To the Lead Member for Finance and Support Services
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REPORT OFTHE PROCUREMENT MANAGER
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TO THE LEAD MEMBER FOR FINANCE AND SUPPORT SERVICES
on
16th January 2012
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TITLE:Community Equipment Stores (CES) Project–Approval to purchase the latest upgraded version of the CES software package,ELMS2.
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RECOMMENDATION:
The Lead Member for Finance and Support Services is requested to approve an exemption to Contractual Standing Orders in order to enable the CES Project team to engage the supplierof the ELMS2 software package,ETHITEC, in contract negotiations and to produce a detailed specification for common use of ELMS2 v8, enabling the potential for further collaboration and future financial efficiencies.
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EXECUTIVE SUMMARY:
Within Greater Manchester, ELMS2 is currently used by Salford, Manchester and RochdaleCouncilswho have been working closely with other GM Authorities and the AGMA North WestImprovement & Efficiency Programme (NWIEP) on a proposal to join up their ELMS2 systems and administration operations as part of a collaboration project which will offer opportunities to realise future savings subject to phase 2 work.
Bolton and Wigan are also considering using ELMS2 as part of this collaborative initiative.
The purpose of this report is to gain the approval of the Lead Member for Finance and Support Services to waiver Contractual Standing Orders and allow Salford to act as the lead authority to implement phase 1 of the CES Project and contract with the supplier of ELMS2 for the latest upgraded software package.This will allow the latest version to be implemented collaboratively across thoseAuthoritiesthat already use the software, as opposed to going to the market for a different system.
Waivers to proceed in this way have been approved locally by the other authorities currently using ELMS2 – Manchester and Rochdale.
Lead Member for Finance and Support services is asked to note that the cost of upgrading to ELMS2 v8 will be fully funded by the NWIEP. However,purchase of the upgraded software package needs to be completed quickly as the NWIEP funding is available on a "use it, or lose it" basis and will be withdrawn if the system is not purchased by March 2012.This will enable those authoritiesinvolved to upgrade their systems at practically zero costand this will provide opportunities for further potential consolidation and efficiencies.
Lead Member is therefore requested to approve the recommendation at the head of the report.
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BACKGROUND DOCUMENTS:
NWIEP’s Outline Business Case for the Community Equipment Project.
NB - Background Documents are exempt
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KEY DECISION: YES
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BACKGROUND DETAILS:
ELMS2
Salford, Manchester and Rochdale currently use the ELMS2 system supplied by ETHITEC to assist with the management of their Community Equipment Service. These authorities have previously selected ELMS2 as result of a competitive selection process.
The ELMS2 system is well regarded by all the organisations that use it and they wish to remain with this system for the foreseeable future. The current system is the recognised market leader and used widely in the UK.
ETHITEC are the only provider of ELMS2 – they own the product.
The ELMS2 system is well supported by ETHITEC and they have an excellent understanding of community equipment operations and business requirements which could not be easily replicated with another supplier. ETHITEC have been engaged with the 3 organisations for 5 years or more.
The contract with ETHITEC will be considered for review in 4 years and the market will be tested to ensure that this solution still meets the requirements of the collaboration and that it still represents value for money.
Anticipated Benefits
Each organisation currently using ELMS2 has a separate version of the system which all operate independently of each other.
A Business Case has been produced which outlines the benefits of merging the existing distinct systems into a single shared system. This will then enable furtherpotential consolidation in relation to the admin teams that use the systems, store capacityacross the region, and thetypes offunctions that are carried out within each store (subject to phase 2 work).
It is anticipated that the implementation of a common consolidated system will deliver the following benefits as a result of service and procurement consolidation across AGMA:
•Increase in service user self help and choice
•Increased flexibility and service access for users and staff across GM.
Improved access to services and relationships with Health and other partners
• A standardised service for users and staff across Greater Manchester (GM)
•Optimised market management and knowledge sharing
•Modernised processes and systems
•Implementation of agile working technology to track equipment deliveries via bar-coding and GPRS handheld readers.
•Reduced process duplication
•Improved GM wide and localised reporting
•Potential consolidation of store capacity and stock held by organisations (subject to phase 2 work). Automation of stock ordering and improved stock management.
•Improved transparency and control of costs across both Health and Social Care
•Improved recycling of stock
•Improved supplier quality across GM
It is anticipated that the proposed project will allow each Local Authority to make significant savings, both in terms of IT spend (i.e. number of licences, annual maintenance costs, servers, associated hardware and support) and through numerous operational efficiencies.It is estimated that a saving of up to £1.072 million may be achievable if maximum consolidation and collaboration is achieved. The full range of collaborative opportunities is detailed in the OutlineBusiness Case.
Salford – Lead Authority role
It is proposed thatSalford Council will take the role of lead authorityand will contractwith ETHITEC on behalf of all partners. The other authorities will procure appropriate licences to use the ELMS2 system. This will simplify future negotiations and increase the partners’ buying power in the marketplace, offering a strong position to negotiate heavy discounts with the supplier.
It is proposed that this new contract model, i.e. a lead authority (Salford) with other ‘user’ authorities(initially Manchester and Rochdale), can be rolled out so that other GM Authorities that are not currentlyusing ELMS2 will be able to procure user licences to access the system in future.
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KEY COUNCIL POLICIES:N/A
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EQUALITY IMPACT ASSESSMENT AND IMPLICATIONS:
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ASSESSMENT OF RISK:
This is low risk from a procurement perspective. The respective organisations have also been fully involved in the development of the Business Case and are committed to exploring this collaborative opportunity further.
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SOURCE OF FUNDING:
The cost of the project is covered by NWIEP funding which has been set aside for collaboration work such as this.
PROCUREMENT IMPLICATIONS:provided by Mark Griffiths, Procurement Manager
The anticipated costs of procuring a single ELMS2 solution via a lead authority, together with the procurement of user licences for all user authorities is expected to be less than £50k and is a one off cost spread across 3 authorities. This is deemed to be outside the full requirements of OJEU and therefore carries limited risk of challenge.
The cost ofremoving ELMS2 and implementing another system in its place would significantly exceed the cost of retaining the current system and upgrading collaboratively as recommended. It would also almost certainlytake the projected costs above the thresholds fora full tender exercise.
Bearing in mind that the Council is under a best value duty to carry out its functions economically, efficiently and effectively, with the objective of achieving value for money in all procurement activity, there is a strong case to support a systems upgrade as opposed to a full procurement exercise.
Although a systems upgradedoes present a risk of challenge (see Legal implications below), that risk is low. Conversely, the consequences of not upgrading the current software package using available NWIEP funding by 31 March 2012 would represent the loss of a short term funding opportunity for 3 authorities to improve their IT infrastructure at virtually nil cost. But more significantly,it would be a missed opportunity to provide the platform forfurther collaboration and the potential for future financial efficienciesto be delivered on an AGMA-wide basis.
LEGAL IMPLICATIONS –supplied by Tony Hatton, Principal Solicitor(ext 2904).
There is a risk, albeit minimal, that awarding such a contract with ETHITEC, if done outside of the usual procurement / tender process, could be subject to challenge by an aggrieved provider, on the basis that it ought to have been put out to tender (or invited quotes from three or more providers) and advertised in accordance with procurement Regulations and / or the City Council’s contractual standing orders. Any such challenge is highly unlikely in this instance as the value of the contract is relatively small. The Council Constitution provides that usual standing orders rules may be waived or excepted by a Lead Member for Finance and Support Services record of decision and so this report ought to be approved by him.
The Council will be reluctant to use a new contractor as any failure or delay in the procurement process may potentially jeopardise the ability of the Council to provide the service and may well have significant detrimental effects on Service users. Selection from a limited number of bidders – or a single source as here - chosen on the basis of their reputation and proven ability to meet the requirement of the service will be more cost effective and efficient under the circumstances. The Council is under a best value duty to carry out its functions economically, efficiently and effectively with the objective to achieve value for money in all public procurement, and would argue that running a full procurement exercise in the interim will not achieve value for money. It is proposed that the market be tested again in four years time following a review of the service.
In general terms, this decision may be vulnerable to challenge by way of Judicial Review if it is made in a manner which is ‘unfair’, ‘irrational’ (or ‘unreasonable’ in the Wednesbury sense) , ‘unlawful’ or in breach of human rights legislation. The risk of that challenge is significantly mitigated and reduced by the reasons given within the report.
It remains within the authority’s remit to apportion its funding streams where appropriate but any decision making process must give due regard to the above matters.
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FINANCIAL IMPLICATIONS–supplied by Andrew Tonge, Group Accountant CHSC Directorate
The cost of upgrading to ELMS2 v8 will be fully funded by the NWIEP. There is existing budget provision within the Equipment Service for the annual software licence and maintenance. There is no additional financial liability for the City Council.
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OTHER DIRECTORATES CONSULTED: N/A
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CONTACT OFFICER:Mark Griffiths, Procurement Manager, extension 6290.
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WARD(S) TO WHICH REPORT RELATE(S):All