Prior to its recent changes the National Asylum Support Service (NASS) completed its project for letting contracts to providers of accommodation services for asylum seekers. The procurement involved negotiations with incumbent local authority providers and consortia for the continued support to a proportion of the asylum seekers in their respective regions. For the remaining provision, NASS followed a competitive procurement process.
In total over 32 five year contracts (with a right to extend for a further year) have been let to nine public and nine private sector providers. The contracts have a value of over £670m over their expected life and are expected to result in the provision of accommodation for approximately 35,000 asylum seekers per year.
The Project Team was led by senior NASS officials, consisting of a mix of in-house staff and specialist consultant support with legal support being provided by Field Fisher Waterhouse (David Wilkinson and John McLaughlin).
The project is viewed as a major success. Previously providers of accommodation services for asylum seekers tended to be paid for the provision of a fixed level of accommodation regardless of whether or not the accommodation was used. This resulted in NASS paying large sums for unused bed spaces. In 2004, NASS started its Next Steps initiative in which it renegotiated some contracts, so that providers were paid on the basis of the number of people being supported (as opposed to capacity available). The current project was a continuation of that process and applied the same principle to all of the contracts under which NASS provides accommodation to asylum seekers under Section 95 of the Immigration and Asylum Act 1999.
As with many major government procurements, the project had to go through the OGC Gateway review process. The reviewing team awarded the project an unconditional green light and recommended that the project be used as a model example of how to conduct a procurement.
So why was the project such a success? David Wilkinson of Field Fisher Waterhouse thinks that it is a combination of things including:
- Good allocation of risk: When NASS first set about procuring accommodation in the 1990s, it was procured on a fixed basis. NASS took the risk of its requirements being for less than the accommodation that it had secured. In the end too much capacity was secured and NASS paid the price of retaining the risk. For the current project NASS reassessed who was best able to manage the risk. It became apparent that it was the service providers. When accommodation is not required by NASS, the Service Providers are able to look to other organisations, such as Refugee Action and local authorities, to take up the slack. Something that NASS does not have the experience or capacity to do itself.
- Being Realistic: When the contractual documents were prepared, they were carefully structured in a way which, while robust from NASS's perspective, was not unreasonable from the bidders' perspective. The aim was to produce a contract which bidders would view as not what they would want, but equally not unreasonable. This approach meant that it was easier to maintain the line that the contract was non negotiable.
- Being specific: A detailed service specification was prepared and shared with bidders early in the process. As their views were taken into account early on, the version by which bidders actually calculated their prices, was not subject to any material change.
The specification was also focused on the outputs that NASS wants, as opposed to exactly how the service is to be performed. This allows bidders to keep their costs to a minimum by being creative in how the service is to be provided.
- Good organisation: Approximately 28 bidders made it through the indicative bid stage. It was then necessary to embark on a period of clarification of bids over a period of six weeks during which each bidder on average had 4 clarification meetings. That is almost 120 all day meetings in 30 working days! Managing this process was no small task.
The Project Team had to operate with military efficiency. It created a small number of Negotiation Teams which each had responsibility for a small number of bidders. This ensured that continuity was maintained with each bidder so that they did not get the opportunity to play one member of the Project team off against the other. However, splitting the teams in this way created the risk that each team would take differing approaches. To overcome this, the overall Project Team Leader, did not take an active role in any particular team. Instead he maintained an overseeing role and then participated in particular clarification meetings, if key issues were being discussed. As part of the overseeing role, he ensured that each team took a similar approach. Two daily team leader meetings were held. One in the morning before bidders arrived and one at the end of the day after the bidders had gone home. This allowed the teams to share experiences and make sure that bidders were being treated fairly.
- Engagement with stakeholders: There are a large number of public sector bodies who have a clear interest in how the contracts operate. These range from local authorities to those in the voluntary sector. NASS consulted with these bodies extensively during the planning stages to ensure that their views were taken into account long before the tender process started.
- Using the competition: Too often in the past, public sector procurers of services have not been prepared to use the competitive pressure of the tender process to their own advantage. However, times are changing. Bidders were made acutely aware that they had to put their best foot forward and that they would not have an opportunity to embark on detailed negotiations. This took some bidders a while to get used to. However, once they realised that NASS was serious, bidders become much more flexible in terms of their service offerings and their prices. The end result was that the prices achieved at the BAFO stage were significantly less than those at the indicative bid stage.
The challenge for the future is to ensure that the contracts deliver the benefits which they have been set up to do. Time will tell. A lot will depend on the way in which the contract managers implement the contracts and apply the contract management and KPI regime set out in the contracts. This is another area where NASS took a realistic approach.
Bearing in mind the nature of the services, it would have been very easy for a lengthy list of KPI's to be established covering all aspects of the services that are to be provided. The danger with this approach would have been that the contract could have become difficult to manage and have failed to incentivise the providers to perform in those areas which are most important to NASS. The approach adopted was therefore much more focused. A small number of KPIs have been written into the contract and the impact of these on the level of service credits has been carefully structured to ensure that providers are appropriately incentivised, but are not unreasonably penalised for lapses of performance.
For FFW the NASS procurement comes on the back of a number of other recent procurements for the likes of the Department for Education and Skills, Ofsted and Transport for London. In each of these the project teams involved have achieved their aims through well managed processes, which have been undertaken to exacting but realistic timetables and with a clear recognition that the dynamics of the competitive process can be used to the public sectors’ advantage. The challenge for the private sector is to properly understand how they can use the process in a way which allows their bid to come out on top. This is particularly so since the new procurement rules were introduced earlier this year. All those involved in the procurement process would do well to get to grips with these new rules and to start to work out how they can be used to their advantage. After all, the new procedures create opportunities for both the public and the private sectors.
If you have questions or need advice about matters of public procurement or commercial contracting, contact David Wilkinson on 020 7861 4262 .
