Councillors Alibor Choudhury, Abdul Asad, Denise Jones, Joshua Peck, John Pierce, and Md. Maium Miah declared an interest in this Agenda item,

as set out in the minutes at item 3 above.

Please note that the order of business was varied by resolution of the OSC earlier in the proceedings in order to allow this item to be considered following Agenda Item 4 “Petitions”, however for ease of reference the deliberations of the OSC, and subsequent decisions taken, are set out below in the order detailed in the agenda. Representations were made by Mike Smith, Chief Executive of Real, in respect of this agenda item, when presenting his petition.

The OSC considered the report “Mayoral Executive Decision ‘Call In’ Decision Log No 063 – “Contract Award – Direct Payment Support Service” comprising of the report considered, and subsequent decision taken, by the Mayor on 11 August 2014 (Mayoral Executive Decision published on 14 August 2014), together with the reasons for “Call In”/ alternative course of action set out in the Call In requisition, signed by Councillors Rachael Saunders, Amy Whitelock Gibbs, Danny Hassell, Helal Uddin and Clare Harrisson, in accordance with the provisions of 4 of the Council’s Constitution (Call In requisition presented 21 August 2014 and declared valid 22 August 2014).

The Chair welcomed: Councillors Rachael Saunders, Clare Harrisson and Danny Hassell, three of five Councillors who had Called In the decision of the Mayor outside Cabinet and also Councillors Alibor Choudhury (Cabinet Member for Resources) and Abdul Asad (Cabinet Member for Health & Adult Services), Ms Deborah Cohen (Service Head Commissioning & Health, ESCW) and  Keith Burns (Programme Director Special Projects – Commissioning & Strategy, ESCW) who were in attendance to respond to the “Call-in”.

Councillors Saunders and Harrisson presented the “Call-in”: summarising the reasons for “calling in” the Mayoral Decision, outlining the key concerns of the “Call-in” Members, and setting out the action sought from the OSC to address these as follows: -

·           Concern expressed that the Mayor proposed to award the contract for the Direct Payment Support Service (DPSS) to an organisation whose bid was approximately half of the expected annual contract value estimated by Officers; and therefore whether a service of an appropriate quality would be provided to users and the sustainability of this. With a big private company bidding so low questions arose as to how such a saving could be made and how it would impact on the service. Often the result was online service delivery or devolving delivery to call centres, with staff on poor conditions.

·           Referencing a number of points set out in the Call In requisition including:

o   That the current contract holder the local user-led organisation of disabled people, Real, employed disabled local residents whereas POhWer the proposed contract holder was not user led.

o   Real had scored more highly on quality than other bidders during the assessment of tenders, but was not to be awarded the contract.

·           Noted that respected advocacy organisations for the disabled community such as Disability Rights UK and Inclusion London had expressed concern over the proposal, and advised that commissioning should be done in a way that took account of broader social value not just price. Real provided a voice for local disabled people, and was operated by them and the Council made great use of it. The case could be made that the Mayor had not fully considered social value and equalities in making his decision.

·           Concern expressed at the lack of transparency in respect of the Mayor’s decision making on this matter: Rather than adhering to proper process and proposing this Budget saving in public at a full Council meeting, where it was likely to face great opposition, the de facto decision to reduce funding for this service had been made outside Cabinet, under Executive Powers. The decision making process was only now being highlighted as a result of the protest and the Call In.

·           The Mayor should therefore be requested to reconsider his decision.

Councillor Saunders subsequently responded to questions from the OSC summarised as follows:

·           The current contract holder Real, was both user led and locally based and had a track record of delivering a quality service in Tower Hamlets. Whereas the proposed contract holder, POhWer, based in Hertfordshire and as a result staff working for them in Tower Hamlets may have to operate remotely, requiring them to work from cafes. Was there a danger that the extensive skill and knowledge base of Real, developed over time in this particularly diverse community, would be lost for ever? It would be a shame to risk losing such a valuable user led organisation to make such a contract saving.

·           Although the Call In requisition proposed that the commissioning and procurement process be rerun; would a reassessment of current bids with revised weightings attached to assessment criteria, likely to result in a different outcome as to a preferred bidder, be an acceptable alternative? Abnormally low bids, such as the preferred one, should have been ruled out.

·           Requested to comment on the value of face to face service provision in this area versus online or telephone provision. She understood from Real protesters and constituency casework that it made a huge difference to service users that a person was physically available to help them. They could be assisted with filling in and scanning forms, that they couldn’t do themselves, communication was in their own language, relationships had been built on trust and personal circumstances didn’t need constantly explained.

·           Had there been adequate consultation regarding the commissioning with service users? Mike Smith CE Real responded that there had been no consultation with service users prior to commissioning. The last consultation had been a year ago on independent support planning which was not related to this issue.

The above named Cabinet members and Officers responded to the concerns raised by the “Call-in” Members and the petition received earlier, and subsequently responded to questions from the OSC summarised as follows:

·           Response to Call In requisition:-

• Commented that the Mayor/ Administration held the same principles since first elected: valuing locally embedded organisations and projects, organisations from the community which listened to it and delivered services which met the needs of local people. He did not dispute what had been stated by Real regarding its ideal service provision and the Mayor/ Administration believed in user led initiatives.
• Outlined elements of the procurement process timeline, emphasising:

Ø  The specification had been carefully designed to encompass the aspirations of the Mayor/ Administration but this also included many of the suggestions from Real.

Ø  Tenders had been the subject of a rigorous and robust assessment process to ensure quality and best value.

Ø  The Lead Member Councillor Asad had been regularly briefed on progress.

Ø  Full information had been presented to the Mayor to enable a fully informed decision.

o    The commissioning process had been undertaken in full accordance with the Authority’s Procurement Policy Imperatives and Procurement Procedures/ timetable. The Authority was legally prevented from specifying that only local organisations could bid for the contract, however for a number of years it had encouraged tendering opportunities for local organisations within the legal constraints, and in this case the turnover requirements at pre-qualification questionnaire stage reflected this approach.

o    Emphasised that there were significant legal risks for the Authority in revisiting the commissioning process to revise criteria/ outcomes, when there were not good grounds to do so. Officers further clarified that it was not possible to revisit weightings attached to assessment criteria, as once advertised they must stand.

• Commented that the process had been impartial being managed by Officers with little involvement from the Mayor/ Cabinet members, and he was certain this position could be appreciated given adverse media criticism of undue influence of other matters by the Mayor/ Administration.
• Emphasised that there would be stringent contract management arrangements to ensure adherence to the specification and the service delivery of the preferred bidder should not be pre-empted.
• Commented that it was important to differentiate between the organisations bidding and the commissioning process.
• The opportunity to re-commission the service with a view to stretching resources to allow for inclusion of an online/ telephone dimension had been welcomed, however the service specification remained a mix of face to face and online delivery.  The spec also included a requirement for an outreach element with delivery in locations convenient and accessible for service users, such as community halls, places of worship, Idea Stores. However the part of the service to support those choosing a personal cash budget had been decommissioned some months previously.
• Commented that the commissioning process had commenced in July 2013 and there had been few representations to clarify viewpoints on it. However it was regrettable to now hear of the destabilising impact on Real due to the outcome of this process.
• POhWER was a charity and membership based organisation, started and developed by service users, with the objective of supporting and providing opportunities for the disabled and vulnerable. It had started in Hertfordshire and grown to become a large but not yet national organisation.

·                    Response to OSC Questions:-

• What were the outstanding qualities that POhWER would bring to this aspect of service provision in Tower Hamlets and what understanding had it demonstrated of cultural diversity and language needs of local residents? The POhWER bid had been the most economically advantageous with the best balance of quality and price. It had scored highly on quality compared with the other bids and was a close second to REAL.  It had demonstrated a good understanding of cultural diversity issues in Tower Hamlets and significant strengths in delivering locally to which references from other local authorities attested. The contract specification was clear that service provision in users first language of choice was a requirement and the methodology statement had been drawn up carefully to encompass these requirements. Contract management arrangements would ensure delivery of the required service.

o   Whilst acknowledging the challenging savings requirements placed on the Authority in the coming two years, there was also a consensus that an organisation such as Real should be protected from their impact. What action was the Authority taking to ensure Real’s continued existence and effective functioning? It had never been the intention that the outcome of this procurement process should have a destabilising impact on Real, and the Authority/ Officers would work with Real on its finances to ensure that it continued to discharge services for other significant adult social care contracts it held with the Authority, and to continue to function as a viable organisation.

o   How did the contract for DPSS meet the needs of local people? A contract specification had been drawn up which clearly set out the requirements of service provision which included:

Ø Communicating with service users in the first language of their choice;

Ø Having a workforce that reflects the community;

Ø Promoting local employment;

Ø Having a detailed knowledge of local services that may be of benefit to service users;

Ø Delivering the service at times and in locations that are convenient and accessible for service users.

The Administration was therefore hopeful that the selected bidder would deliver services holistically to meet the needs of local people.

• If Real lost the contract for DPSS would local jobs be lost? It was a requirement that staff working on the existing contract should be transferred to the new organisation/ contract under TUPE regulations.
• It was proposed to commission a new contract for DPSS with a cost saving of approximately 50 per cent going forward. How was this possible and would it result in a good service becoming a no frills service? A combination of factors allowed this including:

ØOfficers considered there was significant scope for efficiency in the existing service provision.

ØPOhWER had a larger infrastructure that allowed it to spread its overheads and achieve greater economies of scale.

ØMuch greater use of ICT and in particular automation of back office functions.

Officers had spent considerable time during the commissioning process to verify that POhWER’s bid was credible, and additional references were taken up with other authorities with whom it had existing contracts. 

• Had the requirements of the Social Value Act 2012 been incorporated into the commissioning process? Yes, the methodology statement and in particular questions focused on delivery at a local level had addressed it.
• The importance of recognising the value of local organisations delivering local services had been emphasised and petitioners had been clear in presenting the petition that the current service provider was fully aware of the needs of the local community. How had the preferred bidder convinced Officers it could do so? POhWER was a close second to Real when assessed on quality criteria and had demonstrated significant strengths in delivering in a Tower Hamlets context. It had been awarded contracts in Tower Hamlets which commenced recently and initial feedback from commissioners was good.
• Further to clarification of the number of bidding organisations and their local status (8 bidders 1 being defined as local) clarification sought and given as to how the preferred bid, which was 34 percent lower than the average price bid, could be sustainable when the bid was also significantly lower than 6 peer organisations delivering similar services countrywide. Also efficiencies from spreading overheads and greater use of ICT applied to all the other national organisations bidding so where was the efficiency to be delivered in one of the most competitive markets known? Officers had tested the sustainability of the submitted price through a clarification process, and from this it was clear that the bidder understood the contract specification including paying its employees London Living Wage and the implications of TUPE. There were no legal grounds to reject the bid as unsustainable. The achievement of efficiency depended on service delivery models, economies of scale and commercial decisions as to the contract value. However it was important to note that the the selection was based on a combination of price and quality.
• Did the preferred bidder POhWER have experience of service delivery in DPSS in other London boroughs? No experience of such service delivery in other London boroughs, but it had experience of providing advice and advocacy services in London boroughs from which it was aware of staff costs in and out of London.
• How would the Authority ensure that the funding spent on this contract was used for Tower Hamlets residents and not spent in other parts of the UK? The contract. terms and conditions allow the council to require the provision of contract monitoring information, including expenditure that will be used to ensure that the service is properly funded locally.
• Further to clarification as to the level of briefing of the Mayor on issues pertinent to this commissioning process, the questions asked by the Mayor at the point of his decision making, and which Cabinet members and Chief Officers were present to advise him at this point, the Chair commented that it was disappointing and unacceptable that the Mayor had taken the decision outside Cabinet and sent other Cabinet members not present to account for it. This did not provide the OSC with an opportunity to fully scrutinise the decision making, an important element of consideration as to whether the matter should be referred back to the Mayor for further consideration. The Chair proposed and it was agreed that in future, if a decision was made by the Mayor outside Cabinet and Called In to OSC for further consideration, either the Mayor or those Cabinet Members and Chief Officers present when the decision was made should attend the OSC to respond to the Call In, and if necessary formally summoned to attend through the appropriate constitutional provisions.

At this juncture the Chair sought and was given advice by David Galpin, Service Head Legal Services, as to options available to the OSC when concluding its deliberations on this matter, summarised below. The OSC could:

·           Endorse the Mayor’s decision and enable implementation to go ahead.

·           Refer the matter back to the Mayor outside Cabinet for further consideration, with reasons for its referral (setting out the nature of OSC concerns) and possibly recommending an alternative course of action.

Mr Galpin also advised that in referring the decision back to the Mayor for further consideration there would be significant legal risks with any recommendation to the Mayor that he should not award the contract including:

·           If the Mayor decided not to award, that may be challengeable on grounds of administrative law, if there are not good reasons for taking a different view than was previously taken.

·           A decision not to award would require a further procurement exercise and this would require a further unlawful direct contract award as an interim measure.

·           It may lead to challenge from the previously successful bidder (whether or not well-founded).

·           The OSC had already been advised that it was not possible to revisit weightings attached to assessment criteria, as once advertised they must stand. Under public contract regulations the Authority was obliged to operate a fair and transparent commissioning process.

The Chair summarised that the OSC considered that the decision of the Mayor outside Cabinet should be referred back to the Mayor for further consideration for the reasons detailed by OSC members in concluding their deliberations, and outlined below:

·           Concern that the proposed contract award would result in the loss to the borough of a very significant amount of intellectual property held by the current contract holder, Real, a user led organisation based in the borough; this would be very damaging. It appeared that the preferred bidder POhWER were undercutting the current service provider, and a first rate assessment evaluation of the service given to date had not taken place.

·           The Mayor was permitted by law to take the decision but the OSC was permitted to request that he give it further consideration, and the latter was unlikely to precipitate a legal challenge.

·           Concern that there were serious risks associated with the bid to operate the DPSS with a cost saving of approximately 50 per cent going forward. How was it possible to achieve this whilst ensuring a good quality service for users? Also serious concerns for local disabled employees following the TUPE process.

·           Concern that although the preferred bidder operated in other parts of the country, it had no experience of service delivery in DPSS in other London boroughs, only of advice and advocacy provision which was a different field.

·           Concern that the case for value for money remained unproven.

·           Concern that an opportunity to ensure employment for the local community and strength of the local economy was being lost.

·           Consideration that the most important factor was not local employment and local centres for service delivery, but provision of a service appropriate for local service users. All were concerned whether the extremely low bid preferred was sustainable in a market where comparative organisations providing the same services could not come close to making such a bid. There was a risk of a poor service for users or a failure in provision.

·           Concern also that the proposed award of contract would have a damaging impact on the ability of Real to function effectively within Tower Hamlets.

The Chair then Moved and it was:-

Resolved (on a unanimous vote)

1.     To refer the decision of the Mayor outside Cabinet back to the Mayor for further consideration for the reasons detailed above.

2.     That the commissioning/ procurement process is re-run with better consideration being given to the funding of service quality and the impact of the process outcome on service users.

Action by:

Angus Taylor (Principal Committee Officer, Democratic Services, LPG)

Deborah Cohen (Service Head Commissioning & Health, ESCW)

Keith Burns (Programme Director Special Projects – Commissioning & Strategy, ESCW)

ADJOURNMENT

At this juncture following a request for a comfort break from an OSC member the Chair Moved the following motion for the consideration of OSC members, and it was: -

Resolved

That the OSC adjourn for a period of 5 minutes, at 8.30pm, and that the meeting reconvene at 8.35pm.

The meeting adjourned at 8.30pm

The meeting reconvened at 8.35pm