Proposed decision
To extend the existing Old Rectory Business Centre Management
Services contract by a further one year.
Background and reason for the decision:
The Old Rectory is a KCC owned facility that has offered high
quality office space to SMEs since 2009. The centre is managed by
an external supplier. The previous contract for management services
was awarded in 2015 for a period of seven years, with an extension
granted for a further one year which will end in November
2023.
The proposal is to extend management services contract at the
centre by a further 12 months during which time a review will be
conducted to decide the future of the Centre.
Gross estimated income will be more than £1m if the contract
was extended for three years, but current financial circumstances
suggest that a more detailed review of all the options should now
be undertaken to decide the best value course of action.
Options:
1) Extend the contract for the duration of 3-years - to exercise
the full extension clause within the existing contract, allowing
the current service provider an 11-year term (7 years with up to
48-month provision for extensions). The current provider has
proposed a reduction to their share of profits by 25% (from 40% to
30% of the total profit) for the duration of a 3-year contract
extension with effect from 31st November 2023. This option would
increase KCC’s share of the profits (if other terms remain
the same), and by extending the existing contract, it will cut out
the disruption/cost of a potential new management company replacing
the current provider (IWG/Basepoint). Also, given the volatility of
the current market, it may be sensible to go out to tender in 3
years’ time, when conditions could be more favourable to
business.
2) Initiate a full PCR compliant procurement exercise. Whilst The
Old Rectory has benefited from the current service provider
maximising potential income generation from the centre, a full OJEU
process would permit KCC to test the market to ensure both price
and value for money. KCC would continue to receive a share of
profits. However, any potential change to the service provider
could be disruptive to current licensees located at the
centre.
3) Disposal of the asset. If this option is chosen the Council
would lose out on future income revenue but would receive an
immediate capital receipt which could be put towards other Council
resources. This option would potentially be disruptive to existing
businesses located at the centre.
4) Disposal of the asset and transfer of its functions (as a
business centre) as an ongoing concern. This option would also
ensure that any disruption to existing businesses located at the
centre is minimised. As with Option 3, if this option is chosen the
Council would lose out on future income revenue but would receive
an immediate capital receipt which could be put towards other
Council resources.
The proposed decision meets the objectives of ‘Framing
Kent’s Future 2022-2026’ by supporting the Kent economy
to be resilient and successfully adapt to the challenges and
opportunities it faces over the coming years; and by backing SMEs
and entrepreneurs to start-up, grow and drive adoption of new
technology.
Decision type: Non-key
Decision status: Recommendations Approved
Division affected: Northfleet & Gravesend West;
Notice of proposed decision first published: 02/06/2023
Decision due: Not before 2nd Jun 2023 by Cabinet Member for Economic Development
Lead member: Cabinet Member for Economic Development
Lead director: Stephanie Holt-Castle
Department: Growth, Environment & Transport
Contact: Mark Reeves 03000 417160 Email: mark.reeves@kent.gov.uk.
Consultees
The proposed decision was considered by the
Growth, Economic Development and Communities Cabinet Committee in
May.
Financial implications: The centre is self-funding and generates an annual profit, which is placed within a “sinking fund” held by KCC, ring-fenced for The Old Rectory and is utilised as necessary, where works to the building in the future become necessary. The annual net profit to KCC is currently estimated to be between £75k-£80k.
Legal implications: We are exercising the extension clause within the Contract and therefore there is minimal risk of challenge as the OJEU Call for Competition and Award Notice details that the contract would be for up to a 11-year period (7 years with up to 48-month provision for extensions). There has been no case law where a party has successfully challenged an extension allowed for within a procurement process that was granted late. It would be difficult to evidence grounds of challenge when the potential extension period has been detailed within the notices and tender documents. Any additions/adjustments to the standard contract produced in 2015 (ratified by KCC Legal Services) will be passed to KCC Legal for checking ahead of the contract being put in force.
Equalities implications: An EqIA was published in 2023, with low/no negative impact on Protected Groups, and no potential for negative discrimination. The assessment also identifies positive impacts on Protected Groups. The previous assessment was in 2019. It should be noted that a diversity questionnaire will be requested from each tender response in the event of an open procurement process. In addition, is provider is required to provide services consistent with the Council’s Equality and Diversity Statement. Data Protection implications a DPIA for the Old Rectory is not required since KCC does not collect personal information on licensees or centre users.