Amey Public Services LLP- Operational Performance Monitoring Report for 01 October 2022 to 31 March 2023, Financial Performance at 31 December 2022
North Lanarkshire Council · 3 May 2023
Back to Environment and Climate Change Committee — 3 May 2023 and its agenda
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North Lanarkshire Council Report Environment and Climate Change Committee Does this report require to be approved? ☒ Yes ☐ No Ref AMcP/JA Date 03/05/23 Amey Public Services LLP: Operational Performance Monitoring Report for 01 October 2022 to 31 March 2023, Financial performance at 31 December 2022 From Andrew McPherson, Chief Officer (Community Operations) E-mail mcphersona@northlan.gov.uk Telephone 07939 280467 Executive Summary This report outlines Amey Public Services (APS) Limited Liability Partnership (LLP) performance against its’ business objectives and council priorities for the period October 2022 to March 2023 and its’ financial performance to March 2023 Recommendations It is recommended that the Environment and Climate Change Committee: (1) Acknowledge APS LLP’s operational performance up to 31 March 2023, along with service delivery highlights over the past 6 months. (2) Acknowledge APS LLP’s financial performance at 31 December 2022. The Plan for North Lanarkshire Priority Improve North Lanarkshire's resource base Ambition statement (17) Ensure we keep our environment clean, safe, and attractive
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1. Background 1.1 The council created the roads, street lighting and winter maintenance services LLP in 2010, following a tender exercise for a strategic partner to deliver such services over a ten-year period. The successful bidders were Amey Local Government Limited and the contract commenced on 14 December 2010. Amey LG Ltd (now Amey Public Services LLP) owns a 67% shareholding in the strategic partnership with the council owning the remaining 33%. 1.2 A Management Committee consisting of representatives from both APS and North Lanarkshire Council is responsible for the LLP’s governance, which includes operational delivery and management, staffing, financial control and reporting, health and safety, performance monitoring and risk management. The Management Committee meets quarterly, with council representation consisting of one senior officer and one Elected Member, and APS LLP membership comprising up to four representatives. 1.3 As per the Works Agreement, service reviews required to be carried out jointly at year 4 and 8 of the strategic partnership. The former Planning and Transportation Committee considered the findings of the Year 4 review and approved the requirement for the council to continue working with APS LLP to identify opportunities for the business to establish a stable financial position. 1.4 The Year 8 review commenced in July 2018 with the outcome initially reported to the former Infrastructure Committee in November 2018, but then carried forward to former Policy and Resources Committee in December 2018. The review recommended that the then Head of Environmental Assets conduct a market testing exercise to identify whether amending some of the existing contract rates and prices for a term beyond June 2021 will be more beneficial to the council than ceasing the contract at its natural termination date. 1.5 The results of the market testing demonstrated that amending APS LLP rates provided value for money and recommended that the contract be extended for a period up to June 2024. The extension to the contract was reported to and approved by the former Environment and Transportation Committee in August 2019. 2. Report 2.1 This report confirms where Amey Public Services LLP are fulfilling its contractual obligations and meeting the council’s service delivery expectations, as well as providing information from Financial Solutions on financial performance and overall financial standing within the company. This information will help give early warning of any financial risks which may give rise to operational or reputational risks for the council. Performance Indicators 2.2 Operational and financial performance is reported to this Committee after it has been considered by the Amey Management Committee. This provides Management Committee representatives with the opportunity to address any issues which require attention and thereafter, allows this Committee to receive the updated position, including any remedial actions where these may be required. 2.3 The outcomes from the 2021-22 and the forecast for 2022-23 performance indicators are detailed within appendix 1.
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Best Value Efficiency Saving (BVES) 2.4 The first 10 years of the contract makes provision for the contractor to provide the council with a BVES. This payment was set out at the time of tender and was a percentage of cost delivered through the contract. The BVES was then added to the revenue budget for the Roads’ service as an income and reinvested in road maintenance activities. 2.5 The contract is now in the extension period, and this means the contractor is no longer contractually required to provide the BVES. In financial terms, based on the average BVES for the first 10 years of the contract, this will result in a £313,000 budget reduction and therefore a reduction in road maintenance activities. Overview of Governance Arrangements 2.6 APS LLP satisfies the council’s required oversight arrangements, and routinely submits the monitoring information expected by council officers in line with the timeframes specified within the LLP Agreement. Comments, Compliments and Complaints 2.7 During this reporting period APS received 3 compliments regarding surfacing work, social value activities and from Police Scotland in relation to the Fireworks event at Strathclyde Country Park. 2.8 During this period APS received 1 complaint relating to winter treatments. Service Delivery Highlights 2.9 The following service delivery highlights were achieved during this period:- • APS maintained its excellent H&S record over the period with 0 RIDDORS, 0 Lost time injuries and 0 Non-Lost Time Injuries in 2023 Year to date. • Completion of the 2022/23 carriageway resurfacing programme. • Continued with the construction of the Newhouse to Salsburgh Active Travel route. • Continued with the gully cleaning programme, cleaning 57,174 gullies over the financial year, with plans being developed to address problematic gullies or those that could not be cleaned due to obstructions. • Continued with the LED replacement programme on main roads and residential roads, with 35,415 residential and footpath light replacements, 8,458 designs completed for main roads and 4,485 main road lanterns installed since the start of the programme. • Undertook the winter service delivery programme • Completed the junction upgrade at Woodside Street, Coatbridge. • Completion of the A71 Horsley Brae junction improvement.
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2.10 APS staff have also undertaken several activities in support of the local and wider community: • Attended careers fairs at New College Lanarkshire, Our Lady’s Secondary School and Greenfaulds Secondary School. • Presented £250 cash collected from Amey colleagues to Baby Loss Retreat’s charity shop in Airdrie. • Continued the long association with St Andrew’s Hospice, with a number of events and activities this year. These included providing support setting out cones for the September 6K fun run so the event could be run safely; in early November providing a gritter and driver for the Santa Dash at Strathclyde Country Park with Santa hitching a ride to the event; and APS employees installing the Christmas lights on the hospice’s Christmas tree, donated two £500 Selfridges Luxury Christmas Hampers for them to raffle and raise funds for the hospice. • From November 2022 to January 2023, Amey hosted 6 mentoring sessions at Greenfaulds Secondary School with S5 pupils to support employability skills through CV writing, interview skills and personal branding. • On Saturday 26 November 2022 at Bellshill Cross, APS provided pedestrian barriers and minor traffic management to control vehicular traffic during the unveiling of the Billy McNeil statue. Business Development 2.11 A key aim of the contract is to encourage business development. During this period APS were successful in the following: • Ongoing contracts with East Renfrewshire Council and Inverclyde Council continued to perform well, however, the latter contract with Inverclyde Council ended in November 2022 when Amey was unsuccessful with its tender for the successor contract. • Continued to work both with other Amey Scottish Highways contracts and other Amey Business Units, in particular Secure Infrastructure, on further opportunities for third party works (civils works, schools’ maintenance and street lighting maintenance). Financial Impact Public Accountability Obligations – Financial year 2022/23 2.12 To satisfy the Council’s duty to ensure the organisation delivering roads, street lighting and winter services on its behalf is financially sound, the Council’s Section 95 Officer maintains appropriate and proportionate processes and procedures for scrutinising APS LLP’s financial performance. 2.13 The Council’s Legal Agreements with APS LLP specify the financial information which must be submitted to the Council, including an annual business plan, monthly management accounts, audited financial statements etc., to enable Financial Solutions to assess and report any financial risk likely to arise as a result of the Council using APS LLP to deliver these services.
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2.14 The Council expends both revenue and capital resources annually with APS LLP to deliver services which assist the Council in achieving its priority outcomes. For the financial year 2022-23, sums of £10.964m and £11.322m were budgeted in respect of revenue and capital respectively for roads and lighting maintenance. APS operates a financial year ending 31 December 2022 and revises its forecast twice throughout the year. Based on APS revised forecast (RF2), works from the Council represent around 93% of annual anticipated net turnover. Financial Performance as at 31st December 2022 2.15 The financial statements presented in Appendix 2 are based on the Reforecast Budget 2 position which takes account of known movements from the approved 2022 Reforecast Budget 1 position shown in Appendix 4. 2.16 Based on their financial statements to 31st December 2022, members will wish to note the LLP is reporting a provisional annual accounting profit of £0.475m, which is a £0.144m adverse variance to the RF2 forecast profit of £0.619m, primarily due to increased volume of winter maintenance resulting in higher than anticipated employee, materials and plant and vehicle costs. Appendix 2 provides further details regarding the LLP’s financial position as well as commentary to explain the key variances reported. 2.17 Although the contract provides scope for the Council to receive dividends from this partnership agreement, the cumulative negative trading position evidenced in the balance sheet means the LLP has not yet had an opportunity to declare any dividends. 2.18 In return for satisfactory service delivery and effective financial performance through the LLP, Amey Local Government Limited is entitled to receive a management fee which comprises both fixed and variable elements and is partially linked to the level of works delivered through the contract. However, the payment of the management fee is dependent upon generation of cumulative profits and given the LLP currently has cumulative net liabilities, the management committee has agreed that no management fee is payable for 2022. Overall Financial Standing – Balance Sheet as at 31st December 2022 2.19 Appendix 3 provides key balances to give members an update on the overall financial standing of the company, as at 31st December 2022, along with the previous year’s comparator figures. Key balances and indicators worthy of specific note include: a) As a result of previous year losses, the company has cumulative net liabilities of £5.625m, an improvement of £0.484m on the previous year position which primarily reflects the 2022 accounting profit. b) A comparison of the LLP’s current assets to its current liabilities equates to a net current asset of £1.599m and a current ratio of 2.14. A ratio of less than 1 is generally an indication of an organisation having insufficient resources to meet its obligations, and therefore in this instance, indicates that the LLP has a strong current asset position. However as detailed in section 2.17, the company has a significant long term liability balance resulting in the net liability position overall.
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c) The LLP has a long-term liabilities balance of £7.225m, which predominantly reflects loan support of £6.175m provided by the parent company Amey LG to enable the LLP to continue delivering services. Currently, there are no expectations that any additional loan support will be required by the parent company. In recognising the LLP is largely dependent upon the support received from the parent company, officers from Financial Solutions regularly obtain assurances from the LLP and Amey LG regarding their continued loan support. d) Following the takeover of Amey Group Ltd by One Equity Partners (OEP) in December 2022, Amey Group Treasury were instructed to clear down all subsidiary bank accounts each month end. Balances are then reinstated in week 1 of the following financial period. Amey have confirmed that balances will be managed to ensure there is no impact on their commitments to supply chain. Approved Budget 2022 2.20 In line with Amey group timelines, the 2023 budget has been prepared by the LLP, and indicates an anticipated accounting surplus position of £0.522m on turnover of £17.822m. Based on APS budget, works from the Council represent around 96% of annual anticipated net turnover. Appendix 3 provides further details on the approved budget and commentary to explain the key movements. 2.21 Members should note that the 2023/24 budget was prepared in September 2022, at which time they were anticipating income from three other local authorities. However, they were unsuccessful in securing the contract with one of these authorities resulting in a revised budgeted surplus of £0.216m. 3. Measures of success 3.1 These reports are intended to give Members an insight into how the LLP is performing and where it is supporting delivery or adding value to the council’s priorities. 4. Supporting documentation 4.1 The following appendices support this report:- Appendix 1 Performance Indicators & Outcomes Appendix 2 Financial Performance as at 31 December 2022 Appendix 3 Overall Financial Standing as at 31 December 2022 Appendix 4 Approved Budget – 2023 Andrew McPherson Chief Officer (Community Operations)
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5. Impacts ( http://connect/report-template-guidance ) 5.1 Public Sector Equality Duty and Fairer Scotland Duty Does the report contain information that has an impact as a result of the Public Sector Equality Duty and/or Fairer Scotland Duty? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? If Yes, has an assessment been carried out and published on the council’s website? https://www.northlanarkshire.gov.uk/your-community/equalities/equality-and-fairer- scotland-duty-impact-assessments Yes ☐ No ☐ 5.2 Financial impact Does the report contain any financial impacts? Yes ☐ No ☒ If Yes, have all relevant financial impacts have been discussed and agreed with Financial Solutions? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.3 HR policy impact Does the report contain any HR policy or procedure impacts? Yes ☐ No ☒ If Yes, have all relevant HR impacts have been discussed and agreed with People and Organisational Development? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.4 Legal impact Does the report contain any legal impacts (such as general legal matters, statutory considerations (including employment law considerations), or new legislation)? Yes ☐ No ☒ If Yes, have all relevant legal impacts have been discussed and agreed with Legal and Democratic Solutions? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.5 Data protection impact Does the report / project / practice contain or involve the processing of personal data? Yes ☐ No ☒ If Yes, is the processing of this personal data likely to result in a high risk to the data subject? Yes ☐ No ☐ If Yes, has a Data Protection Impact Assessment (DPIA) been carried out and e- mailed to dataprotection@northlan.gov.uk Yes ☐ No ☐ 5.6 Technology / Digital impact Does the report contain information that has an impact on either technology, digital transformation, service redesign / business change processes, data management, or connectivity / broadband / Wi-Fi? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact?
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Where the impact identifies a requirement for technology, has an assessment been carried out (or scheduled) by the Enterprise Architecture Governance Group (EAGG)? Yes ☐ No ☐ 5.7 Environmental / Carbon impact Does the report / project / practice contain information that has an impact on any environmental or carbon matters? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 5.8 Communications impact Does the report contain any information that has an impact on the council’s communications activities? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 5.9 Risk impact Is there a risk impact? Yes ☐ No ☒ If Yes, please provide a brief summary of the key risks and potential impacts, highlighting where the risk(s) are assessed and recorded (e.g. Corporate or Service or Project Risk Registers), and how they are managed?
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Appendix 1 Performance Service Area Target Outcome/Purpose 2021/22 Actual 2022/23 Target 2022/23 Actual Comments Improve economic opportunities and outcomes OBJECTIVE: Improve infrastructure to help current and incoming businesses to grow and create employment, help current and incoming businesses to grow and create employment Street Lighting Activities To enable vulnerable people to feel safe in their local area 97.91% 95% 96.50 This performance target includes measures related to: Works Outstanding, Works Quality, Dispute Resolution, Dark Street Lamps & Works Registration Compliance (SRWR). Roads Works Activities Contribute to the long-term economic sustainability of North Lanarkshire 90.02% 95% 88.17 This performance target includes measures related to: Works Outstanding, Works Quality, Dispute Resolution & Road Works Registration Compliance (SRWR). General Performance Contribute to the long-term economic sustainability of North Lanarkshire 90.78% 95% 94.26 This performance target includes: Reinstatement Compliance, Remedial Works Compliance, Prompt Payment to Suppliers, Public Complaints & Health and Safety Compliance. OBJECTIVE: : Improving North Lanarkshire’s resource base BVES efficiencies To positively support the partnership, deliver efficiencies to the Schedule of Rates payable via the works agreement £277,697.59 (2019 BVES) N/A No longer applies to contract There is no target for BVES as this is calculated as a percentage of annual spend. The BVES is paid to NLC annually (based on calendar year spend). Street Lighting Activities – Performance has remained like previous year and exceeds the minimum target of 95%. Road Works Activities and General Performance – Performance has dropped recently and is below the target of 95% however this does not pose any real concerns and we continue to work with APS to meet the set targets. General Performance – Performance has improved and is slightly below the target of 95% however this does not pose any real concerns and we continue to work with APS to meet the set targets. BVES efficiencies – This is no longer applicable to the contract performance.
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Appendix 2 Financial Performance as at 31 December 2022 2022 2021 Commentary Annual Forecast (RF2) Provisional Outturn Variance Provisional Outturn £m £m £m £m Income from NLC 18.568 19.105 0.537 15.888 Revenue & capital funding Strategy WIP (net of provision) 0.454 1.024 0.570 3.186 Write down strategy to 2024 Other 3rd party income 0.897 0.926 0.030 1.143 Other clients inc. other local authorities Total Income 19.919 21.056 1.137 20.217 Increased income due to capital works delivered and winter maintenance. Expenditure; Employee costs (6.057) (6.889) (0.832) (6.559) Increased employee costs due to increased volume of winter maintenance, increased headcount and overtime. Sub-contractor costs (3.308) (3.157) 0.150 (3.205) Anticipated increase in sub-contractor costs reflected in RF2 budget not fully materialised due to increase in internal head count. Materials (5.455) (5.552) (0.097) (5.780) Increased costs due to increased volume of winter maintenance and the requirement to use sub-contractors Plant & Vehicle costs (3.700) (4.220) (0.520) (3.560) Increased costs due to increased volume of winter maintenance and the requirement to use sub-contractors Property, Communications & Other (0.781) (0.763) 0.018 (0.552) Reduced costs due to reduction in expenditure rates offset by increases in insurance charges. Total resources expended (19.300) (20.581) (1.281) (19.657) Trading profit/(loss) 0.619 0.475 (0.144) 0.560 Amey Public Services LLP Income & expenditure
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Appendix 3 Amey Public Services LLP Overall Financial Standing - Balance Sheet as at 31 December 2022 Balances/ Indicator 2022 YTD Actual Commentary 2021 2022 Movement £m £m £m Stock 0.399 Primarily LED lanterns and salt 0.686 (0.288) Trade Debtors 0.085 Predominately inter-company balances 0.926 (0.841) Accrued Debtors inc. prepayments 2.650 Predominantly work in progress, prepayments and deferred income relating to indexation and pension reclaim. 1.164 1.486 Trade Creditors (0.456) Material balance which Amey aim to pay within agreed terms of 60 days (0.474) 0.018 Other Creditors inc. VAT & other taxes (0.947) Accruals, deferred income and VAT (2.791) 1.845 Cash/ Bank (0.132) Predominantly due to cash in transit payments and revised banking arrangements introduced in November 2022. 0.625 (0.758) Net Current Assets/ (Liabilities) 1.599 0.137 1.463 Long term Loans (7.225) Predominantly parent company loan of £6.175m and payroll costs to group of £1.049m. (6.246) (0.979) Net Asset / (Liabilities) (5.625) (6.109) 0.484 Current Ratio 2.14 1.04 1.10
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Appendix 4 Approved Budget - 2023 2022 2023 Commentary 2022 Annual Forecast (RF2) Budget Movement 2022 v 2023 Provisional Outturn £m £m £m £m Income from NLC 18.568 15.170 (3.399) Revenue & capital funding 19.105 Strategy WIP (net of provision) 0.454 1.973 1.519 Write down strategy to 2024 1.024 Other 3rd party income 0.897 0.679 (0.218) Other clients inc. other local authorities 0.926 Total Income 19.919 17.822 (2.097) 21.056 Expenditure; Employee costs (6.057) (5.166) 0.890 Reduction in costs due to continued recruitment challenges and reduced headcount. (6.889) Sub-contractor costs (3.308) (1.232) 2.076 Reduction in costs due to assumed reduction in capital schemes and subsequent reduction in required support from supply chain partners. (3.157) Materials (5.455) (4.937) 0.517 Reduction in costs due to current capital schemes which had high material costs now coming to an end. (5.552) Plant & Vehicle costs (3.700) (5.152) (1.452) Increase in costs due to ageing fleet resulting in increased repairs and maintenance. (4.220) Property, Communications & Other (0.781) (0.812) (0.031) Increased costs due to requirement to take out new insurance policies following move to new owners in December 2022. (0.763) Total resources expended (19.300) (17.300) 2.001 (20.581) Trading profit/(loss) 0.619 0.522 (0.097) 0.475 Management Fee 0.000 0.000 0.000 0.000 Net profit/(loss) 0.619 0.522 (0.097) 0.475 Amey Public Services LLP Income & expenditure