Purpose

Background Information
 

1.           
The London Borough of Sutton,
London Borough of Merton and the
Royal Borough of Kingston upon Thames are neighbouring boroughs in
South West London who have shared a Payroll contract since 2011. In
2021, the Authorities agreed to jointly procure an integrated Human
Resources Payroll System, with the aim of achieving economies of
scale and commonality of approach. The contract for London
Borough of Sutton, London Borough of
Merton and the Royal Borough of Kingston upon Thames, is let
through Sutton Council and managed by the Shared HR&OD service
(Sutton and Kingston).
 

2.           
The Services are
delivered using a cloud based software platform. The provider used
cloud based services to support many private and public sector
organisations’ HR and payroll functions. This approach has
been successful for all three boroughs and there is agreement that
this should continue. 
 

3.           
This collaborative procurement approach
has strengthened the Councils’ buying power and ultimately,
economies of scale and helped to capitalise on staff resources
around payroll and pensions payroll administration. This paper sets
out the approach taken to review the contract with a recommendation
to retain the current provider of the Payroll System. This will
enable us to continue to use a service which is reliable and cost
effective and to avoid the significant implementation costs which
would be involved in moving to another provider.
 
Options considered
 

4.           
An assessment was carried out on numerous variations
of the current contractual arrangements set out above,
including: 
 

Option 1: Do
nothing

This does not meet
the objective to develop an effective longer term contractual
solution for the three Councils. 

Option 2: Bring
service in-house

This is primarily a
software solution, and none of the three Councils involved in this
procurement have the appropriate skill set. 

Option 3: Call off
under an existing framework, with a direct award 

This is the
preferred option for the procurement of the new contract.
The Council would like to award a contract to an approved provider,
using a call-off from the Software Products and Associated Services
contract (no. Y23065), through the KCS framework for Software
Products and Associated Services. Although the contract will be
awarded to the preferred supplier, operational account management
will remain with the Council’s existing HR Payroll System.
The framework contract has been procured for use by the public
sector to achieve best economy of scale and to reduce the time in
working through a procurement process. 

Option 4: Run a
competitive tender for the appointment of single or multiple
suppliers 

Running a
competitive procurement is a lengthy and resource intensive
endeavour and the KCS framework for Software Products and
Associated Services is considered to be a robust framework which
offers an effective sourcing opportunity.

Option 5: Consider
procurement of a Payroll system run by another provider

This is not deemed a
suitable option as this would involve significant resources to
effectively procure and implement a new system. All three Councils
have worked collaboratively to configure the existing system to
meet their business needs. All three Authorities agree that in
order to maximise their return on investment, and maintain
stability in a time of large scale organisational transformation,
it makes good business sense to retain the current system, as it
meets their requirements.

 

5.           
Option 3 is the procurement option that
delivers an opportunity to enter into a contract directly with the
existing provider in the most economical way, with a service level
agreement which meets the needs of London Borough of Sutton, London
Borough of Merton and the Royal Borough of Kingston upon Thames,
with clear continuity of service.
 

6.           
The payroll software is HMRC accredited
and internal payroll accuracy is trending above 99%. Time and
resources have been dedicated to integrate the respective learning
management systems, and considerable time has been spent mobilising
manager and employee self-service.
 

7.           
The procurement is being led by London
Borough of Sutton on behalf of all three Councils, through calling
off from the KCS procurement services framework which focuses on
providing compliant routes for the UK public sector to procure
products and services from local, national and global suppliers
with a direct award to a supplier in the Software Products and
Associated Services category (no. Y23065). 
 

8.           
The preferred supplier partners with our
existing provider through a reseller arrangement. This allows the
Council to obtain a more favourable rate for the current system
than a direct award with the provider via the Crown Commercial
Service GCloud framework, which is the
framework currently being used.
 

9.           
Sutton is carrying out this procurement
exercise a year before the existing contract comes to an end, to
reduce any risks of price increase in the final year of the current
contract. Therefore this will be a new six year contract. It will
be for a fixed price, which means cost increases will be expected
at the point of re-letting in 2030 but believe it is important to
secure this certainty of costs at the current time.
 

10.        
Sutton will be terminating the current
contract by invoking clause 18.1 of the current contract, which
allows the Council to end the call-off contract at any time, by
giving 30 days notice. Notice will be
served to the existing supplier by 30 June 2024.
 

11.        
At the point of implementation of the
last contract, a migration into a cloud based software platform and
the in-sourcing of the payroll payment team took place. At this
point, a re-letting of the contract is a straightforward process
and will not require significant implementation resources or a
parallel running period, which allows the HR&OD service to
retain its strategic focus and resources on supporting service
delivery across the Council.
 

12.        
Commercially sensitive information about
the proposed procurement is appended at EXEMPT Annex
1 (exempted from publication).
 

13.        
Following the authorities' approval, the contract will be
signed by Sutton on behalf of the three
authorities. 
 
Resource Implications
 

14.        
The total contract price for the new six
year period is on target to be a total of £3.3m. The annual
charge for all partners will be £554k, payable from 2024/25
through to 2029/30. The RBK share of the costs is averaged at
£184k per annum, against an existing annual budget of
£165k. The budget shortfalls will be reviewed as part of the
Council’s budget setting process. 
 
Financial Risks
 

15.        
The increase in contract cost will result
in a shortfall against the existing budget, which will be reviewed
as part of the Council’s budget setting
process. 
 

16.        
The continuation of the current shared
arrangement for the payroll contact will help minimise the risk of
additional costs of change and disruption to the service being
provided.
 
Commissioning
Governance Board (CGB) Endorsement
 

17.        
The CGB has endorsed the proposed
decision on 17 June 2024.
 
Reason for Urgency
 

18.        
The decision was due to be taken by the
Corporate & Resources Committee on 27 June 2024. However, the
meeting has now been postponed due to the General Election and
rescheduled for 17 July 2024.
 

19.        
The Council has been made aware that the
prices agreed by the software provider are valid until 30 June
2024, which means that this decision cannot wait until the next
meeting of the Committee without incurring additional cost to the Council around the
value of the contract. 
 

Content

To continue the shared contract arrangement
with the Royal Borough of Kingston upon Thames, London Borough of
Sutton and London Borough of Merton for the payroll contract, with
the procurement being led by London Borough of Sutton through a
call off from the KCS Procurement Services framework to the
supplier named in the EXEMPT Annex 1 (exempted from
publication) for a contract term of 6 (six) years, with the total
value of £1,109,276 exclusive of VAT and £1,331,131
inclusive of VAT proportioned to the Kingston Council.