1.17 One way in which a Private Finance arrangement may enhance value for money is to bring together under a single contractor responsibility for design, construction and operation. In principle, such a contractor might be expected to provide office accommodation that is economical to operate, particularly in terms of maintenance, cleaning, security and other important services, collectively known as facilities services. An important issue that many departments face is deciding which of these facilities services are so closely linked with the provision and maintenance of the building that they should be included in the scope of the contract. The Agency told us that, in their view, the value for money of total facilities management, by which all facilities services are provided by a single contractor, remains unproven.
1.18 The Agency received proposals from the three short-listed bidders to provide what they termed a total facilities management service, bringing together maintenance and all other facilities services. The Agency recognised that if such a service were not implemented, existing contracts for individual services could potentially be administered by four separate agencies on five sites with differing expiry dates. Therefore in September 1995, the Project Board devised a strategy for the delivery of accommodation and offices services across the Newcastle Estate. Their strategy separated services into two main categories: mandatory and optional. Mandatory services, which had to be included in the Private Finance project, related to the maintenance of the building fabric and mechanical and electrical systems. Optional services were those services, such as cleaning and security, which are less integral to the provision of the building itself. The Board expressed a long-term aim to move towards a total facilities management service for the whole estate, as long as it provided value for money.
1.19 When bids were received for "optional" services, the Agency's evaluation panel expressed concern at the private sector's ability to deliver total facilities management. There was a very wide range in the bids for optional services: from as little as £195,000 per annum from the NEP group, up to £900,000 per annum from the NERL consortium, implying to us that bidders had either:
a) widely differing perceptions about the level of service required by the Agency's output-based specifications; or
b) put less detailed work into pricing this optional part of the deal.
1.20 The Agency did not intend to rank the bidders on their offers for optional services, but to use them as a tie-break. In the event, because the NEP consortium bid was judged superior on the other elements of the deal, this did not prove necessary, and the Agency's decision became one of whether or not to accept NEP's offer for optional services. They discussed the optional services with NEP, after the latter's appointment as preferred bidder, but in September 1996 they decided for the following reasons not to include the optional services in the contract with NEP:
a) NEP had declined to provide staffing figures or a breakdown of how their prices had been calculated, which in the Agency's view cast doubt on their value for money;
b) the Agency were concerned about the impact that poor service could have on their business;
c) full assessment of the value for money of NEP's prices against alternatives would have required substantial work by the project team that would divert them from the remaining negotiations on the development of the estate and on mandatory services. It could hazard the intended signature date for the deal; and
d) the Agency chose the alternative approach of allowing the Department's business units to obtain optional services through either NEP or alternative suppliers as they wished, as existing contracts expired.