15 October 2013

Where did the NSL contract savings go to?

Parking contract savings - as safe as houses?
Calculator and cup of tea at the ready? then armchair audit time it is.

Back on 23 September Mr Mustard attended the Cabinet Resources Committee. It was receiving a report from Finance about the financial performance for the first quarter of the council tax year i.e. for April to June 13. For the first time in Mr Mustard's short but eventful life (since 10 March 2011 - ha, he is in his terrible twos phase) there was an overspend, of £2,384,000 (to nearest £thousand) and the biggest culprit was "Streetscene" (hard to tell exactly from the name what that encompasses but it will become clearer later) which was £2,163,000 overspent on a budget of £15,212,000 a spectacularly awful result which is 14% over budget.

Now Mr Mustard hastens to add that these were the projected outturns for the end of the year so there was still 9 months remaining in which to get back on track (or go further off the rails!) but clawing 14% back, or 7 weeks of expenses to put it another way, looks like a mighty ask.

The way in which the figures were presented was insufficiently precise at the Directorate level for Mr Mustard and this is how the streetscene budget problem was presented in the written report:

The Street Scene Directorate is forecasting an overspend of £2.163m which includes:
   An overspend of £1.081m in  the Special  Parking  Account. This  is  due to cost pressure on the NSL contract of £0.800m plus shortfalls in income of £0.378m.
  The Parking service is forecasting an overspend of £0.434m, due to shortfalls in off street parking. (this is a different overspend to the one above)
  An overspend of £0.380m in the Waste service is a result of domestic refuse staff cost pressures, however it is anticipated that the May Gurney contract negotiation should bring this back in line.
  An overspend of £0.170m in  Street Lighting  is  as a result  of budgeted savings that will now not be achieved during the year.
  A Highway Maintenance overspend of £0.246m is a result of winter maintenance pressures.

That was all far to vague for Mr Mustard (who had failed to notice Appendix 2 where the answer to his question was to be found) so he asked for a breakdown of the £2.163m and he was helpfully sent a copy of the table although he could have been pointed at it. Here it is:

Description Budget V1 Q1 forecast Variation

£'000 £'000 £'000
Street Scene Management Team 647 631 -16
Business Improvement 333 332 -1
Mortuary 136 134 -2
Street Lighting 6,339 6,509 170
Transport -6 -131 -125
Highways Inspection/Maintenance 508 754 246
Parking -747 -313 434
Parks, Street Cleaning & Grounds Maintenance 5,052 5,084 32
Street Cleansing 4,236 4,240 4
Waste 2,911 3,291 380
Recycling 3,278 3,238 -40
Streetscene 22,687 23,769 1,082
Special Parking Account -7,475 -6,394 1,081
Total 15,212 17,375 2,163

Variations in red are underspends so no need to worry about those.

The street lighting overspend is last year's budget failure carried forward. Surely we can just buy fewer lamp posts? It's not as if anything appears to be wrong with the ones that are being taken out.

There is winter pressure on highways maintenance. Mr Mustard seems to think that much greater sums have been spent in previous years and this lack of spend will shortly show up as potholes.

Parking refers to the anticipated spend in off street car parks. Mr Mustard thinks that this would magically come back to what it was if the system and charges are put back to what they were when he started blogging i.e. install cash parking meters (and card) and make prices those of 2010 or lower until there is 90% occupancy of car parks most of the time.

The waste overspend of £380k is expected to be salvaged from changing to in-house and away from May Gurney (except that they are going to continue to run the Summers Lane recycling depot - shiny new signs everywhere and a most useful facility). When the dust settles, we'll see.

So everything except for on-street parking, permits and PCNs is £1,082,000 behind budget and the Special Parking Account (on-street parking, permits and PCNs) is very nearly the same at £1,081,000 behind budget. The annual increase in the SPA budget was always going to be hard to maintain and Mr Mustard has told the relevant councillors to wean themselves off this income stream which just shouldn't be there. So instead of ripping almost £7.5m out of the pockets of the motorist (the majority of whom are also residents) a mere £6.4m will be filched instead; both surpluses are obscene.

The SPA budget problem was explained as "Cost pressure on NSL contract plus shortfall on income". The shortfall is easily fixed with cash parking meters but the NSL overspend had Mr Mustard foxed as it is a fixed price contract. So he asked for a breakdown, the one that should have supplied to councillors in the report (which to be fair Cllr Alan Schneiderman did pick up on in the pre-scrutiny meeting) and here it is:

Reason £,000
Vacant Managers Post -41
Agency Costs (parking manager back fill) and Pension strain 107
Signs and Lines 100
NSL Parking deployed Hours and bit payments. 821
Software license and support -7
On street parking/parking suspension fees/Parking permits 378
DLO charges for suspensions 143
Reduced SLA with Parking Design team -421
Total 1,080

So we have had an interim parking manager since the NSL contract started on 1 May 12. Why? is the startlingly obvious question. Why we employ someone who has to travel miles when there must be perfectly good candidates available locally is hard to fathom. Has the council even advertised or is it that the reputation of parking at Barnet is so bad (as has been reported to Mr Mustard by another council parking department less than 20 miles away) that there are no takers? It's not as if parking is a temporary thing, there will be a need for a parking manager into the next decade at least. Anyway that is £66,000 to the bad.

Nice to see real money being spent on signs and lines. Only another £900,000 needed.

We'll come to the £821,000 in a minute in yet another table.

Is it any wonder that the income from on-street parking and permits is down. Prices were increased markedly and that caused behavioural changes and suppressed the income. Making it harder to pay also had an effect; cash is universal and the meter removal policy has hit the council hard. Permit income will slowly recover now that they are £40 again.

Then we have the usual inter department budgeting which seems to be such a waste of time, moving money from the left pocket to the right. An extra £143,000 paid to the DLO (Direct Labour Organisation) for suspensions. How many suspensions are going on and what does one suspension cost? This figure seems high.

Now Mr Mustard was concerned about cost pressures of £800,000 on the NSL Ltd parking enforcement contract, you know the one which was advertised as saving us £600,000 and here is a screen print from the council's website which is looking rather out of date

Then Mr Mustard asked for a breakdown of the figure of £821,000 as he likes everything to be clear. Here it is.

£’000 £’000
2012.13 budget (NSL Contract) 3,020
Savings 13.14 -349
13.14 budget 2,671
13.14 Spend
Deployed hours 541
BIT Payments (Contract management KPIs) 291
Basic Contract Payment 2,635
NSL Non-Scheduled Items 25
13.14 projection
Difference 821

Now the standard monthly payment to NSL this year is £212,755.64 giving a base annual payment of £2,553,067 and on top of this about £25,000 a month (yes, a month) is paid through NSL to Verrus for the largely unloved PayByPhone system giving another £300,000 per year (2012/13 payments came to £290,559). This seems an extraordinary amount for processing payments willingly made of £2,945,682 from Pay & Display (as it was quaintly described in the SPA) and another £300,000 or so of car park income. A fee equivalent to 9% just for holding your hand out and taking money seems like remarkably poor value.

So last year £3,020,000 was budgeted for NSL and base fees & charges amounted to £2,843,626 and the rest was swallowed up an extra hours payment of £104,000 and by one-off transition costs such as redundancy payments. In version 2.5 of the Business Plan, which went through a dozen iterations, are the projected annual costs of parking enforcement for the 5 year term, viz:

Projected costs of Options 2012/13 2013/14 2014/15 2015/16 2016/17 Total

£'000s £'000s £'000s £'000s £'000s £'000s
NSL – Cost of Contract 3,246 3,220 3,328 3,328 3,328 16,451

which leaves no scope for a saving of £349,000 in this financial year 2013/14 and ignores inflation. Mr Mustard asked under Freedom of Information legislation for the NSL contract and he did receive most of it although the financial information was, of course, redacted. Thus Mr Mustard can't tie the actual payments to the budgeted figures but a budget of £2,671,000 against an annual payment of £2,850,000 is utterly unrealistic.

What the budget also shows is that there is no budget for the KPI (Key performance indicator) performance payments which might amount to another £291,000 in 2013/14 except they can't as the performance was stuck at minus 6 at the start of the year so it should be 6 months before a KPI payment is due assuming performance improves every single month. Mr Mustard will be checking the actual KPI measurements at the year end.

Now the really shocking figure is the one of £541,000 for deployed hours which should have said "extra deployed hours". Now why are the council trying to save £600,000 p.a. and then negate 90% of the proposed savings by  spending on extra enforcement hours.

Now call Mr Mustard suspicious if you like but an extra £541,000 spent on enforcement is likely to lead to a net PCN income of at least £1million. That wouldn't be the motivation, would it?

We know that the contract was failing all the way through 2012/13 and so the solution looks like rather than termination is to throw money at the contract to make it work in 2013/14 and it is one of the few contracts that the council enters which works this way,i.e. the more you spend the more you gain, always assuming that all the extra marginal parking tickets don't just lead to extra appeals to PATAS.

One final point is that NSL are entitled to 50% of the savings they generate on the contract. No "options proposals" were suggested in the first year of the contract. The 50% saving is meant to encourage and reward innovation. 

There hasn't been any.

This is an early One Barnet contract. It hasn't made the anticipated savings. Let's hope that NSCSO and DRS are better (don't hold your breath).

Yours frugally

Mr Mustard

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