Agenda item

The Portfolio Holder for Housing and Communities to submit a report confirming the proposed terms of the contract extensions, resulting from negotiations and recommending the extension of the contracts.

Cabinet

 

1)     NOTED the decisions taken to date in respect of the interim support provided to the Leisure Operator, Sports Leisure Management (SLM) during closure & remobilisation periods, and the Deed of Variation agreed for the period September 2020 to March 2021;

 

2)     APPROVED the extension of the contracts for Waterfield Leisure Centre (WLC) and Melton Sports Village (MSV) for a period of 2 years, on the basis of the contract terms detailed in the report and the financial information in Appendix A;

 

3)     DELEGATED authority to the Chief Executive, in consultation with the Leader of the Council, to finalise and enter into any contract / property documentation necessary to affect the extension within the parameters set out in this report;

 

4)     APPROVED further work to be undertaken on:

 

(a)   the options around the Council’s offer to residents in respect of leisure services from April 2024;

 

(b)   an options appraisal of Council-owned leisure sites in the context of the Council’s Corporate Asset Management Strategy;

 

(c)   the recommendations from 2.4.a and 2.4.b to be submitted for Cabinet’s consideration in February 2022.    

 

Andrew Cotton, Director for Housing and Communities, introduced the report, the purpose of which was to update Members on the Council’s leisure contract and consider continued support to the leisure service in light of the pandemic and seek approval for a Deed of Variation.

 

Councillor Pearson, Portfolio Holder for Housing and Communities, moved the recommendations and explained that the Council was committed to providing good quality leisure and had a statutory responsibility to support the leisure provider and had taken a pragmatic and considered approach to reach the recommendations in this report. The Leader seconded the motion.

 

There was a query relating to the number of years of the contract and aligning this with previous arrangements. It was noted these would be aligned to end at the same time.

 

Councillor Higgins lost visual connection during this item however he was able to contribute to the debate and vote by phone.

 

DECISIONS (KEY)

 

Cabinet unanimously

 

1)     NOTED the decisions taken to date in respect of the interim support provided to the Leisure Operator, Sports Leisure Management (SLM) during closure & remobilisation periods, and the Deed of Variation agreed for the period September 2020 to March 2021;

 

2)     APPROVED the extension of the contracts for Waterfield Leisure Centre (WLC) and Melton Sports Village (MSV) for a period of 2 years, on the basis of the contract terms detailed in the report and the financial information in Appendix A;

 

3)     DELEGATED authority to the Chief Executive, in consultation with the Leader of the Council, to finalise and enter into any contract / property documentation necessary to affect the extension within the parameters set out in this report;

 

4)     APPROVED further work to be undertaken on:

 

(a)   the options around the Council’s offer to residents in respect of leisure services from April 2024;

 

(b)   an options appraisal of Council-owned leisure sites in the context of the Council’s Corporate Asset Management Strategy;

 

(c)   the recommendations from 2.4.a and 2.4.b to be submitted for Cabinet’s consideration in February 2022.    

 

Reason for the decision

1.1.a       The government enforced closure of leisure centres affected the viability of SLM to generate any revenue to cover the costs of the period of closure.

1.1.b       The government's guidance was that local authorities should act to ensure leisure operators at risk are in a position to resume normal contract delivery once the outbreak is over and, by implication, seek ways of providing support. Public sector outsourcing contracts such as the two leisure services contracts typically include a provision to apportion the cost risk of specific ("qualifying") changes in the country's laws. This means that contractors do not have to include a risk premium for these changes in their pricing which the public sector would pay even if that risk does not materialise. On balance these clauses result in better value for money for the public sector, however if the risk does materialise – as has been the case with the various Coronavirus Regulations in force since March 2020 – then the public sector bears the cost.  These clauses provide that SLM should be put in a "no better and no worse" position that it would have been in (looking at each contract's financial model) had the Qualifying Change in Law not taken place. 

1.1.c        Both of the Council's contracts with SLM entitled SLM to claim (where a "Qualifying Change in Law" event has taken place):

a)    relief from obligations under the contracts; and

b)    adjustments to the Management Fee.

1.1.d       Varying the agreements avoided the risk of costly litigation should the Leisure provider sought to pursue a breach of contract claim against the Council if support had not been provided.

Contract Extensions

1.1.e       The extension of the contracts provides some certainty for leisure provision in the Borough and the financial position up until March 2024.   The Council has negotiated provision to enable it to recoup the support it has provided to SLM during the Coronavirus pandemic by way of a profit share agreement.  Recovery of such support relies on profits being generated by SLM.

1.1.f         The Council is acting in line with guidance and procurement regulations – see below at 5.1.e et seq.

1.1.g       If the Contracts are not extended, there is a risk that any procurement exercise undertaken during the current pandemic will be fettered by the uncertainty in the leisure industry. Leisure providers are not in a position to bid for new contracts or provide competitive financial proposals due to the uncertainty of footfall and other business pressures resulting from Covid 19.

Further work on options around leisure delivery and best use of Council assets

1.1.h       The extension allows the Council to consider the future leisure offer to residents of the Borough within the context of a changed environment for the industry in the post-Covid era.

1.1.i         An options appraisal will demonstrate a Best Value approach to the best use of Council-owned assets in the context of the future leisure offer. 

The Leader thanked Andrew Cotton for his work at the Council and wished him well in his future career.