Agenda item

Report number ENV703 of the Cabinet Member for Environment.    (Enclosure)

Decision

1. Cabinet approves the incorporation of the Environment SK companies (limited by shares) utilising Model articles of association

2. Cabinet approves the appointment of the following as Directors of Environment SK Ltd and Environment SK Commercial Services Ltd

·         Cabinet Member for Environment – Councillor Dr. Peter Moseley (Chairman)

·         Assistant Director Commercial and Operational – Ian Yates

·         Strategic Advisor (Housing Led Regeneration) – Tracey Blackwell

3. Cabinet approves the appointment of a Non-Executive Director to the Board of Environment SK Commercial Services Ltd

Considerations/Reasons for Decision

1. Report number ENV703 of the Cabinet Member for Environment
2. The Council’s Corporate Strategy and its emphasis on commercialism
3. The Council’s current grounds maintenance contract with Glendale which expires at the end of February 2019
4. A review of service delivery options by the Environment Overview and Scrutiny Committee
5. The decision made by Cabinet on 12 July 2018 to deliver the service through a company that is wholly owned by South Kesteven District Council and subsequent decision by Council on 26 July 2018 to make changes to the Council’s 2018/19 budget framework
6. New arrangements would require input from a range of the Council’s support services, for which Service Level Agreements were being prepared
7. New performance measures would be considered when the service is reviewed during the 2019/20 financial year
8. Section 1 of the Localism Act 2011
9. A company limited by shares would allow the Council to own and control the environmental services vehicle and allocate any profits for use in the Council’s wider activities
10. The group structure would separate the discrete classes of activity (core services and purely commercial activity)
11. The Companies Act 2006
12. Model Articles of Association for a company limited by shares as Appendix 1 to report number ENV703
13. Cabinet’s decision on 6 September 2018 to agree a review of the governance arrangements for all of the Council’s companies
14. Any commercial lending undertaken by the Council would be structured within the operating framework of the Treasury Management Strategy
15. Services provided to the company by the Council would be fully charged on a cost recovery basis
16. The Transfer of Undertakings (Protection of Employment) Regulations 1981
17. Public Contract Regulations 2018

Other options considered and assessed

The core grounds maintenance service could be delivered by establishing one company – Environment SK without the need for a separate commercial entity. The advice received to date indicates that the Council would need to be assured that commercial trading levels would not be at risk of exceeding the thresholds sets out in procurement regulations. Effectively this could limit the ambition of the company in terms of developing its commercial strategy and competing for new contracts. From the Council’s perspective this could limit the opportunities available to derive new revenue streams and therefore its ability to cross-subsidise other corporate services or invest in local priorities.

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In presenting report number ENV703, the Cabinet Member for Environment referred to recent work that had been undertaken to determine the best way for the Council to deliver its grounds maintenance service. A decision had been made that the service should be delivered in-house and arrangements needed to be in place to ensure a smooth transition on the changeover date. The primary focus was ensuring that the company was in a position to pick up the core service provided by the Council in respect of grounds maintenance; it would then develop to explore commercial opportunities. This approach was supported by other members of the Cabinet.

As speed was a priority, the formation of the company had been based around Model Articles of Association with a view to them being developed in light of the governance review of company arrangements and any other future developments. Reference was made to a provision that allowed the Directors to appointment a Chairman. Cabinet Members agreed that the Cabinet Member for Environment should be appointed as Chairman and that this should be incorporated within the decision. The Chairmanship of the Directors resting with the Cabinet Member for Environment could then be clarified within the Articles of Association as and when they were updated.

A number of Cabinet Members commended the speed with which this report had been produced and brought before Cabinet. Members also spoke of the opportunities presented by the formation of the company and the Council’s aim to act more commercially. Reference was made to support for the decision to bring the service in-house both from local communities and parish councils.

Some questions were asked around the transfer of staff from the existing grounds maintenance provider to the Council and measures that were being taken to ensure a seamless transfer of appropriate staff for the delivery of the service. The success of the transfer was considered dependent on good communication between the outgoing provider and the Council and it was hoped that a good agreement would be in place well in advance of the due date.

The report referred to the role of a range of support teams from across the Council. Members noted that Communications were an integral part of the project and that the Communications Team had been actively involved in meetings around the formation of the company and project planning.

Members agreed the recommendations as set out in the report subject to the clarification that the Cabinet Member for Environment should be the Chairman of Directors’ meetings.