Interim award for the provision of vehicle fuel charge card facilities

Report: 8
Date: 17 November 2011
By: Director of Resources on behalf of the Commissioner

Summary

OGC Buying Solutions (now known as the Government Procurement Service, (GPS)) set up a Framework for the provision of fuel cards which commenced on 23 August 2009 for an initial period of two years until 22 August 2011. The Framework provided that GPS had the right to extend the Framework for a further year on up to two occasions, until 23 August 2013.

On 30 July 2009 the Finance and Resources Committee approved the MPS recommendation for a direct award under the Framework of a two year contract to Arval, with an option to extend for a further two periods of one year. The parties to the contract intended there to be an option to extend in line with the Framework.

GPS extended the framework agreement on 13 July 2011 for a period of two years until 23 August 2013. When the MPS explored the possibility of exercising the option to extend the contract it found that this was not available due to the way it had been drafted. Therefore, the only option available is for a new contract to be awarded.

Paragraph 7 of the framework agreement permits the contracting authority (MPA) to either make a direct award to a supplier on the Framework or to conduct a mini-competition. This report asks the Committee to note a direct award under the Framework has been put in place for a period of five months to January 2012 whilst a mini-competition exercise is completed to award a further two year contract under the Framework..

A. Recommendations

That Members not

1. the direct award put in place under the Framework to January 2012 for the provision of vehicle fuel charge card facilities at an estimated cost of £4.71m.
2. a further report will be submitted to the December Finance & Resources Committee on the outcome of the mini-competition exercise for the award of a two year contract for the provision of vehicle fuel charge card facilities.

B. Supporting information

Background

1. The MPS has a requirement to fuel approximately 6,000 vehicles not only within the Metropolitan Police District but throughout UK and overseas. A variety of fuels are required, the most common of which are unleaded petrol and diesel. The provision of a credit card sized fuel card, administered by the contractor, is necessary to enable fuelling of the MPS fleet from both agency fuel sites and MPS bulk fuel installations. The contract includes the provision of information to allow the comprehensive management of the vehicle fleet across all areas of policing.

2. On 30 July 2009 the MPA Finance and Resources Committee approved the direct award of a two year contract to Arval under the Framework, with an option to extend initially by one year followed by a further year, two years in total. The parties intended there to be an option to extend in line with the Framework, which was reflected in the MPS recommendation and MPA approval. However this was not accurately reflected in the contract, which repeated the Framework term for GPS’s option to extend the Framework rather than for the parties to the contract (i.e. the MPA and Arval) to extend the contract. Therefore, the only option available was for a new contract to be awarded.

3. In order to award a new contract, two options were available under the Framework Agreement. Paragraph 7 of the Framework Agreement permits the contracting authority either to make a direct award without further competition to a supplier on the Framework or to conduct a mini-competition.

4. Therefore, using these options, the MPS has put in place a contract with the incumbent Arval under the Framework for a period of five months until January 2012. During the course of this contract, a mini-competition will be undertaken to establish that the MPS is receiving value for money. The mini-competition will result in the award of a two year contract.

5. With regard to the award of the five month contract to Arval, the original justification for award to Arval was as follows:

Arval were the only company that were able to meet the MPS requirements in terms of go-anywhere coverage, comprehensive management information provision and rebates. The rebate is given on every litre of fuel we draw with a further rebate from three specific suppliers. Platts price deals (a recognised index which is based upon the market price of oil) do not offer sufficient coverage across the MPS to be considered currently. Splitting the award across suppliers was looked at but this would add additional administrative work and be confusing for users.

6. Although oil prices have risen, little else has changed in the market since the original award in 2009, and the core aspects of the justification remain valid. One of the three specific suppliers offering an additional rebate no longer does, but the remaining benefits to the MPS still appear to make the use of Arval most economically advantageous. No other provider on the Framework offers the combination of management information, rebates on pump prices and extensive geographical coverage.

7. Arval provide information to enable users to choose the cheapest fuel available in their area affording best value and also ensuring officer downtime is kept to a minimum, with the card being accepted in 99% of retail outlets. This comprehensive coverage is a significant benefit in terms of minimising ‘wasted’ time of officers having to refuel vehicles.

8. Transport Services have confirmed that the performance of Arval as the supplier of Fuel Card services has been satisfactory with no performance issues during the course of the agreement to date.

Procurement Strategy Information

9. In line with the MPA Contract Regulations, the GPS Framework was identified as accessible to the MPS and as such was used to procure this requirement. It was the intention of the parties to the contract to continue the contract in line with any extension of the Framework. However, due to the way in which the contract was drafted, the MPA could not extend with Arval. Consequently, both options within the Framework were used, resulting in a five month contract by direct award, during which time a mini-competition would be undertaken to demonstrate value for money.

10. In accordance with clause 3.8 of the MPA Contract Regulations ‘All purchases made via a Central Purchasing Body are deemed to comply with these Contract Regulations and no exemption is required subject always to the Public Contracts Regulations 2006’.

Tendering process

11. The tendering process was conducted by GPS (then known as Buying Solutions). Once the Framework had been awarded, the MPS were able to use the results of the evaluation to compare the relative commercial benefits of the suppliers on the Framework and select a supplier.

12. In line with the terms and conditions of the GPS Framework agreement, sufficient evaluation detail was available following award by GPS to allow the MPS to assess which service provider offered the most economically advantageous tender without having to re-open competition.

13. However, as the option to undertake a mini-competition is open to the MPS, this will be done in order to independently ensure value for money is being obtained.
General Contract Information

14. This contract is owned by Transport Services.

15. The contract was awarded through the GPS Framework for Fuel Cards. The Framework was awarded for two years with the options of two one-year extensions.

C. Other organisational and community implications

Equality and Diversity Impact

1. The procurement process required bidders to declare their existing policies and initiatives and future actions with regard to promoting a working environment that actively encourages equal opportunities and non-discrimination on the grounds of race, gender, disability, sexual orientation, religion or belief and age.

2. The equality and diversity record of the Arval is of a calibre commensurate with the GPS requirements, aspirations and reputation. The Contract ensures compliance with all equality and diversity related matters and includes setting up a mechanism to monitor performance in respect of equal opportunities and diversity throughout the lifetime of the contract.

Consideration of Met Forward

3. In line with the Procurement Strategy, which underpins and supports the delivery of the Procurement element of Met Support by improving the MPS infrastructure, driving out waste, improving value for money and concentrating resources on fighting crime, this agreement will both drive out waste and improve value for money by engaging a specialised company to provide fuel card services to the MPS, delivering discounts on fuel purchased and minimising time wasted by police officers or staff refueling vehicles by having 99% coverage of refueling locations across London.

4. In addition, this contract supports the objective of procuring services in collaboration, as by using the GPS Framework the MPS is participating in an agreement that was tendered on behalf of and is available for use by the entire public sector and, as such, has an approximate spend across all its users of £300M per annum, which in turn directly influences the competitive discounts available.

Financial Implications

5. The total cost of the intended four year agreement is estimated to be £46m. Fuel costs are met primarily from centralized budgets in Customer and Commercial Services with some small budgets still held locally.

6. Spend for the first two years was £23M in line with that forecast to the MPA Finance and Resource Committee in 30 July 2009.

7. Fuel consumed is reducing within the MPS, approximately 250,000 litres for the first four months of the current year (2011/12). However, although volatility in the fuel markets and continuous price increases (15% since July 2010) make it difficult to forecast an exact spend for future years, the figure in the original report of £46M for 4 years is highly likely to be accurate.

8. The GPS Framework offers excellent purchasing power as it aggregates spend across all its users, circa £300M per annum.

Legal Implications

9. The facts are set out in the summary to the report. DLS supports the recommendation of a direct award of the contract from the date of expiry of the original contract (22 August 2011) to January 2012. A direct award would comply with EU and UK Procurement Law. Whilst the parties to the contract may have intended to include an option to extend the contract and the MPA agreed to the option to extend being included within the contract, the contract itself failed to include an option to extend. Accordingly, the safest course of action is to approve a further direct award and retrospective approval with a further report to be submitted to the Finance and Resources Committee as recommended. This will facilitate a mini-competition amongst suppliers on the framework, to ensure that the most economically advantageous is the subject of the award for the subsequent two year period.

Environmental Implications

10. Although there are implications in terms of exhaust emissions of vehicles, these are not directly related to the purchase of fuel but the use and composition of the vehicle fleet itself. Therefore, the implication of extending this contract is that there is no impact in terms of environmental factors.

Risk (including Health and Safety) Implications

11. A risk assessment was carried out and no risks were highlighted in the potential award of this agreement.

D. Background papers

• Report to Finance and Resources Committee - 30 July 2009 Vehicle Fuel Charge Card Facilities

E. Contact details

Report authors: Steve Abbott, Transport Services and Daniel Green, Procurement Services, MPS

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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