Preferred bidder pulls out of £400M contract talks after row over transferred staff.
Suffolk County Council was this week facing the prospect of rethinking the procurement of its £400M highway services contract, after preferred bidder Balfour Beatty Living Places backed out of the deal.
The contractor’s withdrawal was this week confirmed as the reason for Suffolk’s eleventh hour decision to retender the contract last week (News last week).
As a result, Amey, Carillion/Mott MacDonald, Enterprise Mouchel and May Gurney/WSP are now back in the running for the contract. It is worth around £40M per year, initially for five years, but is extendable to a maximum of 10 years.
It is understood that Balfour Beatty withdrew after the council added more liability for staff salaries and pensions to the deal without giving any additional guarantees over workload. The contractor is still expected to rebid when the work is retendered.
Suffolk County Council’s cabinet member for roads, transport and planning Guy McGregor said: “Balfour Beatty has found itself not prepared to move over its exposure of risks associated with the Tupe transfer of staff, including their salaries which are of course protected.”
According to McGregor, “several hundred” public sector engineers and other staff are now due to transfer to the winning contractor under the deal.
Currently the Conservative controlled county has a part privatised highway maintenance service. Incumbent Carillion/Mott MacDonald uses a mix of its own and council staff, with routine maintenance labour still employed by the council.
Under the new contract all Suffolk operatives and all but director, performance monitoring and council liaison roles will transfer to the winning bidder.
One source close to the procurement process said: “The issue is down to the council changing the Tupe requirements part way through the bidding process. At one point, all of Ipswich Borough Council’s highways staff were thrown into the mix.” Balfour Beatty was not prepared to sign up to these changes.
“The council still had the opportunity to offer the contract to the next best bidder but chose not to, which suggests it wants to go back and reconsider how the contract is structured,” added the source.
Suffolk councillor and leader of the council’s Labour group Sandy Martin said he was “doubtful” that Balfour Beatty was at fault. “This is a contractor with a lot of experience of this sort of work,” he said, adding that the blame lay with Suffolk’s procurement team.
“We have said all along that the council does not necessarily have the skills needed to get it all correct,” he said. “This contract has been idealistically driven by those committed to privatisation who tend to gloss over the pitfalls. We think the current highway contract has delivered a good service, the extent of the new contract is unnecessary and will not achieve what the council says it will.”
Neighbouring Norfolk County Council is working one year behind Suffolk on a similar deal. An engineer putting that deal together also questioned Suffolk’s approach.
Balfour Beatty this week said that it was “happy to continue the bidding process”with Suffolk County Council over its highways maintenance contract.
Highways Agency pauses next asset support contracts
The Highways Agency has written to bidders for the next two Asset Support Contracts (AS Cs) due to be let, saying it is unable to continue procurement to its “previously broadcast timetable”.
Bidders had been expecting to receive the results of the Agency’s stage one assessment of Area 6 - covering Cambridgeshire, Essex, Suffolk and Norfolk - and Area 8 - Bedfordshire, Hertfordshire and parts of Cambridgeshire and Suffolk -this month.
The letter gave no reason for the delay but the Agency is understood to be extending the initial bid review process for Areas 6 and 8 to take stock of commercial issues that had arisen since the award of its first two ASC contracts in Area 2 and Area 10.
An Agency spokesman said the November 2013 target date for the start of the Area 6 and 8 contracts remained unchanged, adding that while contract award was likely to be later than planned, the winning contractors will still have time to mobilise before November.
In a statement, the Agency said: “We are working to complete the stage one assessment and will move to stage two as soon as possible. We continually seek to improve the way we procure services. It is therefore important that we learn from our experiences in previous procurement exercises, and that we apply what we have learnt in letting future contracts.”
This week the Agency began the procurement process for ASC contracts for Areas 4 and 12 which cover Kent and Sussex and Lincolnshire.