More on Bidding 2

Continuing with our theme covering bidding, we have Joe Kuipers to thank, via his latest blog post, for sharing various insights gained at the recent NoOffence conference held in Derby. Joe says the mood amongst a room full of potential bidders was 'uncertain', but given the content of the day, I suspect that's a bit of understatement. 

Could these be some of the reasons why we hear bidders are dropping out in significant numbers? The full blog post can be found here, but the following is a slightly edited version:-


So, what was the uncertainty about? In a nutshell, bidders be they primes or second or third tier potential providers still had many questions. This applied especially to second and third tier providers, with some key questions for them being:

• Can you afford to take part?
• How much risk can you carry and for how long?
• Are the Industry Standard Partnering Agreement (IPSA) and the 'Market Stewardship' principles sufficiently well defined from the general to the specifics of TR?
• Do you know why you want to be involved, as the MoJ has declared continuing commitments to 'austerity' ? In other words, the probation 'pie' is a shrinking one with not a lot of profit scope.

My talk followed an engaging and MoJ approved opener from Jonathan Martin (of NOMS). He gave a fair overview of TR. In particular he referenced the 'trading relationship' (my words) between the NPS (to be managed by Service Level Agreements with NOMS) and the CRCs (to be subject to contracts with NOMS). It seems quite clear that the CRCs will have a subcontracting relationship with the NPS, i.e an accountability link, in addition to the more direct accountability to NOMS via the three NOMS account managers (in the process of being appointed) and their future teams. The 'chain of command' therefore for prime, second and third tier contractors could be interesting?

I focused on the plethora of interfaces that future contractors from whatever tier would need to consider if they were to provide an effective service, all in the context of the whole TR approach being a bad idea because of the disaggregation of offenders by risk. That said, I am committed to trying to help the case and staff transfers to be done as safely as possible - I and our ASPT team owe that to our communities and staff. I reminded the audience that reliance on a contract when things go wrong is naive and that at heart probation service delivery is a people business, with partnership and contracts needing to be grounded in agreed common purposes, principles and values. In this respect the concept of desistance is central reflecting a recognition that people normally change their behaviour somewhat slowly, with lapses - bit of a nuisance really in a world of PbR? Credit to Nigel Bennet of PublicCo for an excellent presentation on desistance.

For the primes the main interface (i.e.the one that will judge them) will be NOMS / MoJ. Now, I did not need to comment much on just how good the contract management NOMS / MoJ reputation was/is, but did remind listeners that in the future it was to be 'forensic'. This may well be the case as the MoJ can ill afford further contract debacles, so contractors, be warned.

Contracts can work between sensible and like-minded parties, in an environment of some stability. I asked the audience to reflect on the sensibility and stability of government, its long term thinking (or reactivity) and what the implications might be for longer term contracts. This consideration feeds right down the supply chain - kicks can get and feel bigger towards the bottom of the food chain. And, in relation to risks for the second and third tier providers (there are so many), regardless of IPSA etc how much risk will fall on them from the primes, for how long and what guarantees might they have about volumes and price? Will contracts devolve, will pricing be spot purchasing? And, if PbR is a devolved element, how long might you have to wait for the P, if it can be defined who was responsible for the R?

The big interface for the primes will be a fractured staff group, with varying intents and aspirations for the future. It is without doubt the case that the CRCs will be the subordinate partners in the new TR landscape, which is not the same as saying that staff in the NPS have the better deal. And, when it comes to future cuts it will be in the CRC arena, perhaps to the extent that it will cease to be a people business at all, instead TR marking a transition to major increases in electronic monitoring (which might just suit some primes?) in the lower risk 'market'.

I talked about all the other partners that probation trusts interface with and what a complex environment we work in; small but so connected throughout the justice system. All those interfaces need to work not just for one organisation as now, but for two major ones and a host of subcontractors. So, might we expect communication difficulties, overlaps, duplications, underlaps and gaps? 

This brings me onto what I considered to be a highlight of the conference day, a presentation by Mark Johnson and Owen Willcox of Geldards. They examined the draft contracts to be, between NOMS / MoJ and potential providers available to them at that time. Their assessment, and recognising that further work was expected on the contracts, did not make for reassuring listening for potential bidders, either primes or others. Below I pick out some key factors for those interested in probation contracts, and ask readers to note that their presentation was intended as a general guide to the contract structure, that documentation is subject to change, and that Geldards LLP shall not be liable for any reliance placed on this information in the absence of a specific retainer with them to advise. Critically there must be an emphasis on rehabilitation over profit.

• MoJ retains a special share with veto rights.
• 7-10 Year Contract Period, capable of 3 year extension.
• The contractor has no power to terminate (!).
• No volume guarantee by the Authority.
• Instructions from other commissioners (e.g. PCCs and NPS) are mandatory.
• The contractor must comply with the requirements of Contract, Good Industry Practice (especially safeguarding & risk) and directions (including Probation Service Instruction, Prison Service Instructions).
• There is a range of Applicable Laws: Offender Management Act; Human Rights Act; Equality Act; Freedom of Information Act; State Aid regulations; Children Act 2004; Care Act 2014; MAPPA; European Social Fund Obligation; Welsh Language Act.
• Contractor deemed to have satisfied itself as to assets and nature & extent of risks under Contract (clause 15(1) and clause 39(3)).
• Authority excludes all liability for failure to provide information or incorrect information.
• Contractor indemnifies Authority for death & personal injury, property damage, third party claims advisory from its acts or omissions (clause 17).
• There is a limited cap in schedule 11 App 8 but subject to important exceptions – data protection breach, IPR breach, ESF obligations, ‘off contract’ services.
• Detailed programme of insurances required (schedule 16).
• General principle, each party retains its pre-existing Intellectual Property rights, BUT the contractor must grant free licence to Authority to use all IPR necessary to perform services (includes right to sublicence contractor).
• New IPR developed by Contractor belongs to the Authority!
• And, be careful about use of third party rights (e.g. software licences) – contractor indemnifies Authority for any breaches.

On PbR, we know there will be a fee for services and a PbR element, which will change over time. The maximum that can be paid is £4,000 per unit paid after 26 months (the binary measure), and a possible £1,000 per unit paid 35 months later (the frequency measure).  I won't go on about the payment mechanism - the key question for bidders must be how long they can wait to be paid? Please note, 'unit' is not my terminology - it is just how the business will be seen in the future. A reductionist and monitarist approach.

Mark and Owen set out the areas of greatest risk, as they could see at the time of the conference:

•  Payment (calculations/volumes/measures open to dispute).
•  Interfaces with other agencies (things falling down the gap).
•  Authority’s and others’ capacity to manage the contact.
•  Changes in laws or government policy.

Now, am I going to argue with that? Good luck to bidders, and it looks as if your contracts are to be just about as one-sided as ours have been, but you will have better hiding places? Finally, the best advice for those considering dipping their feet in the TR bidding process, especially if you are a smaller business, is don't sign anything without good legal advice and without an escape route.

Editors note - 'Authority' refers to MoJ/Noms