Growing grounds maintenance firm idverde is celebrating winning a £26m job as part of an environmental services mega-contract that sees it expand its London footprint. The contract comes in two lots - a £209m rubbish-collection and recycling lot for four boroughs won by Veolia, and the grounds maintenance lot for two boroughs secured by idverde.
The mega-contract was tendered by the South London Waste Partnership (SLWP), which was formed by neighbouring London boroughs Croydon, Kingston, Merton and Sutton with the aim of saving at least £32m by joining forces. The partnership used the competitive dialogue process over two years to make the contract award. What are the advantages of such contracts and will we see more of them in future?
"Competitive dialogue is a robust process. By the end of it you can drill down to get a real understanding of how it's going to work," says idverde bids director Saul Huxley. "Normally you don't get a chance to meet people - it's a closed bid. Sometimes as a client you're obliged to choose the cheapest offer and you don't meet the bidders. At least in this case we got to meet each other.
"It was really good by the end. You really know what each other is trying to achieve. We got to know them very well. It was challenging but at the end of it all we've all done a good job. We think we achieved a solution which is cost-effective and gives the best service."
The process starts even before the outline bid, or "outline solution", is submitted. Idverde met the SLWP team four times before submitting its outline solution on price and quality. "They wanted to know how many people we would have, how we would deliver on the ground, how many machines we would use, how we would interact with community groups - who, what, where, how, basically. The council will say this is what we've got, what do you think you can do for us? How do you think you can make it work? One can assume that the majority of the key players in the green industry went in for that and we know of at least five."
After the SLWP evaluated these initial bids and shortlisted to three bidders, there was another series of meetings before contractors submitted detailed solutions. Following that, idverde was selected as preferred bidder. Then the negotiations became even tougher as both sides thrashed out the terms that would seal the deal.
SLWP strategic partnership manager Annie Baker says: "Working together and using competitive dialogue allowed us to get a good competition and explore the different options. We defined the outcomes that we wanted and it gave us flexibility. We felt the advantages were significant given the size and the scope of the contracts."
She says idverde was well-established and award-winning but ultimately its bid best met the SLWP's objectives on everything from technical specification to financial and legal elements and community work, such as with friends groups. "Our evaluation criteria were strict. Idverde had the best bid that met the procurement criteria. That's the advantage of getting the evaluation criteria right. It's quite objective in the end," she adds. "All the bidders were great to work with."
By the end of the process the two sides had met 18 times, while idverde had held at least 12 more meetings with stakeholders in and around the area to get an idea of how they could best work together. "It was a lot of work," says Huxley. "It is a proper dialogue. Competitive dialogue is pretty rare. There are only about one a year in the green industry. If it was something that was free, I imagine all councils would do it."
Having the resources to conduct such an in-depth process is one advantage to councils joining forces. But that does not mean finding the resources is easy, says Baker. "There can be challenges and it is quite resource-intensive. But we know as a result of having competitive dialogue we realised more savings," she says.
"You've got to have the right people in the meetings going through the submissions. It takes quite a lot of time. You've got to plan carefully for that to make sure it works. You've got to give them as much detail as you can. We had a small team - myself, advisers and service leads. But different people were involved at different times."
Baker says it was helpful to discuss the services and their delivery. "The contract we've got was quite stronger as a result. Things like engaging with the friends groups and making sure we've got a really good group of outcomes."
This detailed final set of discussions allowed the two organisations to better forward plan and become more creative. "It's more about understanding what the client wants," says Huxley. "We really like competitive dialogue because everything is clear. There are commercial elements in this contract that are quite unique which don't take place in all contracts."
For example, idverde agreed to take on commercial risk on sports pitches, outdoor recreation services and cemeteries. It guaranteed to reach or improve income targets over the potential 24-year contract. "We collect it. If we're not very good at our job and we don't collect that money, we pay the difference," Huxley explains. "If we over-perform we share some of that with the council."
But this is not about chasing a big profit on council-owned assets, Huxley stresses. "There's not so much reward. It's about a sustainable strong relationship. We're not trying to make lots of money. It's about trying to be there as long as we possibly can."
Potential gamble for contractor
For a contractor, getting involved in competitive dialogue tendering can be a big gamble. "There would've been bidders who would've put an awful lot of time and effort in this process and to no reward," says Huxley. "It's a very big effort to everyone involved but you all know what the goal is."
Both Baker and Huxley think the trend of local authorities clustering together will increase. "I wouldn't be surprised at all if within the next five years one in four is a cluster," says Huxley. "There will continue to be council partners coming together and also service clusters as in SLWP."
Birmingham City Council is in the process of merging its grounds maintenance and waste departments. Assistant director waste management Darren Share says there is potential to link up with neighbouring local authorities too.
But Huxley does not believe the clusters are ever likely to get that big. "You get to a critical mass beyond which you compromise the ability to deliver a good service."
Ground Control managing director Marcus Watson is not convinced we will see quite so many. "Grounds maintenance is actually quite a local thing. It's not like buying a copy of Microsoft Word from the internet." He says understanding a local community and its needs is crucial to successful grounds maintenance, which makes it unlikely that many mega-contracts will appear.
"In London, where it is high-density and with councils that are neighbouring, I can see that will really work. I expect to see some continuation of partnerships there. But elsewhere I don't think so, because of the localism agenda."
In terms of the contract length, Watson doubts whether many local authorities will want to commit to such a long contract because much can change in a decade in terms of market forces, automation and so on. "I'm surprised that contracts greater than 10 years actually exist," he says.
"The whole point of competition is to ensure that on a regular basis you get regular value for money. There will be safeguards in the contract and the easiest way to ensure value for money is to go to the market every now and again. There's an argument that such lengthy contracts are anti-competitive." Huxley also cannot see many more 24-year contracts coming up.
Watson believes competitive dialogue is more suited to where there is restriction of supply for a product or service and it is unlikely to become mainstream in grounds maintenance. He explains: "It's very expensive and requires a high level of expertise. Is that a level of expertise local authorities have on the payroll? I don't think it is."
idverde - How contract was won
Saul Huxley, bids director at idverde, says the company had the advantage on size and availability of assets and delivered cost-effective plans, but a focus on added value was also crucial. "We do a lot of environment and friends group work that doesn't make money and can be unfashionable. We see ourselves as market leader and I think it's our responsibility to do things in the right way. The added-value things we are committed to do and our commercial and innovative ways of working set the difference. The SLWP were very impressed by the level of creativity and innovation."
Part of the deal will see the contractor investing £500,000 in leisure facilities in Merton and Sutton, currently going through planning. "Those facilities are about getting more people into parks and trying to generate a little bit of income, on a revenue-sharing basis. Gone are the days when you can employ a few guys, mow the lawns, cut the hedges and so on, and then disappear. A lot of our clients don't have the client officer team they used to have. They need support. You've got to be sharper, you've got to be brighter, you've got to be fit for purpose. We've got to be in a position where we're overseeing the service as well as delivering it."