Re-tendering of payroll and pensions administration services

Report: 5
Date: 17 May 2004
By: Commissioner

Summary

This report informs the MPA Co-ordination and Policing Committee of the status of the re-tendering of the contracts for the outsourced payroll and pensions administration services and seeks the Committee’s approval to issue the “Invitation to Negotiate (ITN)” documentation to a qualified short-list of bidders.

A. Recommendations

That Members approve the issue of the “Invitation to Negotiate (ITN)” documentation for the procurement of payroll and pensions administration services to a qualified short-list of bidders.

B. Supporting information

Background

1. The MPS undertook a series of procurement exercises during 1998 – 1999 that resulted in the award of 11 contracts to outsource support services previously provided in-house. These services were in the areas of: information and communications technology, transport, pay and pensions and facilities management. The two contracts for the provision of pay and pensions administration services were awarded to Capita Business Services Limited.

2. Given the long lead-times required for re-tendering such contracts, work commenced in 2002 to develop a strategy to re-examine the sourcing requirements for these services. During 2002, the MPA Finance Committee approved the MPS’s proposed strategy and gave its approval for the following:

• To set-up a dedicated programme managed within the Procurement Services Department to undertake the review of the sourcing requirements for these services and the re-tendering of the contracts – this is known as the Outsource Services (OS) Programme.
• To hire external specialist technical consultancy and legal support for this work.
• To hire dedicated MPS staff for the OS Programme.
• The indicative timetable for this re-tendering activity.
• Where necessary to facilitate the re-tendering process and/or the safe transition of services to new suppliers, the extension of existing contracts (subject to individual MPA approval for each proposed extension).

3. Full-time work commenced on the OS Programme in July 2003, following the recruitment of appropriate MPS personnel and the award of contracts for consultancy support. In addition, the MPA Finance Committee approved a revised plan with indicative timescales, including dates for the issue of OJEU notices and a budget covering a five-year projection of costs for inclusion in the Medium Term Financial Plan (MTFP).

4. The MPS Management Board approved the strategic approach that underpins the OS Programme and the high-level aims and objectives for the review of the sourcing and future provision of these services on 23 September 2003. The strategic approach of the OS Programme is that, provided that its guiding principles and objectives can be met, the MPS supports the principle of maintaining service provision through outsource arrangements where they currently exist. Any decision for wholesale in-house delivery would be due to operational and security imperatives or failure by the market to demonstrate that it could deliver, and was committed to deliver, a safe, resilient, and effective value-for-money service. In addition, the strategy specified the following objectives for the OS Programme:

• Apply lessons learned from the past and wider best practice.
• Be underpinned by a robust justification of the case for outsourcing.
• Have a clear statement of programme objectives and desired business benefits.
• Protect the MPS’s unique interests as a public safety organisation.
• Precisely define the best contractual relationship in each service area.
• Be carefully scoped and planned to encourage the most appropriate suppliers to bid.
• Apply stringent tests of suppliers’ ability to manage change and provide business continuity.
• Maintain options in respect of operational risk.
• Develop a strong service management organisation.

A copy of the MPS Management Board paper will be presented to the MPA Finance Committee on 24 May 2004 to note.

5. A seven month extension to the pay and pensions contracts was approved by the MPA Finance Committee on 23 October 2003. This was to ensure sufficient time was available to review and specify the future business and technology requirements for these services and to allow sufficient time for the MPS’s re-tendering effort to facilitate the possible safe transition to new suppliers. These contracts are now due to expire on 31 March 2006.

Market engagement, scoping and strategy

6. The pay and pensions workstream within the OS Programme then developed a sourcing strategy for the future provision of these services. This work involved a comprehensive consultation process to determine the scope, service levels and packaging strategy that should be adopted to achieve the objectives for the next generation of pay and pensions contracts. This involved MPS senior stakeholders, key contacts in other organisations in receipt of similar services and pay and pensions services suppliers. Their views were sought on packaging, transition, transfer of data, contract duration, staffing / TUPE issues, attractiveness of the potential deal, market trends and current best practice. This strategy was approved by the Outsource Contracts Steering Group (OCSG), chaired by the Director of Resources, on 5 January 2004 and a copy of the strategy’s management summary was presented to the MPA Finance Committee for note on 22 April 2004.

7. The high level scope of the services required for the next generation of outsourced pay and pensions administration services, as described in the sourcing strategy, is as follows:

• A fully managed payroll service for Police Officers and Police Staff including payroll processing, pay advice (payslips), payment (BACS, CHAPS and cheque), payroll accounting, costing and reconciliation, end of year and statutory reporting
• The provision of pensions administration and pensions payroll for Police Officers using the Police Pension Scheme (PPS)
• Pensions administration for Police Staff, using the Principal Civil Service Pension Scheme (PCSPS)
• The maintenance and security of payee and pensioner records and payroll data, including service and contribution histories
• Handling of queries related to pay or pensions.

Procurement approach

8. The procurement route adopted for re-tendering those services within the OS Programme is the standard European Union (EU) “negotiated” route. This approach was approved by the Director of Procurement Services, having taken legal advice, and endorsed by the OCSG on 25 January 2004.

9. The EU’s negotiated route is used when an organisation wishes to develop solutions with suppliers to ensure a better match with its requirements and is often used for contracts of the size and complexity of those under consideration. With a negotiated route, the MPS seeks to move as quickly as possible to work with suppliers who offer the best fit with its business criteria whilst conforming to the legal requirements and defined stages which protect a fair and robust competition. To facilitate this an “Invitation to Qualify” (ITQ) stage has been included in the process which comprises Pre-Qualification Questionnaire (PQQ) and Invitation to Submit an Outline Proposal (ISOP) stages, as illustrated below. Copies of the ITQ documentation issued to potential bidders are available from the Director of the OS Programme.

Chart 1: ITQ documentation (see supporting material)

10. Members should note that the MPA’s standard approach to procurement is to follow the EU’s ‘restricted’ procurement route which involves the issue of an ‘Invitation to Tender (ITT)’ at the contract stage. This is used when the exact requirement of the products/ services being tendered is known precisely in advance. The MPA Contract Regulations have been drafted with this in mind and consequently they refer to the ITT throughout. Having taken advice from the Deputy Treasurer of the MPA and the programme’s appointed legal advisers, it has been agreed that the ITN is synonymous with references in the MPA Contract Regulations to the ITT.

11. Approval to commence procurement action for new contracts for payroll and pensions administration services and the issue of an OJEU notice was granted by the MPA Finance Committee through their approval of the exempt paper entitled “Routine Contracts Programme” which is presented to the committee on a rolling basis. The intention to issue an OJEU notice and commence procurement action was also highlighted to the committee in two exempt papers entitled ‘Programme for Re-tendering the Services through the Current Outsource Contracts’ dated 18 December 2003 and 22 April 2004.

Qualification phase

12. An OJEU notice was published on 6 February 2004 which specified, in line with the sourcing strategy, three lots for the provision of pay and pensions administration services:

• Lot 1. Police Officer and Police Staff payroll services.
• Lot 2. Police Officer pensions services.
• Lot 3. Police Staff pensions administration.

13. To encourage a robust competition, a proactive market engagement exercise was conducted which resulted in a healthy response to the OJEU notice. Details are contained in the associated Exempt Paper.

Commercial Strategy

14. Details of the approved Commercial Strategy are contained in the associated exempt report at agenda item 8.

ITN documentation

15. The ITN documentation comprises five volumes as follows:

• Volume One: General documentation and bidders instructions (including response requirements), in accordance with relevant MPA Contract Regulations
• Volume Two: High level draft terms and conditions of contracts.
• Volume Three: Detailed Statement of Requirements (output specification including HR and TUPE requirements).
• Volume Four: Pricing/Payment/Performance and commercial requirements.
• Volume Five: Background information, including existing volumetrics.

16. All members of the Pay and Pensions Action Group – including the nominated MPA Internal Audit member – will have reviewed all five volumes of the ITN prior to issue. Members may also review copies of the completed ITN documentation held by the Director of the OS Programme if they wish and, if it would be helpful, the OSP will provide individual briefings to Members if they wish.

17. Subject to approval of this paper, the MPS intends issuing the ITN documentation to the short-listed bidders on 18 May 2004 who will be required to respond by early July 2004. The current timetable showing key procurement milestones thereafter is contained in the associated Exempt Paper.

C. Race and equality impact

1. The OS Programme can confirm that this procurement exercise will ensure that contracts are only let with organisations that fully support the MPA’s equality and diversity policies.

2. There are no direct diversity and equal opportunity implications related to this report.

3. Consultation processes with MPS staff with regard to future requirements are ongoing for each of the workstreams. A briefing process has been agreed with trade unions with a representative attending relevant meetings in each workstream. The OS Programme Director also holds a bi-monthly briefing meeting with trade union representatives.

D. Financial implications

The financial implications to the MPA of the procurement of these pay and pensions administration services are detailed in the associated Exempt Paper.

Overview of risks

A complete overview of risks are contained in the associated Exempt Paper.

E. Background papers

Background Papers previously seen by Finance Committee

• Exempt Paper to Finance Committee – 18th April 2002 entitled “Outsource Contracts in the MPS - Proposed Strategies For Renewal”
• Exempt Paper to Finance Committee – 24th October 2002 entitled “Programme for Re-tendering the Services through the Current Outsource Contracts”
• Open and Exempt Papers to Finance Committee – 10th July 2003 entitled “Appointment of Consultants to support the Outsource Services re-tendering programme and the Procurement Business Process Improvement Programme”
• Exempt Paper to Finance Committee – 10th July 2003 entitled “Programme for Re-tendering the Services through the Current Outsource Contracts”
• Exempt paper to Finance Committee – 23rd October 2003 entitled “Recommendation for the extension of the existing contract for the provision of Pay and Pension Services”
• Exempt Paper to Finance Committee – 18th December 2003 entitled “Programme for Re-tendering the Services through the Current Outsource Contracts”
• Exempt Paper to Finance Committee - 22nd April 2004 entitled “Programme for Re-tendering the Services through the Current Outsource Contracts”

F. Contact details

Report author: Sharon Burd and Steve Atherton, MPS.

For more information contact:

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

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