figures presented to members in December, there is sufficient budgetary provision in the capital programme to meet the costs associated with the basic refurbishment programme if members choose to allocate it to Godalming and Farnham centres. 63. The capital proposals also include those additional items agreed by the Council as desirable across the five centres. In addition DCL has submitted enhanced proposals for improvements to the centres, which they believe, would add value and in many cases have a positive impact on the revenue position. Given the overall cost implications of the capital improvement proposals it is clear the Council is not currently in a position to finance the desired capital schemes from within existing resources. Officers are therefore recommending that further work is undertaken with DCL to identify which elements of the proposals generate revenue benefits and could be provided at nil cost or that could be financed through alternative sources of capital financing, albeit taking account of the financial pressures referred to in the (Exempt) Annexe.

Recommendation

That the Executive recommends to the Council that:

1. the Council notes that the additional costs indicated in the three year financial strategy will now be required if the Council’s policy to operate the existing five leisure facilities is continued, and recognises the pressure this will place on the revenue budget requiring significant savings if balancing the financial strategy is to be achieved going forward; 2. subject to 1 above the Council reaffirms its policy to operate the existing five leisure facilities; 3. the Council enters into a 15 year management contract with DCL which includes the operation of all five leisure centres commencing 1st July 2008, subject to the satisfactory agreement of detailed contract terms by the Director of Finance, Solicitor to the Council and Director of Environment and Leisure, noting that this decision will bring to a close the parallel discussions with the Guildford Rugby Club and the commercial operator;

4. the management contract includes responsibility for DCL to implement the basic refurbishment works as set out in the contract specification; to be funded from resources currently identified in the capital programme with the additional 1.6 million being met from the 2million earmarked by the Council in February for the implementation of the Leisure Strategy; 5. the additional net cost of 5,000 per annum for the inclusion of a new post of Disability Sports Co-ordinator within the contract be noted; 6. the additional net cost of 20,000 per annum for DCL to undertake the annual National Benchmarking Service audits and customer satisfaction surveys as part of the requirement of the new contract be noted;

7. the appointment of a part time post holder, from 1st April 2008, to establish and implement the performance management duties set out in the contract and to include an amount of 20,000 in the 2008/9 budget, be approved;

8. the Council approves the provision of a leisure centre repair and maintenance fund to meet the costs of the Council’s future responsibilities under the contract with a contribution from revenue of 200,000 per year from 2008/2009; 9. officers be instructed in conjunction with DCL to investigate and report back on capital improvement options focussing on those that could be delivered on a cost neutral basis, and for Members to identify which facilities they consider to be the highest priority;

10. officers be instructed to liaise with key stakeholders such as the Town Councils and Cranleigh Parish Council to identify ways in which they may be able to assist in delivering the Leisure Facilities Strategy, including identifying any potential sources of additional funding for the capital proposals;

11. the forthcoming review of the Council’s policy for Discretionary Rate Relief and the potential financial benefits that can be achieved by including Waverley’s leisure centres within the policy be noted; and

12. the recommendation set out in the (Exempt) Annexe be agreed.

Background Papers (DoEL/DoF)

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

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

Paul Wenham Telephone: 01483 523238
E-mail: pwenham@waverley.gov.uk

Peter Maudsley Telephone: 01483 523398
E-mail: pmaudsley@waverley.gov.uk




comms/exec/2007-08/055