Understanding the context
Many authorities are finding that high levels of subsidy to operate their sport and leisure services, particularly facility costs, are no longer sustainable. Local authorities are increasingly looking to outsource these operations or use alternative delivery models. Those that have already outsourced may be looking to extend or re-procure existing management contracts.
In order to make an informed decision about fundamental changes to the way services are delivered, it is essential that an Options Appraisal is undertaken. The benefits are:
- It requires the local authority to clearly articulate the desired outcomes for the service, based on an understanding of the community need
- It provides an objective, transparent and rigorous assessment that can stand up to scrutiny and challenge
- It provides an understanding of the risks associated with different operating models
- It enables an informed decision to be made on the optimal best value solution to meet the individual needs of a particular local authority area.
A number of facility management options are available in the market, including:
- Continued in-house management
- Outsourcing to an existing Trust or private contractor
- Establishing a new Trust or other form of social enterprise company
- Transfer to town/parish councils or educational establishments
- Community asset transfer to community organisations or sports clubs
- Establishing a Joint Venture company with an external operator
- Disposal of assets on the open market.
The outsourcing market is growing and increasingly competitive, with a number of large operators now managing significant portfolios of contracts and facilities. These operators can set up charitable vehicles to benefit from national non-domestic rates (NNDR) and VAT savings, and may be able to provide some capital investment to refurbish or replace ageing facilities. Many established Trusts are looking to expand and grow their business beyond their original geographical base.
Establishing a new Trust or other form of social enterprise is another option. It can take many forms, such as an Industrial Provident Society or Charitable Incorporated Organisation. It should have clear social objectives, be a not-for-profit body and be managed in an accountable and transparent manner.
The optimum solution will depend on local circumstances. A mixed economy of different providers is becoming more prevalent.
Procurement of a leisure management contract should be underpinned by a rigorous pre-procurement exercise to establish:
- The outcomes the service is seeking to achieve and how they fit within the wider corporate objectives of the council
- Which facilities are to be included in the contract and whether any refurbishments or new builds are required
- Which services, such as sports development, are to be included
- That stakeholders and partners have been given the opportunity to influence the process and political support has been secured
- That the proposals are affordable and deliverable, and have undergone soft market testing to test key issues and ensure sufficient market interest exists.
The aim is to find the right balance for the authority in terms of developing the quality of facilities and services, increasing participation in sport among different groups in the community, achieving broader outcomes in health and wellbeing, encouraging community engagement , improving commercial performance and reducing costs.
How can Sport England help?
- Local authorities are advised to seek professional advice to prepare an Options Appraisal before developing a procurement exercise. Sport England can act as a critical friend, to assist with scoping and definition.
- Use the Procurement Toolkit to follow good practice in contract procurement, reduce the costs and time required for the process, and achieve a mutually beneficial contract partnership which can deliver the desired sporting and social outcomes. The toolkit provides guidance on procurement routes and process, and template contract documentation. Specialist advice will still be required as this is a complex area and the long-term implications for the service and the council’s financial position are considerable.
What's the result?
Adoption of alternative delivery models can help to deliver:
- Reductions in net subsidy of the service
- Increased investment in facility replacement and refurbishment
- Improved customer satisfaction
- Increases in overall participation at facilities
- A more financially sustainable leisure provision
- A clearer focus on specified and measurable social outcomes.