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.
Data Protection implications:
A DPIA for the Old Rectory is not required since KCC does not collect personal information on licensees or centre users.
Decision type: Non-key
Decision status: Deleted
Division affected: Northfleet & Gravesend West;
Notice of proposed decision first published: 04/05/2023
Department: Growth, Environment & Transport
Consultees
The proposed decision was considered and endorsed by Members of the Growth, Economic Development and Communities Cabinet Committee at their meeting on 16th May 2023.
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, provider is required to provide services consistent with the Council’s Equality and Diversity Statement.