Agenda item

(CSP: MEC & MEC1)

Purpose: To consider the appointment of the Council’s Property Investment and Management Advisor.

Resolved that Montagu Evans be appointed as the Council’s Property Investment and Management Advisor.

This decision is not subject to call in as:

·      a delay in implementing the decision could cause the Council serious financial implications or could compromise the Council's position.

therefore it will be implemented immediately.

The Executive considered a report (Agenda Item 6) which sought approval to delegate authority to (a) the Head of Finance to award the call off contract to Montagu Evans following a mini competition dated 31 August 2018 under the terms of the Crown Commercial Services Framework (ref: RM3816 dated 12 April 2017) and (b) the Head of Legal Services to enter into a call off contract. This was in respect of the appointment of the Council’s Property Investment and Management Advisor.

Councillor Anthony Chadley advised that Montagu Evans had already been appointed to this role, following an appropriate procurement exercise in August 2017, to manage the original sum of £50m to be invested in commercial property. To date, £48m of this sum had been invested and the income target for the Council of £500k per annum was already being exceeded. Councillor Chadley added that the Property Investment Board was in place to oversee this expenditure.

As a result of this success, approval was then given by Council in July 2018 to increase the sum for property investment to £100m and thereby increase the Council’s potential income. Advice from the Council’s Legal Team was to carry out a procurement process for the additional £50m investment and as this could create two parallel contracts it was agreed that the existing contract with Montagu Evans would be cancelled and a procurement process undertaken to cover the additional investment and the management of the entire £100m portfolio.

Montagu Evans was the only bidder, they were considered suitable and met the required criteria. Montagu Evans was therefore recommended as the Council’s Property Investment and Management Advisor.

Councillor Dominic Boeck added to the points made by Councillor Chadley. The Council had worked with Montagu Evans since 2016 and in Councillor Boeck’s view they had done an excellent job. While the Council’s in house expertise was good, Montagu Evans had provided an extra depth in that expertise. He was delighted to support the recommendation.

Councillor Jeff Brooks felt it was disappointing that only one bid had been submitted and questioned whether the reasons for this had been investigated. He accepted that Montagu Evans had met the required quality criteria, but he was concerned that there was no competitor with which to compare the bid from Montagu Evans and he queried if any lessons had been learned from this process.

Councillor Chadley advised that he had asked the very same questions. It was however very difficult to investigate why no further bids had been submitted. Some assumptions had been made, it was felt that the involvement of Montagu Evans in the first tranche could have resulted in other property firms deciding not to bid. Councillor Chadley did make the point that the bid for the £100m portfolio from Montagu Evans was an improvement upon their original successful bid for the £50m. He also explained that Montagu Evans scored more highly and was a substantially cheaper alternative to its competitors for the original tendering process for the £50m portfolio.

Councillor Boeck added that the sums of £50m and £100m were not considered substantial in the market and there was therefore only a small pool of potential bidders. He went on to explain that Montagu Evans had gained much experience in property investment and would have been challenging competition if any other bids had been forthcoming.

Councillor Brooks accepted that the incumbent provider would have been seen by its competitors as having the fast track for this contract, however he felt it was invaluable to identify lessons learned from the process.

Councillor Brooks noted from the report that fees for a single provider for a £100m portfolio would potentially be in the region of £2.5m for a five year contract and felt that a greater awareness was needed of how the portfolio was structured, i.e. whether bonuses were paid and penalties issued, to help ensure that value for money was being achieved. Councillor Graham Jones noted that a response to this point could involve commercially sensitive information and it was agreed that this would be followed up with Councillor Brooks outside of the meeting.

Councillor Alan Macro questioned the difference between the fees potentially paid to Montagu Evans and the level of income expected to be received by the Council. His expectation was that the Council’s income should, in comparison, be higher than the amount paid to Montagu Evans.

Councillor Chadley explained that he could not answer that point in full due to commercial sensitivities, but did point out that Montagu Evans was responsible for the ongoing management and maintenance of properties and therefore the £2.5m was not a profit for them. The income obtained by the Council was a profit.

RESOLVED that following the conclusion of a further competition process within the Crown Commercial Services framework, it was agreed that the Council should appoint Montagu Evans as its Property Investment and Management Advisor.

Other options considered: None identified.