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Date of Procurement Board 26th March 2015
Joint Provision of Community Equipment for Health and Social Care- Contract Extension
Wards: All
Report Authorised by: Strategic Director: Helen Charlesworth May
Portfolio: Cabinet Member Adult Services: Councillor Jackie Meldrum
Contact for enquiries:
Ged Taylor, Interim Lead Commissioner, Integrated Commissioning Older Adults
020 7926 9962 gtaylor2@lambeth.gov.uk
Report summary
The London Borough of Lambeth and Lambeth Clinical Commissioning Group (CCG) each have
a statutory responsibility to provide aids and equipment to eligible Lambeth residents to enable
them to remain at home and live more independently.
The 2 organisations commission this service jointly and have a contract with Medequip Assistive
Technology Ltd from 1st April 2011 to 31st March 2015 with an option to extend to 31st March
2017. This report is requesting approval for a contract extension of 1 year.
Finance summary
The original estimated value of this contract was £3.282m but the estimated cost of the contract
to 31st March 2015 is £3.918m. The cost of the contract is divided between the Council (55%)
and CCG (45%). The Council’s original contribution to the contract was estimated to be
£438,500 for each year of the contract but demand has increased significantly over the term of
the contract and expenditure for the 14/15 financial year is projected to be £850,000. The value
of contract extension for 15/16 for the Council is therefore projected to be £850,000.
Recommendations
(1) To extend the current Community Equipment for Health and Social Care Contract for 1 year
with Medequip Assistive Technology Ltd from April 1st 2015 to 31st March 2016 with a value
of £850,000.
1.
Context
1.1
The London Borough of Lambeth and Lambeth Clinical Commissioning Group (CCG)
each have a statutory responsibility to provide aids and equipment to eligible Lambeth
residents to enable them to remain at home and live more independently. This support
includes the provision of various daily living aids and equipment.
1.2
Equipment provided includes daily living aids such as bath boards and raised toilet seats
and more complex equipment such as hoists and specialised beds and mattresses.
1.3
In order to deliver this, seven boroughs including Lambeth set up a consortium for an
Integrated Community Equipment Service (ICES) Framework agreement which was
awarded to Medequip Assistive Technology Ltd (Medequip) for the period 1st April 2011 to
31st March 2015 with an option to extend to 31st March 2017. This contract delivered a
significantly improved performance from the previous in-house arrangement between the
Council and CCG. Medequip pay the staff working on the contract the London Living
Wage.
1.4
Since its inception, other boroughs have accessed the Framework Agreement and it is
now made up of 20 London boroughs.
2
Proposal and Reasons
2.4
The option of re-tendering the service was considered, however, the outsourced
community equipment service provider marketplace is fairly limited better and value is
unlikely to be obtained in a re-tender. Contract documents and prices for another
framework in London that was let in 2011 were obtained, and some financial modelling
was carried out. This exercise did not find any evidence that this framework could offer
better value than Medequip.
2.5
An options analysis carried out on behalf of the Consortium in June 2014 recommended
that the framework-based ICES service contracts should be extended because:

Extending and using the existing contracts limits implementation costs and risks.

The agreements with Medequip are not exclusive, and do not have a minimum
spend or minimum order or activity volumes. Therefore, the commitment (arising
from an extension) for the Council is limited, and the option to potentially use other
providers will still remain open after extending the contract.

No other viable options were found that could be used to continue the community
equipment service past March 2015. Sixteen other possible options were
investigated, but none were found to be viable, for one or more of the following
reasons:

There was a legal/contractual obstruction (e.g. the contract could not be used due
to it being restricted to local authorities in a particular region, or it was expiring
soon with no extension provisions)

The option of procuring an alternative provider was not yet sufficiently advanced
(e.g. the procurement was still ongoing with no guarantee that it would be
complete in time, or that it would offer a better alternative to the Medequip
contract).

The option of procuring an alternative provider another only offered a partial
solution (e.g. supply of community equipment goods only, and not services).

The option would not be available in time for the expiry of the existing contract with
Medequip (e.g. in-house procurement of a new community equipment framework).

The option of procuring an alternative provider could not be properly costed and
appraised, because the necessary data was not available and/or was not provided
by the potential supplier.
2.6
The service is operating effectively and has achieved a rate of 98% or over for deliveries
on time, or with acceptable reasons. Deliveries on time are a key area of performance for
this service.
2.7
Complaints received from clinicians placing orders for equipment are comparatively low at
less than 1% of all deliveries. Ongoing, established relationships between contract
management teams and the provider result in speedy resolution of issues and continuous
communication regards performance.
2.8
Negotiations have already taken place with the provider to secure cost reductions,
increase cost effectiveness and deliver enhancements to the service. As there is no better
alternative to the current service provider it is recommended this contract is extended for
one year in line with other partners in the consortium.
3
Finance
3.1
This service is an area of cost pressure and growth for all boroughs in the consortium
including Lambeth as community equipment uptake is rising and has been for several
years.
3.2
The expectation is that this trend will continue with the ongoing emphasis within both
health and social care on supporting people at home, delaying or avoiding admission to
hospital or residential care and facilitating early discharge from hospital.
3.3
The original business case estimate for this contract estimated social care expenditure to
be £438,550 per year from April 2011 but the projected expenditure for 2014/15 is likely to
be £850,000. This is £251,000 above the current budget for this service. This additional
funding, which will also be required in 2015/16 for the recommended contract extension
will be funded from earmarked reserves in 2014/15 and a combination of surplus budgets
in Reablement and Integration (LBL Adult Social Care)
3.4
However, there has been close monitoring of expenditure and a number of cost reductions
within the consortium as well as improvements to equipment servicing and maintenance.
Other cost reductions include:
 Price freeze on activity for 4 years (including the current year)
 Reduction in mark–up for the majority of special items (those not in the catalogue)
from 20% to 15%
 Tighter arrangement for collections with more responsibly given to Medequip to
ensure they meet targets (KPIs) of 65% collection rate in 15/16 and 70% in 16/17 (up
from under 60% currently). These increases should save Lambeth £200k.
 Greater efficiencies on equipment costs, with savings targets built into the contract
3.5
In addition, Commissioning and Delivery leads in Lambeth undertake rigorous and regular
review of contract activity to ensure opportunities for cost savings can be identified. These
include:

Reviewing the most frequently purchased items and ensuring only the most cost
effective items are available in the Lambeth catalogue

Reviewing authorisation of orders of specialist equipment to ensure standard
catalogue alternatives are not available
4

Recycling and sharing specialist equipment with other boroughs

Improving collection times for equipment no longer required which generates a
credit against the contract cost

Providing prescriptions for single items that can be collected by service users
from pharmacists which reduces delivery costs

Gifting simple items of low value equipment where collection and cleaning
charges exceed the item’s credit value
Legal and Democracy
4.1
The authority to deal with the matters set out in this report is delegated to the Cabinet
Member who should exercise their discretion following recommendation by the
Procurement Board.
4.2
The London Borough of Lambeth has a statutory responsibility to provide aids and
equipment to eligible Lambeth residents to enable them to remain at home and live more
independently.
4.3
The current contract with Medequip is a three year contract from 1st April 2011 to 31st
March 2015 with an option to extend for up to 2 years, to 31st March 2017. The contract
was formed pursuant to Lambeth accessing a framework agreement procured by the
Royal Borough of Kensington and Chelsea in 2010 through OJEU procurement.
Medequip is the sole supplier on the framework. The framework agreement between
Kensington and Chelsea and Medequip provided for an initial contract period ending on
31 March 2015 with an option to extend by 2 periods of 12 months. In accessing the
framework Lambeth adopted the terms and conditions of the framework, albeit with the
initial contract term being 3 years.
4.4
The framework agreement was advertised as being of 7 years duration, including
extensions. Framework agreements should usually not exceed 4 years duration.
Guidance issued by the then Office of Government Commerce (OGC) stated that a
longer duration can be justified '... in order to ensure effective competition in the award of
the framework agreement [where]…. four years would not be sufficient to provide a
return on investment.' In advertising the framework for up to 7 years Kensington and
Chelsea presumably assessed it as justifiable on this basis but as the framework
contract commenced on 1st April 2010, the six months period within which the award
could be challenged lapsed in 2010.
4.5
Where the initial contract made provision for extensions then any extensions done within
the terms of the original contract will be permitted under the Contract Standing Orders
without the need for formal tender.
4.6
Lambeth is the contract holder but any contract extension will need to be agreed by
Lambeth Clinical Commissioning Group, as it funds 45% of the contract costs.
4.7
Because this contract extension exceeds the Council’s threshold of £500,000 this is a
key decision and is on the Council’s Forward Plan.
5.
Consultation and co-production
5.1
Service users and stakeholders were consulted when the service was commissioned and
the outcome used to inform the standard equipment on the Lambeth catalogue. The
provider seeks continuous feedback from service users to assess their satisfaction with
the service provided.
6.
Risk management
6.1
The key risk with this contract is expenditure exceeding the budget however this is a
demand led service and the provision of equipment is a statutory requirement. More
accurate forecasting of demand and activity has meant that budget provision for future
years beyond the 14/15 financial year will be more in line with projected expenditure.
6.2
Also the more rigorous monitoring of activity and expenditure enables this risk to be
managed.
7
Equalities impact assessment
7.1
An equalities impact assessment was undertaken when the service was commissioned
and the impact assessed to be low. The provision of community equipment has a positive
impact for a number of groups of individual’s particularly disabled and older people.
8
Community safety
8.1
Disabled children and adults and older people can be supported to live more safely in their
own homes as a result of the provision of appropriate community equipment.
9
Organisational implications
9.1
Environmental
The provider has an environmental policy in place which minimises the amount of waste
sent to landfill by effective recycling of equipment and monitors the use and disposal of
hazardous material.
9.2
Staffing and accommodation
No implications for staffing or accommodation.
9.3
Procurement
The date of the Procurement Board considering this contract extension is 19th March
2015. The contract runs to 31st March 2015 and the contract extension proposed will run
from 12 months from 1st April 2015.
9.4
Health
The community equipment service is jointly commissioned with Lambeth CCG and makes
a major contribution to facilitating timely discharge from hospital.
10.
Timetable for implementation
The date of the Procurement Board considering this contract extension is 26th March
2015. The contract runs to 31st March 2015 and the contract extension proposed will run
from 12 months from 1st April 2015.
Audit trail
Consultation
Name/Position
Helen Charlesworth-May –
Strategic Director
Pete Hesketh & Tom
Dennerley - Finance
David Thomas - Legal
Services
Wayne Chandi- Democratic
Services
Councillor Meldrum
Internal Officer Board
Procurement Board
External
Lambeth
cluster/division or
partner
Commissioning
Date Sent
Date
Received
13/04/15
07/05/15
Business Partnering
05/03/15
09/03/15
3
Enabling: Integrated
Support
Enabling: Corporate
Affairs
Cabinet Member:
08/03/15
10/03/15
4
06/03/15
11/03/15
4
10/03/15
17/3/15
Date of meeting
26th March 2015
Report history
Original discussion with Cabinet Member
Report deadline
Date final report sent
Report no.
Part II Exempt from Disclosure/confidential
accompanying report?
Key decision report
Date first appeared on forward plan
Key decision reasons
Background information
Appendices
Comments in
para:
06/03/15
19/03/15
No
Yes
09/05/14
Expenditure, income or savings in excess of
£500,000
Recommended by Procurement Board
08/02/11
Contract Variation Form & Single Report
Procurement Board 30/10/14
None.
APPROVAL BY CABINET MEMBER OR OFFICER IN ACCORDANCE WITH SCHEME OF
DELEGATION
I confirm I have consulted Finance, Legal, Democratic Services and the Procurement
Board and taken account of their advice and comments in completing the report for
approval:
Signature ______________________________________ Date ________________
Ged Taylor, Interim Lead Commissioner, Integrated Commissioning Older Adults
I approve the above recommendations:
Signature ______________________________________ Date ________________
Post
I confirm I have consulted the relevant Cabinet Members, including the Leader of the
Council (if required), and approve the above recommendations:
Signature ______________________________________ Date ______________________
Councillor Jackie Meldrum
Cabinet Member Children and Adult Services
Any declarations of interest (or exemptions granted): None
Issue
Interest declared